Bank of England finds QE did not increase bank lending: who would have thought

I read an August 2020 Bank of England Staff Working Paper (No.883) – Does quantitative easing boost bank lending to the real economy or cause other bank asset reallocation? The case of the UK – recently, which investigates whether the large bond-buying program of the Bank stimulates bank lending. They find that there was no stimulus to lending. Which would only be a surprise if one thought that mainstream monetary economics had anything useful to say. Modern Monetary Theory (MMT) economists were not at all surprised by this finding.The reality is that the lack of bank lending during the GFC had nothing to do with a liquidity shortfall within the banking sector. It had all to do with a lack of credit-worthy borrowers – which should tell you that bank reserves do not constrain bank lending. The fact that mainstream institutions such as the Bank of England are now publishing this sort of research, which undermines the mainstream theory is the interesting fact.

The reason this is an interesting exercise is that it uses a unique dataset, which includes the exact banks “that receive reserve injections through the BOEs APP (QE banks)”.

This allows the researchers to conduct what is called a “difference-in-differences” methodology, which essentially pinpoints reasons for variations between observations in the dataset.

The practical importance of studies like this is that they provide real world evidence to allow us to understand the way the monetary system operates and to reject the way mainstream economists construct those operations.

In a recent blog post – ECB nearly comes clean – higher fiscal deficits, higher QE (July 20, 2021) – I discussed a report that the Economic Affairs Committee of the UK House of Lords has issued on July 16, 2021 – Quantitative easing: a dangerous addiction? (July 16, 2021) – where they rehearsed all the usual errors relating to QE.

These are the errors that mainstream economists introduce into the policy debate and their teaching programs.

So real world evidence refuting basic mainstream propositions is always welcome.

I also considered these questions in a series of blog posts 12 years ago – when people were starting to wonder what the impacts of the large central bank bond-buying programs would be.

They were scared that the so-called ‘money printing’ interventions from the various central banks early on in the GFC would be inflationary.

The reason they thought that is because they had either been taught that in economics programs at university or because they had been listening to politicians and their crony mainstream economists relentlessly pushing that message in the media.

This set of blog posts was designed back then to set the record straight.

1. Quantitative easing 101 (March 13, 2009).

2. Building bank reserves will not expand credit (December 13, 2009).

3. Building bank reserves is not inflationary (December 14, 2009).

4. Lending is capital – not reserve-constrained (April 5, 2010).

It is amazing that it took so long for bank officials to acknowledge what Modern Monetary Theory (MMT) economists knew all along.

QE does not increase the risk of inflation in an economy.

If it did then Japan should have been hyperinflating by now given the 20 years or so of very large government bond purchases by Bank of Japan.

The problem that the mainstream economists encounter here is that they start with a flawed view of the private banking system.

They believe that bank lending is constrained by the reserves they have in the vault and that quantitative easing solves this shortage by providing those reserves.

So banks are conceived as being ‘desks’ where officials wait for cash to come in in the the form of deposits, which they loan out, profiting from the difference between deposit and loan rates.

But this is a completely incorrect depiction of how banks operate.

Bank lending is not ‘reserve constrained’.

Banks extend loans to any credit worthy customer they can find and then worry about their reserve positions afterwards.

Remember the role of bank reserves is to facilitate the clearing system for transactions that have cross-bank implications.

So if Bank A creates a loan which simultaneously creates a deposit in its books, the person can either draw down the deposit and spend the cash in a business that banks with Bank A or spend in a business that banks elsewhere, say, Bank B.

In the former case, there is no clearing issue. Bank A simply transfers the deposit funds from the customer to the business.

In the latter case, Bank B will call on Bank A to transfer the funds into the account of its business customer.

Those transfers are what the clearing house is about and there are millions of such transfers being done on a daily basis.

That is what bank reserves are for.

So Banks A and B have accounts at the central bank and the relevant entries are made in those accounts to satisfy the transaction noted above.

The banks never loan out reserves to commercial customers (borrowers).

They sometimes loan out excess reserves to each other to smooth out the clearing system.

If banks are short of reserves (their reserve accounts have to be in positive balance each day and in some countries central banks require certain ratios to be maintained) then they borrow from each other in the interbank market or, ultimately, they will borrow from the central bank through the so-called discount window.

They are reluctant to use the latter facility because it normally carries a penalty (higher interest cost).

The point is that building bank reserves will not increase the bank’s capacity to make loans.

