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Apart from the main misconception of money creation, that is, the exogenous-endogenous money creation debate, there exist a number of lesser misconceptions, including that banks are 'fully lent' when they have no excess reserves, that money creation begins with a new bank deposit, and that a...
Persistent link: https://www.econbiz.de/10013102919
Founded on the money multiplier, the imminent demise of which is not overstated, there exists a profound misconception: that money creation begins with a new deposit. In many cases the source of the new deposit is not specified, and somehow the recipient bank acquires reserves. In other cases...
Persistent link: https://www.econbiz.de/10013103442
The endogenous-exogenous money debate is a futile one. Exogenous money creation, based on the money multiplier, is not a money creation process. Rather, it is a monetary policy model, but in it money is still created endogenously: bank loans (and foreign asset accumulation by banks) concurrently...
Persistent link: https://www.econbiz.de/10013103829
Exogenous money creation does not exist, but did under a past specie-money system. Central bank control of bank reserves and therefore control of bank deposit (money) creation via the money multiplier can exist, but this has nothing to do with the process of money creation. Rather, it is a style...
Persistent link: https://www.econbiz.de/10013105509
Many scholars have fought valiantly to change perceptions on the process of money creation. However, misconceptions remain in place some quarters. In order to demonstrate empirically that a new bank loan creates a new bank deposit (without the bank having to recruit a new deposit), the author...
Persistent link: https://www.econbiz.de/10013082232
The state of bank liquidity, measured as the banks' net excess reserves (NER) with the central bank, is a critical element of the successful implementation of monetary policy. Central banks have absolute control over NER and manipulate it to bring about a positive NER (in QE periods) to drive...
Persistent link: https://www.econbiz.de/10013082853
There is a profound misconception amongst certain commentators on money and banking: that quantitative easing creates new money. The misconception is either: (1) that new money is injected into the economy; (2) newly created excess reserves can be used by the banks to make new loans. Neither of...
Persistent link: https://www.econbiz.de/10013083027
It is sometimes stated that government spending leads to money creation, at the same time providing the banks with excess reserves, leading to further money creation. This is so, but the statement ignores the fact that the money stock (and reserves) was depleted when revenue was raised in order...
Persistent link: https://www.econbiz.de/10013083185
The origins of monetary policy can be traced back to the days of the goldsmith-bankers when a reserve of gold coins was held by them to meet the promise stated on their bank notes: that they could be exchanged for gold. However, this covenant was doomed from the start, due to the avarice of...
Persistent link: https://www.econbiz.de/10013083837
After the discovery by the goldsmith-bankers that loans could be made by the issue of the newly accepted means of payments, receipts/bank notes, there was an inevitable next step: deposit money. Bank notes are deposits, but in a different form. Bank deposits are also accounting entries, but they...
Persistent link: https://www.econbiz.de/10013083838