Money Creation

This link will give you the 2014 Q1 article put together by the Bank of England.  So, read between the lines as much as you read the lines.

Money Creation by the Bank of England

 

Introduction

‘Money in the modern economy: an introduction’, a companion piece to this article, provides an overview of what is meant by money and the different types of money that exist in a modern economy, briefly touching upon how each type of money is created. This article explores money creation in the modern economy in more detail.

The article begins by outlining two common misconceptions about money creation, and explaining how, in the modern economy, money is largely created by commercial banks making loans.(1) The article then discusses the limits to the banking system’s ability to create money and the important role for central bank policies in ensuring that credit and money growth are consistent with monetary and financial stability in the economy. The final section discusses the role of money in the monetary transmission mechanism during periods of quantitative easing (QE), and dispels some myths surrounding money creation and QE. A short video explains some of the key topics covered in this article.(2)

 

CLICK FOR THE ARTICLE: Money Creation by the Bank of England

 

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