Deposit creation multiplier
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Money creation, or money issuance, is the process by which the
money supply In macroeconomics, the money supply (or money stock) refers to the total volume of currency held by the public at a particular point in time. There are several ways to define "money", but standard measures usually include currency in circul ...
of a country, or of an economic or monetary region,Such as the
Eurozone The euro area, commonly called eurozone (EZ), is a currency union of 19 member states of the European Union (EU) that have adopted the euro ( €) as their primary currency and sole legal tender, and have thus fully implemented EMU polici ...
or ECCAS
is increased. In most modern economies, money creation is controlled by the
central bank A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a country or monetary union, and oversees their commercial banking system. In contrast to a commercial bank, a central b ...
s. Money issued by central banks is termed base money. Central banks can increase the quantity of base money directly, by engaging in
open market operations In macroeconomics, an open market operation (OMO) is an activity by a central bank to give (or take) liquidity in its currency to (or from) a bank or a group of banks. The central bank can either buy or sell government bonds (or other financial a ...
. However, the majority of the money supply is created by the commercial banking system in the form of
bank deposit A deposit account is a bank account maintained by a financial institution in which a customer can deposit and withdraw money. Deposit accounts can be savings accounts, current accounts or any of several other types of accounts explained below. ...
s. Bank loans issued by commercial banks that practice fractional reserve banking expands the quantity of broad money to more than the original amount of base money issued by the central bank.
Central bank A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a country or monetary union, and oversees their commercial banking system. In contrast to a commercial bank, a central b ...
s monitor the amount of money in the economy by measuring
monetary aggregate In macroeconomics, the money supply (or money stock) refers to the total volume of currency held by the public at a particular point in time. There are several ways to define "money", but standard measures usually include currency in circula ...
s (termed broad money), consisting of
cash In economics, cash is money in the physical form of currency, such as banknotes and coins. In bookkeeping and financial accounting, cash is current assets comprising currency or currency equivalents that can be accessed immediately or near-im ...
and bank deposits. Money creation occurs when the quantity of monetary aggregates increase.For example, in the United States, money supply measured as M2 grew from $6.407 trillion in January 2005, to 18.136 trillion in January 2009. See Federal Reserve (2009) Governmental authorities, including central banks and other bank regulators, can use policies such as
reserve requirement Reserve requirements are central bank regulations that set the minimum amount that a commercial bank must hold in liquid assets. This minimum amount, commonly referred to as the commercial bank's reserve, is generally determined by the centra ...
s and
capital adequacy A capital requirement (also known as regulatory capital, capital adequacy or capital base) is the amount of capital a bank or other financial institution has to have as required by its financial regulator. This is usually expressed as a capital a ...
ratios to influence the amount of broad money created by commercial banks.


Money supply

The term "money supply" commonly denotes the total, safe,
financial asset A financial asset is a non-physical asset whose value is derived from a contractual claim, such as bank deposits, bonds, and participations in companies' share capital. Financial assets are usually more liquid than other tangible assets, such a ...
s that households and businesses can use to make payments or to hold as short-term investment.Money supply
FRS
The money supply is measured using the so-called " monetary aggregates", defined in accordance to their respective level of
liquidity Liquidity is a concept in economics involving the convertibility of assets and obligations. It can include: * Market liquidity, the ease with which an asset can be sold * Accounting liquidity, the ability to meet cash obligations when due * Liq ...
. In the United States, for example: * M0: The total of all physical currency including coinage. Using the United States dollar as an example, M0 = Federal Reserve notes + US notes +
coins A coin is a small, flat (usually depending on the country or value), round piece of metal or plastic used primarily as a medium of exchange or legal tender. They are standardized in weight, and produced in large quantities at a mint in order t ...
. It is not relevant whether the currency is held inside or outside of the private banking system as reserves. * M1: The total amount of M0 (cash/coin) outside of the private banking system plus the amount of
demand deposit Demand deposits or checkbook money are funds held in demand accounts in commercial banks. These account balances are usually considered money and form the greater part of the narrowly defined money supply of a country. Simply put, these are depo ...
s, travelers checks and other checkable deposits * M2: M1 + most
savings account A savings account is a bank account at a retail bank. Common features include a limited number of withdrawals, a lack of cheque and linked debit card facilities, limited transfer options and the inability to be overdrawn. Traditionally, transa ...
s, money market accounts, retail money market mutual funds, and small denomination time deposits (
certificates of deposit A certificate of deposit (CD) is a time deposit, a financial product commonly sold by banks, thrift institutions, and credit unions in the United States. CDs differ from savings accounts in that the CD has a specific, fixed term (often one, t ...
of under $100,000). The money supply is understood to increase through activities by government authorities,"A tate budgetdeficit will lead to a direct rise in the money supply if the...Treasury finances the deficit not by borrowing but by drawing down balances it holds at commercial banks or he central bank" From Cacy (1975) by the central bank of the nation,See " Money multiplier" and by commercial banks.


