ALB wrote:Someone should
The whole ECB document is a good description how the modern monetary system works. In fact it is something we can, and should, quote (and quote again) against the "thin air" school of banking. "Private credit" of course includes outside deposits (i.e not those opened by a bank for those it makes a loan to, but people and organisations depositing their own money there) and what banks themselves borrow.I think I'll put it to Steve Keen since he claims the backing of German banks for his description of how the monetary system works (and since he teaches just down the road from me at Kingston University). Not that he's a "thin-airist". It''s just that his description is an open invitation for them to misinterpret him..
if that were true why would they say “create inside money”? Why not just say that they borrow money from other banks in order to lend it out? Why even include it in a section called “how is money created?” at all?the only way it makes sense is if they create it at the moment the loan is made. They say it’s backed by “Private Credit” because they are saying it’s only temporary. It will (hopefully) be paid back.