Talk:Money creation

message: In the last paragraph of "An example of the creation of new money in the USA" -- It says: the same process also runs backwards - Federal Reserve may sell Treasury securities it holds as assets to primary dealers, taking money out of circulation and reducing money supply.
Should this not be buy.  —Preceding unsigned comment added by Ossworks (talk • contribs) 15:40, 31 March 2008 (UTC)
replies: text: No, it should be sell. It sells the securities for money (cash or reserves), which takes money out of circulation.--Gregalton (talk) 20:25, 31 March 2008 (UTC)
thread_title: Errors

message: See http://en.wikipedia.org/wiki/Talk:Fractional-reserve_banking
Money is also created by the central bank in converting foreign currency to domestic currency.  —Preceding unsigned comment added by 41.182.227.244 (talk) 14:32, 16 September 2009 (UTC)
replies: text: I agree with the dispute tag.  This article goes completely against modern (post 1920) economic theory.  Money is more than coins and banknotes, it includes electronic money, and bookkeeping entries - anything that represents a liability of the central bank.  Not being allowed to talk about the Fed??!!  Obviously something is wrong here Smallbones 15:01, 17 September 2006 (UTC)
replies: text:  Could you please explain your point of view and why do you assert that the article goes against post-1920 economic theory? manu3d 14:05, 26 November 2006 (UTC)

text: Credit Card Debt is just one facet of the Money Multiplier mechanism. I'd suggest to reframe the whole article  and its examples from the point of view of a single bank dealing with individual customers, and then explain the bank's connection with a generic national bank along similar lines. Doing so, any kind of non-cash withdrawal (money transfers, plastic money) is properly contextualized. What you do think? - manu3d 12:42, 29 November 2006 (UTC)

text: What makes you say this? (And, please sign your comments). I just got a new credit card with a spending limit of £500. If I buy goods worth £500 why is that not new money? The receipts of the shops add up to an extra £500 which they would not have without my new credit card.--Janosabel 21:44, 11 July 2007 (UTC)
replies: text: I must support Janosabel 100% here. Credit card debt is no different from any other kind of debt. The credit card company creates money which it is then generating revenue from. Standard money creation. MartinDK 10:34, 16 July 2007 (UTC)
replies: text: Credit card debt is not money creation. When you make a credit card purchase the card issuer has to pay the shop or business immediately and cover this payment using their existing funds, they later reclaim this money from the carholder. As such they are lending out money which they already have and not creating money.--81.86.104.84 (talk) 22:44, 14 January 2010 (UTC)
replies: text:  Credit card debt is definitely "money" creation. Correct, it is vague if it is new "printed money" creation. One should wonder, does extensive use of credit cards, increases "money" circulation or not? I believe it is.   Also, I don't believe that large companies send the boy Monday morning to bring the cash from the Bank. Sorry for the style of writing, I am trying to be clear.  — Preceding unsigned comment added by Alexopth1512 (talk • contribs) 22:27, 17 April 2011 (UTC)
replies: text:  Agreed. When you get a zero balance $5000 credit card, those dollars are your dollars to spend as you wish.  Credit card debt is often securitised so that de facto new deposits are created in favour of the holders of the securities and in return the bank gets the full amount of deposits available for more lending, and under Basel only requires to have capital for a small fraction of the full amount of lending - the bank is levered with respect to its capital.  Under Basel the portion of unused Helocs, credit cards and other unused lines of credit are not counted as loans and do not require any allocated capital against the agreed dollar amounts.User:Andrewedwardjudd|Andrewedwardjudd]] (talk) 09:32, 19 April 2011 (UTC)
thread_title: Disputed

message: "As a loan is paid back, more commercial bank money disappears from existence than was created (assuming an interest rate above zero). "
Surely this is wrong? The borrower must pay back interest + loan to the lender. When the capital sum is paid back the original loan is annihiliated, but the bank retains the interest.  So this line should be deleted. OK?  — Preceding unsigned comment added by Doc Richard (talk • contribs) 21:27, 4 December 2011 (UTC)
thread_title: Loan payback

message: :"There is currently neither an explanation on where the money comes from to pay the interest on all these loans" [...]
The example is a series of loans to the government. If government keeps increasing its borrowings over time in the manner described, then an increasing percentage of its spending becomes interest repayments, requiring further funding from either borrowing or taxation. This can be seen in real-life in government accounts, and has a natural limit.
: [...] "nor is there an explanation as to how the United States Department of the Treasury manages default on said loans (see Lehman Brothers)."
It isn't clear how Lehman Brothers is relevant. This is not an example of a bank defaulting on a loan from the government: the loans in the example are from banks to the US government - there is no risk to the government or the Federal Reserve to manage here.
Mauls (talk) 16:39, 4 November 2020 (UTC)
thread_title: Dubious statements

message: This article is all about precious metal coins and bank notes, which account for less than 10% of the US money supply.  The minting section has no relevance in today's world, e.g. what percentage of the face value of coins is in precious metal coins?  In the US, I'd guess it rounds to 0.00%, and almost the same with almost all other countries.  0.00% times 10% = irrelevance.  Smallbones (talk) 18:56, 9 January 2008 (UTC)
thread_title:  Article needs a major revision 

