Money creation should not be left to the government. So-called private money (mostly banks’ debts to their account holders) is a vital part of the economy

Money creation should not be left to the government. So-called private money (mostly banks’ debts to their account holders) is a vital part of the economy

The great inflations of the past were caused by profligate or greedy governments

When an account holder gives a bank some cash in return for an increased deposit balance, the bank keeps only a tiny fraction of what it has received in the form of liquid reserves. The rest is lent out to borrowers, who in turn deposit the money, creating still more private money. Because borrowers pay interest, this process leads to the peculiar position that I both receive interest on my current account balance and pay no charges for the bank’s transaction services.

Abolishing private money would stop “fractional reserve” banking in its tracks. Banks would have to match deposits pound for pound with cash instead of loans. Account holders would have to pay charges and would receive no interest on their deposits. The gains from creating money that currently accrue to banks and their customers would instead be pocketed by the state. This could help fund public spending, reducing the government’s borrowing requirement or perhaps eliminating it altogether.

http://www.ft.com/intl/cms/s/0/8a021fca-cee4-11e3-8e62-00144feabdc0.html?siteedition=intl#axzz30FXcjloC

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