Richard Murphy says:
July 9 2021 at 3:58 pm
Banks create money solely because the government licences them to do so. They cannot do so otherwise. As a result the backstop of all money creation is the government
Banks create money by creating credit. OK – but anyone who creates credit is creating money.
Might well be money of greater or lesser righteousness, use, anonymity and so on but it’s still money.
To take a stupid example. We’re in a pub. We’re drinking in a round. First bloke gets the round in. That’s the creation of credit. The other three – this is only a small sessh – now owe our first bloke a pint. And on to stage two, one bloke has paid off that debt – destroying credit in the process – but the other two now owe two pints each and so on.
We have credit creation and destruction in the course of buying rounds for people. And there’s not a single government licence in view here, is there?
And if bank credit is money – which it is in the wider sense – then so is drinking in rounds.
Money creation might well be influenced by government rules, we’ll agree to that. But it is not dependent upon a government licence.