Money creation by the central bank


Central banks

The authority through which monetary policy is conducted is the
central bank A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a country or monetary union, and oversees their commercial banking system. In contrast to a commercial bank, a central b ...
of the nation. The mandate of a central bank typically includes either one of the three following objectives or a combination of them, in varying order of preference, according to the country or the region: Price stability, i.e. inflation-targeting; the facilitation of maximum employment in the economy; the assurance of moderate, long term, interest rates. The central bank is the banker of the governmentFormally, the Treasury's banker, or the banker of the respective competent authority, depending on the country, e.g. of the Ministry of Finance and provides to the government a range of services at the operational level, such as managing the Treasury's single account, and also acting as its fiscal agent (e.g. by running
auction An auction is usually a process of buying and selling goods or services by offering them up for bids, taking bids, and then selling the item to the highest bidder or buying the item from the lowest bidder. Some exceptions to this definition ex ...
s), its settlement agent, and its bond registrar. A central bank cannot become insolvent in its own currency. However, a central bank can become insolvent in liabilities on
foreign currency A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins. A more general de ...
. Central banks operate in practically every nation in the world, with few exceptions. There are some groups of countries, for which, through agreement, a single entity acts as their central bank, such as the organization of states of Central Africa, Established by
Cameroon Cameroon (; french: Cameroun, ff, Kamerun), officially the Republic of Cameroon (french: République du Cameroun, links=no), is a country in west-central Africa. It is bordered by Nigeria to the west and north; Chad to the northeast; the C ...
,
Central African Republic The Central African Republic (CAR; ; , RCA; , or , ) is a landlocked country in Central Africa. It is bordered by Chad to the north, Sudan to the northeast, South Sudan to the southeast, the DR Congo to the south, the Republic of th ...
, Chad, Republic of Congo, Equatorial Guinea and
Gabon Gabon (; ; snq, Ngabu), officially the Gabonese Republic (french: République gabonaise), is a country on the west coast of Central Africa. Located on the equator, it is bordered by Equatorial Guinea to the northwest, Cameroon to the nort ...
which all have a common central bank, the
Bank of Central African States The Bank of Central African States (french: Banque des États de l'Afrique Centrale, BEAC) is a central bank that serves six central African countries which form the Economic and Monetary Community of Central Africa: *Cameroon *Central Africa ...
; or monetary unions, such as the
Eurozone The euro area, commonly called eurozone (EZ), is a currency union of 19 member states of the European Union (EU) that have adopted the euro ( €) as their primary currency and sole legal tender, and have thus fully implemented EMU polici ...
, whereby nations retain their respective central bank yet submit to the policies of the central entity, the
European Central Bank The European Central Bank (ECB) is the prime component of the monetary Eurosystem and the European System of Central Banks (ESCB) as well as one of seven institutions of the European Union. It is one of the world's most important centr ...
. Central banking institutions are generally independent of the government
executive Executive ( exe., exec., execu.) may refer to: Role or title * Executive, a senior management role in an organization ** Chief executive officer (CEO), one of the highest-ranking corporate officers (executives) or administrators ** Executive dir ...
. The central bank's activities directly affect interest rates, through controlling the
base rate In probability and statistics, the base rate (also known as prior probabilities) is the class of probabilities unconditional on "featural evidence" (likelihoods). For example, if 1% of the population were medical professionals, and remaining ...
, and indirectly affect stock prices, the economy's wealth, and the
national currency Fiat money (from la, fiat, "let it be done") is a type of currency that is not backed by any commodity such as gold or silver. It is typically designated by the issuing government to be legal tender. Throughout history, fiat money was sometime ...
's exchange rate. Monetarists and some
Austrians , pop = 8–8.5 million , regions = 7,427,759 , region1 = , pop1 = 684,184 , ref1 = , region2 = , pop2 = 345,620 , ref2 = , region3 = , pop3 = 197,990 , ref3 ...
"The chief cause of inflation,
Hayek Hayek, Hayki or AlHayki is a surname: * As a variant spelling of the Czech name Hájek, which originally meant "a grove", it commonly occurs in Czech place names. It occurs among Polish Jews in a Polish language spelling as ''Chajek''. * The ...
wrote, is governmental control of the money supply."
argue that the central bank should control the money supply, through its monetary operations."Empirical studies of relations between the monetary base and the total money supply establish a strong basis for believing that central banks can control the money supply." Critics of the mainstream view maintain that central-bank operations can affect but not control the money supply."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. ... Rather than controlling the quantity of reserves, central banks today typically implement monetary policy by setting the price of reserves — that is, interest rates." McLeay (2014)


