JP Hochbaum
DP Veteran
- Joined
- Feb 7, 2012
- Messages
- 4,456
- Reaction score
- 2,549
- Gender
- Male
- Political Leaning
- Independent
There is no money multiplier as banks do not lend out savings:
"Money creation in practice differs from some popular misconceptions — banks do not act simply
as intermediaries, lending out deposits that savers place with them, and nor do they ‘multiply up’
central bank money to create new loans and deposits."
And 97% of the money supply is done through bank lending, while 3% is done with government spending. Which indicates that government spending would make it near impossible to cause inflation or devaluation.
And Lending creates deposits.
"Lending creates deposits — broad money
determination at the aggregate level
As explained in ‘Money in the modern economy: an
introduction’, broad money is a measure of the total amount
of money held by households and companies in the economy.
Broad money is made up of bank deposits — which are
essentially IOUs from commercial banks to households and
companies — and currency — mostly IOUs from the central
bank.(4)(5) Of the two types of broad money, bank deposits
make up the vast majority — 97% of the amount currently in
circulation.(6) And in the modern economy, those bank
deposits are mostly created by commercial banks
themselves."
THis is not coming from ideological hacks but rather from a central bank. Although this is from the bank of England, other similar systems operate the same way. (United States, Japan, Canada, Australia).
http://www.bankofengland.co.uk/publ...lletin/2014/qb14q1prereleasemoneycreation.pdf
"Money creation in practice differs from some popular misconceptions — banks do not act simply
as intermediaries, lending out deposits that savers place with them, and nor do they ‘multiply up’
central bank money to create new loans and deposits."
And 97% of the money supply is done through bank lending, while 3% is done with government spending. Which indicates that government spending would make it near impossible to cause inflation or devaluation.
And Lending creates deposits.
"Lending creates deposits — broad money
determination at the aggregate level
As explained in ‘Money in the modern economy: an
introduction’, broad money is a measure of the total amount
of money held by households and companies in the economy.
Broad money is made up of bank deposits — which are
essentially IOUs from commercial banks to households and
companies — and currency — mostly IOUs from the central
bank.(4)(5) Of the two types of broad money, bank deposits
make up the vast majority — 97% of the amount currently in
circulation.(6) And in the modern economy, those bank
deposits are mostly created by commercial banks
themselves."
THis is not coming from ideological hacks but rather from a central bank. Although this is from the bank of England, other similar systems operate the same way. (United States, Japan, Canada, Australia).
http://www.bankofengland.co.uk/publ...lletin/2014/qb14q1prereleasemoneycreation.pdf