 How to Waste £375 Billion In the years following the financial crisis, the UK wasted £375 Billion on a failed scheme to stimulate the economy and end the recession. This was one of the biggest missed opportunities in history. Here's how it happened. In 2009, the government wanted to get more money into the economy to start a recovery. Now there are two ways to get more money into the economy. The usual way is to get banks to make more loans. Every loan a bank makes creates brand new money. So when people borrow more, more money is created. But there was just one problem. In 2009, banks weren't lending. They were terrified that their existing loans wouldn't be repaid, so they weren't willing to make new ones. So if banks aren't creating enough money, the Bank of England can step in to create money instead. As Mervyn King, then Governor of the Bank of England explained, a damaged banking system means that today banks aren't creating enough money. We have to do it for them. From 2009, the Bank of England started a scheme called Quantitative Easing. They electronically created £375 Billion of new money to stimulate the economy. That's nearly £6,000 for every man, woman and child in the UK. But instead of giving this money to the government or even to ordinary people, the Bank of England put this £375 Billion straight into the financial markets. By flooding the markets with newly created money, it pushed up share prices by 20%. The big idea was that people who owned shares would feel wealthier and would then go out into the economy and spend more. The money would trickle down and eventually everyone would end up better off. But most people don't own many shares. In fact, 40% of the stock market is owned by just the wealthiest 5% of the population. These people became richer by £128,000 per household. But they didn't go out and spend more. Instead, they put even more money into the financial markets to benefit from rising prices. So Quantitative Easing didn't work. For every £1 the Bank of England created in this way, just 8p trickled down into the real economy. The rest of the money got trapped in the financial markets, making the rich even richer, but doing very little to help anybody else. Meanwhile, at the same time as the Bank of England was creating all this new money, the government was running out of money. In 2010, they cancelled a programme to rebuild 715 schools. They also cancelled plans to build over 1,000 flood defence projects. At the same time, tens of thousands of construction workers were unemployed, sat at home desperately looking for work and for something useful to do. Instead of using some of the new money to employ them to build good schools, which would have cost just £1 billion, we let the Bank of England create 375 times this amount just to flood the financial markets. So why does the government cancel essential projects because there's no money? Even though the Bank of England was able to create more new money than the entire government spends in 6 months. What if the Bank of England had taken just a fraction of the money they'd created and put it into the real economy? This is an idea that we call sovereign money. Instead of relying on private banks to create money to push up house prices, or letting the Bank of England create money to flood financial markets, we could use the power to create money in the public interest. To improve our economy, to build better homes, better infrastructure, cleaner energy, more jobs or whatever we democratically decide is most important. If the Bank of England had taken just £10 billion, less than 3% of what they actually created and given it to the government to spend into the economy, the recession would have been over much sooner and hundreds of thousands of people could have been saved from years of unemployment. By spending £10 billion on building affordable homes, the government could have created up to 284,000 jobs and as those new employees go out and spend their salaries, this would create even more spending and more jobs. So when new money goes into financial markets through quantitative easing, it takes £1 to grow the economy by just 8 pence. But when new money goes into the real economy, then every £1 created grows the economy by £2.80. There is a better way to use the power to create money. Instead of using it to prop up financial markets or push up house prices, we can make sure the power to create money is used for something that benefits ordinary people. We're campaigning for a financial system that works for society and not against it. Join us at PositiveMoney.org