Nicola Cutcher

Finally the Bank of England have published a clear-as-day document explaining:

The majority of money in the modern economy is created by commercial banks making loans.

Banks are not simply intermediaries, lending out deposits that savers place with them. They also do not merely ‘multiply up’ central bank money to create new loans and deposits as the ‘money multiplier’ model teaches. Private banks create new money when they make loans. Most economic textbooks do not represent this reality – they are wrong. So most peoples’ understanding of money is wrong too. Isn’t that amazing when we talk about money all the time?

Plenty of people have been making this point in recent years – Ann Pettifor in her book Just Money, the New Economics Foundation in their book Where Does Money Come From? and the group Positive Money.

David Graeber has just written an excellent article for the Guardian explaining the significance of this publication from the Bank of England. It’s essential reading. Is this the start of a revolution in our understanding of what money is and how it is created?

Like many, I was sad to hear that Tony Benn had died. Only last week I’d watched the documentary film The Lottery of Birth which featured an interview with Benn. In it he said:

I think the key to any progress is to ask the question ‘why’ all the time. Why is that child poor? Why was there a war? Why was he killed? Why is she in power?

Last night I listened to Benn’s episode of Desert Island Discs and was struck by him saying:

I have tried to use such experience as I had to encourage other people. And if I had an epitaph I would like people to say ‘he encouraged us’.

He certainly encouraged in the full sense of the word: to give confidence and hope. He encouraged me to keep asking the question why.