The market value of all final goods and services produced in a country in a given period. As the money supply grows, more money is available, which can be invested in productive avenues. However, it can also be used to gamble and drive up asset prices.
This is the government's response to the bank bailouts and is necessary in a debt/based monetary system where increased purchasing power is the result of growing debt and where a diversification of debt provides overall stability and market confidence.
We don't decide swho creates credit for what. We leave that to a couple of chaps in a bank to decide, basically. A short history of bubbles. A bubble occurs when there is very high inflation in the price of a specific good or service ver a short period of time. The first recorded bubble was the tulip bubble of 1637. The idea of the tulips and their relevance is that you saw the first ever financial bubble and crash.
So while we've got ?18 billion over the course of the decade in profit from creating cash, the banks have actually created $1.2 trillion.
Between 1998 and 2007 the UK money supply tripled.
$1.2 trillion was created by banks, whilst $18 billion was created by the Treasury.
A lot of people think when I say, this or when you say this, or when Positive Money say this, that we are all a bunch of nutters.
But on the 9th of March in 2009, the governor of the Federal Reserve, Ben Bernanke, gave the first ever broadcast interview the Governor of the Central Bank of the United States of America had ever given.
The day before that he had bailed out AIG, which is an insurance company, not even a bank, to the tune of about US$160 billion.
Chaotically, they have to ease quantitatively. They have to lend as a lender of last resort. Throughout history, monetary systems were designed to give the dominant international power an advantage, and this power is fiercely defended and expanded on. And they flee in terror from an incredible bogey man. An American flag is burned at the height of the demonstration.
So you are kind of one removed from gold backing or saying that there is a definite solid commodity money behind the paper money and the credit money that we are all using over here. Kind of one removed from it. After Hiroshima, Tokyo wondered when the next atom bomb would fall. They did not wonder long.
Anyone who says that we shouldn't have bailed out the banks doesn't quite understand the nature of our monetary system.