Creating New Money

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Book/Report: CREATING NEW MONEY: A monetary reform for the information age. By Joseph Huber & James Robertson. New Economics Foundation


Main topic of the report is Seigniorage Reform.


Introduced by Sepp Hasslberger [1]:

"The reform that is being proposed by Huber and Robertson is articulated in a very simple two steps:

1. Central banks should create the amount of new non-cash money (as well as cash) they decide is needed to increase the money supply, by crediting it to their governments as public revenue. Governments should then put it into circulation by spending it.

2. It should become infeasible and be made illegal for anyone else to create new money denominated in an official currency.

Commercial banks would thus be excluded from creating new credit as they do now, they would be limited to credit-broking and a financial intermediary role.

- "We refer to this as "seigniorage reform". While adapting to the new conditions of the Information Age, it will also restore the prerogative of the state to issue legal tender, and to capture as public revenue the seigniorage income that arises from issuing it. Originally, seigniorage arose from the minting and issuing of coins by monarchs and local rulers. Extending it to the creation of all official money will correct the anomaly that has grown up over the years, resulting today in 95% of new money being issued, not by governments as cash (coins and banknotes), but by commercial banks printing credit entries into the bank accounts of their customers in the form of interest-bearing loans."

So the central principle is that new money should be created as debt-free public revenue and not as debt-constituting banking industry assets. The paper discusses various options for spending that money into the economy. The advantage of this versus earlier similar approaches to monetary reform is that the proposal is no-nonsense and doable, and the discussion leaves room for government decisions while clearly outlining what the important changes are that should be at the basis of a new system.

I recommend you download the paper for study. It brings a lot of clarity into a rather murky area that has been kept so for a long time by economists' unwillingness to look at, and propose to change, the basics of how we create and tune money so it will best serve our individual and collective economic interests." (

From the Report


  • Chapter 1: A Monetary Reform for the Information Age 1
  • Chapter 2: Restoring Seigniorage: Implications for Public Finance and Monetary Policy 8
  • Chapter 3: Restoring Seigniorage: Implications for Banking 20
  • Chapter 4: The Wider Case for Seigniorage Reform 31
  • Chapter 5: Replies to Suggested Objections 44
  • Chapter 6: Prospects 59


  • Joseph Huber Born in 1948. Chair of economic and environmental

sociology at Martin-Luther-University, Halle. Topics of research are industrial ecology as well as monetary policy. During the 70s and 80s he was an activist of the alternative movement and co-founder of Self-Help Network in Germany, a citizens’ initiative pioneering in green banking and ethical investment. Before tenure in 1991, he earned his living as a writer and policy advisor. In recent years he has been active in the International Greening of Industry Network, the Environment Bank, and the Senate of Berlin Town Forum. He is co-founder of Citizens‘ Town AG Berlin.

Contact Prof. Dr. Joseph Huber , Institut für Soziologie Martin-Luther-Universität, D – 06099 Halle Tel: +49 345 552.4242 Fax: +49 345 552.7149 Email: [email protected]


  • James Robertson Born in 1928. Since 1973, independent writer,

lecturer and consultant on alternative futures, economic and social change. Co-founder, New Economics Foundation, 1985. Recent publications include The New Economics of Sustainable Development (for the European Commission, 1999), and Transforming Economic Life (for the Schumacher Society in association with New Economics Foundation, 1998).

His early career had been in Whitehall; he accompanied Harold Macmillan on his prime-ministerial “Wind of Change” tour of Africa in 1960, and then worked in the Cabinet Office. He later set up and directed the Inter-Bank Research Organisation for the UK banks, and contributed to enquiries on government, civil service, parliament, and London’s future as a financial centre.

Contact James Robertson, The Old Bakehouse, Cholsey Oxon OX10 9NU, England Tel: +44 (0)1491 652346 Fax: +44 (0)1491 651804

Email: [email protected]


For all the prominence and sophistication of share dealing and financial services in the new economy, it is rare that we ask questions of our money system itself. The way that we issue and use money seems so ingrained that it’s hard to question. It is, in the words of George Orwell “the air we breathe”. Like air, it’s everywhere, we are dependent on it, and perhaps most important, until it is really dirty, it cannot be seen. We see the money system as something natural. But it’s not.

The rules of the money system have shifted. The majority of money that now changes hands does so electronically. As a result, far more than ever before, new money is not issued by the state but by banks. Ninety seven pounds in every one hundred circulating in the economy will now have been issued by banks (in the form of sight deposits, printed into customers’ accounts as interest-bearing debts). Only three pounds are cash, issued by the state (in the form of banknotes and coins, issued at no interest). The cost to the state of issuing new money is only the cost of producing banknotes and coins. The cost to the banks of issuing new money is virtually zero. The state receives public revenues from issuing cash, but banks make private profits. The benefits of the money system are therefore being captured by the financial services industry rather than shared democratically.

The loss of this privilege is equivalent to an extraordinary twelve pence on income tax in the UK. In effect it has become a subsidy to the private banking sector – a nice little earner, but one that should always have been for public benefit rather than private gain. This is likely to grow as as we move further still towards a cash-free economy, perhaps to a point where coins and notes represent less than 1% of money in circulation. Unless we find creative alternatives, the benefit of issuing new money will have transferred entirely from public benefit into private corporate gain.

This argument has been made by monetary reformers, who have become increasingly vocal. The contemporary Jubilee 2000 campaign, for example, focuses on the unpayable debts of the poorest countries. It has begun to argue that debt is as systemic a by-product as pollution or global warming of a global political economy locked into the search for rates of return on capital of fifteen per cent annually or more.

This report represents a fundamental breakthrough on this agenda. While the principles of monetary reform have been asserted often enough before, the steps from where we are to where we need to be, in terms of a democratic and efficient money system, have been obscure or unconvincing.

For the first time, this report offers a practical and clear step-by-step agenda on the essential first step of restoring the right of issuing new money in a modern economy to be of benefit for the common good. In the terms of the new thinking that is emerging about the creation of sustainable and inclusive economies, this is an achievement that ranks high. It fits directly into a new theoretical model, combining socio- and ecological economics, in which market actors are located within common property resources rather than allowed to free-ride on the back of them. In short, the market meets the commons; and new economics, whether through eco-taxes or monetary reform, concerns the achievement of a fairer and more sustainable balance of cost, risk and return between the two.

This report addresses the issues and the complexities of how new money can be created. I encourage you to engage with it in full, because the analysis and prescriptions are landmark achievements and I am proud to be associated with it.

There is no better time for an idea such as monetary reform to flourish. The democratic state is being eroded in the face of global markets. In many parts of the world, concerns about market failure now have to be put alongside concerns about state failure. Issuing new money in the form of public expenditure enables the public purse to go further – whether for public transport, environment or regeneration. Restoring democratic control over how new money is issued is an important step towards a global economy in which unpayable debts are reduced and resources can be freed up for sustainable development.

Creating New Money

Many of the ideas developed by the New Economics Foundation and sister organisations working on sustainability around the world seemed obscure or unlikely when we first set them out. We look forward to monetary reform moving to the centre stage of public and policy debate in the way that eco-taxes, stakeholding and debt cancellation have done. We invite your participation, whether as a critic or as a supporter, in helping to shape this debate for the economy of our future.

Ed Mayo, Executive Director New Economics Foundation