Loans create deposits which generate reserves not the other way around.

The major institutional constraints on bank lending (other than a stream of credit worthy customers) are expressed in the capital adequacy requirements set by the Bank of International Settlements (BIS) which is the central bank to the central bankers.

They relate to asset quality and required capital that the banks must hold.

These requirements manifest in the lending rates that the banks charge customers

But despite what is taught in mainstream courses in monetary economics, bank lending is never constrained by a lack of reserves.

Which is why MMT economists never considered QE to be an appropriate vehicle for increasing bank lending in order to stimulate the economy.

Quantitative easing merely involves the central bank buying bonds (or other bank assets) in exchange for deposits made by the central bank in the commercial banking system – that is, crediting their reserve accounts.

Quantitative easing is really just an accounting adjustment in the various accounts to reflect the asset exchange. The commercial banks get a new deposit (central bank funds) and they reduce their holdings of the asset they sell.

It was always obvious that the reason the commercial banks were reluctant to originate loans during the GFC was because they were not convinced there were credit worthy customers on their doorstep.

Further, after years of lax assessment practices in relation to credit-worthiness, the banks tightened their rules once the GFC threatened their solvency.

The 2020 Bank of England report has reflected on this issue and constructed a unique dataset.

The paper still runs the line that:

Banks receive cheap liquidity, in the form of central bank reserves injections, as a direct effect of the asset purchase programs. This should encourage banks to lend more to households and businesses, transmitting the impact to the real economy.

Which continues the myth that bank lending is in some way reserve constrained.

But their mission – to “the impact of the two main waves (March 2009 to November 2009 and October 2011 to October 2012) of the UK asset purchase program (APP), also referred to as quantitative easing (QE) on UK banks’ balance sheets” and to see whether there was any association with the bank lending practices is interesting.

The empirical data is clear:

1. The Bank of England QE program began in March 2009, which followed the US Federal Reserve launching a program in November 2008.

Of course, the Bank of Japan launched its large-scale bond buying program in 2001. So we already knew what happened.

But the mainstream economists kept dismissing the Japanese case as ‘special’ due to cultural differences.

That was a poor way of saying they didn’t have a clue why the way in which the Japanese monetary system responded violated all the textbook predictions that the mainstream economists made.

2. There was no visible impact on bank lending, which showed a “fall or little to no growth” in the period after the QE program began in Britain.

Loans to non-financial businesses fell sharply between early 2009 and 2014.

The authors assembled a dataset which allowed them to compare “UK banks that received reserve injections from APF, called QE-banks, with those that did not.”

They had 18 years of data from “the second half of 2000 to the first half of 2018”.

The authors note that:

When the Bank of England conducts QE, reserves are credited to the reserves account of the seller’s bank, and that bank then credits the seller’s deposit account with the same amount. Hence, banks involved in QE operations (QE banks) initially receive additional liquidity (as reserves), while other banks (non-QE banks) do not.

They note that the initial boost to reserve balances for the QE-banks could “leak” to the other banks, through the payments system – in the way I described above.

However, due to the institutional structure in Britain the QE-banks “mostly do business with a small subset of banks who are also participants in the Bank’s QE operations” and so the leakage was considered small.

The authors also note that the “money multiplier” does not exist in Britain and:

… the supply of credit is mainly driven by banks’ ability and/or incentives to lend.

Yet they still claimed that QE “improves banks’ ability to lend” but other factors like “depleted capital positions” and other regulatory matters intervened.

Their results are interesting:

1. “the additional liquidity did not incentivise QE-bank to increase lending, relative to the control group. There is no evidence suggesting that these results were driven by changes in relative demand for loans the two groups faced.”

2. They “no evidence that lower lending by QE banks after the two QE waves is caused by differences in the demand for loans between the treatment and control groups.”

3. “Relative to the control group, QE banks increased reserves and reduced lending to other banks after QE1. They also increased holdings of government securities, especially after QE2. This suggests that QE banks reallocated their resources from lending towards government securities with low risk weights.”

This is significant.

There was a lot going on at that time.

The Banks scrambled to increase the quality of their capital base – which is why they increased their holdings of government bonds which were considered lower risk than retail loans.

Banks also reduced their exposure to the European debt crisis by reallocating their assets to British bonds.

So there was asset reallocation going on but no increase in bank lending as a result of the rising reserve balances.

The overall conclusion of the paper is that “if the policy objective is to provide an additional boost to the economy through supporting bank lending in a time of stress and uncertainty, it might be valuable consider using alternative credit easing tools.”

