I agree with the sentiment about those who oppose taxation but query whether the state is indeed the ultimate creator of money. That was certainly true when most transactions used cash. It was the aim of the Bank Charter Act 1844 to prevent banks from creating money and return control of the money supply to the state. But today about 99 per cent of payments are made electronically and only three per cent of money in existence is created by the Bank of England and the Royal Mint. The rest comes from private banks because they can make loans far in excess of their deposits. As IMF economist Michael Kumhof says: “The key function of banks is money creation, not intermediation.” As Marx famously said “All that is solid melts into air.”
True enough, Dickie (indeed strictly speaking the Bank of England can’t create money under EU rules) but QE shows the government can act like private banks. My feeling is that the government likes leaving money creation to private banks to draw them into the system, as they do with borrowing – not necessary but good for confidence in the currency. Anyway, it was the argument against tax-haters that I wanted to post, as you noted.
I agree with the sentiment about those who oppose taxation but query whether the state is indeed the ultimate creator of money. That was certainly true when most transactions used cash. It was the aim of the Bank Charter Act 1844 to prevent banks from creating money and return control of the money supply to the state. But today about 99 per cent of payments are made electronically and only three per cent of money in existence is created by the Bank of England and the Royal Mint. The rest comes from private banks because they can make loans far in excess of their deposits. As IMF economist Michael Kumhof says: “The key function of banks is money creation, not intermediation.” As Marx famously said “All that is solid melts into air.”
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True enough, Dickie (indeed strictly speaking the Bank of England can’t create money under EU rules) but QE shows the government can act like private banks. My feeling is that the government likes leaving money creation to private banks to draw them into the system, as they do with borrowing – not necessary but good for confidence in the currency. Anyway, it was the argument against tax-haters that I wanted to post, as you noted.
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Yes, it is certainly very useful for countering the tax haters.
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