message: (Cf. point 5 in the list, "This lending of money that it has on deposit is the precise point at which new money is created, because the depositor still has his money, ...")
The statement "the depositor still has his money" is in my opinion a kind of a short cut of the true fact. The depositor has NOT got the money anymore, rather he is in possession of the bank's promise to repay him money. (In case of a money transfer, the amount would have been deducted from the sender's bank's cash position.) Thus (net) money is not created, as the bank got in possession of the actual money, which is proven by the fact that the sum of total deposits and total loans in the list below that paragraph net out to the original depositted (physical) money.
It is of course true that by the prevailing mechanism implicitly the same money comes to use as collateral for loans of value a multiple times of the money's nominal value -- clearly increasing the buying power in the economy; this effect however is not appropriately coined as "money creation". (To give a further clearifying analogy: If a company owns 10000 USD and prepares a statement with many asset and liability positions, then even though the sum of absolute values of all these figures exceeds 10000 one would not say that the company has created money. These are just numbers.)
ThomasP, 24.3.2008  —Preceding unsigned comment added by 217.7.223.62 (talk) 16:31, 25 March 2008 (UTC)
thread_title:  On the example of how money is created in the US, and the precise point where money is created 

message: Under:
An example of the creation of new money in the USA
4. The government deposits the check in its own account.
Somebody needs to clarify "its own account" - which bank is this ??  —Preceding unsigned comment added by 65.202.103.25 (talk) 19:51, 29 April 2008 (UTC)
thread_title:  Need clarification 

message: I feel there should be a discussion around how second mortgages affects M0 money supply. Commercial bank money created through the multiplier in fractional reserve banking shouldn't affect the market as long as it is only used on real estate and loan installments (i disregard interest in this case), but in the case of a second mortgage the money can be used on anything.
If these second mortgages are repaid, the only effect is a 1-30 years boost on the money supply. Whenever this turns into a foreclosure / bankruptcy however, the first mortgage is repaid but the second remains in the system.
In these times, couldnt this have a significant effect on M0? --Aravn (talk) 09:58, 5 December 2009 (UTC)
thread_title:  Second mortgages and money supply 

message: After reading this article I spent a little time trying to find historical examples of competive minting. The only thing I have found resembling competetive minting is competition between city states or smaller states in the middle ages, which is very different from the kind of competetive minting described in this article. I think this part of the article might be a complete fiction, or if such minting has ever existed then it was in a far more limited form than minting by governments. Perhaps the article could be changed to reflect this, as it is misleading in its current form.--81.86.104.84 (talk) 22:49, 14 January 2010 (UTC)
replies: text: The correct referent of this is the contractural relations between the state and the private enterprises, normally purveyors to the Crown, that produced the actual currency. The monopoly on general money is more or less identified with the state power and has been throughout civilized history, so it's only the production of speciæ by different shops that are referred to and I think you should be able to find a fairly rich history behind that. i.e. in those places and times where the state didn't also monopolize the actual production and distribution of the currency. 72.228.150.44 (talk) 01:26, 23 January 2010 (UTC)
replies: text: Of course in the current period, with the creation of exotic and derivative forms of money, in a case like that of the United States, a relatively small portion of the total effective "money" supply is state created. 72.228.177.92 (talk) 18:10, 12 April 2010 (UTC)
thread_title:  Competitive minting? 

message: Doesn't work also create money?
E.g. you take some wood make a chair and sell it. Haven't you cretaed money worth the diference between materials, labour etc and the selling price?
If so can someone who understands this please add to the article. If not cn someone who understands also please add to the article as a common misconception.
Thanks  —Preceding unsigned comment added by 182.239.160.54 (talk) 13:35, 8 September 2010 (UTC)
thread_title: What about work? Production and other value adding?

message: I would like to see the process of "creating money" in today's banking system explained and clarified through simply listing the balance sheet operations in which a bank records the process. 
This should take the following form for the creation of "bank money": 
:1) Balance sheet of commercial bank in t1 (before creating new "bank money")
:2) Balance sheet of commercial bank in t2 (after creating new "bank money") 
:3) Comparison of balance sheet in t1 and balance sheet in t2 with respect to changes in assets, liabilities, and net assets (equity). 
And the following form for the creation of central bank money: 
:1) Balance sheet of central bank in t1 (before creating new central bank money)
:2) Balance sheet of central bank in t2 (after creating new central bank money)
:3) Comparison of balance sheet in t1 and balance sheet in t2 with respect to changes in assets, liabilities, and net assets (equity).
Since there are different forms of central bank money, I would like to see the balance sheet operations for creating
:a) Central Bank Notes (not the creation of the paper notes, but the balance sheet operations of releasing them into the economy)
:b) Electronic Central Bank Money 
:c) Coins (again, not the production of the coins themselves, but the balance sheet operations of releasing the into the economy) 
a) and b) would also clarify the process of creating so-called "fiat money".  
Should not a simple description of what banks actually do when they create money be the very least we can expect from an article attempting to clarify how money is created?  There should be no mystery in simple balance sheet operations.  Thanks, folks Thewolf37 (talk) 12:37, 26 September 2010 (UTC)
thread_title:  Balance sheet operations for creating money 