Which really is a confession.

QE was never going to break the deadlock in the loans market that arose during the GFC as the deep uncertainty drove would be borrowers underground.

Households, fearing unemployment, did not want to take the risk.

Businesses, knowing that household spending was constrained, and with excess productive capital, had little incentive to borrow more even at lower rates.


Another piece of evidence that tells any aspiring student not to study mainstream monetary economics, unless you like fiction.

That is enough for today!

(c) Copyright 2021 William Mitchell. All Rights Reserved.

This Post Has 11 Comments

  1. This complements the work from the paper published by the Economics Department at the University of Warwick.

    QE and the Bank Lending Channel (2015), accessed 7 December 2021 at

    Using Bank of England data together with an instrumental variables approach, we find no evidence of a traditional BLC associated with QE.

    The killer quote is on page 16

    Our contribution is to add to this analysis by studying the effect of QE on individual
    banks balance sheets using the panel dimension of our dataset. There has been a popular
    tendency to believe that reserves created by QE sit on banks’ balance sheets rather than
    being lent out. This characterisation misunderstands the role of reserves in the UK banking
    system in two ways. First, reserves are highly unlikely to have sat statically on banks’ balance
    sheets. Reserves are the ultimate means of settlement, such that when payments are made by
    banks’ customers, absent any offsetting payments, they are settled in reserves. Second, such
    a characterisation seems to assume there is a normal tight link between reserves, money and
    the quantity of lending via a money multiplier. But the UK sterling monetary framework has
    no such feature.

  2. Bill,
    Is there a link between QE and the rapid rise in UK house prices via low mortgage rates and lax lending multiples of income ? In the absence of jingle mail in the UK perhaps housing is a more creditworthy asset than other lending?

  3. The mainstream economic models don’t work?
    Well, many of us are saying just that, since a long time ago.
    Financialization of the economy will only make debt grow – private debt and, ultimately, public debt (in Portugal, in the aftermath of the GFC, 25b€ of private debts were nationalized and, now, has become unpayable public debt).
    Italy, a once heavy industrialized country, is now struggling to find out what to manufacture in the future.
    A non-elected government is running the third largest economy of the EU, dreaming with start-ups.
    In the end, they will be manufacturing more debt.
    These bottlenecks had happened in the past and they spawned two world wars.
    We’re cooking the third, right now.

  4. Bank of Canada is an interesting case.

    In 2009 Scott Fullwiler did this piece – Don’t Fear the Rise in the Fed’s Reserve Balances

    Mark Carney knew All of this before he took up his post as head of the Bank Of England. Yet, while Carney was at the bank of England he acted as if he knew nothing. So what does that information tell us apart from at the time economists were completely clueless?

    1. Every time Carney opened his mouth it was propaganda he was spreading to off set the market reaction to what they were doing. Drahgi pulled off the same trick for years.

    2. QE is a tool they use to fight inflation as both the financial crises and pandemic shows. As soon as there is a crises first 2 things they do are slash interest rates and QE. It has nothing to do with bank lending.

    3. They do know how the mechanics actually work but act as if they don’t every time they speak is to appease the markets.

    4. What Volker did was just a continuation of the The Powell Manifesto – 1971. Nothing short of a coup de tat to get full control of the democratic system. If you look at the interview I posted up yesterday with former Ohio Congressman Dennis Kucinich. The exact same trick is being played out at the state level.

    5. When foreign students come to the West to study economics they go back home like a ticking time bomb. Everything they are taught to believe will only help the West in a time of crises. It is part of their foreign policy agenda.

    We live in Orwellian times when just about everything they say the opposite is true and what democracy we have left is getting poisoned because of it. There is such a disconnect between the rulers of the country and the economic profession and the universities that pump out this garbage. The rulers of the country know exactly how it works and have known for 100’s of years.

    My guess is the trust broke down during the cold war when so many people were caught spying that went to Oxbridge. It was probably at this time The ruling class decided universities had to change and universities had to be created to pass the ideological test. How we ended up with places like the Chicago School and business schools that don’t educate but indoctrinate the population.

  5. Warren thinks they have the interest rate thing backwards. They don’t they only say they have it backwards.

    If they actually thought increasing interest rates fought inflation that is what they would have done at the start of the financial crises and the pandemic. They didn’t they slashed interest rates and done the opposite of what the text books say you should do.

