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...

The economic crisis that began in 2007 and still lingers has invited comparison with the Great Depression of the 1930s. It has also generated renewed interest in Milton Friedman and Anna Schwartz's explanation of the latter as mainly the consequence of the Fed's failure as a lender of last...

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...

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...

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...

It is a well-establish opinion that money creation has its genesis in the loan activities of the goldsmith-bankers in seventeenth-century London. This is accurate for bank note money, which had its origin in the receipts for precious metal deposits issued by the goldsmith-bankers. However, money...

Many texts which cover money creation regard the reserve requirement (RR) as being at the very centre of the process, and many still regard the process as starting with a bank receiving a new deposit (and placing the required reserves with the central bank, lending out the rest, which is...

Despite stout efforts by some scholars to demonstrate the logical and direct relationship between bank domestic credit extension (DCE) and M3 growth (because money creation is the outcome of new DCE), there remains, in much of the literature, a disconnection between these two aggregates. The...

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...

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...