Monday, October 17, 2011


On Thursday, the Bank of England announced another £75 billion of "quantitative easing".


Quantitative easing (QE) occurs when central banks create new money and use it to buy interest-bearing assets.


If you think it's a little odd that one national institution, the Bank of England, is buying bonds issued by another, the Treasury, you're right, it is. The government doesn't want you to think too hard about it, in case we start thinking that they [...] are making things up as they go along and hoping for the best.


[B]anks create money through the act of lending it. They don't have to limit themselves to lending out the money deposited with them. In fact, they can end up lending huge multiples of the money they hold in reserve. When they authorise a loan or extend credit in the form of an overdraft, the money is conjured out of nowhere. The banks then receive interest on the loan. The interest is how banks make their profits, so they want to lend out as much as possible for as long as possible, even if the lending is unsustainable in the long run.


As the authors of Where Does Money Come From?, a handy guide to money creation published by the New Economics Foundation, point out, banks prefer to lend money against existing collateral. As a result they have a really bad record when it comes to supporting start-ups and small and medium-sized enterprises that want to expand or innovate. But they are brilliant at inflating bubbles in commercial and residential property.


Private and unaccountable control of the money supply - the very archetype of unconstitutional privilege - has failed and this failure is bringing misery to millions around the world.


The problems we face are complicated, it's true, but they are not as complicated as some would like to make out. We will begin to see how to solve them when we have a clear understanding of the fundamentals of social organisation, including the origins and nature of money.

It is an understanding that those who are currently powerful would rather we didn't have.


Their control of the money supply has never been subject to democratic debate. [...] As protesters gather in the world's financial districts, I hope they will be able to bring reform of the banking system out of the shadows.

The established order can cope with riots. It cannot cope with a reasonable conversation about the role of the banks in misallocating capital and creating crises.

Dan Hind

....but hey, do what you will anyway.

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