September 2018 Release of our petition to have the Reserve Bank issue our money along with an opinion piece.

June Press release on the swiss referendum. Despite the campaign of confusion and fear run by opponents, 25% voted for the Sovereign Money Initiative.

April The AustralianRoyal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry is coming up with some serious wrongdoing by the banks and financial institutions

May 2017 Positive Money New Zealand issued a press release seeking clarity from the Reserve Bank on how our money is created. They still refer to intermediation by the banks, which is not how our banking system works.

5th November 2016 An article in The Guardian newspaper in England argued that abolishing debt-based currency holds the secret to getting our system off its addiction to growth.

5th September 2016 KPMG released a report, commissioned by the Prime Minister of Iceland, titled "Money Issuance" The report looked at money created by the Government.

28 March 2016 Bryan Gould agreed to be our Patron. Bryan is a respected commentator on economic matters, an author, academic and Companion of the New Zealand Order of Merit.

14 October 2015 The Finance Commission of the Dutch parliament discussed monetary reform.

22 November. The British parliament debated money creation last week, for the first time in 170 years. There was cross-party support for a proposal to set up a monetary commission

23 September. A new generation of young people, dubbed ''property orphans'' may be destined to be renters for life.

17 September. The Bank of International Settlements (BIS), the bank used by central banks, confirmed New Zealand houses are among the most "unaffordable" in the world compared to people's incomes.

25th April 2014 "Strip private banks of their power to create money": says the Financial Times' chief economics commentator Martin Wolf, who endorses Positive Money's proposals for reform

15th March 2014 - In a historic move The Bank of England quarterly bulletin explains how money is created. Whenever a bank makes a loan, it creates a deposit in the borrower's bank account, thereby creating new money. The bank says that this differs from the story found in some economics textbooks.

16th August 2013. The retiring head of the Financial Markets Authority apologised for the mistakes made saying "You were let down".


“The banks do create money. They have been doing it for a long time, but they didn’t realise it, and they did not admit it. Very few did. You will find it in all sorts of documents, financial textbooks, etc. But in the intervening years, and we must be perfectly frank about these things, there has been a development of thought, until today I doubt very much whether you would get many prominent bankers to attempt to deny that banks create it.”

H W White, Chairman of the Associated Banks of New Zealand, to the New Zealand Monetary Commission, 1955.

Guarding against inflation

How well has the current system prevented inflation?

Over the last 20 years, the banks have been inflating the money supply by an average of 9% per year, through creating endless amounts of new debt. This has led to inflation over that time of hundreds of percent, especially in the housing market.

In fact, between 1980 and 2010, total general inflation (the increase in the Consumer Price Index) was 429%, while house price inflation has been much higher at 1,310%!

From this we know that an annual increase in the money supply of 7-10% will cause inflation, so we already know our upper-limit on how much new money should be created. As long as the MPC keeps the annual increase under 9% per annum (the average growth rate since 1990) then inflation should be less than it has been under the old system.

In other words, inflation is significantly less likely under the modernised system than under the existing one.

Further safeguards against inflation

If further safeguards are needed to reassure people that hyper-inflation is not a risk, the following safeguards could be put in place (but note that they are not included in our proposal at this stage):

  • The absolute amount of the increase in any one month must be no more than x% greater than the previous month. This prevents any wild fluctuations in the amount of money created from month to month, and depending on the level of ‘x’, ensures that it would take decades before they could create sufficient levels of money to cause hyperinflation.
  • The total annual increase in the money supply should not exceed x% of the current total money supply. If you doubled the money supply in the space of one year, you would cause asset bubbles and very high inflation. If you cut the money supply by 50%, in one year, you would cause an economic collapse. Common sense suggests that the ‘safe’ rate of growth in the money supply should closely match the rate of growth of the economy in order to keep inflation as close as possible to zero.

The difference between bank created debt money and State created Positive Money

A 10% rate of growth in money supply is a very different thing when that additional money comes from the state, rather than from commercial banks.

When commercial banks increase the money supply, they do so by creating an equivalent amount of debt. The new money acts as a stimulus to the economy, but the new debt acts as an immediate drag on the economy. (If you accept and spend a personal loan in August, you will start repayments in September.

In September you are immediately poorer than you were before you took the loan (even though you may have more 'stuff') as your disposable income is reduced by the amount of the repayments. You spend less in the shops and the real economy loses your regular spending).

Allowing banks to create money is therefore akin to pressing both the accelerator and the brake at the same time – and the results are equally painful to watch!

In contrast, the debt-free injection of money from the Reserve Bank is free from the immediate sedative of an equivalent amount of debt. This is akin to pressing the accelerator with your foot clear off the brake. Which system would you expect to have the greatest stimulating effect on the economy?

For that reason, we can assume that a 10% increase in the money supply, when created as debt-free money by the Reserve Bank, would be far more of a stimulus to the economy than the same rate of increase when caused by commercial banks issuing debt. Whether we should therefore aim for 5% instead (to avoid any risk of inflation) or stay at 10% (to pull ourselves out of this recession with a quick stimulus) needs further analysis.

In short, however, inflation is much less of a threat under the modernised system, whereby the state creates all new money, than under the existing system (whereby new money is created as debt by private commercial banks).




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