Abstract
AbstractIn recent years, a number of different strands within heterodox economic thinking have successfully provided more empirically robust and sociologically informed analyses of how money gets created. However, there is a tendency within these analyses to discuss the different money creation theories and institutional practices in isolation, inhibiting a broader audience from grasping the whole institutional picture. By integrating contemporary heterodox theories and the latest empirical evidence, this article therefore attempts to develop a “landscape” view of modern money creation that visualizes and explains the different ways that modern money is created. It suggests that, while it is ultimately only commercial banks that can “create” new bank deposits in customers’ accounts, this may be initiated by one of three institutional mechanisms: by customers “borrowing new money into existence” when commercial banks make loans; by central banks creating new money when they purchase assets such as government bonds from investors; and by the government “spending new money into existence”. The article also reflects on how a clearer institutional understanding of these processes may be helpful in improving our overall capacity to think about how money creation may better serve current urgent social and environmental needs, especially in the post-COVID-19 context.
Publisher
Springer Science and Business Media LLC
Subject
Management, Monitoring, Policy and Law,Nature and Landscape Conservation,Sociology and Political Science,Ecology,Geography, Planning and Development,Health (social science),Global and Planetary Change
Cited by
1 articles.
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