Since the financial crisis there exists a widespread discussion about the role of banking in a monetary economy. We contribute to this discussion by presenting a basic model of the banking sector which models banks as originators of credit without owning pre-collected savings or reserves...

The goal of this paper is twofold. First, we wish to better explain the relationship between Sargent and Wallace's (1981) unpleasant monetarist arithmetic, the closely connected fiscal theory of the price level (FTPL), and the monetarist view of inflation. Second, we discuss how the recent...