Shropshire Star

Letter: Reforms to banking system are needed

Politicians often say there is a shortage of money as an excuse for not fully funding vital services like health, education and transport.

Published

I often wonder if politicians understand how the money and banking system works and where money comes from?

Only three per cent is created (minted) by the Bank of England. This is sold to the private (commercial) banks. The other 97 per cent is created electronically as debt by private banks when they make loans. When private banks make loans they do not lend existing money. They type numbers onto computer screens, then press send to the borrower's account. When those numbers hit the borrower's bank account it becomes newly created money (the borrower's debt). When banks lend it is mostly for mortgages (pushing house prices up) or to the financial sector.

Very little is lent to viable small businesses. At present it is the private bankers who are steering the direction of our economy, not politicians. The only solution is to remove the power to create money from the banks and place this power into the hands of an independent, transparent and accountable body.

Newly created money could then be spent annually into the economy, ensuring the continuance of vital services. In this way money would be created in the public interest rather than in the bankers' interests.

J Clift, Shrewsbury

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