Broad Money as a Multiple of Base Money in the UK since 1844

A measure of how far "base money" has been stretched, or how many times interest is paid to somebody, somewhere, per Pound of base money:

Graph #1

At an interest rate of, say, 3%, from 1885 to 1965 it would take about 12% of base money each year, to pay the interest on the money created on top of base money.

At the same hypothetical interest rate, from 1990 to 2005 it would take about 72% of base money each year to pay the interest on the money created on top of base money.

But if the UK is anything like the US, there is more debt than what's included in broad money on this graph. Positive Money, some years back, was saying "Banks create new money whenever they make loans. 97% of the money in the economy today is created by banks, whilst just 3% is created by the government."

97 divided by 3 is 32.333...  times 3% is 97%. At an interest rate of 3% it would take 97% of the base money each year, to pay the interest.

The graph, by the way, doesn't go up to 32.333. It only goes up to 30.

Adam Smith said

Let us suppose, for example, that the whole circulating money of some particular country amounted, at a particular time, to one million sterling, that sum being then sufficient for circulating the whole annual produce of their land and labour. Let us suppose, too, that some time thereafter, different banks and bankers issued promissory notes, payable to the bearer, to the extent of one million, reserving in their different coffers two hundred thousand pounds for answering occasional demands. There would remain, therefore, in circulation, eight hundred thousand pounds in gold and silver, and a million of bank notes...

But a million pounds is sufficient, Smith says. Long story short, the circulating money settles back down to one million pounds paper, with the gold and silver gone to uses other than circulation. 

I don't see base money in Smith's example. But at 3% interest, the cost of this million pounds of paper money would be 3% of the money he started with. Not 12%, or 72%, or 94%, but 3%. That's low-cost finance. It would mean less financial cost embedded in output, and less in the cost of living.

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Bank of England, Broad Money in the United Kingdom [MSBMUKA], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/MSBMUKA, March 8, 2021.

divided by

Bank of England, Monetary Base M0 in the United Kingdom [MBM0UKA], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/MBM0UKA, March 8, 2021.