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That’s incorrect, as the original article explains. Absent QE (which the BOE explains in this article can result in both creation and destruction of money, depe
by simple-thoughts 4y ago
That’s incorrect, as the original article explains. Absent QE (which the BOE explains in this article can result in both creation and destruction of money, depending on complex factors) money is usually created and destroyed without any influence from central authorities. You can read the article for a detailed explanation, but the simple version is that the financial sector as a whole can increase/decrease the entire balance sheet together. Yes assets and liabilities are balanced, but if the size of the balance sheet grows then there are more liabilities and this more money.
- brutusborn 4y agoI’m not saying the central authorities create money, I’m saying they confer the privilege to do so. Minor players do not truly create money in this way because they are isolated from the financial sector as a whole. They don’t get to play at the big boys table, so their contribution is zero sum.
- simple-thoughts 4y agoThis starts to get outside the scope of the article, but it is not true that USD central authorities fully or even majority control the money supply through regulation. You can create a bank in UAE or many other jurisdictions with a local license that allows you to deal in USD completely outside the jurisdiction of US enforcement agencies. Even within the jurisdiction of US agencies, there is a shadow banking ecosystem that is poorly understood and highly illegible. Most USD are not created within the jurisdiction of US authorities because USD is an international trade and reserve currency.
- jljljl 4y agoBanks are regulated and restricted, but any entity who lends money would technically create money. Individuals are rarely at a size where they can do this, but hedge funds and insurance companies are.