UK Parliament debates money creation

Hi All,

Just found this interesting article from UK Parliament debating the creation of money.

www.parliament.uk...

Discusses the creation and production of money creation and how it affects economy, while many of you know how this works, it's the first I've seen on this issue.

it works via the "red bank" over there- I'm amazed anyone in power is even acknowledging the fact that money is a joke.

a reply to: Baldric

I hesitate to point out that before tackling the idea of money creation as a tax payer I would be grateful if our chancellor of the exchequer and prime minister could stop making such huge and embarrassing blunders with the way they handle this country's finances etc.

Osborne should have known exactly to the penny how much the EU was going to claim from us. To find he hadn't a clue and it came as a shock to cameron means these two don't understand how to do their jobs correctly. Its embarrassing to see the low level of intelligence that we have in such foremore ministers and it leaves people without any confidence of their handling our country's finances. If you can't manage your annual budgets as has been demonstrated, perhaps they should leave the creation of money until they can get past this country's housekeeping budgets.

They could also get the problem of CEO's living here and not paying any tax here and also collect the right amount from the crown and all other virgin island bank accounts owned by people living here. I suspect our revenues would b e considerably better were they to learn the rudiments of corporation tax and how to stop all corporations that owe tax to us from fiddling the british people.

I think this kind of finance should be taught in schools and especially the role of the bank of england and all central banks as most people think the bank of england is owned by the british tax payer, they don't realise whose behind it.

An excellent read.
I'm actually glad some of our politicians have got the balls to discuss it. Pity no one will take any notice.

Someone explain to me how a reputable nation creating money is significantly different than a reputable company selling stock.

originally posted by: TheBlackTiger
Someone explain to me how a reputable nation creating money is significantly different than a reputable company selling stock.

Read the article! It is the banks creating the money by just typing in the numbers into a computer..

And please, you need to define reputable.

There are not too many reputable governments on this whole damn planet.

P

It is a long document and to help break it down, quoted from Steve Baker

...where did all the money that was created as debt go? The sectoral lending figures show that while some of it went into commercial property, and some into personal loans, credit cards and so on, the rise of lending into real productive businesses excluding the financial sector was relatively moderate. Overwhelmingly, the new debt went into mortgages and the financial sector. Exchange and the distribution of wealth are part of the same social process. If I buy an apple, the distribution of apples and money will change. Money is used to buy houses, and we should not be at all surprised that an increased supply of money into house-buying will boost the price of those homes.

... I remember that when quantitative easing began, house prices started rising in Chiswick and Islington. Money is not neutral. It redistributes real income from later to earlier owners—that is, from the poor to the rich, on the whole. That distribution effect is key to understanding the effect of new money on society.

... having lived through this era where the money supply tripled through new lending, the whole system, of course, blew up—the real world caught up with this fiction of a monetary policy—and so QE was engaged in... QE is a great evil; it is a substitute for proper reform of the banking system.

...I want to live in a society where even the most selfish person is compelled by our institutions to serve the needs of other people. The institution in question is called a free market economy, because in a free market economy people do not get any bail-outs and do not get to live at somebody else’s expense; they have to produce what other people want.

...Interest rates are a price signal like any other. They should be telling markets about people’s preferences for goods now compared with goods later. If they are deliberately manipulated, they will tell entrepreneurs the wrong thing and will therefore corrupt people’s investment decisions.

...that this might be pointing towards an end of this monetary order. That is not necessarily something to be feared, because the monetary order changed several times in the 20th century.

...The problem is basically that Governments want to spend too much money. That has always been the case throughout history. Governments used to want to fund wars. Now, for all good, moral, decent, humanitarian reasons, we want to fund health, welfare and education well beyond what the public will pay in taxes. That has meant we needed easy money to support the borrowing.

What is to be done? A range of remedies are being proposed. Positive Money proposes the complete nationalisation of the production of money, some want variations on a return to gold, perhaps with free banking, and some want a spontaneous emergence of alternative moneys like Bitcoin.

...I want to propose three things the Government can practically do. First, the present trajectory of reform should be continued with. After 15 years of studying these matters, and now having made it to the Treasury Committee, I am ever more convinced that there is no way to change the present monetary order until the ideas behind it have been tested to destruction—and I do mean tested to destruction. This is an extremely serious issue. It will not change until it becomes apparent that the ideas behind the system are untenable.

Secondly, and very much with that in mind, we should strongly welcome proposals from the Bank’s chief economist, Andy Haldane, that it will commission “anti-orthodox research”, and it will “put into the public domain research and analysis which as often challenges as supports the prevailing policy orthodoxy on certain key issues.” That research could make possible fundamental monetary reform in the event of another major calamity.

Thirdly, we should welcome the Chancellor’s recent interest in crypto-currencies and his commitment to make Britain a “centre of financial innovation.” Imperfect and possibly doomed as it may be, Bitcoin shows us that peer-to-peer, non-state money is practical and effective. I have used it to buy an accessory for a camera; it is a perfectly ordinary legal product and it was easier to use than a credit card and it showed me the price in pounds or any other currency I liked. It is becoming possible for people to move away from state money.

Then followed with lots of debate into different aspects of money creation and socioeconomic factors. The main options discussed are:

- Ideas of a new sovereign currency and metro banks. Does need to be tested to destruction. Problems in the past with too many currencies and banks lead to lots of failures.

- Increasing currency oversight, culture and regulation with a Monetary Policy Committee. The global economy is an international problem that does require a lot of resources. The G20 and IMF look to be slowly finding some common ground, still a few issues. A gradual increase and ongoing requirement for banks to increase their capital reserves for loans will reduce lending inflation and currency supply as 93% of currency is based on lending.

- Give up. The banks hold the economic ball very firmly so let them play their thing. As a politician regulating trade and commerce is more feasible and impacting as the markets will regulate the economy.

Overall I found the quality of the discussion quite good with most having a good understanding of the situation. The global economy like any other function of government is a big, old, slow and powerful force. It is going to take a lot of knowledge, understanding and time to keep this ship chugging along.

a reply to: kwakakev

Thank you Kwakakev for the summary, sorry i didn't include this in my first post. Was completely shattered and needed sleep. I was going to summarize this morning but you've done an excellent job of that.

I completely agree with you Shiloh7 as also a UK tax payer.


The link above nolonger works as this has changed to an official report link to pdf provided, scroll to 434 header on page for the debate article.

www.publications.parliament.uk...

a reply to: Baldric

To be honest I am a selfish bastard and done that summary for myself. To be in a position to teach one must be familiar with the subject. In providing this summary it taught me a lot.

A lot about why the British rose to power as a colonizing force of this globe. A lot of the history through Rome, Greece, Mesopotamia and Sumer as rulers of this land. Money is about trust, trust we are all doing the best we can. Money is also about reason, matching the supply with the demand.

You can watch the debate if you have access to BBC iplayer

www.bbc.co.uk...