I have already dealt with money creation ex nihilo with regard to Central Banks. Now I want to consider the same problem in view of commercial banks. Continue reading Money creation out of nothing – fact or illusion?
Regarding the extent of credit, supposedly “created” by the commercial banking system, the most fantastic ideas present themselves to the public. I’m not talking about mere verbal inaccuracies, based on vague definitions. If I call commercial credits (or the corresponding savings deposits) by the name of “money” so as to make them undistinguishable from the coins or notes of a central bank, then commercial banks must in fact be considered the creators of vast sums of money, as they are the places were deposits and corresponding credits are to be found. Money properly speaking – the money created by central banks – will then represent nor more than an infinitesimal fraction of the total amount of „money“ to be found in the economy. Continue reading The Money Multiplier – a dead end of economic theory