What's The Problem It is obvious that the current monetary system doesn’t work - the last two years have provided all the evidence we could hope for that something is structurally wrong with the design of our financial system. The response to date, from governments, the media, and academia, has been to focus on the symptoms of the problem...
Before we step into the detail it will help to get the ‘big picture’ overview of the reform. There are 4 steps to the reform: Step 1: Stop Commercial Banks Creating Money The current problems stem from the process of money creation, at the hands of commercial banks. The solution is very simply, to prevent privately-owned companies from...
The Background Before stepping into the detail I would like to clarify some issues that should provide a background to the reform and prevent it from being dismissed on the wrong grounds. I don’t find it useful to label myself as left-wing or right-wing, as socialist or capitalist. My objection to the current financial system is on the...
The Root of the Money Creation Our current financial system runs on the ‘fractional reserve’ system of banking (although the specific terminology is slightly different in recent years). Fractional reserve banking is the legalisation of a con-trick originally invented by goldsmiths. The goldsmiths realised that, of all the money placed in...
THE SITUATION SO FAR With a few relatively small changes, we have now ended the process of money creation as a result of bank lending. When banks make loans after the reform, they will do so by actually moving money that has been invested by one depositor into the account of another depositor (further detail on this process follows). This is in...
Who Gets To Create Money? For the last few decades. commercial banks have been increasing the money supply by an average of around 10% per annum. The fact that this has caused inflation and debased the money supply is obvious - simply speak to anyone in their 70s about the cost of living when they were in their 20s. It has also created a debt...
THERE IS ZERO RISK OF THE "ZIMBABWE EFFECT" At the suggestion that we should allow government - or even an independent agency of state - to create and spend new money, many people immediately think of the farcical scenes in Zimbabwe in recent years. There is absolutely no risk of this happening in the environment created by this reform. For...
The Transition Process We have gone to great lengths to minimise any disruption caused by the reform - to businesses, to the public, to government, and to the banking sector as a whole. In particular, the transition has been carefully planned to avoid any disruption to the financial markets. While protecting traders and bankers might not be high...
THE BETTER ALTERNATIVE... Let’s recap the progress so far. As a result of our reform, the banks now have a liability of £1,800bn to the Bank of England (but they no longer have a liability of £1,800bn to the UK public, so on the balance sheet, they are no worse off). Imagine that they spread their repayments over 30 years (as permitted by...