The only way the government can create additional purchasing powe is by getting itself and us into more debt.
The second big issue with allowing the banks to create money is that they have the incentive to always create more.
So the Bank of England has the responsibility of making sure there's enough of this money in the system. The requirements for banks to hold a specific amount of reserves has changed many times since 1947. At that time, banks needed to hold a minimum ratio of 32% of reserves, cash, or Treasury Bonds to deposits.
There're all sorts of things that governments have done in the past, very successfully in a number of cases, and often not unsuccessfully in this country, the examples that spring to mind, South Korea, Japan, often in East Asia, where governments have been quite targeted about how they're going to rebalance the economy, picking sectors and deciding where the investment should take place
And you're going to have to go along with it because we've been democratically elected and you haven't, and we have a mandate to do this and we're going to make this happen.
So a growing banking sector is not a good thing. If the banking sector is growing it's either that it's becoming less efficient, or it's becoming a parasite on the rest of the economy. We can talk about the banking sector becoming 4%, 5%, 6% of GDP. What's happening to the rest of the economy? It's becoming 96, 95, 94% of GDP.
The only way the government can create additional purchasing powe is by getting itself and us into more debt.
The second big issue with allowing the banks to create money is that they have the incentive to always create more.
Another way of doing it, which we followed, is that we have a credible plan to repay our debts and the value of sterling has fallen by 25% to make our exports more competitive and attractive to overseas buyers, and to be more attractive for British consumers to buy from British producers rather than overseas producers.