Banks create money as ledger entries rather than lending existing deposits

Evidence

Conjured from thin air? To be clear, yes. Most people think that banks take Jill’s savings and lend them to Jack. That’s not what banks do. When a bank lends Jack money, it does not go into its vault to check it has enough cash to back the loan. If it believes Jack will return the loan, plus the agreed interest, all the bank needs to do is add to Jack’s account the number of dollars it lends him. Nothing more than a typewriter or, today, a few keystrokes on a keyboard are necessary. — Yanis Varoufakis, Technofeudalism, 179

Categorization

• DEFINE: Clear demystification of endogenous money creation — banks lend without vault cash.
• XREF: Connects to the post-Bretton Woods monetary regime being dismantled earlier in the chapter; a cornerstone of MMT/heterodox economics. — connects to: Banks create money by keystroke, not by lending existing deposits; Banks create money out of thin air when granting loans rather than lending savings; Banks create money ex nihilo, so credit not savings finances investment — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 139

Broader Connections

• Banks create money by keystroke, not by lending existing deposits #corroborates (1.00)
• Banks create money out of thin air when granting loans rather than lending savings #corroborates (0.98)
• Banks create money ex nihilo, so credit not savings finances investment #expands (0.92) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 139