Some 80% of MPs lack basic understanding of where the UK’s money comes from, according to a new poll.
The survey, commissioned by the reform campaign group Positive Money, found that 71% of MPs believe that only the government has the power to create money. A further 9% said they didn’t know who creates the nations money.
However, most new money is now created when commercial banks give out loans. The government only creates coins and notes, which make up around 3% of all the money in the economy.
In response to the statement “New money is created when banks make loans, and existing money is destroyed when members of the public repay loans”, only 12% of MPs correctly said this was true.
Positive Money says the troubling findings show that the government is ill-prepared to see the warning signs of another financial crisis.
“MPs have no chance of understanding the house price bubble unless they know these basic facts about money,” said Ben Dyson, founder of Positive Money.
“The financial crisis was caused by banks that created too much money and lent it recklessly. We’re now in danger of repeating the same mistakes.”
To prevent a second financial crisis and mitigate the risk of a housing bubble, Positive Money is calling for the government to strip banks of their power to make new money.
Photo: Images of Money via Flickr