Money & markets
How central banks conjure money out of nothing
11 min
What actually happens when money is 'created' — the mechanics of central banking, reserves, and quantitative easing, and what really limits how much money can exist before it loses value.
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Show notes
Physical cash accounts for only three percent of the United Kingdom money supply.
Commercial banks create new money by typing digital entries into a borrower's account ledger.
Central bank reserves act as a specialized digital currency used only for interbank settlements.
Quantitative easing functions as a digital asset swap rather than the physical printing of money.
The Federal Reserve balance sheet expanded from eight hundred billion to six point five trillion dollars.
Inflation occurs when the total money supply grows faster than the production of goods and services.
In this episode
- 1Intro1 min
- 2The Myth of the Printing Press2 min
- 3The Central Bank Ledger and Reserves3 min
- 4Quantitative Easing: Conjuring at Scale3 min
- 5The Limits of Creation2 min
- 6Outro1 min
Sources
- Money creation in the modern economy | Bank of England
- The Fed - The Central Bank Balance-Sheet Trilemma
- [PDF] Banks' Wealth, Banks' Creation of Money, and Central Banking
- Money creation in a fractional reserve system (video) - Khan Academy
- Banks do not create money out of thin air | CEPR
- Does the Fed Actually Print Money? — Satoshi's Clock
- How the Fed and Commercial Banks “Create Money” | Mises Institute
- How Money Actually Works (What They Left Out of the Textbook) | Untaught
- Where Does Money Come From? (The Answer Will Make You Angry) | Untaught
- Where Does New Money Come From? — Satoshi's Clock
- Bank of England Quarterly Bulletin 2014 Q1
- Understanding Modern Money: How a sovereign currency works
- Money creation
- The double entry behind the money creation in the central bank reserve accounts
- How is money created? | Bank of England
- Bank of England Quarterly Bulletin 2014 Q1
- Money in the modern economy: an introduction | Bank of England
- https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-in-the-modern-economy-an-introduction.pdf
- Bank of England Market Operations Guide: Our objectives | Bank of England
- The importance of central bank reserves - lecture by Andrew Bailey | Bank of England
- The Bank’s framework for providing liquidity to the banking system as a whole - review by Bill Winters
- Quantitative easing | Bank of England
- QE at the Bank of England: a perspective on its functioning and effectiveness | Bank of England
- The central bank balance sheet as a policy tool: past, present and future
- Bank of England Working Paper No. 511
- Centre for Central Banking Studies
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