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Money is just an IOU, the banks are rolling in it
There’s really no limit on how much banks could create, provided they can find someone willing to borrow it.
The Bank of England’s dose of honesty throws the theoretical basis for austerity out the window.
Back in the 1930s, Henry Ford is supposed to have remarked that it was a good thing that most Americans didn’t know how banking really works, because if they did, “there’d be a revolution before tomorrow morning.”
Last week, something remarkable happened. The Bank of England let the cat out of the bag. In a paper called “Money Creation in the Modern Economy,” co-authored by three economists from the Bank’s Monetary Analysis Directorate, they stated outright that most common assumptions of how banking works are simply wrong, and that the kind of populist, heterodox positions more ordinarily associated with groups such as Occupy Wall Street are correct. In doing so, they have effectively thrown the entire theoretical basis for austerity out of the window.
To get a sense of how radical the Bank’s new position is, consider the conventional view, which continues to be the basis of all respectable debate on public policy.
Source: http://philosophers-stone.co.uk/wordpress/2014/03/money-is-just-an-iou-the-banks-are-rolling-in-it/
