How is money created in the economy
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How is money created in the banking system.
Where does money come from?Is money made from trees
A guide to the UK monetary and banking system. Second Edition.
What is money? How is it created? How does it enter into circulation? These are simple and vital questions it might seem, but the answers remain contested and often muddled.
Includes new sections on Quantitative Easing, LIBOR and the Eurozone sovereign debt crisis.
There is widespread misunderstanding of how new money is created.
Where Does Money Come From? examines the workings of the UK monetary system and concludes that the most useful description is that new money is created by commercial banks when they extend or create credit, either through making loans or buying existing assets.
Where does money come from in the worldIn creating credit, banks simultaneously create deposits in our bank accounts, which, to all intents and purposes, is money.
Many people would be surprised to learn that even among bankers, economists, and policymakers, there is no common understanding of how new money is created.
This is a problem for two main reasons. First, in the absence of this understanding, attempts at banking reform are more likel