Open-market operations

Open-market operations (OMOs) concern the purchase and sale of securities in the open market by a central bank. OMOs essentially swap one type of
financial asset A financial asset is a non-physical asset whose value is derived from a contractual claim, such as bank deposits, bonds, and participations in companies' share capital. Financial assets are usually more liquid than other tangible assets, such a ...
s for another; when the central bank buys bonds held by the banks or the private sector, bank reserves increase while bonds held by the banks or the public decrease. Temporary operations are typically used to address reserve needs that are deemed to be transitory in nature, while permanent operations accommodate the longer-term factors driving the expansion of the central bank's
balance sheet In financial accounting, a balance sheet (also known as statement of financial position or statement of financial condition) is a summary of the financial balances of an individual or organization, whether it be a sole proprietorship, a Partnersh ...
; such a primary factor is typically the trend of the money-supply growth in the economy. Among the temporary, open-market operations are
repurchase agreement A repurchase agreement, also known as a repo, RP, or sale and repurchase agreement, is a form of short-term borrowing, mainly in government securities. The dealer sells the underlying security to investors and, by agreement between the two pa ...
s (repos) or reverse repos, while permanent ones involve outright purchases or sales of securities.Open-market operations
FRS
Each open-market operation by the central bank affects its balance sheet.


Monetary policy

Monetary policy is the process by which the monetary authority of a country, typically the central bank (or the
currency board In public finance, a currency board is a monetary authority which is required to maintain a fixed exchange rate with a foreign currency. This policy objective requires the conventional objectives of a central bank to be subordinated to the exch ...
), manages the level of short-term
interest rate An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, ...
sIt has been argued that the central bank of a fiscally and monetarily sovereign nation can actually affect, if not dictate, the whole interest spectrum – above which, of course, as it is argued, adjustments are made for their actual conduct of business by commercial banks and the private sector, in accordance to their assessments, objectives, and preferences. E.g.: "Monetary policy – and there we are increasingly certain – cannot only influence the expectations component, but also the term premium. ... Central banks can lower long-term rates by removing duration risk from the market." Cœuré (2017). Also: "There is no evidence that the central bank has any meaningful control over the...spread between the short-term and the long-term rate of interest utit is quite clear that the central bank has full control over the long-term rate of interest. and influences the availability and the cost of credit in the economy,Monetary policy
FRS
as well as overall economic activity. IMF (3 November 2017)
Monetary Policy and Central Banking
Central bank A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a country or monetary union, and oversees their commercial banking system. In contrast to a commercial bank, a central b ...
s conduct monetary policy usually through
open market operations In macroeconomics, an open market operation (OMO) is an activity by a central bank to give (or take) liquidity in its currency to (or from) a bank or a group of banks. The central bank can either buy or sell government bonds (or other financial a ...
. The purchase of debt, and the resulting increase in bank reserves, is called "
monetary easing Quantitative easing (QE) is a monetary policy action whereby a central bank purchases predetermined amounts of government bonds or other financial assets in order to stimulate economic activity. Quantitative easing is a novel form of monetary pol ...
". An extraordinary process of monetary easing is denoted as "
quantitative easing Quantitative easing (QE) is a monetary policy action whereby a central bank purchases predetermined amounts of government bonds or other financial assets in order to stimulate economic activity. Quantitative easing is a novel form of monetary pol ...
", whose intent is to stimulate the economy by increasing liquidity and promoting bank lending.


