by Anne BelseyProsperity, July 2007

Money is such an integral part of most people’s lives that few give it much thought. It’s just there.

There might never be quite sufficient for all the things that even a rich country like Britain might wish for, but then money cannot be conjured out of thin air, can it?

Actually the real origin of the British money supply will probably surprise most people.

More than 97% is indeed conjured out of thin air. It is created by the privately-owned clearing banks (HSBC, Barclays, Nat West, LloydsTSB, etc.) whenever they make someone a loan.

They do not lend existing money — their savers’ deposits for example — but create new money from nothing. Of this lending, about 60% is in the form of mortgages on houses.

Until the 1980s, few house mortgages were advanced by banks, most were advanced by mutual building societies, who actually lent, and could only lend, money that had been deposited with them by their savers. In this way there was a limited amount of money in the housing market. House price rises were limited by the amount of savings held by the nation as a whole.

An Unlimited Amount of Money
Since the banks got into the housing market in the 1980s, with many building societies demutualising and becoming banks, they have become the major source of mortgages.

As banks are not limited to lending out only the amount deposited with them, but can create as much money as they wish in the form of loans to house-buyers, we now have a situation of an unlimited amount of money chasing a finite housing stock, which is the recipe for inflation. Even with twice as many houses available in the nation’s housing stock, house prices would still soar to the level that would enable the banks to squeeze the maximum amount of profit out of their borrowers.

This problem is particularly acute in London because this is where live the nation’s highly paid financiers, who easily earn the money to buy a nice place — and maybe a few more to rent out to the low paid!

The Privatisation of Money
In the years since 1946, when the Bank of England was nationalised, the amount of the money supply created by a public agency has fallen from 46% to 3%.

Currently the public purse benefits annually by about £1.5 billion on the profit of providing that 3% of the money supply. By contrast, the banks, in creating the remaining 97% are subsidised by the British people to the tune of £50 billion every year.

If this privatisation of the money supply was reversed, then that £50 billion would be available to fund our public services without there being a need to increase taxes. Indeed, the nation could enjoy increased spending on public services — wiping out NHS deficits, giving students free tuition and maintenance grants, increasing pensions — and a cut in taxes!

The Money Fuse to the Climate Bomb
Debt, whether it is carried by an NHS Trust, a business or a family, is the greatest pressure under which anyone can labour. Yet whereas an NHS Trust, a business or a family can try to bring its accounts in order by earning more and spending less, a national economy and, far less, the global economy cannot.

Within such an economy one person’s spending is another person’s earnings. The global economy cannot spend less without earning less, and earning less will mean financial ruin for some people. It will mean families losing their homes, businesses going bankrupt and public services laying-off staff.

It is the frantic need for continued economic growth, both in this country and around the world, that is the cause of one of the world’s greatest threats: climate change.

The Solution
We can save the planet without causing a world-wide recession through the simple medium of removing the power of the private banks to create money. All money should then be created by a publicly-owned agency, which should be spent into circulation on public services.

Potentially, we could enjoy the benefit of both increased spending on public servicesand tax cuts together.

Removing the power of the banks to create money would mean that their lending would be limited to the amount of savings that they held, just as is the case with mutual building societies and credit unions.

This would limit the amount of money in the housing market and so end house price inflation.

But perhaps most importantly, we could end the current ‘dog-chasing-tail’ scenario of today’s frenetic and ultimately futile attempt of whole economies trying to escape from debt — when debt is the basis of their money supply.

It is this vain attempt to escape debt that is the cause of so much of humanity’s destructive impact upon the world’s climate and environment.

Boggling the Mind
The true nature of the money supply is so different to the popular perception, that trying to understand it and all the ramifications that stem from it is not easy.

Take your time, but not too much time, the longer the situation persists, the worse it will become and it will be the younger generation who will have to shoulder the burden.

The present entirely fraudulent money system is in place due to widespread ignorance. Learn about the situation. There are books on the subject, but the easiest way is through the web. Armed with this knowledge, talk to your friends about this subject. Ask them where they think money comes from and how it is created. You will be surprised just how little most people know.

Only by ending this widespread ignorance can we end the great banking fraud and all the problems that stem from it.

You might also want to join the Money Reform Party which I established to address this problem. Also, there are a few individuals in other parties who are interested in Money Reform. If you are a member of another party, why not raise this issue with your party colleagues?

Contact: The Money Reform Party, 34 Berkeley Close, Dunkirk, Faversham, Kent, MEI3 9TR;
info -AT- moneyreformparty -Dot- org -Dot- uk

Please print out, photocopy and distribute these articles. Also copy and paste them to emails, and circulate widely, and please include all the essential contact information below. Thank you.

Essential Further Reading:
PROSPERITY: Freedom from Debt Slavery
is a 4-page quarterly Journal which campaigns for publicly-created debt-free money.PROSPERITY is edited and published by Alistair McConnachie and a 4-issue subscription is available for £10 payable to PROSPERITY at 268 Bath Street, Glasgow, Scotland, UK, G2 4JR. Tel: 0141 332 2214; Fax: 0141 353 6900, Email: contactus AT ProsperityUK DOT com All back-issues are still available. The 40-page Report,Clarifying our Money Reform Proposals, launched at the 2006 Bromsgrove Conference, is available for £10 payable to PROSPERITY and is essential reading for beginners.

The Grip of Death: A study of modern money, debt slavery and destructive economics by Michael Rowbotham, [Jon Carpenter Publishing, 1998] and Goodbye America! Globalisation, debt and the dollar empire by Michael Rowbotham, [Jon Carpenter Publishing, 2000] and Creating New Money: A monetary reform for the information age by Joseph Huber and James Robertson [New Economics Foundation, 2000] are all available from PROSPERITY.