Understanding Inflation The Role of Central Banks Explained

Watch full length Podcast about Monetary System:    • The Monetary System: Where Does Our M...   The creation of money, especially by commercial banks, has profound implications for the economy and society. The banking sector plays a crucial role in money creation by creating new deposits through the granting of loans. When banks grant loans, they create additional money that is recorded as a deposit in their accounts for borrowers. This practice is contrary to the popular notion that banks are merely lending out existing money. It also means that net bank lending must constantly increase in order to keep money in circulation. The fact that money is created through bank loans means that the economy is dependent on lending. The idea that one must save before investing is an outdated view that contributes to current economic problems. The banking system has a huge impact on the world as it supplies the nation with money, making it necessary to protect and subsidize it. Money creation by banks is like a "super subsidy" for the right to create money. However, this money creation should actually serve the public and be issued democratically. The current system results in an unequal distribution of wealth and can lead to instability and crises. The collapse of one bank would have a huge impact on everyone, which underscores the need for stabilization. It is noted that there is a lack of order in the international macroeconomy, which also leads to instability. The real difficulty politically is deciding who controls purchasing power and money creation. There is another form of money: electronic central bank money, which commercial banks use to make payments among themselves, which adds even more complexity to the system. MMT argues that a government issuing its own fiat currency can finance its spending without first raising tax revenues or taking on debt. MMT emphasizes that taxes serve primarily to increase demand for a currency and control inflation, not to finance government spending. Central banks can create money by buying government bonds without relying on financing. In summary, money creation by commercial banks is a complex and often misunderstood system. Subscribe to our Channel:    / @phonicfacts   (So you don't miss upcoming Podcasts!) Thanks for listening! 😊 Write me a comment for Explainers or Podcasts on different Topics! #monetarysystem #debtcrisis #debt