    Inflation was their main concern in 2008 and 2020 not bank lending.

  6. Do LSAPs/QE independently causally increase the price of financial assets, according to MMT (us)?

  7. Were they really fighting inflation following the GFC? I thought the reasoning went:
    a) the major banks had just lost all the money there was
    therefore b) more money had to be provided to keep the world from a deflationary shutdown.

    Similarly in the pandemic, half the western world was about to be locked out of work, and the missing earnings had to be replaced somehow.

  8. Mel,

    I could well be wrong but my view is….

    After using fiscal policy to bail out the banks not monetary policy and fiscal to bail out the pandemic.It was definitely inflation that was their main concern.

    The same amount of money was getting spent but businesses were about to fold. The things that produce the goods and services everybody needs. There wasn’t a shortage of money in the private sector due to fiscal policy the deficits grew substantially.

    Fiscal policy bailed out the banks and fiscal policy bailed out the pandemic not monetary policy. When you get to a stage when money and demand are the same or both are increased in the private sector, but those that service that demand ( businesses) are in free fall inflation can quickly be the problem. The last thing you want in that scenario is increased bank lending as well. As bank lending can be inflationary on top of all of the other inflationary pressures that were building.

    What did they do ?

    Slashed rates and introduced QE. Even the Bank of Canada introduced QE on the lie it improved bank lending when they know fine we’ll it doesn’t. In Canada, reserve balances had been effectively zero for over a decade, and bank lending continued as it did anywhere else. Canada’s inflation also had been similar to that of the U. S.

    Then attack the deficits.

    So why did the BOC lie about what QE does ?

    My view is they were using QE as an inflation control tool. Stripping interest income out of the economy. What other reason was it for ? They could have simply instructed the central bank to buy the debt. Like all other central banks around the world they had to keep up the charade and try and hide the truth and QE is the perfect green curtain of the many green curtains they use.

    Why we want to change the way banks operate and avoid the next Minsky moment. Stop Bank lending falling off a cliff in the first place. With the quantity restricted solely by credit quality. As an economy heats up, credit quality declines and loans become restricted - systemically preventing the Ponzi stages of finance that lead to a Minsky Moment.

    Or to put it another way ….

    Corporation tax should be done away with altogether it just gets passed on to the consumer anyway and waste of skills and real resources trying to collect it. Those people and real resources should be doing other things.

    Since capitalism is run on sales give tax cuts to consumers not business.

    Both the self employed and small business will benefit from the increased sales. Now that consumers have more money to spend.

    Ideally, it is best if tax move countercyclically-increasing in expansion and falling in recession. That helps to make the government’s net contribution to the economy countercyclical, which helps to stabilise aggregate demand.

    We recommend introducing a job guarentee to do that. It is far superior than the carpet bombing approach of increasing taxes to control inflation or interest rate targeting.

    Those payments and reductions are spatially targeted precisely where they are required and target effective demand instead of aggregate demand. So you can have an area where private sector employment is increasing. Government spending on JG jobs will reduce in that area. While at the same time, the JG is increasing spending in a weak private sector area elsewhere in the country. That will improve private sector spending in those areas.

    Tax rates should be set so that the government’s budgetary outcome (whether in deficit, balanced, or in surplus) is consistent with full employment.

    A country like the UK (with a current account deficit at full employment) will probably have a budget deficit at full employment (equal to the sum of the current account deficit and the domestic private sector surplus).

    A country like Japan (with a currrent account surplus at full employment) will have a relatively smaller budget deficit at full employment (equal to the domestic private sector surplus less the current account surplus).

    Most things sort themselves out after that because of competition. A skills based immigration policy and a competition and monopoly authority with some real teeth are imperative along with cutting the retirement age.

    Because we have got rid of the corporation tax. You need to solve the problem at source. that “predistribution” rather than “redistribution” works better. Once you’ve let the rich become super rich, they have the incentive and the power to defeat the effort to tax them. those horses have already bolted.

    Such as eliminating government bonds (that provide interest income to rentiers), banning stock ownership by pension funds backed by the government, and regulations to constrain and narrow permitted banking activities-all of which remove most of the highest incomes in question at the source.

    The only bonds Brexit Britain needs are Granny Bonds

    But we also need to put the City Of London back in its box at the same time. Show them who is in charge of they won’t get a banking licence.

    The job of a bank is to promote the capital development of the economy. That is its public purpose; the job it is licensed to do. All other activities that conflicts with that purpose must be prevented.

