,! TRU? IS \T 
MONEY IS JU/ AN ,I,\1 & ! BANKS >E ROLL+ 9 IT 

,PEOPLE 3 

,AU?OR 3 ,DAVID ,GRAEB] 

,TEXT 3 

,BACK 9 ! #a#i#cS1 ,H5RY ,=D IS SUPPOS$ TO HAVE REM>K$ ?AT IT WAS A GOOD ?+ ?AT MO/ ,AM]ICANS DIDN'T KN[ H[ BANK+ REALLY WORKS1 BECAUSE IF !Y DID1 0!RE'D BE A REVOLUTION BE=E TOMORR[ MORN+04 

,LA/ WEEK1 SOME?+ REM>KABLE HAPP5$4 ,! ,BANK ( ,5GL& LET ! CAT \T ( ! BAG4 ,9 A PAP] CALL$ 0,MONEY ,CREATION 9 ! ,MOD]N ,ECONOMY01 COAU?OR$ BY ?REE ECONOMI/S FROM ! ,BANK'S ,MONET>Y ,ANALYSIS ,DIRECTORATE1 !Y /AT$ \TRI<T ?AT MO/ COMMON ASSUMPTIONS ( H[ BANK+ WORKS >E SIMPLY WRONG1 & ?AT ! K9D ( POPULI/1 HET]ODOX POSITIONS MORE ORD9>ILY ASSOCIAT$ ) GR\PS SU* AS ,OCCUPY ,WALL ,/REET >E CORRECT4 ,9 DO+ SO1 !Y HAVE EFFECTIVELY ?R[N ! 5TIRE !ORETICAL BASIS = AU/]ITY \T ( ! W9D[4 

,TO GET A S5SE ( H[ RADICAL ! ,BANK'S NEW POSITION IS1 CONSID] ! CONV5TIONAL VIEW1 :I* CONT9UES TO BE ! BASIS ( ALL RESPECTABLE DEBATE ON PUBLIC POLICY4 ,PEOPLE PUT !IR MONEY 9 BANKS4 ,BANKS !N L5D ?AT MONEY \T AT 9T]E/ - EI!R TO CONSUM]S1 OR TO 5TREPR5EURS WILL+ TO 9VE/ IT 9 SOME PR(ITABLE 5T]PRISE4 ,TRUE1 ! FRACTIONAL RES]VE SY/EM DOES ALL[ BANKS TO L5D \T CONSID]ABLY MORE ?AN !Y HOLD 9 RES]VE1 & TRUE1 IF SAV+S DON'T SUFFICE1 PRIVATE BANKS CAN SEEK TO BORR[ MORE FROM ! C5TRAL BANK4 

,! C5TRAL BANK CAN PR9T AS MU* MONEY AS IT WI%ES4 ,BUT IT IS ALSO C>EFUL NOT TO PR9T TOO MU*4 ,9 FACT1 WE >E (T5 TOLD ?IS IS :Y 9DEP5D5T C5TRAL BANKS EXI/ 9 ! FIR/ PLACE4 ,IF GOV]NM5TS C\LD PR9T MONEY !MSELVES1 !Y W\LD SURELY PUT \T TOO MU* ( IT1 & ! RESULT+ 9FLATION W\LD ?R[ ! ECONOMY 9TO *AOS4 ,9/ITUTIONS SU* AS ! ,BANK ( ,5GL& OR ,U,S ,F$]AL ,RES]VE W]E CREAT$ TO C>EFULLY REGULATE ! MONEY SUPPLY TO PREV5T 9FLATION4 ,?IS IS :Y !Y >E =BIDD5 TO DIRECTLY FUND ! GOV]NM5T1 SAY1 BY BUY+ TREASURY BONDS1 BUT 9/EAD FUND PRIVATE ECONOMIC ACTIVITY ?AT ! GOV]NM5T M]ELY TAXES4 

,IT'S ?IS UND]/&+ ?AT ALL[S US TO CONT9UE TO TALK AB\T MONEY AS IF IT W]E A LIMIT$ RES\RCE LIKE BAUXITE OR PETROLEUM1 TO SAY 0!RE'S JU/ NOT 5\< MONEY0 TO FUND SOCIAL PROGRAMS1 TO SPEAK ( ! IMMORALITY ( GOV]NM5T DEBT OR ( PUBLIC SP5D+ 0CR[D+ \T0 ! PRIVATE SECTOR4 ,:AT ! ,BANK ( ,5GL& ADMITT$ ?IS WEEK IS ?AT NONE ( ?IS IS REALLY TRUE4 ,TO QUOTE FROM ITS [N 9ITIAL SUMM>Y3 0,RA!R ?AN BANKS RECEIV+ DEPOSITS :5 H\SEHOLDS SAVE & !N L5D+ !M \T1 BANK L5D+ CREATES DEPOSITS0 444 0,9 NORMAL TIMES1 ! C5TRAL BANK DOES NOT FIX ! AM\NT ( MONEY 9 CIRCULATION1 NOR IS C5TRAL BANK MONEY 'MULTIPLI$ UP' 9TO MORE LOANS & DEPOSITS40 