message: This page talks a lot about how money is created, but it says very little about why anyone cares. IE - what are the implications of changes in money supply. Clearly an increase in money supply is correlated with inflation, but that isn't always true. Are there other implications? It seems silly to talk about the "money supply" without assessing what it means to change the supply of "money". 
Does anyone have any ideas for an "implications" section like this? Fresheneesz (talk) 01:36, 20 November 2010 (UTC)
thread_title:  Implications about money supply changes 

message: You're missing a key component to Re-Lending:  The other 80 of the original deposit can also be used to fractionally lend money into existence making the total amount of money that can be loaned into existence from step A to B, based on a 20% reserve rate, is not 80 but 400.  Of course, if that depositor requests any money back, the bank will be over their reserve ratio.
Your table should look more like this (with a 25% ratio):
 
* A   100     400    500
* B    400    1600  2100
* C    1600  6400  8500
* .....
Why is it that most people seem to think that some how, magically, only a fraction of deposits become reserves?  By using the reserve ratio for this fraction, it's only perpetuating a misconception and biasing wikipedia.  The reserve ratio only has to do with the amount of money banks can lend into existence, not how much of a deposit becomes reserves.  For a bank, the whole deposit becomes new reserve, not some little fraction of the deposit.  —Preceding unsigned comment added by Javalizard (talk • contribs) 21:27, 22 November 2010 (UTC)
replies: text: The process of money creation in a fractional reserve banking system is elementary. Suppose Bank A has 100 in assets. If the reserve rate is 20%, the bank must retain 20 in reserve and is free to lend 80. If that money is deposited in Bank B, it must keep 16 in reserve and is free to lend 64. If 64 is deposited in Bank C, it must keep 12.80 in reserve and can lend 51.20. After just three steps, the total money created would be 80 + 64 + 51.20 or 195.20. The money multiplier at this stage would be 195.20/80 or 2.44. If the process is continued indefinitely, the money multiplier would be 1/0.2 or 5 and the total money created would be 5 times 80 or 400. Virgil H. Soule (talk) 03:12, 28 January 2014 (UTC)
thread_title:  Step A to B: the other 80 of the deposits 

message: If you have 20 in reserves with a 20% reserve ratio, the amount of money that can be loaned into existence is 20/0.2 or 100.  This table shows subtraction of the original deposit by the reserve to create tho money loaned into existence (for you math types,  100-100*0.2=80)  When it should be division: 20/0.2=100.  See the previous section.  The math should be 100/0.2 for the total amount of reserves that can be created being 500.  
A short passage was added to address the maximum of each step instead of just the example.  People make wild assumptions about how initial deposits are then converted to reserves by some reserve ratio based on the example.  The example is just that and doesn't address the maximums.  Would some of you stop deleting the passage on the maximum relending in each step based on your false ideas derived from the example?  It is rather crafty that people keep imposing their false ideas of how relending works.  You are stopping others from understanding the process by imposing your own limited and false view of relending.   If you look at the math in the example, they don't even use the money multiplier properly between the reserves and the relending amount created, how can anyone thus assume it is correct or meaningful in any way?   The example doesn't even say maximum amounts any where.  The issue was un-addressed before the passage on maximums was added.
There are internal discrepancies with how the bankers describe the system working and what their equations actually do.
—Preceding unsigned comment added by Javalizard (talk • contribs) 16:10, 23 November 2010 (UTC)
replies: text: The process of money creation in a fractional reserve banking system is elementary. Suppose Bank A has 100 in assets. If the reserve rate is 20%, the bank must retain 20 in reserve and is free to lend 80. If that money is deposited in Bank B, it must keep 16 in reserve and is free to lend 64. If 64 is deposited in Bank C, it must keep 12.80 in reserve and can lend 51.20. After just three steps, the total money created would be 80 + 64 + 51.20 or 195.20. The money multiplier at this stage would be 195.20/80 or 2.44. If the process is continued indefinitely, the money multiplier would be 1/0.2 or 5 and the total money created would be 5 times 80 or 400. Virgil H. Soule (talk) 03:12, 28 January 2014 (UTC)
thread_title:  Re-lending: step A 

message: A much better description of the chart would be for an initial deposit to reserve conversion rate of 20% and a money multiplier of 25%.  — Preceding unsigned comment added by Javalizard (talk • contribs) 18:33, 23 December 2010 (UTC)
thread_title:  Re-lending: a better description of the chart 

message: I'm going to ask politely that people stop calling the relending section original research when it is a summation of facts on the same page in a reordered fashion, plain mathematics, visual displayed on a chart in the same page, or pulled from a related page, such as money multiplier.  When someone can explain to me how you get reserve ratio of 20% when you divide 20 / 80, then you can keep your edits that suggest the relending series original text doesn't need clarification.  It seems extremely clear to me that 20/100 is 20%.  The original text even states that it is a 20% reserve RATE.  How obvious is it to people that 20/80 on the other hand is a 25% reserve ratio?  The section on the money multiplier even discusses how it is calculated.  So,  I calculated it!  People are removing my edits because they don't understand math.  These undos are an affront to the reality of math everywhere.  I find this kind of wikipedia behavior reprehensible.  Can we do something about these disinformation users?
Javalizard (talk) 10:44, 30 December 2010 (UTC)
replies: text: You need to properly cite the chart, you can't just cite another wikipedia article. Also I'd like to see your calculations; what you've been posting here is difficult to follow and the numbers you have don't sound right. Voiceofreason01 (talk) 23:16, 30 December 2010 (UTC)

