The money is just circulating through this system over and over again and if you think about it, a one pound coin could be used to make a billion pounds of payments if it was circulated a billion times.
The settlement banks would then swap a bond for the reserve currency and agree to repurchase the bond for a specific amount at a specified future date.
It means that the government then never needs to bail out a bank. Banks can be allowed to fail. The system would actually be how people think it is, that when you put your money in the bank it's really safe, or at least they used to think, perhaps before the 2008 crisis. There's a spectrum of opportunities there which we're just not exploring at the moment, that's what's upsetting me, that we're not even experimenting, when we know that the system we have now is fundamentally flawed. We've just had the biggest crisis since the Second World War, since the 1930s, really. We know we have a system where the creators of money are underwritten by us anyway.
It's made people very, very wealthy. It's allowed financial markets to expand absolutely enormously. Anybody involved in that is keen on seeing a deregulated world. In the case of the UK, you have a government which has been quite overtly and deliberately and aggressively arguing against any forms of regulation being imposed on those financial markets.
It can often be not much more ? than you're simply the next door neighbour of a country that's currently in trouble. Many of the world's financial crises ? in the past thirty years have been caused by rapid withdrawals of a nation's currency or the currencies of an entire region.
If you trust bankers to control the money supply, the money supply will just grow and grow and grow, as will the level of debt, until the point where it crashes, when some people can't repay the debt and then they'll stop lending.
You hear politicians and journalists saying, We've been living beyond our means. We've become dependent on debt. We need to rein in our spending and live within our means.
It's not possible in the current system. The reason why everyone is in debt now is not because they have been recklessly borrowing.
If money is spent into the economy, a lot of money goes into houses, for example, into mortgages, that's an increase in the amount of money in the economy without a corresponding increase in activity, in output, in GDP.