Where Does Money Come From?
A Guide to the UK Monetary and Banking System

What is money? How is it created? How does it enter into circulation? These are simple and vital questions it might seem, but the answers remain contested and often muddled.

Where Does Money Come From? is a comprehensive guide to the modern UK monetary and banking system. It reviews theoretical and historical debates on the nature of money and explains how we arrived today with a system where the vast majority of new money is created by commercial banks.

Banks create new deposits through making loans, buying existing assets or by providing overdraft facilities which customers themselves turn in to deposits when they draw on them. These deposits are accepted by everyone, including the state, in payment for taxes. They are added to the money supply. Most money nowadays is created this way.

Based on detailed research and consultation with experts, the book includes in-depth explanations of the role of the central bank, regulators, the government and the European Union in influencing the creation and allocation of money.

It concludes that the current monetary system is inherently unstable, depending as it does primarily on the confidence of private banks themselves, while the central bank or government have chosen to exert little control over either the quantity of new money created or whether it is used for productive or speculative purposes.

Written throughout in non-technical language, the book will be of value to the general public, policy-makers, finance and banking professionals, academics and students.