The US is awash with Positive Money style “debt free” money – shock horror.

I do like this chart – copied from an article by FrancesCoppola.

The chart shows the big expansion in the amount of central bank created money (“debt free” money as Positive Money sometimes calls it) in the US since QE began. The blue line is total bank deposits and the red is total bank loans or total debts attributable to commercial banks.

As Positive Money has pointed out a hundred times, normally almost 100% of money in circulation is created as a result of commercial banks “lending money into existence”. That is, for every hundred pounds of money in circulation there is a good £95 of debt owed by someone somewhere to a commercial bank.

However, QE has transformed the situation. If the above chart is any guide, about 20% of money in the US is now central bank or “debt free” money. (Though there numerous ways of measuring the money supply, so the 20% figure should only be taken as a rough guide.)

But the sky has not fallen in as a result of that unprecedented and major change in the nature of US money. And that of course lends support to the idea pushed by Positive Money and other advocates of full reserve banking, namely that if the ENTIRE money supply were to consist of central bank rather than commercial bank created money, there would not be any huge problems.