Where Does Money Come From?

This book should be required reading for politicians, policy makers - and economists, whose models still ignore banks and fail us. It clearly explains the surprising fact that it's private banks that create money, not governments or central banks. The only money the central bank can print is paper money which is now only a couple of per cent of the money supply. The book also puts to bed the widely-held myth that the source of bank loans is the deposits of savers. Far from it. Banks create credit by the simple and cost-free act of an entry in an electronic register.This, of course, is the opposite to how the general public - not to mention politicians, policy makers and economists - sees the money system working. In fact, it sounds so unlikely that it seems a little conspiratorial. But it's fact and this book, supported by sources including central banks themselves, helps us to understand this special right that private banks and their owners have been granted to produce credit "out of thin air".Given the enormous power, impact and financial advantage given by this right, most of us would expect that a government or its central bank would be able to closely supervise it. One of the most surprising and concerning facts this book highlights is just how limited the regulatory powers are over banks. It helps to explain how asset bubbles such as credit-fuelled housing inflation arise with increasing frequency, and how so little is done to prevent the inevitable crashes. The reality is that little can be done because regulatory powers are now so weak and the temptation by banks is so strong to expand credit, profits and bonuses. Nothing makes this clearer than the central role that non-productive housing inflation plays today in providing a home for this excess credit. It dwarfs commercial lending to the productive sector.The arcane world of banking is little understood. That needs to change among both the public and policy makers, so that we can start to mend the broken system. This clearly-written, thoroughly researched book will be an eye-opener for most people. Its role is to explain how things are, and provide wider context to show how the system arose, how similar issues were tackled in the past or, indeed, are tackled in the present by countries with saner banking systems. It doesn't offer a prescription for how to fix the dysfunctional finance system we now have, but it does show that the system we have isn't the only, or the best, way to manage this critical part of the economy. And it provides ample proof that combining self-management ("light-handed regulation") with this amazing right and temptation for excess, simply isn't working.

How new money is created is widely misunderstood. This book provides a well-researched, authoritative, and readable account of how the monetary system currently works in the United Kingdom, a description which in its general outline is applicable to the United States and to most other advanced economies in the world as well. The authors' central conclusion is that almost all money in general circulation today (97%) is created by commercial banks when they extend credit, either through making loans or buying existing assets.This book's analysis is neither radical nor new. The book Where Does Money Come From? was recently cited in the Quarterly Bulletin 2014 Q1 of the Bank of England's Monetary Analysis Directorate, and its central conclusion was corroborated. If you are interested in finding out more about this, search for "bank of england" and "money in the modern economy" in your browser.This book is not a dogmatic prescription for the financial reform that seems to be so urgently required by the financial system as it exists today, but it presents a clear, factual account of how banking and money creation actually work at present. It is not leisure reading for the simple-minded, but neither is it so technical that only a trained economist can understand it. The understanding provided by this account could well serve as the background for meaningful discussion of needed economic reforms--and a welcome alternative to the ideological posturing that too often is passed off as analysis.

The best condensed primer on what the financial structure consists of in terms of actual functionality instead of abstract theory which has proved to be misleading in the extreme. Banks don't lend from funds collected from depositors. They create money out of nothing. Theory says this is what is called fractional reserve banking. Nothing doing. This is a deception. That's what the financial system is. An edifice constructed out of blind trust on the part of those who prefer ignorance on the one hand and those who on a daily basis take advantage of that trust to stuff their pockets with ill-gotten gain on the other. Read all about it here.

This fills a lot of gaps in what a student of economics is normally taught or mis-taught about where money comes from and how it is created.

This books gives a very clear down to basic description of how the British system works. Should be mandatory reading in any democratic society

This is the most insightful book I’ve read on money and how the financial sector influences the economy. It is clear and thorough covering the history and current role of money.

Very enlightening about the origin of the present fractional reserve lending system.

Simple to read but comprehensive explanation. Summarizes actual monetary mechanism in modern economy. I would recommend to all especially students.

It's a very good book. Highly recommended for its clear description of credit creation and destruction. It's one of the only sources I've been able to find that really makes sense of the matter.Two minor complaints: the level of knowledge of Economics required to understand everything properly is perhaps a little higher than the authors would make you believe. It would be great to see a book by the same authors explain everything including the basics.Second, Werner seems to be clearly the most senior academic among the authors, two others being PhD students at the time of writing. In several places (probably more than a dozen) there are sentences like "... as pointed out first by Werner...". I generally find academics blowing their own trumpet to this degree annoying. Especially the "first". It leaves the reader of this particular book a little unsure... Does Werner not get the credit in the academic world he thinks he deserves? Are his ideas largely ignored? Or why does he need to keep insisting that he was the first to do this and that? It would have been a nicer read if more modesty had been displayed.Overall though it's a great book.

I read this book having read "The Grip of Death: A Study of Modern Money, Debt Slavery and Destructive Economics " and being shocked by my ignorance about what money is, despite studying Applied Economics to degree level, then studying a masters degree in Islamic Banking and Finance, teaching macro-economics briefly and having a quasi-economic role in my first job. This book is a clear explanation of the UK monetary system. It also made me feel better about my ignorance as it covered the traditional manner that money is taught (and I was) which bears no relation to the modern reality. I would heartily recommend this book to everyone as the issue it covers are pretty fundamental regarding the economic issue we face.

This book is formatted like a text book, and at first appearance seems aimed at academics. However, it is an excellent explanation of money and how the money system works, and very understandable from a outsider's point of view. Recommended if you want to understand where money does actually come from: I was gobsmacked to learn that is the highstreet banks that do it, not central banks or governments. This book also points out the fundamental flaws of quantitative easing, explaining how it was never going to inject money into the wider economy, instead it only inflates bank's balance sheets.

If you are interested in how money is created, and the various effects and control of that creation, then this is well worth reading. It is really well written and not full of typical "baffle them with bullshit" that the bankers themselves use to make banking look more complicated than it actually is."The process by which banks create money is so simple that the mind is repelled. When something so important is involved, deeper mystery seems only decent" K. Galbraith quote page 146.If you are interested in money creation and alternatives to the current banking system, look for"Dick Eastman" on the internet, who promotes a non-usury system. Books by CH Douglas and Arthur Kitson, written many decades ago, are worth a look.

A great book. I've read the odd book before about the source of money but still always struggled to answer simple questions like 'who makes our money?' and 'how does it affect our economy?'. Now I think I know a little about it. The book is written from what seems like a very common sense perspective and successfully explains the source of money and how most of it actually comes from commercial banks through the creation of credit. I'm sure some professional economists will have alternative views on some of the material but overall it is one of the best books on economics and money I have ever read (okay I haven't read more than a few, ie 10-20). It is both logical and clear.I read it on my Kindle and had to do quite a bit of referring back and forth to remind myself what some essential phrases meant (eg the definition of base money, or the fact that there are so many different names for certain types of government securities) so it's maybe worth keeping a pen and paper to note some of these down as you read.