text: As if [Wikipedia:Verifiability|citing another wikipedia page] wasn't bad enough, you've been editing that page too. Are you trying to "cite" your own edits to wikipedia articles? bobrayner (talk) 01:13, 31 December 2010 (UTC)

text: You cannot cite another wikipedia article. If you want to use the chart here you MUST bring the sources over from the other article. I would do the work for you except your calculations don't appear to be factually correct and you refuse to clarify your position or post your calculations. I also have WP:WEIGHT concerns about including the chart in this article because it lacks the context provided in money multiplier. Voiceofreason01 (talk) 18:28, 31 December 2010 (UTC)
thread_title:  Please stop reverting the relending section to show improper math 

message: *Human beings have been creating private monies for thousands of years.
*Anybody offering credit services to facilitate trade can create a private money providing they can retain creditors or have their own claimable assets.  
*money creation is not reserved for governments and central bankers.  Private monies exist in the economy that are not counted as part of the official money supply.  For example a bar tender has a chalk board with the available newly created money allowing customers to buy drinks where repayment with interest could be required. If he wanted and was legally allowed he could get rid of the chalk board and issue loaned tokens that could be used in the local community amongst people who knew and trusted him and these could be redeemable for cash if people came to his bar or 'deposited with him' for an interest payment or used to buy his services.
Surely wiki can do a better job at being encyclopediatic than some particularly important pages are doing?  Doesnt the word mean 'all incompassing teaching' ? Andrewedwardjudd (talk) 10:10, 14 April 2011 (UTC)
thread_title:  First section is hopelessly misleading if not completely wrong 

message: Whoever is going to zap this soon, please man up, say who you are, and why you wish to delete. Don't hide behind an anonymous IP address.
This source, legal forgery is well researched and sourced, so have a look at it before you remove the link. It is relevant to alternative
views. Thank you. Brandsby (talk) 14:38, 5 September 2013 (UTC)
replies: text: Here I am, "manned up" (but WP has lots of female contributors). The source you want to add looks like a personal blog. See WP:SPS for guidance. Now if your source was Professor Billy Davies from American University, then Professor Davies' blog might work. But these are not the same guys. What you might do is look at the sources that your Davies has utilized and incorporate those sources into the article.  – S. Rich (talk) 15:25, 5 September 2013 (UTC)

text: This is a sourcing issue for Wikipedia. At this stage we are not concerned with "what" Davies says. Rather, "who" is Davies. If he were a university professor in the subject of economis, and had published these ideas on his blog, then we could use it. But Davies is not a professor or published author. Wikipedia has restrictions on the type of source we allow. In this case, because Davies is simply providing his accumulated wisdom, we cannot use it, no matter how "true" or "correct" it is. To compare, the 2008 paper by Nigel Jenkinson might be an acceptable source.  Where was it published. – S. Rich (talk) 16:44, 5 September 2013 (UTC)
thread_title:  Money creation and "legal forgery" 

message: This paper from the Bank of England effectively refutes most of the assertions in this article (that money creation is mostly about fractional-reserve banking and the money multiplier). Is this article therefore wrong? (I ask objectively, not to make any political or academic point). 
http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q102.pdf  — Preceding unsigned comment added by 86.24.204.126 (talk) 18:33, 30 April 2014 (UTC)
replies: text: Thanks. This paper is a major contribution from one of the most authoritative institution on this topic. Yet, the way the paper is being sourced in the wiki article is misguiding. Indeed, the way it is referenced seem to give credit to the fractional reserve banking theory, whil in fact the paper clearly argues that some of this theory is wrong, in particular the role of reserves, and whether those reserves are being 'multiplied' by private banks (which the BoE says it's wrong). See this excerpt:
Another common misconception is that the central bank determines the quantity of loans and deposits in the economy by controlling the quantity of central bank money — the so-called ‘money multiplier’ approach. In that view, central banks implement monetary policy by choosing a quantity of reserves. And, because there is assumed to be a constant ratio of broad money to base money, these reserves are then ‘multiplied up’ to a much greater change in bank loans and deposits. For the theory to hold, the amount of reserves must be a binding constraint on lending, and the central bank must directly determine the amount of reserves. While the money multiplier theory can be a useful way of introducing money and banking in economic textbooks, it is not an accurate description of how money is created in reality. Rather than controlling the quantity of reserves, central banks today typically implement monetary policy by setting the price of reserves — that is, interest rates.
In reality, neither are reserves a binding constraint on lending, nor does the central bank fix the amount of reserves that are available. As with the relationship between deposits and loans, the relationship between reserves and loans typically operates in the reverse way to that described in some economics textbooks. Banks first decide how much to lend depending on the profitable lending opportunities available to them — which will, crucially, depend on the interest rate set by the Bank of England.
By the way, this new paper by the IMF also confirms this view: 
The availability of savings of real resources does not constitute a limit to lending and deposit creation, nor does the availability of central bank reserves. Modern central banks pursue interest rate targets and must supply as many reserves as the banking system demands at those targets. This fact flies in the face of the still very popular deposit multiplier narrative of banking, which argues that banks make loans by repeatedly lending out an initial deposit of central bank reserves.­
Based on those sources, I think the current wiki page deserves an important update.  — Preceding unsigned comment added by Stanjourdan (talk • contribs) 12:51, 9 July 2016 (UTC)

