The Truth Behind the ‘Magic Money Tree’

The vast majority of money is created out of nothing by banks when they make loans.

The main problem with this is that the vast majority of new money goes into financial and property markets, boosting asset and stock prices, and making the rich richer. Very little is used to boost wages, create jobs, and invest in the things we need.

So there is a ‘money tree’, but the question is: can it be used more effectively? There is no reason why some of the money created shouldn’t be invested through the government into things society really needs.

There is a tendency for politicians to see monetary policy outside of their knowledge base, thinking it is just something to be left to the central bank. Monetary policy has impacts that are of enormous political significance, and it is up to Parliament to scrutinise the wider effects of monetary policy on the economy and society.