Money … what do you know?


By Charles Grimes

Money. What could be simpler? We’re surrounded by it, and by its effects. We all know about it. We always have. Ever since we were children dropping those first “pocket money” coins into a Piggy Bank we’ve had some sort of relationship with it. We’ve earned it. We’ve spent it. We’ve lost it. We’ve saved it. Maybe in those years since childhood we’ve amassed plenty of it, or alternatively perhaps we’ve always struggled to have enough, but either way money is ever-present in our lives and something that we like to think that we understand.

But in 2008 the picture for many of us altered. Suddenly we were catapulted into a strange post-crisis world where economics and finance no longer made sense like they once seemed to, things no longer happened as we once expected them to or indeed as we felt they should. Accountability seemed to disappear. Banks “failed” and yet somehow stayed in business. Corporations incurred huge losses but their CEOs got bonuses. We found ourselves in an “Alice in Wonderland” world full of bizarre distortions and assumptions, assumptions that prompted many of us to start asking some fundamental questions … Can endless growth really be possible on a finite-sized planet? What are the long-term dangers of a debt-laden society? With ever-increasing house prices, can our cities survive when those working in medium-low paid sectors such as health, education, retail, catering can no longer afford to live there? Can growing inequality possibly be sustainable?

Of course, these problems didn’t just arise in 2008. They’d been there for decades, talked about and warned about by a few, though ignored by most of us. As John Lanchester described, “When the economic currents running through all our lives were mild and benign, it was easy not to think about them…Then (in 2008) it turned out that these currents were much more powerful than we knew, and that instead of cosseting us and helping us along they were sweeping us far out to sea, where we’d have no choice but to fight against them, fight hard.”

If it was the crisis that brought them centre-stage in 2008, what many people are coming to realise is that the problems had actually been waiting in the wings right from the start, awaiting their time to make their entrance. “Inequality”, “Debt”, “Boom-and-Bust” are not simply chance happenings which we can overcome, they are actually inevitable products of the current system. Nobel laureates and distinguished academics from around the world – from Cambridge to Stanford, from Oxford to Melbourne – are now telling us that these problems are systemic, that no amount of “tweaking” will work, that what is needed is a significant overhaul of the financial and banking system. And it’s not just academics who believe the system is no longer fit-for-purpose. When someone of the stature and experience of Mervyn King (Governor of the Bank of England 2003-2013) states “Of all the many ways of organising Banking, the worst is the one we have today” then we need to sit up and listen.

As expected there’s a wide range of ideas and potential solutions on offer. Positive Money is a UK-based movement aiming to democratise money and banking so that it works for society and not against it. As an organisation it has a very clear focus – to take the power to create money away from Banks and put it into a public body.

I said right at the start that we all like to think we know about money. But what if I ask “Where does most money come from? Who creates it?”. The usual responses are “The Government” or “The Bank of England”. When I suggest that it’s actually Banks – Barclays, HSBC, Lloyds et al – who create over 97% of money I’m met with signs of disbelief. So let me explain.

Say you want to buy a house or a flat. You go to your local branch of Barclays to sort out the £200,000 mortgage loan. After they’ve done all the usual checks and said “Yes”, they will credit your account with the £200,000 so you can buy the property. If I asked “Where does that £200,000 come from?” you might assume that it’s from a pool of money that other Barclays’ customers have saved. But it doesn’t. That’s not how it works. The money doesn’t come from any other account. In fact, it doesn’t “come” from anywhere. It is simply created out of thin air! When the Barclays employee agrees to the amount and actually credits your account, they don’t need to go and check to see if they have any money available to lend you. They don’t actually have it. They just enter £200,000 in your account, and that’s it. Done.

Now, that “act of creation out of thin air” is not inherently bad. What IS damaging, however, is the fact that the beneficiary of all those monthly repayments over 25 or 30 years, is a private company – ie: Barclays. Positive Money believe that the power of creating money is so important and fundamental to the public good that they want to take that power away from Banks and vest it in an independent public body (perhaps part of The Bank of England).

It goes without saying that Banks are not going take such an initiative lying down. As the saying goes, “Money is power”, and they certainly have plenty of the latter. Their lobbying power is undoubtedly enormous. But the tide may be turning. There have been recent signs of progress in The Bank of England, the Federal Reserve in the US, and the European Central Bank, not to mention initiatives by Positive Money’s sister organisations in The Netherlands, Denmark, Sweden and Iceland.

You can find out more about the campaign at

There are also more than 35 Positive Money groups around the UK. For more information about your local Hereford group please contact:


Charles Grimes is a Business Psychologist who coaches teams and individuals to improve their communication, performance and leadership.

He lives out amongst the sheep and cows in rural Herefordshire.


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