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.

Transaction Accounts

As a customer of a bank, your current account will be replaced by a Transaction Account. Your debit/ATM card, cheque book, and internet banking will all work as normal. The only difference will be:

  1. The bank won't be able to use the money in your account for its own investments
  2. There would probably be a small fee (≈$5/month) for using the account. This 'Transaction Account' system means that if the bank goes bust, the money in your account is 100% safe and can be quickly transferred to another bank.

Transaction Accounts replace current accounts

Present-day 'current' accounts, are generally used for payment services (cheques, debit cards, cash machines, electronic fund transfers), and receiving money (such as a monthly salary).

These current accounts will be replaced by 'Transaction Accounts'. To the customer, a transaction account will appear to be almost exactly the same as a present-day current account, and members of the public will probably continue to call them 'current' accounts.

However, to differentiate between the pre- and post-reform situations, we'll be using the technical term Transaction Accounts.

What is still the same

  1. Transaction Accounts will still provide cheques, debit cards, access to cash machines, electronic fund transfers etc.
  2. Salaries will still be paid into Transaction Accounts.
  3. Payments between individuals and businesses will still be made from one Transaction Account to another.
  4. Customers will still have instant access to money in the Transaction Accounts.
  5. These accounts may still offer overdrafts. (The provision of overdrafts is a key, but complex part of the modernised system, which is dealt with here: Overdrafts & General Liquidity in the Modernised System.)

What is different

  1. A bank will no longer be able to use the money in Transaction Accounts for making loans or funding its own investments.
  2. These accounts will all be held 'off the balance sheet', and not be considered part of the liabilities of the bank.
  3. The money paid into Transaction Accounts will be held in full within an account at the Reserve Bank. In other words, the money is 'in the bank' at all times, and could be repaid in full (to all customers) at any time, without having any impact on the bank's overall financial health. It is technically impossible for the money to be lost, and a bankrupt bank would still be able to repay all its Transaction Account holders.
  4. Because the banks are unable to use the funds placed in these accounts to invest or lend, they will be unable to earn a return on these funds. As they will still incur the costs of providing payment services (cheque books, ATM cards, cash handling etc), they will almost certainly need to implement account charges to cover these costs.

Benefits of the changes

  1. The government and taxpayer would have absolutely no exposure to problems with individual banks.
  2. It would now be impossible to suffer a 'run on the bank'. Even if all Transaction Account customers of one bank were to withdraw their money on a single day, the bank would be able to pay with no impact on its financial health and no need for emergency assistance from the government.
  3. Money placed into a Transaction Account would be 100% safe. There would be no ceiling limit on the amount that is safe, and the 'guarantee' has no real or potential cost for the taxpayer (because the money can not be lost).
  4. Because of the way the clearing system under this modernised system would work (see ‘The Payments System’), the time for payments to show up in the recipient's account could be as little as 30 seconds (as compared to 2 hours to 4 days as at the moment). This would provide a better service to both individuals and companies and would make the economy more efficient.
  5. If a bank collapsed, it would only be an administrative procedure to move the Transaction Accounts over to other banks, and no money would ever be at risk.

Cost of these changes - Account Fees

As mentioned above, because the banks can not use these funds any more to make loans, they will want to recoup the costs of providing payment services through charging account fees.

While no-one likes to start paying for something that was previously free (although it should be noted that many banks are already introducing fees on current accounts), the fee that banks charge would be more than outweighed by the very considerable savings that the average working adult could expect to make as a result of the modernised system (these savings are discussed later).

Note that even today, these costs are incurred by the bank, and recouped from customers via unauthorised overdraft charges and other unexpected fees.

In the current system, many accounts pay no interest at all.

In addition, the post-reform payments system may be significantly cheaper to run than the present-day clearing system, as there would be no need for a complex ‘clearing’ system (transactions would be instant and final). This means that the only significant costs would be in creating the physical ATM cards and cheque books, offering customer service, and maintaining the banks' main computer systems.
In practice, there will be significant market pressure to keep account fees as low as possible.

As the next chapter shows, to be able to make loans, post-reform banks will need to attract customers who wish to make investments with them.

One way to attract customers and gain market share is to run a 'loss-leader' campaign with their Transaction Accounts. They would do this for the same reason that they currently offer free overdrafts to students - someone who banks with you for normal payment services is far more likely than the average consumer to save with you and come to you first for overdrafts, credit cards and mortgages.

As a result, competition between banks for market share means that the costs of payment services may be ‘absorbed’ by the banks as a cost of acquiring market share, and recouped from their investment earnings. In short, the cost passed on to customers is likely to be minimal.




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