text: Thank you for those informations. It seems that your first reference (Bank of England) is cited in the article, but not the other two (The Guardian and the International Monetary Fund). What about adding them?Adèle Fisher (talk) 17:06, 18 March 2018 (UTC)
replies: text:  For instance "In other words, everything we know is not just wrong – it's backwards. When banks make loans, they create money" ("The truth is out: money is just an IOU, and the banks are rolling in it").Adèle Fisher (talk) 17:07, 18 March 2018 (UTC)
thread_title:  Recent Bank of England paper 

message: Hello fellow Wikipedians,
I have just added archive links to  on Money creation. Please take a moment to review my edit. If necessary, add  after the link to keep me from modifying it. Alternatively, you can add  to keep me off the page altogether. I made the following changes:
*Added archive https://web.archive.org/20090605101615/http://federalreserve.gov:80/releases/h6/hist/h6hist1.htm to http://www.federalreserve.gov/releases/h6/hist/h6hist1.htm
When you have finished reviewing my changes, please set the checked parameter below to true to let others know.
Cheers.—cyberbot IITalk to my owner:Online 21:17, 9 January 2016 (UTC)
replies: text: sourcechecked=true  —jmcgnh(talk) (contribs) 14:52, 30 October 2016 (UTC)
thread_title:  External links modified 

message: Hi,
Looked this subject up out of curiosity and I'm trying to understand this paragraph:
Money creation (also known as credit creation) is the process by which the money supply of a country or a monetary region (such as the Eurozone) is increased. A central bank may introduce new money into the economy (termed "expansionary monetary policy", or "money printing" by detractors) by purchasing financial assets or lending money to financial institutions. Commercial bank lending also creates money in the form of demand deposits. Through fractional reserve banking, bank lending multiplies the amount of broad money beyond the amount of base money originally created by the central bank. Reserve requirements and other capital adequacy ratios imposed by the central bank can limit this process.
Central banks monitor the amount of money in the economy by measuring monetary aggregates such as M2. The effect of monetary policy on the money supply is indicated by comparing these measurements on various dates. For example, in the United States, money supply measured as M2 grew from $6.407 trillion in January 2005, to $8.319 trillion in January 2009.
So money is created to increase the money supply and central banks monitor the amount of money.
Why does the amount of money need to be increased and does this process go on indefinitely such that there is more and more money going around in, say, the Eurozone?
That a central bank may introduce new money seems to indicate that this is occasional. So does credit creation mean that lending through banks is the usual means of creating money?
What about pre-existing money? How was it introduced to begin with?
Thank you for clarifying as other readers may also find this confusing.--JamesPoulson (talk) 15:55, 8 July 2016 (UTC)
thread_title:  Clarifying money creation 

message: With regard the old "money multiplier" vs "endogenous money" debate - please take a look at the post I put on the talk page of fractional reserve banking. I think the consensus has changed and it is time to reflect that in Wikipedia. Reissgo (talk) 07:32, 30 October 2016 (UTC)
thread_title:  Time for a new consensus? 

message: The last part of the section on Money Multiplier is incomprehensible and probably nonsensical.  It is not even grammatical.  To quote it:
credit creation process in commercial banks is an important attribute in the economy. Money deposited with commercial banks some part of this derivative deposit is kept as statutory reserve ratio as stated by the central bank. For example 20% of the demand deposits of axis bank is kept (20% of 1000) and other other part is advanced as loan to another commercial bank canara bank as a deposit there then canara bank will keep the 20% and forward the other part to icici bank this process continues but it is not a never ending process...
I can't make any sense of this, but phrases such as "other other part" show that it isn't just my ignorance.  This cries out for rewriting.  I'm no authority on this stuff; if I was, I would attempt to rewrite it.  I'm tempted to try to rewrite it anyway on the reasoning that anything I might provide will probably be an improvement.  — Preceding unsigned comment added by Paul Abrahams (talk • contribs) 05:51, 6 March 2017 (UTC)
replies: text: I agree it was gibberish - now removed. Reissgo (talk) 22:50, 7 March 2017 (UTC)
thread_title:  Gobbledegook under "Money multiplier" 

