Green Party: “The power to create money must be removed from private banks”

After the Green Party of England and Wales has passed a Monetary and Banking Reform Motion at their conference in September 2013, now they have published an updated monetary policy document on their website.

Positive Money does not support or endorse any political party, but we strongly encourage the debate about money creation to take place within political parties. The Green Party’s monetary policy document is worth highlighting, as much of it is entirely consistent with Positive Money proposals.

Here are some key paragraphs:

EC661 The Green Party believes that, as the means of exchanging goods and services, the stock of money is a vital common resource which should be managed in the public interest. Yet only 3% of our money supply currently exists in the form of notes and coins issued by the Government or the Bank of England. 97% of the money circulating in the economy takes the form of credit that is created electronically by private banks through the accounting processes they follow when they make loans.

EC662 The existing banking system is undemocratic, unfair and highly damaging. Banks not only create money, they also decide how it is first used – and have used this power to fund financial speculation and reckless mortgage lending, rather than to finance investment in productive businesses. Through the interest charged on the loans on which all credit is based, the current banking system increases inequality. It also regularly causes economic crises: banks create and lend more and more money until the level of debt becomes unsustainable, boom turns to bust, and the taxpayer bails out banks that are “too big to fail”. Finally, the need to service the growing mountain of debt on which our money is based is a key driver of unsustainable economic growth that is destroying the environment.

EC663 The existing banking system has failed and is no longer fit for purpose. The Green Party believes that the power to create money must be removed from private banks. The supply of our national currency must be fully restored to democratic and public control so that it can be issued free of debt and directed to environmentally and socially beneficial areas such as renewable energy, social housing, or support for community businesses.

EC664 A Green Government will therefore develop and implement a programme of banking reform based on the following principles:

a) All national currency (both in cash and electronic form) will be created, free of any associated debt, by a National Monetary Authority (NMA) that is accountable to Parliament;

b) The 1844 Bank Charter Act will be updated to prohibit banks from creating national currency in the form of electronic credit. To finance their lending, investment or proprietary trading activities, banks will have to borrow or raise the necessary national currency from savers and investors;

c) The NMA will be mandated by law to manage the stock of national currency so that it is sufficient to support full employment, while avoiding general inflation in prices, and taking into account the development of local currencies;

d) Any new money created by the NMA will be credited to the account of the Government as additional revenue, to be spent into circulation in the economy in accordance with the budget approved by Parliament;

e) The members of the NMA will be appointed – for fixed terms – by a Select Committee of Parliament;

f) The independence and integrity of the NMA will be assured by law requiring NMA members and staff to be free of any conflict of interest; mandating full transparency of NMA decisions; and prohibiting lobbying or undue influence of NMA members or staff by government, financial institutions, corporations or any other private interest.