    For banking to be effective it must be boring - bowler hat boring. The job of a bank is to provide capital development loans to the economy based solely upon credit analysis. All other activities deflecting from that purpose are banned.

    1. Banks can only lend directly to borrowers for capital development purposes (i.e. business credit lines and household loans), and the banks keep those loans on their books until cleared.

    2. Banks must operate on a single balance sheet. No hiving things off into ‘off balance sheet’ subsidiaries to try and hide them.

    3. Banks cannot accept collateral. Collateral is a fixed charge over an asset as an insurance policy and aligns the incentives of banks with those possessing assets, not ideas. It stops banks being capital developers and turns them into pawn shops. That is the wrong alignment of incentives. We want loan officers with skin in the game. Their success should depend upon the success of the borrower. Banks should line up in insolvency with the other unsecured creditors (and importantly behind the remaining preferential creditors - employees).

    4. Depositors are protected 100% at all amounts. A depositor in a commercial bank is holding nothing more than an outsourced central bank account. They are not investors in the bank and should never be treated as such.

    5. The job of the bank resolution agency is to ensure the banks are properly capitalised given their loan book and declare them solvent. If they are not, they take the bank over and resolve it with any excess losses absorbed by government. This aligns the incentives of the regulator. If they get the solvency calculation wrong and the capital buffers exhaust, the regulator stands the cost.

    6. The Central Bank provides unlimited, unsecured lending to regulated banks at zero interest rates. Collateral serves no purpose since the bank has been declared solvent (and therefore there is no reason for it to be illiquid), and collateralised Central Bank lending just shifts the losses to depositors who are protected 100% anyway.

    7. Once you get rid of interbank collateral and funding requirements, you get rid of one of the final excuses for keeping Government Bonds. National Savings annuities for pensions (allowing retiring individuals to receive a secure lifetime income) would get rid of the final one. Transferable instruments that confer government welfare on the owners do not serve the public purpose. Government welfare receipt is a social decision, not a market driven one.

    See Granny bonds above for more details on number 7

    8. As the asset side is now heavily regulated because of 1-7, you want the liability side to be as cheap as possible. Unlimited central bank access ensures liquidity for depositors and allows lending-only banks to arise. It gets rid of the Interbank overnight market and replaces it with central bank overnight accounts. It puts the Central Bank ‘in the bank’ as a major investor - with open access to the commercial bank’s loan book via the work of the solvency regulator.

    9. All levies, liquidity ratios, reserve requirements and the like are eliminated. The cost of maintaining the collateral system is eliminated. The result is loans at a low price with the quantity restricted solely by credit quality. As an economy heats up, credit quality declines and loans become restricted - systemically preventing the Ponzi stages of finance that lead to a Minsky Moment.

    10. Proscribed banks, forced to rely on credit analysis for profit, help prevent a boom by issuing less credit as project quality declines.You get a natural and steady withdrawal of funding that is far more surgically targeted and responsive to local conditions, than the carpet bombing approach of interest rate adjustments.

    Banks are currently too complicated, too large, too impersonal, too intertwined and systemically dangerous. They need to be simpler, smaller, more local and relationship oriented in scope. All of which are easy to achieve once you adopt steps 1 to 10

    This leaves the payment system, which should be as costless as cash and clear just as instantly to eliminate transaction frictions. Whether that should be publicly provided, or remain outsourced to the banks is an open question.

    Depositors are a cost to the bank and would effectively be a tax, but leaving them with the banks would give them an incentive to get the cost of clearing provision down. It may boil down to a political question that depends upon your view of the effectiveness of public and private provision.

    We need an Open clearing system available to all on an open licence. We want one good clearing system free from outside and inside corruption. Putting these changes in place Mel or something similar will smoothe out bank lending over the cycle. The JG helps to do the rest.

    What backs up the view is the countries that do QE the most, the eurozone and Japan both have suffered from deflation for decades not inflation. Both slashed interest rates even into negative territory. They know exactly why they are doing it and not to increase bank lending.

    As Bill shows if QE does not increase bank lending and Canada, EU, Japan know it doesn’t increase bank lending then why do they lie about it ? That is the question to ask along with so why do they do it then ?

    My view is inflation control. Also a tool that helped them hit the overnight interest rate before introducing other more effective green curtains rather than just instructing the central bank to just buy the debt that would really give their game away.

