“Most money in the modern economy is in the form of bank deposits, which are created by commercial banks themselves… When a bank makes a loan to one of its customers it simply credits the customer’s account with a higher deposit balance. At that instant, new money is created…”
the relationship between reserves and loans typically operates in the reverse way to that described in some economics textbooks. Banks first decide how much to lend depending on the profitable lending opportunities available to them…It is these lending decisions that determine how many bank deposits are created by the banking system. The amount of bank deposits in turn influences how much central bank money banks want to hold in reserve (to meet withdrawals by the public, make payments to other banks, or meet regulatory liquidity requirements), which is then, in normal times, supplied on demand by the Bank of England
Tweet The recent dramatic events surrounding the Greek debt crisis had many of us on the edge of our seats as we witnessed history unfolding before our eyes. From the calling of the referendum, to the landslide No vote, to … Continue reading →
Black Monday is how economists are describing Monday’s market turmoil, which saw stock prices tumble across the globe, from China to Europe to the United States. China’s stock indices fell over 8 percent on Monday and another 7 percent today. On Wall Street, the Dow Jones Industrial Average initially fell a record 1,100 points before closing down nearly 600 points. The decline also caused oil prices to plunge to their lowest levels in almost six years. To make sense of what’s really behind the
If you’ve been reading this blog over the past couple of weeks, you might start wondering if the financial system has any relevance to the real world at all — and we couldn’t blame you. After all, as Adam Smith pointed out in The Wealth of Nations...
The recent frenzy in the world’s stock markets had a number of people panicking about the possibility of (yet) another crash of the magnitude of October 1929, and the possibility of another Great Depression on the heels of the Great Depressions of...
Tweet It is clear that the current approach to monetary policy – which essentially hasn’t changed for three years – is failing to achieve the economic pick-up that the government and policy makers assumed it would have by now. So … Continue reading →
Tweet Labour leadership candidate Jeremy Corbyn has sparked a major debate about monetary and economic policy by calling for what he calls a ‘People’s QE’. He argues that ‘The Bank of England must be given a new mandate to upgrade … Continue reading →
Here’s the secret to keeping calm amidst all the panic on Wall Street yesterday. All you have to do is keep on thing in mind: like the preacher’s watch on the pulpit during the sermon, “It don’t mean a damn’ thing.” Nothing new under the sun ...
We got into a discussion last week with someone who insisted that the whole concept of future savings and thus of Capital Homesteading is a scam: you can’t promise to deliver what doesn’t exist. To that, of course, we answer, “Why not?
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