- money supply..........
Bankene tilfører penger til samfunnet. De skaper dem. Skulle bankene ha finansiert alt dette så er denne tilførselen snudd på hodet. Det er kommersielle banker som lager nesten all nye penger og da henter de ikke inn alle disse pengene. Det ville vært absurd.
We identify that the UK’s national currency exists in three main forms, the second two of which exist in electronic form:
- Cash – banknotes and coins.
- Central bank reserves – reserves held by commercial banks at the Bank of England.
- Commercial bank money – bank deposits created either when commercial banks lend money, thereby crediting credit borrowers’ deposit accounts, make payments on behalf of customers using their overdraft facilities, or when they purchase assets from the private sector and make payments on their own account (such as salary or bonus payments).
Only the Bank of England or the government can create the first two forms of money, which is referred to in this book as ‘central bank money’. Since central bank reserves do not actually circulate in the economy, we can further narrow down the money supply that is actually circulating as consisting of cash and commercial bank money.
Physical cash accounts for less than 3 per cent of the total stock of money in the economy.
Commercial bank money – credit and coexistent deposits – makes up the remaining 97 per cent of the money supply.
There are several conflicting ways of describing what banks do.
The simplest version is that banks take in money from savers, and lend this money out to borrowers. This is not at all how the process works. Banks do not need to wait for a customer to deposit money before they can make a new loan to someone else. In fact, it is exactly the opposite; the making of a loan creates a new deposit in the customer’s account.
More sophisticated versions bring in the concept of ‘fractional reserve banking’. This description recognises that banks can lend out many times more than the amount of cash and reserves they hold at the Bank of England. This is a more accurate picture, but is still incomplete and misleading. It implies a strong link between the amount of money that banks create and the amount that they hold at the central bank. It is also commonly assumed by this approach that the central bank has significant control over the amount of reserves banks hold with it.
We find that the most accurate description is that banks create new money whenever they extend credit, buy existing assets or make payments on their own account, which mostly involves expanding their assets, and that their ability to do this is only very weakly linked to the amount of reserves they hold at the central bank. At the time of the financial crisis, for example, banks held just £1.25 in reserves for every £100 issued as credit. Banks operate within an electronic clearing system that nets out multilateral payments at the end of each day, r
equiring them to hold only a tiny proportion of central bank money to meet their payment requirements.
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