Magic Money Tree
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Politicians often like to point out that there is no “magic money tree”. But that raises the question, where does money actually come from? The answer is more complicated than many people realise.
If you listened to some government ministers, you might assume that there’s a fixed amount of money in the economy, or that the amount is strictly controlled by the Bank of England.
But in fact, money is being created out of thin air all the time. And this process has hugely important implications for issues like housing, inequality and the environment.
Most of the money we use comes in digital form, as the numbers we see on our bank statements. This money is created by private banks like HSBC and Natwest when they make loans. They create it by simply typing numbers into a computer – some might call this magic!
Sound implausible? You don’t have to take our word for it – the Bank of England itself has confirmed that “whenever a bank makes a loan, it creates a deposit in the borrower’s bank ...
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