Contrary to what Emmanuel Macron says, “magic money” exists in the form of quantitative easing and credit creation. Europe deserves a serious discussion on how we could use it better.

Since it was founded in 2010, Positive Money’s raison d’être has been to educate policymakers and the public about how money is created, the problems it causes, and how it could work better. So when high-ranking decisionmakers mislead the conversation by denying this very basic principle of how our economic system works, it’s our job to put the record straight.

About one year ago UK Prime Minister Theresa May told a nurse who hadn’t received a pay raise for 8 years that “there isn’t a magic money tree that we can shake that suddenly provides for everything that people want.”

Oddly enough, French President Emmanuel Macron found himself in the exact same situation when visiting an hospital in Rouen last week. Visibly annoyed by the conversation he was having with staff members demanding more resources to carry their work, Mr Macron tried to cut the conversation by arguing “there is no magic money.”

“At the end of the day you are also the ones paying for the the resources.” he said. “There is no magic money. (…) in a country where we have never reduced our public deficit and which is heading towards 100% of debt/GDP…. Your children will pay for it.” he added.

The magicians of money are alive and well

The problem is… there actually such a thing as magic money. There are even two types of magicians who can produce it out of their magic hats.

First, the European Central Bank has created more than 2,500 billion euros since the launch of its quantitative easing (QE) programme in 2015. And second, as accurately documented by the Bank of England or the Bundesbank, commercial banks’ daily business is to create money by providing credit to the economy. In the run-up to the great financial crisis of 2008, the banking sector grew the money supply by around 10% per year on average. The magic of money creation can also go in reverse: banks and central banks destroy money when they receive loan repayments, but this is in generally compensated by a larger amount of new loans. In fact, a decrease of the quantity of money generally means the economy faces a recession – it’s therefore a magic trick most people don’t want to see.

In today’s environment where money isn’t pegged to any commodity such as gold or silver, money is purely a social convention. Most of our money (outside coins and notes) is electronic and can be created by typing numbers on computers. In that sense, money is magic money because it is virtual. The value of money has no foundation other than society’s common trust in the currency.

In other words, a key feature of our economic system is that the amount of money circulating in the economy permanently evolves (in fact, it almost always grows). And rightly so! An economy reliant on a fixed, unchangeable stock of money would restrict the level of economic activity. The role of banks and central banks is to regulate the amount of money that circulates. This way we can make sure there isn’t too little or too much money for trade and value creation to happen effectively.

An inconvenient truth?

The fact that top political leaders such as Emmanuel Macron or Theresa May appear to ignore the way the monetary system functions is highly problematic and even worrying. Of course, it is highly doubtful that a former banker and economy minister such as Emmanuel Macron is genuinely ignorant of the fact that the European Central Bank has injected 2,5 trillion euros into the economy via quantitative easing.

If his remarks can’t be put down to ignorance, one can only suspect that it is more convenient for Macron to argue that magic money doesn’t exist in order to pursue his political agenda: structural reforms, labor flexibility and budgetary cuts. Indeed, the fact that the ECB is currently creating a massive amount of money in order to stimulate growth and get inflation back to 2% is at odds with the austerity agenda that has been pursued in Europe over recent years.

Obviously, our point isn’t to say that the ECB could just directly pay for nurses in Rouen or elsewhere. That would be at best simplistic and, some would argue, a populist daydream. However, brushing away this issue by arguing that “there is no magic money” is equally populistic, misleading and unhelpful.

Instead of denying the power of money creation, Europe deserves a serious discussion on how we could better use monetary policy to support a fair and sustainable economy, and in particular to finance the transition to a low-carbon economy. Positive Money Europe aims to inspire an honest and open-minded conversation on how to reform the European Central Bank so it serves a more meaningful purpose for citizens.

If President Macron is so ambitious about bringing Europe forward, he would do well to engage in this discussion in a constructive matter.


As a supporter, you’re at the heart of everything we do. We’d love to keep you updated about our exciting work and the ways you can help, including campaigns and events that you might be interested in. We promise never to sell or swap your details and you can change your preferences at any time. To do so, simply call +32 2 880 04 34 or email

You have Successfully Subscribed!

Share This