Stats
The idea that commercial banks have been creating money for the last few hundred years can be hard to believe, but it’s no secret. All the following statistics are taken from the Bank of England or the UK Treasury and clearly show the increase the money supply created by the commercial banks.
The exact data is explained below the chart and table.
One Shocking Soundbite:
The government currently pays around £87 million per day in interest on the national debt. This interest is paid to the very banks and institutions that created the money in the first place, at no costs to themselves, through fractional reserve banking. In other words, the UK education budget is 2/3rds of what it could be if the government had not handed the power to create money over to private, profit-making institutions.
How Much Money Do Banks Create Each Year?
The chart below shows the additional money created by the banks each year. Note that this is not the total money supply – just the addition. The final bar represents the £178 billion created by commercial banks in 2007 – just before the financial crisis hit. Is there any connection between the amount of money created by commercial banks in the last few years, the fact that the City of London was booming between 2005 and 2007, and the financial crisis that followed? Of course!
Money Creation in the UK from 1966 to 2007:
| Year | £bn Total Money Supply (M4) | £billions created by banks in this year | Increase as % of Money Supply |
|
1966
|
19
|
1
|
6.5%
|
|
1967
|
21
|
2
|
12.8%
|
|
1968
|
23
|
2
|
8.5%
|
|
1969
|
24
|
1
|
5.0%
|
|
1970
|
27
|
3
|
11.9%
|
|
1971
|
31
|
4
|
16.3%
|
|
1972
|
38
|
7
|
23.2%
|
|
1973
|
47
|
8
|
22.0%
|
|
1974
|
52
|
5
|
10.9%
|
|
1975
|
58
|
6
|
12.0%
|
|
1976
|
64
|
7
|
11.4%
|
|
1977
|
74
|
10
|
14.9%
|
|
1978
|
85
|
11
|
15.1%
|
|
1979
|
98
|
12
|
14.5%
|
|
1980
|
114
|
17
|
17.2%
|
|
1981
|
138
|
24
|
20.6%
|
|
1982
|
154
|
16
|
11.6%
|
|
1983
|
174
|
20
|
13.3%
|
|
1984
|
198
|
24
|
13.7%
|
|
1985
|
224
|
26
|
13.1%
|
|
1986
|
258
|
34
|
15.1%
|
|
1987
|
304
|
47
|
18.1%
|
|
1988
|
357
|
53
|
17.4%
|
|
1989
|
426
|
68
|
19.0%
|
|
1990
|
477
|
52
|
12.2%
|
|
1991
|
504
|
27
|
5.7%
|
|
1992
|
518
|
14
|
2.7%
|
|
1993
|
543
|
25
|
4.9%
|
|
1994
|
567
|
23
|
4.3%
|
|
1995
|
622
|
56
|
9.8%
|
|
1996
|
682
|
60
|
9.6%
|
|
1997
|
722
|
39
|
5.8%
|
|
1998
|
782
|
60
|
8.4%
|
|
1999
|
814
|
32
|
4.0%
|
|
2000
|
882
|
68
|
8.4%
|
|
2001
|
941
|
59
|
6.7%
|
|
2002
|
1,006
|
66
|
7.0%
|
|
2003
|
1,079
|
73
|
7.2%
|
|
2004
|
1,173
|
94
|
8.7%
|
|
2005
|
1,322
|
149
|
12.7%
|
|
2006
|
1,490
|
169
|
12.8%
|
|
2007
|
1,668
|
178
|
11.9%
|
Average Increase in the Money Supply
Between 1966 and 2007, the average percentage increase in the money supply has been 11.9%.
In a little over 40 years, the commercial banks have inflated the money supply by 87 times, or put differently, by 8,700%! (Can you believe that some critics of the reform that I am promoting argue that taking back control of money creation argue that doing so could lead to inflation?!)
The Correlation Between Mortgage Lending & Money Creation
The red bars in the following chart are taken from the chart above. The green bars shows the quantity (in £ billions) of mortgage loans advanced in that year. The two broadly correlate (revealing that on average, 60% of our money supply is created through mortgage lending).
Note that there are some years where mortgage lending seems to exceed the money creation – this is due to the data used. The green bars show the total amount of mortgages approved – not the net increase in mortgage lending.
The difference between the bars is generally made up with other forms of money creation – lending on personal loans, credit cards and so on.
Source: UK Council of Mortgage Lenders
Explanations
There are various ways to measure the amount of money in the economy. M0 refers essentially to state-created money: notes and coins. M4 – a much larger figure – shows the total amount of money in the economy, including all the bank created money.