Physical currency

The central bank, or other competent, state authorities (such as the treasury), are typically empowered to create new, physical currency, i.e. paper notes and coins, in order to meet the needs of commercial banks for cash withdrawals, and to replace worn and/or destroyed currency.Mankiw (2012) The process does not increase the money supply, as such; the term "printing ewmoney" is considered a misnomer. In modern economies, relatively little of the supply of broad money is in physical currency.For example, in December 2010, in the United States, of the $8.853 trillion broad money supply (M2, table 1), only about 10% (or $915.7 billion, table 3) consisted of coins and paper money. Se
Statistic
FRS


Role of commercial banks

When commercial banks lend money, they expand the amount of bank deposits. The banking system can expand the money supply of a country beyond the amount created or targeted by the central bank, creating most of the broad money in a process called the
multiplier effect In macroeconomics, a multiplier is a factor of proportionality that measures how much an endogenous variable changes in response to a change in some exogenous variable. For example, suppose variable ''x'' changes by ''k'' units, which causes an ...
. Banks are limited in the total amount they can lend by their
capital adequacy ratio Capital Adequacy Ratio (CAR) is also known as ''Capital to Risk (Weighted) Assets Ratio'' (CRAR), is the ratio of a bank's capital to its risk. National regulators track a bank's CAR to ensure that it can absorb a reasonable amount of loss and co ...
s, and their required reserve ratios. The required-reserves ratio obliges banks to keep a minimum, predetermined, percentage of their deposits at an account at the central bank.Many countries in the world, including major economic powers, including Australia, Canada and New Zealand, do not impose minimum cash reserves on banks. This does not allow banks to lend without limit, since there is always, aside from other considerations, the
capital adequacy ratio Capital Adequacy Ratio (CAR) is also known as ''Capital to Risk (Weighted) Assets Ratio'' (CRAR), is the ratio of a bank's capital to its risk. National regulators track a bank's CAR to ensure that it can absorb a reasonable amount of loss and co ...
.
The theory holds that, in a system of fractional-reserve banking, where banks ordinarily keep only a fraction of their deposits in reserves, an initial bank loan creates more money than it initially lent out. The maximum ratio of loans to deposits is the required-reserve ratio , which is determined by the central bank, as : \mathit=\frac where are reserves and are deposits. 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.


