Name: Where Does Money Come From?
ISBN: 9781521043899

Where Does Money Come From?

Where Does Money Come From? reveals how, contrary to public perception, the bulk of today's money supply is created and allocated by commercial banks in their role as providers of credit. The authors argue that this system is inherently unstable, with little effective regulation of how much credit is provided or whether it is used for productive or speculative purposes. Based on detailed research and consultation with experts, including from the Bank of England, Where Does Money Come From? reviews theoretical and historical debates on the nature of money and banking and explains the role of the central bank, the Government and the European Union. This Second edition includes new sections on Libor and quantitative easing in the UK and the sovereign debt crisis in Europe.Praise for Where Does Money Come From?"Refreshing and clear. The way monetary economics and banking is taught in many - maybe most - universities is very misleading and what this book does is help people explain how the mechanics of the system work".David Miles, Monetary Policy Committee, Bank of England"It is amazing that more than a century after Hartley Withers's The Meaning of Money and 80 years after Keynes's Treatise on Money, the fundamentals of how banks create money still need to be explained. Yet there plainly is such a need, and this book meets that need, with clear exposition and expert marshalling of the relevant facts.

What Hacker News says

crazygringoOct 2023

It's actually quite astonishing how hard it is to get answers to these questions.

I spent some time last year trying to understand money "once and for all", and it's astonishing how complicated it is, and how even the general educated public has no inkling whatsoever. (E.g. just basic understandings such as that money is created by banks not governments, and that banks create money out of thin air and not out of deposits.)

I gave up after a while because the information is just so non-accessible. My biggest takeaway is just how a modern educated person is relatively easily able to have a working knowledge of domestic politics and foreign affairs, of basic literary and artistic culture, of history and geography, and of basic math and sciences -- but trying to gain a basic working knowledge of how money actually works -- as opposed to the bunch of shockingly oversimplified and misleading models you learn in Econ 101 -- is shockingly difficult.

Which is not a great state of affairs in democracies, when things like inflation and interest rates can wind up affecting elections. It's relatively easy to judge whether you think Biden is doing the right or wrong thing on Ukraine or Israel; it's virtually impossible to judge what you think the central bank is doing under him.

Ultimately the best starting resource I found was "Where Does Money Come From?":

https://www.goodreads.com/book/show/19241338-where-does-mone...

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epistasisApr 2022

The broadest audience book is probably Kelton's The Deficit Myth:

https://www.goodreads.com/book/show/45731395-the-deficit-myt...

If you want a deeper dive in audio form, I really liked the MMT podcast sub-series embedded in Current Affairs' bird seed podcast. However they spend so much time on the basics and the "controversy" that they only focus on the central banking aspect of it; the critics they bring on are so bad at critiquing it that MMT really come out looking good. There are two aspects:

1) here's how money works with a central bank and what it means about, for example, US government "debt"

2) now that we have these concepts of money, and observe how monetary policy has been used to keep a pool of unemployed people, let's instead try to get full employment with a job guarantee to increase economic productivity.

I am compelled by (2) but it's not as essential as understanding (1) IMHO.

MMTers also tend to focus on government (sometimes called vertical) money creation, and pay much less attention to bank creation of money (sometimes called horitzontal), because MMTers are focusing on monetary policy by currency sovereigns. But horizontal money is super important to understanding economic cycles too. A really good book about this, that focuses on the intricacies of the UK banking system to prove its points, is Where Does Money Come From:

https://www.amazon.com/Where-Does-Money-Come-Ryan-Collins/dp...

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ReraromMar 2020

https://www.goodreads.com/book/show/13144133-where-does-mone...

Where does Money come From

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u40as7Mar 2020

I will offer that 'Where does money come from' By Josh Ryan-Collins, Tony Greenham, Richard Werner, Andrew Jackson. Its a fantastic short book on how money actually works in this system.

The follow up to this is Richard Werners study on central banking.

A lost century in economics: Three theories of banking and the conclusive evidence

https://www.sciencedirect.com/science/article/pii/S105752191...

This is one of the first empirical tests of theories of central banking and how money flows.

Anything by Richard Werner I think is lucid. He has lots of youtube videos that goes into the details in the book and this study.

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qubexDec 2017

I’m not really sure I understand your primary question. The scenario I seem to understand you posit as a backdrop to your question is logically inconsistent: having some deflationary assets is not equivalent to having a deflationary baseline (currency). You must remove the option of escaping inflation by holding riskless cash, otherwise everybody will exert the choice to avoid (risk-adjusted inflation).

Regarding your other questions, I strongly recommend Where Does Money Come From? as providing a solid, albeit somewhat polemic, introduction to how the fiat currency/fractional reserve currency system works in general (and the GBP in particular). Spoiler alert: there is general agreement that topologically it would be more robust if the central bank interacted more directly with non-bank entities, but regulatory capture by incumbents and practical considerations places a damper upon this.

EDIT: ah, noticed you have re-numbered your questions, boarding a plane right now, will get back to you.

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istultusFeb 2024

I would hazard a guess that this is a false equivalency. Sydney and Melbourne probably started out small and as they enlarged into a huge metropolitan conurbation, only the original part maintained the administrative designation "City of X". The City of London, while making up part of the ancient city of London, usually refers to The City of London Corporation which was a financial center made (again) independent from royal authority during the reign of William III to allow its banks to charge interest rates.

From the book Where Does Money Come From (2011): The Dutch brought the concept to England following the successful invasion by the Dutch Prince William III of Orange in the ‘Glorious Revolution’ of 1688, who displaced the reigning monarch. Under the reign of William III (and Mary), the charging of interest (usury) was soon allowed and bank-friendly laws were introduced. Given the previous repeated defaults by indebted kings and a raid on the national mint; Parliament and creditors of the state (namely the merchants and goldsmiths of the Corporation of London) lobbied for the creation of a privately owned Bank with public privileges – the Bank of England – and the secession of one square mile of central London as a quasi-sovereign state within the state.

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