Re:A Revolution in Money
by dllthomas on Wednesday April 02, 2014 @05:44PM
(#7519286)
"ps money is not created by commercial banks but by the Fed through their ability to either buy or sell treasuries issued by the government but maybe that's splitting hairs"
That's using an overly-restrictive definition of money (M0, or "monetary base") that doesn't mean very much in terms of how the economy works. Banks do not create new dollar bills, but they do create new "dollars on deposit at a bank" which I can spend very nearly like a dollar bill (sometimes quite a bit more conveniently) by writing you a check or setting up a wire transfer. This is what many people are paid in, and pay their rent and grocery bills in, and considering it "not money" is wrong. Economists include this in M1, which is a slightly broader measure of the money supply. There are still broader measures.
That's using an overly-restrictive definition of money (M0, or "monetary base") that doesn't mean very much in terms of how the economy works. Banks do not create new dollar bills, but they do create new "dollars on deposit at a bank" which I can spend very nearly like a dollar bill (sometimes quite a bit more conveniently) by writing you a check or setting up a wire transfer. This is what many people are paid in, and pay their rent and grocery bills in, and considering it "not money" is wrong. Economists include this in M1, which is a slightly broader measure of the money supply. There are still broader measures.