Great Nations at Peril by Jürgen Backhaus

Author:Jürgen Backhaus
Language: eng
Format: epub
Publisher: Springer International Publishing, Cham

Money Creation—Private and Public?

In capitalist economies, private banks create most of the money circulating, and these banks thus decide most investments—based purely on private profit-based motives—with no responsibility for the long-term welfare—the common weal. This is so even in social-democratic Scandinavia, and in a state-dominated economy like Japan. Furthermore, this means that only a miniscule proportion of loans come from deposits and saving. The question is whether this is a sound arrangement for society.

Let us first have a look at a standard textbook version of the matter. The former economic advisor to the President and Harvard Professor N. Gregory Mankiw avoids mentioning that banks create around 98 % of money supply in Western economies. Instead, he mentions only the money creating role of the central bank in the USA, The Federal Reserve:

The quantity of money available is called the money supply. … In an economy that uses fiat money, such as most economies today, the government controls the supply of money: legal restrictions give the government a monopoly on the printing of money. …. When the Fed wants to increase the money supply, it uses some of the dollars it has to buy government bonds from the public. (Mankiw 2002, p. 79–80)

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.