Today the Bank of England and HM Treasury launched the Funding for Lending scheme (full details here) designed to enable banks to lend more money to the “real economy” (i.e. not financial institutions). But, as the above graphic shows, the UK is already indebted to the tune of 507% of GDP. Is the answer to this to borrow more?
This kind of lunacy is a direct consequence of the way that banks, debt and money work in the UK today. Because 97% of the money supply is created by private commercial banks as debt, when folk stop borrowing, start saving and start paying down their debt, the money supply shrinks. Hence Quantitative Easing which would be far better spent into the real economy directly on infrastructure projects as Jon Snow comments in his blog today.
These issues were the subject of an extraordinarily good conference – Justbanking– in Edinburgh in April. The organiser of the conference, Beth Stratford, has prepared an interactive presentation highlighting the main themes of the day. Take a moment to explore it – therein lies the solutions to the way we do money and banking today.