message: I have changed the title of the page to money creation and destruction because the existing title gives the (incorrect) impression that the money supply can only ever increase. There may have to be some additional edits to make the page contents better fit the new title but I am not going to attempt them until I see the reaction to the title change.
Note that the fact that the money supply can shrink is not the slightest bit controversial amongst economists and there is already a (single!) sentence in the main body which alludes to this fact, namely "As a loan is paid back through reductions in the demand deposit liabilities the bank owes to a customer, that commercial bank money disappears from existence." Reissgo (talk) 18:56, 30 October 2017 (UTC)
replies: text: Please start a formal "Request to move" if you want to do this. The question is not whether money supply can shrink or not, but whether "money creation" is WP:COMMONNAME for this phenomenon in general. Volunteer Marek  19:27, 1 November 2017 (UTC)
replies: text:  Hmmm... you have a point... and it led me to consider what exactly "this phenomenon" is that being presented. If this "this phenomenon" is "fractional reserve banking" then why have this page at all? There is already a page on that in Wikipedia. If its just the "creating" half of the creation+destruction process than that's a rather odd thing to have. It would be like having one page on Wikipedia called "jumping in the air and then landing" and a separate page devoted to just "jumping in the air". Reissgo (talk) 11:26, 3 November 2017 (UTC)
thread_title:  Title change to "Money creation and destruction" 

message: On November 13th Crashed greek made a series of edits which Volunteer Marek undid with the comment "this has been discussed to death". Indeed it has on the fractional-reserve banking page. Conclusions have been reached and the agreed state of that page has been stable for some time.
Roughly speaking it has been agreed that the BoE paper "money creation in the modern economy" is a RS and nobody on the FRB page is fighting to say anything which contradicts it. The money multiplier section of the FRB page includes the words "Rather than holding the quantity of base money fixed, central banks have recently pursued an interest rate target to control bank issuance of credit indirectly so the ceiling implied by the money multiplier does not impose a limit on money creation in practice". Finally the FRB page has a section entitled "Criticisms of textbook descriptions of the monetary system".
So yes, indeed these things have been discussed at length - but please don't lose sight of the conclusions that have been reached. Reissgo (talk) 16:21, 13 November 2017 (UTC)
replies: text: I had added few citation needed tags. Removal of those tags is not allowed. It should only be replaced by a proper reliable source reference. I will complain in WP:3RR if he reverts again. Crashed greek (talk) 04:49, 14 November 2017 (UTC)
replies: text: Text I added is from main article linked from that section. It is very relevant here. Money creation by commercial banks section is hoax. Crashed greek (talk) 16:25, 14 November 2017 (UTC)
thread_title:  "This has been discussed to death" – indeed 

message: Volunteer Marek deleted the sentence about banks not loaning out of their customer's deposits, which was sourced to the Chicago Fed. Can I ask why? And what is the background to the edit comment "how many years has this been going on now"? The fact that commercial banks are not loaning out of their deposits, nor out of their reserves, has been firmly established in Economics. Are we going to argue that the sky is not blue next? -The Gnome (talk) 09:53, 9 March 2018 (UTC)
replies: text: Quoting directly from the BoE paper: "The reality of how money is created today differs from the description found in some economics textbooks: Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits." The key part is "differs from the description found in some economics textbooks" - that's actually an understatement, it should have said "differs from the description found in most economics textbooks". Wikipedia is supposed to reflect the consensus amongst experts and some editors have taken this to mean the consensus amongst textbooks. So now we have an issue of what counts as experts. If you say that the textbook writers are the experts then wiki should publish the textbook story, even if it's false! If you say that the experts are the central bankers that actually run the system then wiki should publish the (correct) central banker's view. Of course there are more descriptions of the monetary system written by non-monetary specialist economists than there are from central bankers, so on the basis of quantity the textbook story wins... of course on the basis of quality the central banker's story wins. That's the battle in a nutshell. Reissgo (talk) 10:17, 9 March 2018 (UTC)
replies: text: Some experts are more expert than other experts. All joking aside, what you wrote reflects current reality in academia, the media, and politics; We will not have a consensus there any time soon, or a paradigm shift. Yet, when a chorus of central bankers (and, what's more, coming from major world economies) declare that money is created ex nihilo along with other facts of finance, the door stopping tomes of yesterday lose value rather drastically - even though they continue to be taught in myriads of classes. All we can do is allow space for the descriptive viewpoints offered by reliable sources. Take care. -The Gnome (talk) 13:01, 9 March 2018 (UTC)
replies: text: WP:NOTFORUM. Why not do the work to write an integrated and well-sourced section of article content instead of enabling WP:NOTHERE ignorant and obstinate disruption by a single purpose accounnt. This article could use plenty of improvement. It's truly remarkable that there's this ongoing campaign to make it even worse than it already is.  SPECIFICO talk 13:14, 9 March 2018 (UTC)

text: I concede that the sentence (a literal quote from the Fed) is not perfectly encyclopedic - but this is has largely come about through bitter experience. If I put something in my own words then SPECIFICO will claim it is WP:SYNTH. BTW, I have no idea how Pysiocrats came into this discussion. Reissgo (talk) 15:44, 9 March 2018 (UTC)
replies: text: You will either need to improve Wikipedia articles in line with site policies and guidelines or you'll need to stop wasting everyone's time. No need for chatter. Get to work or go away.  SPECIFICO talk 15:50, 9 March 2018 (UTC)
thread_title: Bank loans out of bank deposits, still

