Record of Meetings held in the Palace of Westminster



The Latest Early Day Motion on Money Creation
Invite your MP to sign

Lord Sudeley FSA, Convenor, Forum for Stable Currencies

Early Day Motions as a Political Barometer

Early Day Motions (EDM) are considered a barometer in the House of Commons: they indicate the kinds of issues that concern MPs but don’t get debated. However, the media may take them up. The best example for such a success was the campaign around banks wanting to charge for their ‘hole in the wall’ cash machines. The defeat was based on an EDM that was picked up by a newspaper.

I have been concerned about the banks’ virtual monopoly on money creation ever since I researched the history of my family’s bankruptcy 100 years ago. Through the Christian Council for Monetary Justice my ally in the Commons became Austin Mitchell MP who learned from his constituency how people suffer from the general lack of money and increasing indebtedness on a personal and corporate level.

Austin Mitchell MP talked to the Monday Club on these issues and, to address the cause of the problem in Parliament, tabled Early Day Motion 1515 in 2002. The title was Using the Public Credit. The lack of money as a medium of exchange is in part caused by the continuous decrease in the Government’s creation of interest-free money while the banks’ creation of interest-bearing credit is rising as a percentage of the total money supply.

A total of 24 MPs signed EDM 1515 even though the wording was rather convoluted. David Chaytor MP made it clearer in EDM 854 in 2003: Publicly Created Money and Monetary Reform. 29 MPs signed. 35 MPs signed either or both motions. The parties covered are Labour, Lib Dem and Plaid Cymru.

The Mystery of Money Creation

Why has nobody from the Conservative Party signed? I suspect it is simply the lack of education among Parliamentarians and the electorate alike. The language and the arguments have become too nebulous to understand how money is created and used between banks, the state and the electorate. It is not obvious to a client that every loan of his bank contributes to the total money supply. And it is generally not known that the Government also borrows money at interest rates that result in annual payments comparable to the spending on the military or on education.

Westminster or the City – Who's in Charge?
Shortly after having come to office, the Chancellor Gordon Brown MP passed the Treasury’s right to set interest rates over to the Bank of England. We should note that the Government’s budget equals 40% of the total money supply. 97% of the money supply is now created by banks as interest bearing credit – whether to individuals, companies or the Government – without any governmental control or influence.

Everybody who has ever looked at the growth of interest, knows that it is exponential – whether as positive gain or negative loss. And exponential growth can not be long-term sustainable, especially when total interest payments exceed the repayment of capital costs.

There are only a few studies that cover the long-term relationships between cash and coin of the state and ‘credit money’ of the banks. The problem with this long-term relationship shows up not only in funding pension payments but in more and more public service requirements.

What can Governments do?

Government seems to believe that it can only either tax or borrow. The third way out, the creation of its own interest-free money, is ignored. As cover for this situation there exists the Financial Services Authority whose task is to maintain public confidence. At the same time, the Treasury Select Committee is examining how to create confidence in long term investments. Neither would be necessary if an honest money system was functioning.

The House of Lords’ Select Committee on Economic Affairs has issued a report on aspects of the economics of an ageing population, but it does not recommend what some monetary reformers have been advocating for centuries: the investigation of an appropriate balance between bank-created money and government-created money?

Are Banks Mis-using your Money?
It is rather deplorable that banks are not really accountable to anybody except themselves. As long as banks have enough cash to supply through their holes in walls, they are safe. But since loans are created through computer entries and not by printing money, it is very unlikely indeed that they have enough cash if everybody came to pick up their money in cash.

The even more deplorable aspect is that the exponential growth of compounding interest on interest means that the gap between the growth of capital and the growth of debt will widen such that it will never become bridgeable – whether in developing countries or at home – without a change of monetary policy.
When students are asked to enter loan agreements, before they become indebted as mortgage payers and home owners, it becomes apparent that banks affect the daily lives of people far more than politicians.

EDM 323: Public Credit for Public Purposes
It is thus fortuitous that Austin Mitchell MP has tabled an EDM that asks for the third time that the Treasury institute an Inquiry into the possible benefits of raising money for the state as interest-free ‘publicly created money’. Why should five of the top 10 companies of this country be banks whose product doesn’t cost anything to produce but a computer entry? Shareholders of banks are happy to receive dividends from banks making money out of lending almost effortlessly created money, while all other activities in the country are more and more deprived of ‘real money’ for the ‘real exchange’ of products and services.

The tacit agreement between Westminster and the City, watched over by the Financial Services Authority, does not benefit the country as a whole and certainly not the values of the Conservative Party. It would be a major wake-up call if Conservative MPs began to understand the process of money creation and signed EDM 323. shows the full text and the signatories to date. Here’s what the EDM says:
That this House notes with concern
• the contrast between the enormous expansion of private credit and the growing debt burden that this imposes on society;
• further notes that public credit, as measured by the proportion of publicly created money in circulation, has fallen from 20 per cent. of the money supply in 1964 to three per cent. today;
• believes that using public credit and increasing the proportion of publicly created money should be used to cut the costs of, and to boost the quantity of, public investment and to allow the Chancellor to fulfil his golden rule without further borrowing;
• further believes that this can be done without any impact on inflation;
• and, therefore, urges the Treasury to commission an independent review of the benefits of using the public credit and increasing the proportion of publicly created money.

Do you understand the issue well enough to write or talk to your MP?
With a view to an inquiry by the Treasury, we’d like to aim at
• as many signatures in this Parliamentary year as possible
• an All Party Group of informed Parliamentarians
• a regular agenda item for the Treasury Select Committee.

For a briefing paper on EDM 323, please contact Sabine McNeill the Organiser of the Forum for Stable Currencies at 020 7328 3701 or go to the Forum website at where you will also find a list of books on the money question.