The Dutch Scientific Council for Government Policy (WRR) has published its report on “Money and Debt, the Public Role of Banks” (Jan 17, 2019), confirming our approach to monetary system analysis and opening perspectives for monetary and banking reform. For the time being, the report is available in Dutch only. For now there is a > Summary on the IMMR website.

Bank of England has come clear about deposit creation
(i.e. bankmoney)

For the first time in decades, a central bank, the Bank of England, has openly explained that
- banks create deposits pro-actively irrespective of their reserve position
- banks do not need customer savings for granting credit and in fact cannot make use of them
- central banks do not control the quantity of money.

Above is a BoE video on these questions. A paper in the BoE Quarterly Bulletin, 2014 Q1, deals with the same subject > Money Creation in the Modern Economy.
David Graeber comments on the paper in The Guardian, 18 March 2014 > The truth is out.

The BoE paper is a welcome step forward, even though some crucial components of deposit creation and monetary policy are still missing:
- the (fractional) interplay between central-bank reserves and bankmoney is not explained
- deposit creation by bank purchases is not mentioned
- any demand for money is taken on unchallenged, no matter how large it is and whether it is destined for real-economic or purely financial purposes
- central-bank interest rate policy, i.e. setting base rates and influencing interbank rates, is portrayed as an effective instrument for controlling inflation (which is highly questionable)
- asset inflation is not recognised as a target of monetary policy.
For a résumé by Positive Money > click here.

The Bundesbank, too, is updating its theory on money creation and banking

After the Bank of England also the German Bundesbank has taken the overdue and welcome step of explaining how banks today are pro-actively creating bankmoney (credits on giro account) and how these are fractionally re-financed by the central bank. 

All the same, the Bundesbank, too, skips a number of sensitive aspects such as, for example, the extreme fractionality to which banks are able to re-finance. Consequently, the impossibility of monetary quantity policy within the present bankmoney regime is completely blinded out, and the weakness of short-term base rate policy is downplayed. The publication sticks to the fiction of effective monetary policy by setting base rates. Believing in some elusive transmission mechanism, however, is no longer really convincing against the background of the explanations on the functioning of the present money system given in the same publication.  

Here is the Bundesbank publication as a PDF > The role of banks, non-banks and the central bank in the money creation process, pages 13–30, in Bundesbank Monthly Report, Vol. 69, No. 4, April 2017.  

In an 'Appendix' to this article titled > Remarks on a 100% reserve requirement for sight deposits, pages 30–33, the Bundesbank then explains why it does not think much of 100%-reserve banking. For a critical response > see the respective posting on the menu 'confronting criticism'. 

World Bank logo.jpg

Now also the World Bank is in line with us >

Biagio Bossone / Massimo Costa: The ‘accountancy view’ of money, The World Bank online, 21 May 2018.

Foto Michael Schemmann.jpg

In an > open letter M. Schemmann criticises both the BoE and Bundesbank publications on money creation for not recognizing how fractional reserve banking is based on a fraudulent accounting practice, that is, accounting for loans to customers as a credit claim and liability 'out of nothing' rather than deducting the loan principal on the asset side from a bank's liquid cash or reserves.    

Martin Wolf, chief economics commentator of the Financial Times, explains in an interview with Rens van Tilburg, Sustainable Finance Lab, Utrecht University, what's wrong with the financial system.


Most people still do not know that it is the banks that create almost all of our money, not the government or central bank. The majority of people in each of 20 countries clearly prefers the latter, 87% do not want the banks to be money creators, as revealed by a representative   > international survey by Motivaction and Sustainable Finance Lab, Utrecht University.

Something similar applies to British MPs (and, presumably, to parliamentarians in other countries too). 3/4 of them believe money comes from the Bank of England rather than the banks. 2/3 don't believe that banks create new money (additional deposit money) when they extend credit. And most MPs erroneously believe that bank credit goes to the real economy while in actualy fact the lion's share of new credit feeds non GDP-contributing finance > Dods MP Poll for Positive Money.     

Anshu Jain, ex Co-CEO of Deutsche Bank, apparently thinks of his monetary institute as a nonbank savings and loan association; or as a mere investment trust. He believes in the loanable funds model of banking, as if we already were in a sovereign money system. In this video, H.Scharpf raised the question.


Positive Money Video on: Where does money come from? Who creates it? Who decides how it gets used?

•Mark Joòb explains the dysfunctions of the present money system > The Sovereign Money Initiative in Switzerland, World Economics Association, Newsletters, Vol. 4, No. 3, June 2014.

Steve Keen

Steve Keen

Steve Keen > The Debtwatch Manifesto tackles, among other things, the urgent problem of debt deflation.

Positive Money on > 'all the nitty-gritty technical detailsof money creation by banks

Sensible Money, Ireland, on > How Banks Create and Destroy Money.

• Three papers by Adair Turner
   > Monetary and Financial Stability, Nov 2012
   > Debt, Money and Mephistopheles, Feb 2013
   > Credit, Money and Leverage, Sep 2013

Richard Werner - Banking & the Economy

"Every loan, overdraft, or bank purchase creates a deposit, and every repayment of a loan, overdraft or bank sale destroys a deposit."
Right Honourable Reginald McKenna, Former British Chancellor of the Exchequer and Chairman of the Midland Bank, 1924. 

What is responsible for the crisis? 
“The financial crisis of 2007/08 occurred because we failed to constrain the private financial system’s creation of private credit and money… Banks as we know them today – fractional reserve banks – ... can create credit and private money, and unless controlled, will tend to create sub-optimally large or sub-optimally unstable quantities of both credit and private money.”
Lord Adair Turner, then Chairman of the UK Financial Services Authority, in a speech to the South African Central Bank in 2012.