Friday, July 19, 2013

Stockman (8) Money

The way that banks create demand deposits is to first issue loans credits to their customers. In the modern world, money supply follows credit, and rarely do central bankers inordinately restrict the growth of the latter.

In other words, money grows mainly when commercial bank credit expands, and no amount of Fed bond buying can force member bands to lend into a debt-saturated marketplace.
David Stockman

No comments: