ON NOVEMBER 20, a debate in Britain’s Parliament featured a long-ignored issue — the creation of money by commercial banks. The debate will, hopefully, spark interest among world leaders and members of the public, since the issue is critically important but widely ignored.

Since the banking and economic calamity of 2008, critics from all parts of the ideological and political spectrum have argued about such things as austerity measures versus economic stimulus, the wisdom of quantitative easing (the accelerated printing of money by governments) and the most effective means of taxing workers and consumers. Instead, they should be focused squarely on the long-standing and rather obvious culprit — the creation of “fake” money by banks.

For the first time since 1844, members of the House of Commons addressed, from square one, the structure and, by implication, the propriety of a worldwide banking system that controls or greatly affects the lives of billions of people.

The most obvious issues involving ordinary people and their banks are housing loans, student loans, credit card lines and so forth. But the world’s commercial banks have their hands in much more than just those things. They also directly influence public debt, public policy, inflation, job creation and economic inequality.

Britain’s members of parliament noted, correctly, that ignorance of the banking system was a huge, perhaps determinative, factor leading to the recent financial crisis. And that ignorance was shared by political leaders as well as the public at large.

One MP made a simple but very telling observation: “Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.” But is this observation something people realise? Is this the way most university students are introduced to the banking business in banking and finance classes? Or is this simple fact ignored?

The implications of such a lending mechanism are easy enough to understand in the context of personal or business transactions — this set-up enriches lenders at the expense of borrowers, who falsely believe they have been lent real money, and happily enter into loan agreements. The lenders’ risk is limited — until they begin doing such foolish things as over-leveraging.

However, the implications for society are generally downplayed, even though these are at least as great as those involving single lenders. That is, when “fake” money is created at the time of a loan, that “money” is destroyed once the loan is paid. And this process of fakery can result in dire consequences for the masses. Indeed, during the parliamentary debate, it was pointed out that the monetary system is largely responsible for wild swings in housing prices, unproductive investments and a range of other social ills.

Consider quantitative easing. This alone is a huge, long-term problem, as it merely patches up short-term economic slowdowns with freshly printed dollars. Over time, the people who profit from such a thing are those who are older and wealthier. And this problem can get out of hand in any nation, as it has in the US, if the root cause — a badly flawed banking system — is ignored. Perhaps we can all learn something as the banking debate spreads beyond the British House of Commons to other assemblies and other lands.

The key to good governance is human governance, founded upon human values, human ethics and human behaviour decreed by God. This is true for corporations and interest groups, and it’s true for the governance of nation states.

Standing in the way of human governance is a worldwide banking system conceived in greed and protected by smoke and mirrors. At long last, the members of Britain’s Parliament are committed to an examination of this behemoth, and we applaud them for this.

Will other nations’ legislators, including those in the US, follow the British lead? We’ll see.

Arfah Salleh is the president and CEO of Putra Business School, where William G Borges is a professor

This article first appeared in Forum, The Edge Malaysia Weekly, on December 15 - 21, 2014.

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