"I warn you, Sir! The discourtesy of this bank is beyond all limits. One word more and I—I withdraw my overdraft."  Cartoon from Punch Magazine Vol. 152, June 27, 1917

“I warn you, Sir! The discourtesy of this bank is beyond all limits. One word more and I—I withdraw my overdraft.” Cartoon from Punch Magazine Vol. 152, June 27, 1917

The following is a letter submitted to The Guardian, in response to an editorial. It’s probably the strongest argument I’ve seen for the nationalisation of banks. Most people I’ve met don’t like banks or bankers, but I think most of us have come to accept them as almost a ‘necessary evil’. I think we really need to ask ourselves and our leaders some hard questions.

Why are private banks and financial institutions allowed to have so much control over our money supply?
Banks lend out money at interest to us, but why couldn’t the government exercise this function without charging interest and cut out these ‘middle-men’?

I know that a number of economists have been arguing for some time, that governments which have control of their own currency (such as the U.K., The U.S., Australia, NZ and Canada) should be able to create/lend money into the system to create jobs, build infrastructure and deal with much of our poverty – that in fact all this talk of austerity is just another con-job on the population. Australian economist, Bill Mitchell, has a site which discusses and promotes the idea that sovereign governments should use their power to create money, to ensure full employment in the economy. I’ve put down links to a number of his posts at the bottom of this post.
At any rate, have a read of this letter, and if you feel as I did when I read it, pass it on. Let’s get a much needed discussion on this going.


Your editorial (Negative shock, 28 February) refers to the possibility of direct financing of the deficit by “made-up” money. It is important to recognise that the banking system also creates made-up money as loans. The majority of our money is now issued in this way. There are only two sources of money – state-issued currency and bank-issued debt – and the latter outstrips the former by nearly 10 to one.
Effectively, our money supply system has been privatised. However, in a crisis, the public makes no distinction between the two forms of money, and states have ended up responsible for all money issued in their currencies. The problem with bank made-up money is that it is only issued as debt, which must continually expand if it is to be repaid with interest. Eventually the system can take no more debt. The only source of debt-free money is the state, hence quantitative easing, but under neoliberal ideology this has been given to the banks to lend rather than being issued directly into the economy. Think what wonders £375bn would have done to the real economy. This would have been no more inflationary than bank-issued money and arguably would have been much easier to tax as it would have been spent in much more transparent ways.
Public made-up money is the only money supply system than can be responsive to the democratically expressed needs of all the people. Instead, public services and vulnerable people are being punished through austerity for the sins of “leveraged” (ie borrowed) speculative finance feeding off its control of the national money supply.
Mary Mellor
Emeritus professor of sociology,
Northumbria University

Don’t forget to check out some of Bill Mitchell’s posts (see below)

Till next time


Further Reading:

* Spain is not an example of reform success
* Ratings firm plays the sucker card … again
* The British government can never run out of money

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