    I don’t think the EU or Japan have been trying to inflate like they claim they have been for years. I think they know exactly what they have been doing. Then have to make up fairy tales to try and hide it. Convince the world’s portfolio managers to do what they want them to do.

    As explained by Warren here……

    It would easier if they all stopped this charade instead of trying to keep their neoliberal globalist dream alive. The next smoke and mirrors con trick they are pushing very hard is nominal GDP level targeting and will waste another 30 years trying to prove it. It is everywhere you look at the moment. The right have it in every right wing publication.

    As Brian explains here…..

    When you take the view I do that they are not stupid and after running central banks for 100’s of years. That they all know QE does not increase bank lending. Then you have to come up with a reason why they do it. It might very well be wrong but above is my reason. MMT economists will provide a better reason if they start from the viewpoint that the central bankers know how it works – so why do they do it if they know it does not increase bank lending.

    Canada would be a good starting point. They have known for a long time this is the case so why do QE ? Why did Canada so it ? Lie about it ?

  9. Only recently, I have taken a different point of view and a different starting point and that starting point is that I don’t believe they don’t know how a central bank works after running one for many years. I don’t believe they could set up the EU the way they did or the African currency without knowing full well how things actually work. I actually don’t believe they are stupid I believe they are very clever indeed.

    The economics profession is a different story.

    So I would love to see a chapter in the next MMT book dedicated to that starting point. A whole chapter dedicated to – if they really know how it works why did they do X,Y and Z. If they know how it works why did the ruling class do these things.

    I’m convinced that what will be found to be the case using the MMT lens in that way is that 9/10 there are 2 reasons behind what they do.

    1. To hide how things really work.

    2. To appease the markets – in other words appease their political donors and entrench the power of the ruling class even more.

    What would become Crystal clear is that we are not in an intellectual debate between left and right ideas on how the monetary system works. It would become apparent very quickly that we are in a class war. A class war that bypassed any intellectual debate many years ago and should be treated as such.

    That in fact we are fighting a class war in a class room and that is a huge mistake.

  10. As I understand it, the devising of and coining of the expression QE in Japan around 1995 by Richard Werner (author of Princes of the Yen) was to be an asset swap for the purpose of removing non-performing loans from the balance sheets of the private banks on condition that those banks would then make future loans for productive purposes (into the real economy) and not loans for asset purchases. After all, Japan was then suffering the hangover from their absurd real estate boom and bust. Tokyo’s Imperial Palace was, at one point, “worth” more than the whole state of California!

    The QE of today has become bastardised. Banks being banks, and wanting the easiest return for the least effort, find that there is too much work and skill needed to assess business risk in making loans for productive purposes as against lending into the asset price/unproductive/Ponzi economy (e.g. real estate, share buybacks, art, etc). And if without any loan constraints from banking authorities where do you imagine future loans will be made? We can see the results all around us in this pandemic era and previously following the GFC. Proper economic rules for banking, vis-a-vis the productive economy, are in a parlous state as demonstrated by Australia’s obsession with real estate which has gone through the roof. All of this just adds to the financialisation of our economy feeding the rentiers at the expense of the citizens and further advancing neofeudalism. “Neoliberal” is such a wrong word as it connotes the idea of freeing up when the opposite is the actuality. Similarly for the name of Australia’s Liberal Party which is today a cruel, punitive and unprincipled right wing reactionary party.

    Whilever there are governments not prepared to take an opportunity like this to re-nationalise various public utility industries and services, such as the banks, in whole or in part I believe they are failing to act in the public interest.

    The threefold theories of money and banking being the fractional reserve theory, the banking intermediary theory and the credit creation theory. Only one of those survives empirical testing in the environment of today and that is credit creation. Such being operable under a banking licence within the non-government side of the economy where debts are contractually required to be repaid. A complete contrast with the creation of “debt free” public money on the government side. Money merely being the activator for the economy of real resources and not the economy itself, as it seems to have become in so many minds today.

  11. Nothing is going to change Fred.

    Because these are now the tools of imperialism. The geopolitical tools of US foreign policy.

    No longer do they have to March an army in and build a wall between Carlisle and Newcastle and name the wall after the Emperor.

    Why large deficits hurt banking profits. As Michael Hudson explains here.

    The day will come when the people will have to take on the banks until that day everything else is just white noise. Smaller countries would love to do it but how can they when there is 800 US military bases that support it and the ruling class in the country gets rewarded handsomely for asset stripping their own countries. They hand pick who you can vote for and call it democracy.

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