‘Shock data shows that most MPs do not know how money is created’ Guardian columnist Zoe Williams began her article (29 October). She was publicising the results of a survey of MPs by the banking reform group Positive Money which claimed that it showed that ‘85% were unaware that new money was created every time a commercial bank extended a loan, while 70% thought that only the government had the power to create new money.’

This reflects not the assumed ignorance of MPs, who actually got it right, but the confused use of the word money. This is now used to describe two different monetary phenomena. First, what in America is called ‘fiat money’, money issued by administrative decision by the state as notes and coins and electronically. Second, what used to be called ‘bank credit’, loans banks make to businesses and individuals. This is now called ‘bank money’, so banks are regarded as ‘creating money’ every time they make a loan.