Money Creation Debate in the
House of Commons
Due on 20th November 2014.
Main Website Click here

in Simple English...
This web page was compiled by Edward C D Ingram, 
CEO Macro-economic Design Research Group
a financial columnist, and author of 

‘RestartingEconomics with New Financial Architecture’[1]

The information given below is taken from Edward's forthcoming book

Part 2 of the book is devoted to this subject.
See the BOOK Reviews

The APPENDIX page of this website offers more never previously published insights into what ails our economies.

The science of Macro-economic Design is NEW and has been established by Edward C D Ingram and his research team.




There is a widely understood problem with the world’s money creation system. This problem is said (with good reason) to lead to excessive economic booms and busts, and excessive borrowing. Misery and exploitation follow; and even long lasting economic depressions whilst the excess debts are repaid. 

The present money creation system can be said to have played a significant part in causing the world’s current problems. The problem is that money is created by banks when they lend money. They can lend as long as new borrowers can be found. Thus, management of the total stock of money created, borrowed, and spent, is not properly under control. Changing interest rates is the main management tool used by the Central Banks. It is a very imprecise tool.

And it is a wrong instrument. The price of money (to be borrwed) or the price of anything has a role to play: to create a balance between the supply and the demand. If you manipulate the price (the interest rate) you cannot get that balance. 

The proposed Solution is to hand over the responsibility for money creation to the central banks in a new division called the Money Supply Authority, (MSA). The MSA will be mandated to manage the total stock of deposits and cash. These are the means used to borrow, to lend, to save, and to spend. 

That leaves interest rates free to balance the limited supply of depoosits to borrow with the demand for them. As long as the supply is relatively stable, so too will interest rates be relatively stable.

To keep the supply relatively stable we have to manage foreign investments that come and go. That is dealt with in PART 3 of the book. Currently that is another area of chaos. It can be sorted out.

This money creation solution has the following merits:

1.     The solution is easy to understand as given above and belowIt is easy to understand the need for the MSA and how the solution works.

2.   Introducing the new system is simple and it will not disrupt the economy. The MSA becomes the custodian of the entire stock of money. It can simply print more money as the old credit-created money is repaid and disappears. The total money stock will remain the same. And the total stock will be stable both during and after the change-over. Or, post QE, it can easily be adjusted to be the right amount. The MSA can create and destroy deposits for lending. At present well over 95% of all deposits originate from lending. As these are repaid those deposits disappear. The amount of new money created by QE (Quantitative Easing) is small compared to what is needed for the money stock. So we do not need to worry about that. If we control the supply of deposits to lend we get control of total demand from lending. The aggregate level of speding (at least from borrowing) will stabilise.

2a. Interest rates will create the balance between supply and demand. Interest rates are a price. Prices are supposed to find their own level so as to keep an economy in balance. If you interfere with any price you will create a new level of supply and a new level of demand. The two will not be in balance. There will be too much supply or too little. There will be too much demand or too little. The demand cannot be satisfied when the supply of money with which to pay bills is too little. The value of money falls rapidly when there is too much. 

3.     This solution can breed greater competition among lenders. Bank Reserve Ratios will be lowered (less capital tied up in banking) because deposits will not be put at risk. They will be guaranteed by the MSA - read more.

If the ILS (Ingram's Lending and Savings) model described in PART 1 of the book is adopted, risk of lending and borrowing will be much reduced. Reserve ratios will be reduced accordingly. Again.

The ILS Model manages the amount of wealth lent and the rate at which it is repaid. The cost of the repayments is brought under control and is not oversensitive to interest rates or inflation rates. Everyone benefits from reduced risk. Risk-to-wealth of all parties is reduced markedly.

4.     No more banks that are ‘Too Big to Fail.’ At zero cost, the MSA will totally protect the public from losing their savings when a bank goes out of business. - If lent deposits are lost by bad lending, they get restored by the MSA which prints more money to restore them. Money stock remains the same. Lost deposit money is replaced. The bank gets replaced by another bank / lender or a merger. No matter how big the lender, incompetent or unlucky lenders will go out of business. The economy will be safe. 

5. Banks become agents of the MSA. The MSA will be the custodian of all deposits whether they are lent or waiting to be lent, Banks will borrow the unlent deposits from the National Stock of money held by the MSA, and on-lend them. If they lend and lose the deposits they must repay them anyway or go out of business or merge and repay. No so-called 'Moral Hazard' from rescuing banks that have failed at tax payers' expense.

6.   The MSA can stimulate more spending to boost an economy without the need for more government borrowing. This will be done by reducing sales taxes and the cost of regular payments. This will stimulate spending by everyone on everything proportionately. It will not unbalance the nation's spending or jobs. This will be funded by creating new money as needed to balance the government's books (replace lost revenue etc.), for a limited period only. The money created will be used to reduce the price of goods and services and all monthly payments such as for savings, pensions, and mortgages. The period of duration will be announced in advance, producing a rush to buy ‘whilst stocks last.’

It worked very well recently for the UK when VAT was reduced. The problem was that the treasury borrowed the money needed. Then VAT was raised to get it back. Then the economy slowed...

 6a.    It is fair to everyone and it is simple to administer. One of the major complaints against the present bank-led money creation system is that all of the new money goes to the banks giving them and their borrowers an advantage over everyone else. And it unbalances spending in the economy strengthening some sectors and not others. The others have to catch up later as the new spending money ‘trickles down' to everyone else – eventually. Such as slow response is not consistent with good control systemms engineering practice. The above stimulus method is compliant. It is very fast, and it keeps everything well balanced. 