message: Terms: The article is about Money creation. An article cannot define every term  in it before expanding on its subject. Links to other Wikipedia articles exist precisely to facilitate navigation towards the definition of terms. At best, what we do is define (in a footnote or in the main text body, perhaps) a term that belongs to the process of explaining the subject. But, for instance, about "money" itself, we cannot have the definition of "money" here: That belongs to the article about money!
The "truth": First of all, we must keep reminding ourselves at all times that Wikipedia is relying on third-party, reliable sources. The truth (unless it is self-evident) takes a bask seat to verifiability. Therefore, the presentation of dissident, minority viewpoints, although they might well be the scientifically correct  ones, must be done with extreme care - and, for better or worse, with full inclusion of the mainstream views, since by definition the latter ones take up most of the space in the available sources. So, the guide for this re-write (a re-boot, really) was neutrality and verifiability and then fuller exposition of the subject. 
Outline: Start by the brief definition of the term. It is often used also (and legitimately) for the history of money, so we distinguish between the two. Then we define what exactly is affected by money creation, i.e. the money supply. Then, we move on to the processes through which the money supply is augmented, going through the hierarchy of money in the typical descending order. The money multiplier, which had before a prominent place in the article, is now part of the money creation process by the banks - where it rightly (i.e. per all sources) belongs. Next, we cover "monetary financing" ("debt monetization") since it is a closely related issue, but we cover it here to the extent that it expands our understanding of the process and the effects of money creation. Beyond that, what we have on "monetization" belongs to the main article - which, also, is another right mess. Can we have a constructive discussion about the outline of the "Money creation" article before we move on to points about the text itself?
Remains of the day: I agree that almost all articles in the field of state finances are in dire need of an overhaul, for the same reasons as hinted above. But this cannot humanly be done all at once! Therefore, SPECIFICO (and others) might be correct that we're defining money creation while we have not yet properly defined money itself. However, all this means is that we should keep stacking this up block by block (article by article) until we have in Wikipedia a building of which we can be proud, instead of embarrassed. Am I asking too much, fellow Wikipedians? -The Gnome (talk) 08:40, 12 March 2018 (UTC)
replies: text: Money creation - Where's the definition of this? I'm considering whether this is a good title for a WP article?  Money mechanics is clear. Credit creation is +/- clear.  Money creation not so clear.   SPECIFICO talk 17:52, 12 March 2018 (UTC)
replies: text: Another point is that "money creation" invites the now-discarded Quantity-theory  troglodytes and autodidact deflationist green warriorsto camp out.  SPECIFICO talk 18:34, 12 March 2018 (UTC)
replies: text: The title is indeed a magnet for all sorts of misunderstandings. :-) But, for better or worse (in my view, for worse), I guess we are stuck with it since this is the most common appellation of the process. Take the well known paper in the Bank of England's quarterly. -The Gnome (talk) 23:18, 12 March 2018 (UTC)
replies: text: We could consider Money mechanics which is widely used.  A survey of textbooks might give a clue.  SPECIFICO talk 00:50, 13 March 2018 (UTC)
replies: text: Your suggestion is more accurate. But if an RfC were initiated I'd have to reluctantly vote for "Money creation" on the basis of the relevant rule. A search in online and offline literature shows that "creation" is the term that has stuck. In any case, I personally consider the essence of the mechanics much more important educationally than the nomenclature. -The Gnome (talk) 09:32, 13 March 2018 (UTC)
replies: text: Does "Money creation" not seem to be the most appropriate and usual term for this topic? I would say yes. And Wikidata confirms that it is the most common term in other languages too.Adèle Fisher (talk) 17:09, 18 March 2018 (UTC)
replies: text:  I find 'money mechanics' much less clear about what the article is about. This would sound like this entry could be about anything such as transactions, money markets, money laundering and whatever else involves money and some kind of dynamics around it. Yes "money creation" is probably a bit simplistic, but does it matter when contrasted with the benefit of making this page accessible to the greater number of people who are genuinely wondering how money is created ? Central bankers are doing very well when it comes to obfuscating stuff, but perhaps we don't need to copy them. My 2 pennies. Stanjourdan (talk) 21:03, 29 March 2018 (UTC)

text: Modern Money Mechanics is a terrible source. The reason being that throughout most of the text it implies that banks lend money out of the deposits customers leave with them but then right at the end says "Of course, they do not really pay out loans from the money they receive as deposits." So what are we supposed to make of it? Which exactly of the earlier parts does the "not really" apply to? The BoE paper is both more recent, aimed at a higher level and doesn't contain any "we were only kidding about the earlier stuff" sentences. Reissgo (talk) 11:17, 13 March 2018 (UTC)
replies: text: Which source are you referring to, Reissgo? I have in mind "Modern Money Mechanics", an excellent paper by the Federal Reserve Bank of Chicago. Nothing about "loaning out of deposits", there. -The Gnome (talk) 11:46, 13 March 2018 (UTC)
replies: text:  Yes I am referring to that paper. I did not have any particular sentences in mind - but I just found this for example: "The remaining $9,000 is 'excess reserves.' This amount can be loaned...". Without reading it all again I can say that the authors must be aware that earlier text could mislead readers into thinking that banks lend deposits, otherwise they would not have felt the need to add the "not really" comment. Reissgo (talk) 12:06, 13 March 2018 (UTC)