Credit theory of money

The fractional reserve theory where the
money supply In macroeconomics, the money supply (or money stock) refers to the total volume of currency held by the public at a particular point in time. There are several ways to define "money", but standard measures usually include currency in circul ...
is limited by the money multiplier has come under increased criticism since the
financial crisis of 2007–2008 Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of fi ...
. It has been observed that the
bank reserves Bank reserves are a commercial bank's cash holdings physically held by the bank, and deposits held in the bank's account with the central bank. Under the fractional-reserve banking system used in most countries, central banks typically set mini ...
are not a limiting factor because the
central bank A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a country or monetary union, and oversees their commercial banking system. In contrast to a commercial bank, a central b ...
s supply more reserves than necessary Standard & Poor's (13 August 2013)
Repeat after me: Banks cannot and do not lend out reserves
, Ratings Direct
and because banks have been able to build up additional reserves when they were needed. Many economists and bankers now believe that the amount of money in circulation is limited only by the demand for loans, not by reserve requirements. A study of banking software demonstrates that the bank does nothing else than adding an amount to the two accounts when they issue a loan. The observation that there appears to be no limit to the amount of credit money that banks can bring into circulation in this way has given rise to the often-heard expression that ''"Banks are creating money out of thin air"''. The exact mechanism behind the creation of commercial bank money has been a controversial issue. In 2014, a study titled "Can banks individually create money out of nothing? — The theories and the empirical evidence" empirically tested the manner in which this type of money is created by monitoring a cooperating bank's internal records: The credit theory of money, initiated by
Joseph Schumpeter Joseph Alois Schumpeter (; February 8, 1883 – January 8, 1950) was an Austrian-born political economist. He served briefly as Finance Minister of German-Austria in 1919. In 1932, he emigrated to the United States to become a professor at H ...
, asserts the central role of banks as creators and allocators of the money supply, and distinguishes between "productive credit creation" (allowing non-inflationary economic growth even at full employment, in the presence of
technological progress Technology is the application of knowledge to reach practical goals in a specifiable and reproducible way. The word ''technology'' may also mean the product of such an endeavor. The use of technology is widely prevalent in medicine, science, ...
) and "unproductive credit creation" (resulting in
inflation In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduct ...
of either the consumer- or asset-price variety). The model of bank lending stimulated through central-bank operations (such as "monetary easing") has been rejected by Neo-Keynesian"By increasing the volume of their government securities and loans and by lowering Member Bank legal reserve requirements, the Reserve Banks can encourage an increase in the supply of money and bank deposits. Without taking drastic action, they can encourage but they cannot compel. For in the middle of a deep depression just when we want Reserve policy to be most effective, the Member Banks are likely to be timid about buying new investments or making loans. If the Reserve authorities buy government bonds in the open market and thereby swell bank reserves, the banks will not put these funds to work but will simply hold reserves." and
Post-Keynesian Post-Keynesian economics is a school of economic thought with its origins in '' The General Theory'' of John Maynard Keynes, with subsequent development influenced to a large degree by Michał Kalecki, Joan Robinson, Nicholas Kaldor, Sidney ...
analysis as well as central banks."In reality, neither are ankreserves a binding constraint on lending, nor does the central bank fix the amount of reserves that are available. ... 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 entral bank" McLeay et al. (2014) The major argument offered by dissident analysis is that any bank balance-sheet expansion (e.g. through a new loan) that leaves the bank short of the required reserves may affect the return it can expect on the loan, because of the extra cost the bank will undertake to return within the ratios limits – but this does not and "will never impede the bank's capacity to give the loan in the first place". Banks first lend and ''then'' cover their reserve ratios: The decision whether or not to lend is generally independent of their reserves with the central bank or their deposits from customers; banks are not lending out deposits or reserves, anyway. Banks lend on the basis of lending criteria, such as the status of the customer's business, the loan's prospects, and/or the overall economic situation.


Monetary financing


Policy

"Monetary financing", also "debt monetization", occurs when the country's central bank purchases government debt. It is considered by mainstream analysis to cause
inflation In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduct ...
, and often
hyperinflation In economics, hyperinflation is a very high and typically accelerating inflation. It quickly erodes the real value of the local currency, as the prices of all goods increase. This causes people to minimize their holdings in that currency as t ...
. IMF's former chief economist
Olivier Blanchard Olivier Jean Blanchard (; born December 27, 1948) is a French economist and professor who is a senior fellow at the Peterson Institute for International Economics. He was the chief economist at the International Monetary Fund from September 1, 2 ...
states that
governments do not create money; the central bank does. But with the central bank's cooperation, the government can in effect finance itself by money creation. It can issue bonds and ask the central bank to buy them. The central bank then pays the government with money it creates, and the government in turn uses that money to finance the deficit. This process is called debt monetization.
The description of the process differs in
heterodox In religion, heterodoxy (from Ancient Greek: , "other, another, different" + , "popular belief") means "any opinions or doctrines at variance with an official or orthodox position". Under this definition, heterodoxy is similar to unorthodoxy, w ...
analysis. Modern chartalists state:
the central bank does not have the option to monetize any of the outstanding government debt or newly issued government debt... long as the central bank has a mandate to maintain a short-term interest rate target, the size of its purchases and sales of government debt are not discretionary. The central bank's lack of control over the quantity of reserves underscores the impossibility of debt monetization. The central bank is unable to monetize the government debt by purchasing government securities at will because to do so would cause the short-term target rate to fall to zero or to any support rate that it might have in place for excess reserves.


