The Phaserl


Can banks create money out of thin air?

by Colin Teese, News Weekly:

The global financial crisis in 2007/08, which came close to destroying the world economy, had its beginnings in a banking crisis. The reasons why need not bother us here. But a consequence of it has been to cast the spotlight on banking and money mismanagement associated with the GFC.

Economists who adhere to neo-classical free-market orthodoxy insist that modelling the real economy need take no account of banks. Modern money, they say, was nothing more than a convenient move away from pure barter.

Once upon a time, before money came into widespread use, people used to conduct their commercial transactions using consumable goods. A farmer, say, might exchange eight sheaves of wheat for one cow.

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