text:  I just noticed that the "not really" comment appears near the start of this version of MMM... I have seen this paper in more than one format and from memory it appears near the end in an earlier incarnation - maybe in some sort of appendix - too busy to check right now. Reissgo (talk) 12:11, 13 March 2018 (UTC)
replies: text: It all seems alright. Under a regime of mandatory minimum reserves, banks may end up with excess reserves, i.e. above the mandated minimum. What do they do with those excess reserves? If the central bank wants to retain control of the interest rate, then it pays interest on the (excess) reserves. Otherwise, with zero interest paid on reserves/excess reserves, the banks burdened with excess reserves will compete to loan them out in the interbank lending market, and this inevitably drives the overnight rate down to zero, if left unchecked by the central bank. The Chicago paper explains all that, however, often using language from the prevalent economic analysis. There is also the BIS paper, "Unconventional monetary policies: an appraisal " which you also might know. -The Gnome (talk) 12:26, 13 March 2018 (UTC)
replies: text: If the following facts are obvious to the reader then I do not mind which sources are used. 1) The money supply can be falling despite money being created (when the rate of destruction is greater than rate of creation). 2) The money multiplier formula does not put a cap on the money supply in the real world (because central banks have a policy of creating reserves on demand and also because minimum reserve ratios are zero in many coutries). Reissgo (talk) 13:17, 13 March 2018 (UTC)
thread_title: Re-boot

message: I have rewritten the section 'Money creation by bank lending', including 'Money multiplier', and split it into 'Fractional reserve theory of money creation' and 'Credit theory of money' in order to make it more clear that there are two conflicting theories, and that the latter theory is gaining increasing support. I have tried to make the text clear to non-professionals but it could still benefit from some refinement and clarification. Some of the heavy and theoretical stuff about Schumpeter and Neo-Keynesian and Post-Keynesian analysis also needs to be made more readable, or perhaps moved to a footnote or separate section. Bolarno (talk) 12:43, 31 August 2018 (UTC)
replies: text: Money creation by bank ledning is not a theory. Its a fact.
Please educate yourself here:
https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy 2A01:799:BDE:5900:DCF9:6F6B:691:5DA7 (talk) 15:39, 30 November 2021 (UTC)
thread_title: 'Money creation by bank lending' rewritten and split up

message: An editor has asked for a discussion to address the redirect Issue of money. Please participate in the redirect discussion if you wish to do so.  signed, Rosguill talk 19:27, 22 November 2019 (UTC)
thread_title:  "Issue of money" listed at [[Wikipedia:Redirects for discussion|Redirects for discussion]] 

message: Go to the Bank Of England homepage
Type "Money Creation in the modern economy" and educate yourself plese 2A01:799:BDE:5900:DCF9:6F6B:691:5DA7 (talk) 15:37, 30 November 2021 (UTC)
replies: text: You are right.  — Preceding unsigned comment added by 62.240.134.202 (talk) 19:21, 29 March 2023 (UTC)

text: Please check out "credit mechanics" too, by Bank of England, Working Paper 761 and Papers by Decker/Goodhart (2018 & 2021) about Wilhelm Lautenbach's credit mechanics. In a crisis like 1930ies deficits (debt financed by german government) did not heightening bank money amount. Because receiving debtors used it to reduce their bank liabilities - so bank money amount did not change and did not arrive in real economy in the beginning of "deficit spending". 62.240.134.202 (talk) 18:57, 29 March 2023 (UTC)
thread_title:  Loans create deposits. Not the other way around 

message: In most developed countries, central banks conduct their monetary policy within an inflation targeting framework,[4] whereas the monetary policies of most developing countries' central banks target some kind of a fixed exchange rate system.
[5]''
--Veridelisi (talk) 08:46, 1 December 2023 (UTC)
thread_title: These statements are not actual and not general

message: Central banks use the Open Market Operations for increasing banking's reserve not coin or paper money.
Central banks can increase the quantity of banking's reserve directly, by engaging in open market operations. 
--Veridelisi (talk) 08:46, 1 December 2023 (UTC)
thread_title: Open Market Operations

message: Last 20 years, central banks, IMF , BIS and also Fed published document in this issue. There is no fractional reserve banking system in the world. Loans create the deposits and if is necessary,  central banks give the reserves to the banks .
Also there is no reserve requirement USA, Canada and New Zealand.
--Veridelisi (talk) 08:46, 1 December 2023 (UTC)
replies: text: What you write here does not seem to warrant any changes to the article. According to the definition in Fractional-reserve banking, it is a system in which banks that take deposits from the public keep only part of their deposit liabilities in liquid assets as a reserve, typically lending the remainder to borrowers. This appears to be the case in all countries, reserve requirement or not. --Økonom (talk) 12:52, 1 December 2023 (UTC)
thread_title: Fractional reserve banking