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The Money Reform Party

About Money

It's an idea

Money is a man-made concept designed to ease trade. It is a medium of exchange, far easier than bartering. Money used to be something of intrinsic value - gold and silver, but today it is notes and coins or (far more usually) numbers held in computers. For money to work in it's current form we must trust in it.

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Types of money

In 1987 the Bank of England introduced new definitions of money to try and work out how much of it there was in the system. It's pretty complicated but are some definitions of the types of money for the UK.

M0 = Notes and coins in circulation with the public plus Bankers operational deposits with the Bank of England.

Nib M1 = Notes and coins in circulation with the public, less, Banks' till money, plus, UK private sector non-interest bearing sight deposits.

M1 = Nib M1 plus UK private sector interest bearing sight deposits.

M2 = Nib M1 plus private sector interest bearing retail sterling bank deposits, plus, private sector holdings of retail building society shares and deposits and national saving bank ordinary accounts.

M3 = M1 plus private sector sterling time bank deposits, plus, private-sector holdings of sterling bank certificates of deposit.

M3C = M3 plus private sector holdings of foreign currency bank deposits.

M4 = M3 plus private sector holdings of building society shares and deposits and sterling certificates of deposits, less, building society holdings of bank deposits and bank certificates of deposit and notes and coins.

M5 = M4 plus holdings by the private sector (excluding building societies) of

  • Money-market instruments (bank bills, treasury bills, local authority deposits,
  • Certificates of tax deposit and national savings instruments (excluding certificates, SAYE and other long-term deposits).

You might well ask, which is the correct definition and it seems that there isn't one and each can be used for different purposes. However, it could be said that M0 is 'notes and coins' and M4 is a widely recognised as total 'money' stock including all loans and mortgages, which makes you wonder what M5 is. According to modern economic theory, M5 includes things that are not money but are as good as (near money), like Treasury bills and also excludes a load of stuff too, which makes you wonder why there isn't an M6!

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How much money is there?

Actual notes and coins account for about 3% of the money in the western world. The rest is debt. This debt-money is created every time a loan or mortgage is taken out - see banks.

The consequences of this debt-based money supply are the root cause of all our economic and environmental problems. How can an economy pay back money on its loans (with interest) when 97% of 'money' is supplied by creating debts?

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Notes and coins

Pound coin resting on it's edge. The most significant thing about notes and coins, in the UK at least is, that it is debt free money.

Notes and coins are minted and printed by the government at very little cost, however they do not have any particular need for them (in our 'electronic' world). But banks do because banks supply shops and people with cash. So the government sells the coins to the banks, which pay by cheque or electronic transfer. The money that the government gets from the bank is still debt-free and is added to the revenue from taxes so that it can pay for public services.

The biggest point about the government creating this money is that they have created the money! They could, if they wished, create more to pay for more hospitals, more education equipment and teaching hours, better pension schemes and road systems! - all those things they say they don't have enough money for but we desperately need. By restricting themselves to creating only notes and coins when people and industry are moving towards electronic and internet banking they have diminished their support of the economy to 3%. In 1948 notes and coins equated to 50% of the money supply.

It is the lack of a demand for cash and the decrease in it being created and the unwillingness of Government to create debt-free electronic money that has lead to the debt-based money supply by banks - in order to get "money" it must be borrowed.

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All around us, the gross failure of modern economics screams out to be addressed.

Michael Rowbotham author 'The Grip of Death'

Must Reads

The Grip of Death: A Study of Modern Money, Debt Slavery and Destructive Economics by Michael Rowbotham

The Grip of Death:
A Study of Modern Money, Debt Slavery and Destructive Economics (Paperback)
by Michael Rowbotham

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