Restrictions

Monetary financing used to be standard monetary policy in many countries, such as Canada or France, while in others it was and still is prohibited. In the
Eurozone The euro area, commonly called eurozone (EZ), is a currency union of 19 member states of the European Union (EU) that have adopted the euro ( €) as their primary currency and sole legal tender, and have thus fully implemented EMU polici ...
, Article 123 of the
Lisbon Treaty The Treaty of Lisbon (initially known as the Reform Treaty) is an international agreement that amends the two treaties which form the constitutional basis of the European Union (EU). The Treaty of Lisbon, which was signed by the EU member sta ...
explicitly prohibits the
European Central Bank The European Central Bank (ECB) is the prime component of the monetary Eurosystem and the European System of Central Banks (ESCB) as well as one of seven institutions of the European Union. It is one of the world's most important centr ...
from financing public institutions and state governments. In Japan, the nation's
central bank A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a country or monetary union, and oversees their commercial banking system. In contrast to a commercial bank, a central b ...
"routinely" purchases approximately 70% of state debt issued each month, and owns, as of Oct 2018, approximately 440 trillion JP¥ (approx. $4trillion)At a $1=¥0.0094 conversion rate or over 40% of all outstanding government bonds.Gov't Bonds
Bank of Japan
In the United States, the 1913
Federal Reserve Act The Federal Reserve Act was passed by the 63rd United States Congress and signed into law by President Woodrow Wilson on December 23, 1913. The law created the Federal Reserve System, the central banking system of the United States. The Pani ...
allowed federal banks to purchase short-term securities directly from the Treasury, in order to facilitate its
cash In economics, cash is money in the physical form of currency, such as banknotes and coins. In bookkeeping and financial accounting, cash is current assets comprising currency or currency equivalents that can be accessed immediately or near-im ...
-management operations. The
Banking Act of 1935 The ''Banking Act of 1935'' passed on August 19, 1935 and was signed into law by the president, Franklin D. Roosevelt, on August 23. The Act changed the structure and power distribution in the Federal Reserve System that began with the '' Banking ...
prohibited the central bank from directly purchasing Treasury securities, and permitted their purchase and sale only "in the open market". In 1942, during wartime, Congress amended the Banking Act's provisions to allow purchases of government debt by the federal banks, with the total amount they'd hold "not oexceed $5 billion". After the war, the exemption was renewed, with time limitations, until it was allowed to expire in June 1981.


See also

* Commissary notes *
Commodity money Commodity money is money whose value comes from a commodity of which it is made. Commodity money consists of objects having value or use in themselves (intrinsic value) as well as their value in buying goods. This is in contrast to representat ...
*
Fiat money Fiat money (from la, fiat, "let it be done") is a type of currency that is not backed by any commodity such as gold or silver. It is typically designated by the issuing government to be legal tender. Throughout history, fiat money was sometim ...
*
Fiscal policy In economics and political science, fiscal policy is the use of government revenue collection (taxes or tax cuts) and expenditure to influence a country's economy. The use of government revenue expenditures to influence macroeconomic variab ...
*
Functional finance Functional finance is an economic theory proposed by Abba P. Lerner, based on effective demand principles and chartalism. It states that government should finance itself to meet explicit goals, such as taming the business cycle, achieving full emp ...
*
Gold standard A gold standard is a monetary system in which the standard economic unit of account is based on a fixed quantity of gold. The gold standard was the basis for the international monetary system from the 1870s to the early 1920s, and from the l ...
*
History of banking The history of banking began with the first prototype banks, that is, the merchants of the world, who gave grain loans to farmers and traders who carried goods between cities. This was around 2000 BCE in Assyria, India and Sumeria. Later, in an ...
*
History of money The history of money concerns the development throughout time of systems that provide the functions of money. Such systems can be understood as means of trading wealth indirectly; not directly as with bartering. Money is a mechanism that facilit ...
*
Monetary economics Monetary economics is the branch of economics that studies the different competing theories of money: it provides a framework for analyzing money and considers its functions (such as medium of exchange, store of value and unit of account), and ...
* Monetary reform *
Seigniorage Seigniorage , also spelled seignorage or seigneurage (from the Old French ''seigneuriage'', "right of the lord (''seigneur'') to mint money"), is the difference between the value of money and the cost to produce and distribute it. The term can be ...


Footnotes


References


Further reading

*
Federal Reserve historical statistics
(11 June 2009) * * *


External links


The Role of Central Bank Money in Payment Systems
,
Bank for International Settlements The Bank for International Settlements (BIS) is an international financial institution owned by central banks that "fosters international monetary and financial cooperation and serves as a bank for central banks". The BIS carries out its work thr ...
, August 2003 * Mitchell, William (2009)
Deficit spending 101: Part 1
;
Part 2
;
Part 3


{{Authority control Monetary policy Banking