Tag Archives: credit money

Unfortunately, money has not yet been abolished from economic theory, and we are stuck with pointless debates about banks and money creation. The latest salvo is "Banks do not create money out of thin air" by Pontus Rendahl, and Lukas B. Freund. As the title of this article suggests, Rendahl and Freund are incorrect in their assessment. I assume that the Rendahl/Freund article is a followup to previous arguments, such as a Thomas Hale article I discussed recently. Since I just addressed...

Keeper quote from Joseph Schumpeter. He nailed endogenous money as "credit money" and observed correctly how "money" gets created by banks' extending credit — "they create deposits in their act of lending." This effect is now amplified through non-bank and quasi-bank financial institutions. The contemporary financialized economy runs largely on privately created credit. This has an even greater effect than Schumpeter likely anticipated. Economists' ignoring this unduly limit the scope of...

There has been an intense academic and policy debate on what monetary architecture is the most appropriate recently, but many issues are still unresolved. This column looks at the circumstances under which the current system and the sovereign money system yield the same outcomes, the core arguments in favour of the current system, and what advantages a sovereign money architecture might offer.... Vox.euSovereign money: A challenge for scienceHans Gersbach | Professor at CER-ETH - Center of...

The unfortunate fact that bank deposits are considered money has one side effect: our mysticism about money extends towards banking. The apparent ability of banks to "create money out of thin air" seems unfair, and this leads to questions about what limits their ability to lend. The answer is a lot simpler than one might suspect. For any other business (with the possible exception of the resource industry), output is largely constrained by their ability to find customers that they can sell...