A fast acting stimulus that is administered when it is needed can be much smaller than a slow acting one that is administered late.

7. When new money is created and distributed in this way, it keeps all spending in every sector in the economy in balance. And it strengthen them all. 

Unlike a Keynesian stimulus which uses borrowed money, this kind of stimulus does not distort (crowd out) the borrowing markets. The money available for borrowing will increase rather than decrease. This strengthens the whole economy by increasing demand and increasing the supply of money needed to grow the economy.

8. No need for precision. Currently it may be thought that the MSA will need a great deal of information in order to 'get it right.' This is not the case. A little too much money is a fairly normal condition and the swings up and down in the economy will be much reduced. Why? Because the total money stock and the related rate of spending will vary very much less. It is under tight, not loose, control.

However there is one major problem that the economy still faces: the interest rate can play haqvoc with savings and loans when it changes. And if there is not the exact right amount of money the rate of interest will change. Not as much as now, but it will still be a problem.

In Edward's forthcoming book, he solves this problem. By changing a few things about the structure of debts and debt repayments, huge distortions in the housing sector, huge loss of wealth from savings, huge opportunities for the rich and powerful to scam the system and become billionaires will be removed. Everyone will have to work for their money. There are brief details in the APPENDIX. And all over Edward's various websites. Here is the main one.

9. Protecting world trade and the currency. According to this source, (below), a third of all goods and services are mis-priced because they are imported or exported. See how the world has changed - see this chart.

In part 3 of the book, Edward explains how the MSA will be able to prevent the stock of deposits from being swamped by external investors. When that happens, it changes the value of the currency.

“Paul Volcker once noted that trade is more affected by 10 minutes of movements in exchange rates than by 10 years of trade negotiations.” Taken from “Our chance to slash the high costs of currency manipulation” - By Fred Bergsten, Financial Times, December 16, 2013.

The proposal is that when a foreigner wants to buy into our stocks and shares markets, they will first have to obtain some of our stock of money in exchange for our MSA getting the same value of their stock of money. This will 
  • End the problem of money stock being altered in both economies and the value of both currencies changing in the process. 
  • The pricing of currencies will be determined by the balance of trade. Most of the currency price volatility will be removed from currency pricing. 
  • Save tens of billions in curency protection activites, and remove the need for trillions of dollars around tthe world being held as reserves ready to change ownership changing balances of assets holdings at a moment's notice. Instead, the ownership of that money can be stable and doing something useful. 
  • End currecy price wars. The means to wage a currency war by buying into another nation's investment markets, to devalue the currency and increase export demand, will no longer exist. Currency values will be determined only by the balance of trade. and it will
  • Enable importers and exporters to make a plan and gear up their sometimes huge businesses without crashing as a result of volatile exchange rates. 
 This contains a lot of fascinating information
that has never appeared in text books.

We have an active discussion group at LinkedIn.
 There is a sub-group for policy makers, treasury officails, and central bankers.

To  join this group please Google Search the following words:


[1] The Economic Architecture is the way we do things – how we borrow, lend, create money, and manage currencies, interest rates, and taxation.


For more book details - please see BOOK


  1. 1. Get rid of the privately owned SARB (create money out of thin air). 2. Give the the treasury back the power to issue coin and currency (debt free money). 3. Outlaw banks practice of fractional reserve banking (fraud, create money out of thin air). 4. As in Iceland, jail bankers that commit fraud (every single day!). Banks should get a clear message that they are "not too big to fail" nor "too big to jail". If they get into trouble, just like any other business, let them go BANKRUPT! This for starters. I haven't even got into illegal securitising of mortgages and other debt, banks bundling these and selling them to SPV's, derivatives, etc, etc.

    1. Keith, have you read all of the information I put out? I ask because you are saying more or less the same things.Many people have said this. And mostly I agree with you.

      The difference is that I am not dealing with prison sentences, I put forward several logical reasons for making these changes, reasons that are sometimes in common with others and sometimes based upon several fundamental principles.

      Here are five that my solution complies with::
      1. A stimulus should not go to particular sectors but to all sectors equally.
      2. It should be precise.
      3. It should be fast acting.It should be done timeously so that it is gentle.
      4. Interest rates are a price and so if you alter a price you meddle with both supply and demand. You will always be out of balance.
      5. The interest rate instrument is a very loose and imprecise instrument not capable of steering the quantity of spending in an economy with anything other than overshoots in both up and down diections.

      And I have explained something of how to achieve the change-over smoothly - you would hardly know it was happening as far as the public is concerned. Not till later when everything behaves more predictably..

      My book will expand on all that.

      You can see reviews of the book on the BOOK page. See page titles above.

      Thanks for your support.

      The first video record of my views on money creation goes back to te video link on this page.
      The page name is:

      You will see that page if you scroll up to the top of this page.

  2. Sorry flew of the handle a bit. I get what you're saying, thanks.

  3. Mitchell & Goldsmith in UK "Great Money Creation Debate"
    Jct: The best of of Austin Mitchell and Zac Goldsmith from the "Great Money Creation Debate" in the UK Parliament on the most important issue on the planet, who controls creation of our credit, private banks or government utility, the whole debate I posted with commentary at