FT: Time to update and adapt the Bank Charter Act of 1844

James Skinner, an economist actively engaged in renewable energy and sustainable transport initiatives, has written a  letter to the editor of the Financial Times entitled “Time to update and adapt the Bank Charter Act of 1844”, which was published on 26th December 2012.

He explains that only 3% cent of the money supply today is issued in the form of notes and coins, which still brings in a multibillion-pound profit to the state (seigniorage) and that the private banking sector is able to enjoy a far greater benefit arising from creating the remaining 97% of money in circulation.

Here is an extract:

“Is it not time now to call for the UK’s 1844 Bank Charter Act to be updated, to adapt it to the electronic age? That act made it illegal for private banks to create new money, which, in those pre-electronic days, just meant printing notes. Today, banks dodge this prohibition by creating money electronically, in the form of credit…”

As James Skinner points out, under the terms of the 1844 act, prohibiting private money creation, this benefit would go to the state, reducing banking margins/bonuses and the UK government’s austerity programme.

Read the whole letter here.