Cartoon of the day

Posted: 21 December 2014 in Uncategorized
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Special mention

157610_600 141218_wuerker_605

  1. B.R.Fuller says:

    There is no benevolence to America’s new found recognition of Cuba. The true recognition is that regime change is much easier accomplished through subversion and subterfuge than sanctions. Do the people of Cuba know that something wicked is coming their way?

  2. Magpie says:

    Off topic, but I thought you might be interested (it’s also Open Access):

    International Review of Financial Analysis
    Volume 36, December 2014, Pages 1–19
    Can banks individually create money out of nothing? — The theories and the empirical evidence
    Richard A. Werner

    This paper presents the first empirical evidence in the history of banking on the question of whether banks can create money out of nothing. The banking crisis has revived interest in this issue, but it had remained unsettled. Three hypotheses are recognised in the literature. According to the financial intermediation theory of banking, banks are merely intermediaries like other non-bank financial institutions, collecting deposits that are then lent out. According to the fractional reserve theory of banking, individual banks are mere financial intermediaries that cannot create money, but collectively they end up creating money through systemic interaction. A third theory maintains that each individual bank has the power to create money ‘out of nothing’ and does so when it extends credit (the credit creation theory of banking). The question which of the theories is correct has far-reaching implications for research and policy. Surprisingly, despite the longstanding controversy, until now no empirical study has tested the theories. This is the contribution of the present paper. An empirical test is conducted, whereby money is borrowed from a cooperating bank, while its internal records are being monitored, to establish whether in the process of making the loan available to the borrower, the bank transfers these funds from other accounts within or outside the bank, or whether they are newly created. This study establishes for the first time empirically that banks individually create money out of nothing. The money supply is created as ‘fairy dust’ produced by the banks individually, “out of thin air”.

  3. […] where Richard A. Werner [ht: magpie] steps in. In a recent article, he presents a very useful review of the relevant literature since […]

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