Tag: – fiat money system
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Do Banks Really Create Money From Nothing?
In today’s banking system, most of the money in circulation is created not by governments but by commercial banks when they issue loans. Instead of simply lending out existing deposits, banks create new deposit balances in borrowers’ accounts, expanding the money supply in the process. This modern view of money creation, now acknowledged by central banks and supported by empirical research, challenges traditional textbook stories about banks as mere intermediaries and reveals how credit, regulation, and monetary policy actually shape our economies.