"Money creation in the modern economy" report by the Bank of England

[zg7666]

 

Could anyone please comment on "Money creation in the modern economy" report and the information presented by the Bank of England?

http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q102.pdf

 

They say that it is popular misconceptions — banks do not act simply as intermediaries, lending out deposits that savers place with them, and nor do they ‘multiply up’ central bank money to create new loans and deposits.

In conclusion:  ..banks create money whenever they lend to someone in the economy or buy an asset from

consumers. And in contrast to descriptions found in some textbooks, the Bank of England does not directly control the quantity of either base or broad money.

 

So is it same process as in fractional banking but with 0% reserve requirements? Is it somewhat different in USA?

Report also said  "The Bank of England is nevertheless still able to influence the amount of money in the economy. It does so in normal times by setting monetary

policy — through the interest rate that it pays on reserves held by commercial banks with the Bank of England. More recently, though, with Bank Rate constrained by the effective lower bound, the Bank of England’s asset purchase program has sought to raise the quantity of broad money in circulation."

 

Here is Steve Keen explaining it: http://youtu.be/W_jc0cYCg14?t=15m2s  (at the beginning he seems to be ignorant of Regression theory, but never the less...)

[GRosado]

Could anyone please comment on "Money creation in the modern economy" report and the information presented by the Bank of England?http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q102.pdfThey say that it is popular misconceptions — banks do not act simply as intermediaries, lending out deposits that savers place with them, and nor do they ‘multiply up’ central bank money to create new loans and deposits.In conclusion: ..banks create money whenever they lend to someone in the economy or buy an asset fromconsumers. And in contrast to descriptions found in some textbooks, the Bank of England does not directly control the quantity of either base or broad money.So is it same process as in fractional banking but with 0% reserve requirements? Is it somewhat different in USA?Report also said "The Bank of England is nevertheless still able to influence the amount of money in the economy. It does so in normal times by setting monetarypolicy — through the interest rate that it pays on reserves held by commercial banks with the Bank of England. More recently, though, with Bank Rate constrained by the effective lower bound, the Bank of England’s asset purchase program has sought to raise the quantity of broad money in circulation."Here is Steve Keen explaining it:

(at the beginning he seems to be ignorant of Regression theory, but never the less...)

There are two different viewpoints on how money is created in the economy, Endogenous & Exogenous. Exogenous holds that money is created by the Central Bank which constitutes the reserves that banks lend out while Endogenous holds money is created when banks make loans from nothing & the central bank fills their reserves. I am pretty sure that is what this article is talking about. I think Austrians hold both views on money creation but phrase it in different ways.

[Think Free]

There are two different viewpoints on how money is created in the economy, Endogenous & Exogenous. Exogenous holds that money is created by the Central Bank which constitutes the reserves that banks lend out while Endogenous holds money is created when banks make loans from nothing & the central bank fills their reserves. I am pretty sure that is what this article is talking about. I think Austrians hold both views on money creation but phrase it in different ways.

 

You state this as if there's a difference of opinion over how money is, in fact, created. Is that accurate? Because that seems unlikely.

[GRosado]

You state this as if there's a difference of opinion over how money is, in fact, created. Is that accurate? Because that seems unlikely.

No I state it just like it is in economics, I'm not gonna change around concepts & stuff just because there isn't a difference. Also how is it your asking me if it's accurate & then calling it unlikely right after? No point in asking.It's accurate, look it up for yourself.

[Think Free]

No I state it just like it is in economics, I'm not gonna change around concepts & stuff just because there isn't a difference. Also how is it your asking me if it's accurate & then calling it unlikely right after? No point in asking.It's accurate, look it up for yourself.

 

 

I looked it up. While there's a lot of stuff on exogenous and endogenous money supply, I can't find anything that makes sense of your first post, let alone this incoherent mess.

[GRosado]

I looked it up. While there's a lot of stuff on exogenous and endogenous money supply, I can't find anything that makes sense of your first post, let alone this incoherent mess.

I don't know if your calling my statements an incoherent mess but it is totally unnecessary if you are & I don't know why you would approach in such a way.If you read what the actual post was for the topic & read what the Bank of England put out (which I have a strong feeling you didn't) you would see they are talking about how money is created so please go back & read & then tell me if I was wrong about what I'm talking about.

[zg7666]

On Steve Keen - Austrian economists Robert P. Murphy and Gene Callahan, criticize Keen's 2001 book, by stating that the "work suffers from many of the very faults of which he accuses the mainstream". They also claim that much of his work is "ideologically motivated even while criticizing neoclassical economics for being ideological". They praise his critique of perfect competition, and his chapter on dynamic vs static models, whilst they criticize his attempts at objective value theory and what they claim is his misinterpretation of the Austrian interpretation of Say's law. - http://www.gmu.edu/depts/rae/archives/VOL16_4_2003/6_BR_Murphy.pdf

 

http://wiki.mises.org/wiki/Criticism_of_fractional_reserve_banking#Terminology

[Think Free]

I don't know if your calling my statements an incoherent mess but it is totally unnecessary if you are & I don't know why you would approach in such a way.If you read what the actual post was for the topic & read what the Bank of England put out (which I have a strong feeling you didn't) you would see they are talking about how money is created so please go back & read & then tell me if I was wrong about what I'm talking about.

 

I was calling your second post incoherent. I literally can't make sense of it. I did read what the Bank of England put out, but I just don't understand what you're saying. I tried to get you to clarify but don't understand your response.

[GRosado]

I was calling your second post incoherent. I literally can't make sense of it. I did read what the Bank of England put out, but I just don't understand what you're saying. I tried to get you to clarify but don't understand your response.

So the Bank of England publication is talking about money creation. So my first part deals with the one of two positions they could take on how money is created, Exogenous/Endogenous. However the Bank of England walks a tightrope in between the two so it may be a little difficult to figure it out however I do believe they are leaning towards exogenous money supply creation since they are saying the central bank has basically the final say.