,9 O!R WORDS1 EV]Y?+ WE KN[ IS NOT JU/ WRONG - IT'S BACKW>DS4 ,:5 BANKS MAKE LOANS1 !Y CREATE MONEY4 ,?IS IS BECAUSE MONEY IS REALLY JU/ AN ,I,\4 ,! ROLE ( ! C5TRAL BANK IS TO PRESIDE OV] A LEGAL ORD] ?AT EFFECTIVELY GRANTS BANKS ! EXCLUSIVE RI<T TO CREATE ,I,\S ( A C]TA9 K9D1 ONES ?AT ! GOV]NM5T WILL RECOGNIZE AS LEGAL T5D] BY ITS WILL+NESS TO ACCEPT !M 9 PAYM5T ( TAXES4 ,!RE'S REALLY NO LIMIT ON H[ MU* BANKS C\LD CREATE1 PROVID$ !Y CAN F9D SOMEONE WILL+ TO BORR[ IT4 ,!Y WILL NEV] GET CAU<T %ORT1 = ! SIMPLE REASON ?AT BORR[]S DO NOT1 G5]ALLY SPEAK+1 TAKE ! CA% & PUT IT UND] !IR MATTRESSES2 ULTIMATELY1 ANY MONEY A BANK LOANS \T WILL JU/ 5D UP BACK 9 SOME BANK AGA94 ,SO = ! BANK+ SY/EM AS A :OLE1 EV]Y LOAN JU/ BECOMES ANO!R DEPOSIT4 ,:AT'S MORE1 9S(> AS BANKS DO NE$ TO ACQUIRE FUNDS FROM ! C5TRAL BANK1 !Y CAN BORR[ AS MU* AS !Y LIKE2 ALL ! LATT] REALLY DOES IS SET ! RATE ( 9T]E/1 ! CO/ ( MONEY1 NOT ITS QUANTITY4 ,S9CE ! BEG9N+ ( ! RECESSION1 ! ,U,S & ,BRITI% C5TRAL BANKS HAVE R$UC$ ?AT CO/ TO ALMO/ NO?+4 ,9 FACT1 ) 0QUANTITATIVE EAS+0 !Y'VE BE5 EFFECTIVELY PUMP+ AS MU* MONEY AS !Y CAN 9TO ! BANKS1 )\T PRODUC+ ANY 9FLATION>Y EFFECTS4 

,:AT ?IS MEANS IS ?AT ! REAL LIMIT ON ! AM\NT ( MONEY 9 CIRCULATION IS NOT H[ MU* ! C5TRAL BANK IS WILL+ TO L5D1 BUT H[ MU* GOV]NM5T1 FIRMS1 & ORD9>Y CITIZ5S1 >E WILL+ TO BORR[4 ,GOV]NM5T SP5D+ IS ! MA9 DRIV] 9 ALL ?IS 7& ! PAP] DOES ADMIT1 IF Y\ READ IT C>EFULLY1 ?AT ! C5TRAL BANK DOES FUND ! GOV]NM5T AFT] ALL74 ,SO !RE'S NO QUE/ION ( PUBLIC SP5D+ 0CR[D+ \T0 PRIVATE 9VE/M5T4 ,IT'S EXACTLY ! OPPOSITE4 

,:Y DID ! ,BANK ( ,5GL& SUDD5LY ADMIT ALL ?IS8 ,WELL1 ONE REASON IS BECAUSE IT'S OBVI\SLY TRUE4 ,! ,BANK'S JOB IS TO ACTUALLY RUN ! SY/EM1 & ( LATE1 ! SY/EM HAS NOT BE5 RUNN+ ESPECIALLY WELL4 ,IT'S POSSIBLE ?AT IT DECID$ ?AT MA9TA9+ ! FANTASY-L& V]SION ( ECONOMICS ?AT HAS PROV$ SO CONV5I5T TO ! RI* IS SIMPLY A LUXURY IT CAN NO LONG] AF=D4 

,BUT POLITICALLY1 ?IS IS TAK+ AN 5ORM\S RISK4 ,JU/ CONSID] :AT MI<T HAPP5 IF MORTGAGE HOLD]S REALIZ$ ! MONEY ! BANK L5T !M IS NOT1 REALLY1 ! LIFE SAV+S ( SOME ?RIFTY P5SION]1 BUT SOME?+ ! BANK JU/ :ISK$ 9TO EXI/5CE ?R\< ITS POSSESSION ( A MAGIC W& :I* WE1 ! PUBLIC1 H&$ OV] TO IT4 

,HI/ORICALLY1 ! ,BANK ( ,5GL& HAS T5D$ TO BE A BELLWE!R1 /AK+ \T SEEM+ RADICAL POSITIONS ?AT ULTIMATELY BECOME NEW OR?ODOXIES4 ,IF ?AT'S :AT'S HAPP5+ H]E1 WE MI<T SOON BE 9 A POSITION TO LE>N IF ,H5RY ,=D WAS RI<T4 

,FROM 3 ,!,AN>*I/,LIBR>Y4ORG4 

,*RONOLOGY 3 
,JANU>Y #g1 #bba 3 ,! TRU? IS \T -- ,ADD$4 
,JANU>Y #d1 #bbb 3 ,! TRU? IS \T -- ,UPDAT$4 

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