Misconceptions Around Banking
There’s a lot of confusion about how banks work and where money comes from. Very few of us really understand It. Many university economics courses still teach a model of banking that was never quite accurate.
What’s Wrong With The Money Multiplier?
The money multiplier story highlights that banks do play a role in money creation. However, this model, often presented in textbooks, is not only fundamentally inaccurate, it omits key details with dramatically significant implications.
How Is Money Really Created By Banks?
There are three types of money that we use. Many of us only think about the physical money created via the Treasury Mint and the Federal Reserve. But that only makes up a small portion of our money supply.
How Much Money Can Banks Create?
Do banks have a limit on how much they can create? Are they limited by the amount of reserves they have or the amount of reserves in the system? Are banks limited by capital adequacy ratios?
Do Banks Create Money or Just Credit?
You might hear some people say that banks don’t create money, they just create credit. But should the numbers in your account be thought of as money or just credit?
How Money Gets Destroyed
Where does the money go? Does it disappear from the economy? What are the implications of destroying money?