Exploding the myth of money creation by banks

John Schmid offers a personal response to a contemporary concern

by John Schmid 2nd September 2011

It pains me to read in the Friend (‘The debt-based nature of our financial system’, 27 May) a misconception that I feel is common to almost all basic economics textbooks and pervades the thinking of would-be money reformers.  I believe that it is simply not true that ninety-seven per cent of our money has been created out of nothing by banks and building societies. All our money has been created and is issued by the Bank of England in the hope that it will circulate endlessly and thereby facilitate the exchange of goods and services.