Initiative
Positive Money

Andrew Jackson, Chief Economist, Ben Dyson, Founder of Positive Money

Burgess COMMENTARY

Peter Burgess

Breaking News!

Dear Peter,

We have some seriously big news to announce!

1) Huge milestone in our campaign

When we launched the Positive Money campaign 3 and half years ago and started talking about the fact that banks create money, we were faced with disbelief and shock. A common response was: ‘I don’t believe you. I think you just made that up.’ We had to spend a lot of time and energy to convince people that this is the way the system works.

At that time there was no official document by the Bank of England describing how the money system really works and serious factual misinformation in economics textbooks.

That was a time when we could only dream of these kind of tweets from the Bank of England:

YES, it looks like it was copied from the Positive Money website... and NO, this is not a spoof …These are real tweets from the real Bank of England's twitter account!

Now, after 3 and half years of hard work, after we teamed up with the New Economics Foundation and wrote 'Where Does Money Come From?' in order to have something to back our arguments, now - at last - the Bank of England has released official papers explaining that money is created by commercial banks! And there's even an official video about it!

Find out more here

The Bank of England is the first major central bank in the world - that we know of - to publish something as clear and explicit as this.

This means a huge milestone in our campaign for a just and fair money system. Finally, there's a simple video and a paper to send to all those economists, academics, politicians and anyone shaking their head in disbelief! It should reduce drastically the time wasted in persuading people of all types to accept our analysis of the problems.

We'd like to say a BIG Thank you to all of you who helped us to get to this point!

2) Positive Money’s Chief Economist leaves now that Bank of England knows where money comes from...

In March 2011, Andrew Jackson joined our team and has led our research ever since. He co-authored the books 'Where Does Money Come From?' and 'Modernising Money' and several Positive Money publications.

Andrew is now starting a full-time PhD with the highly regarded Professor Tim Jackson (author of Prosperity without Growth) and will be stepping back from work with Positive Money.

In a strange coincidence, on Andrew’s last day in the office, the Bank of England published the new paper mentioned above explaining exactly how money is created in the modern banking system. The paper actually references 'Where Does Money Come From?', the first book that Andrew worked on. That’s a great finish to 3 years of hard work to educate people about the reality of money!

3) Upcoming Events

• Bristol, Wed 19th March - Positive Money Meetup
• London, Thu 20th March - Canary Wharf Tour
• London, Fri 21st March - Conference “Towards a sustainable financial system” – LSE
• London, Fri 21st March - Loconomics Workshop 3 – London
• Leicester, Sat 22nd March - Money: Impacts, Perceptions, Actions – Workshop
• Manchester, Sat 22nd March - Conference “Age of Austerity – What can you do” (with Ben Dyson)
• London, Mon 24th March - Economics Burlesque: Money – Do we need it?
• London, Fri 28th March - Loconomics Workshop 4 – London
• Sheffield, Mon 31st March - “The Bank of England’s Mission, and the Positive Money proposals”
• London - Lambeth, Mon 31st March - Positive Money Meetup
• London - Greenwich, Wed 2nd Apr - Inaugural Positive Money meetup

• It’s official! Economics students are being misinformed, says Bank of England
• Positive Money’s Chief Economist leaves as Bank of England now knows where money comes from
• The Bank of England dismisses the ‘money multiplier’ theory
• Building a movement for change (A Report of Positive Money’s 2014 Conference)
• Will Green Party in Ireland pass full reserve banking motion?
• Adair Turner on the Politics of Finance on BBC Radio 4

Ben and the rest of the Positive Money team

www.positivemoney.org

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Bank of England on Money and Money Creation in the Modern Economy

Where does money come from? In the modern economy, most money takes the form of bank deposits. But how those bank deposits are created is often misunderstood. The principal way in which they are created is through commercial banks making loans: whenever a bank makes a loan, it creates a deposit in the borrower’s bank account, thereby creating new money. This description of how money is created differs from the story found in some economics textbooks.

Believe it or not, this is an extract from the News Release on new Quarterly Bulletin on Bank of England’s website!

We’ve been talking about the way money is created for the last 4 years. We’ve also argued that the textbooks used in universities were inaccurate. At last, there’s an official document and videos that we can send to all those economists, academics, politicians and everyone who still shake their head when we’re explaining this.

Here are the papers and videos:

Open PDF ... Money in the modern economy: an introduction (531KB)

This bulletin provides an introduction to the role of money in the modern economy. It does not assume any prior knowledge of economics before reading. The article begins by explaining the concept of money and what makes it special. It then sets out what counts as money in a modern economy such as the United Kingdom, where 97% of the money held by the public is in the form of deposits with banks, rather than currency. It describes the different types of money, where they get their value from and how they are created.

The book “Where Does Money Come From?”, co-authored by Positive Money’s Head of Research Andrew Jackson is quoted in the References.

A short video explains some of the key topics covered in this article:

Open PDF ... Money creation in the modern economy (111KB)

A companion piece to this Bulletin article, ‘Money creation in the modern economy’, describes the process of money creation in more detail, and discusses the role of monetary policy and the central bank in that process. For expositional purposes this article concentrates on the United Kingdom, but the issues discussed are equally relevant to most economies today.

• This article explains how the majority of money in the modern economy is created by commercial banks making loans.
• Money creation in practice differs from some popular misconceptions — banks do not act simply as intermediaries, lending out deposits that savers place with them, and nor do they ‘multiply up’ central bank money to create new loans and deposits.

• Just as in normal times, the reserves created by QE cannot be ‘multiplied up’ into additional loans and deposits.
• Nor can reserves be directly lent out, since only commercial banks hold reserves accounts.

“Loans create deposits not the other way round.” Join the Campaign!