Loading...

Banks don't lend money, they create it: Demystifying monetary and banking terminology

6,495 views

Loading...

Loading...

Transcript

The interactive transcript could not be loaded.

Loading...

Rating is available when the video has been rented.
This feature is not available right now. Please try again later.
Published on Oct 25, 2015

Banks create account money in the process called "lending", so why is that term still used? What money is and what banks do are quite mystifying to many people. Richard A. Werner has proposed three theories of banking: Banking as financial intermediation, fractional reserve banking, and the credit creation theory of bankning. I argue that they are suitable to three different banking systems: warehouse banking, banks with gold reserves and pure account-money banks. A certain historical progression may be identified between these three banking systems, and this helps explain why terms from older forms (warehouse banking and gold-reserve banks) persist today. Additionally, banks have a vested interest in not being too candid about what goes on behind the bank counter, in that the popular warehouse theory of banking legitimizes the charging of interest: Depositors must be compensated for the unavailability of their funds, right? I conclude by proposing some relevant changes in banking and monetary terminology.

Loading...

When autoplay is enabled, a suggested video will automatically play next.

Up next


to add this to Watch Later

Add to

Loading playlists...