File:Commercial Banks Balance Sheets (stylized) - Pic-Fusion comparing Aggregated View to Single View (Pic Source Bank of England 2014).PNG
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As it has been common since BoE, McLeavy et al. (2014), central banks do not mention speculative credit in their papers on money creation as primarily causal for financial system fragility.
DescriptionCommercial Banks Balance Sheets (stylized) - Pic-Fusion comparing Aggregated View to Single View (Pic Source Bank of England 2014).PNG |
Commercial Banks Balance Sheet pics comparing aggregated view (money creation theory) with single bank view (classical theory of loanable funds). Within Money Creation in the modern economy (by Bank of England 2014) the authors explain in view of the single commercial bank (sheet) giving loan, that the (buyer´s) bank could retrieve its lost reserves and so a deposit (bank money) seems created in the exact amount of the loan. (in the sense of "loans create deposits"). This is a rather inadequate explanation of money creation by the commercial banking system. To understand this exactly, it requires a macroeconomic view to accounting by banks (see for example Hans Gestrich 1936: Balance sheets of Lending in Lockstep). Knowing this model of Lending in Lockstep, in the context of a prosperous economic phase (only), it is possible to agree with BoE, McLeavy et al.: “But if all banks simultaneously decide to try to do more lending, money growth may not be limited in quite the same way. Although an individual bank may lose deposits to other banks, it would itself be likely to gain some deposits as a result of the other banks making loans.” That seems probable in theory, but a total compensation won´t be possible for smaller banks (especially in countries with balance of payments deficit) – see also Stützel (2011: 27) [Note: C.G.BRANDSTETTER 2023]. References (german): Credit Crunch and Balance Sheet Recession See Decker/Goodhart: Wilhelm Lautenbach´s credit mechanics, 2021, p. 33: "Arguably, one of the key reasons why the monetary aggregate M3 did not significantly increase despite the rapid increase of central bank reserves following the great financial crisis was limited wage growth." See: Lautenbach: Kapitalbildung und Kapitalverwendung, Berlin 1932: „[…] dass aber die gewünschte Belebung der Wirtschaft ausgeblieben ist. […] die unerhörten Anstrengungen und Vorkehrungen das Kreditangebot zu verbilligen und zu vermehren, waren ein Schlag ins Wasser, weil der Kreditnehmer ausblieb, auf den man gerechnet hatte. Es wurde nicht neuer, zusätzlicher Produktionskredit in Anspruch genommen, sondern nahezu ausschließlich Kredit zur Umschuldung, namentlich für Farmer, Eisenbahngesellschaften und illiquide Banken.“ See Gestrich: Neue Kreditpolitik, Stuttgart und Berlin 1936, S. 40: „Besteht eine starke eingefrorene Verschuldung der wirtschaftlichen Unternehmungen, so werden die neu entstehenden Girogelder in der ersten Periode einer Kreditausweitung zunächst von den Empfängern zum Abbau ihrer Schulden benutzt.“ See: Rittershausen: Bankpolitik. Frankfurt 1956. S. 32: „Umgekehrt bedeutet die Tilgung einer Bankschuld eine Sterilisierung von Kredit. Auch hier liegt wieder einer der Fälle vor, auf welche die Banken und die staatliche Wirtschaftspolitik nur sehr wenig Einfluß nehmen können: so war die Stagnation der 30er Jahre in Deutschland und anderen Ländern besonders dadurch gekennzeichnet, daß die Versuche der Banken und der staatlichen Stellen, den Kredit auszudehnen, jahrelang an der Neigung der Kundschaft scheiterten, vorhandene Schulden zurückzuzahlen. Es kam immer wieder durch die deflationären Wirkungen von Tilgungen zu einer Kompensation und damit Vernichtung jener aktiven Effekte, welche eingeleitet worden waren.“ Valuation |
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Date | March 2014 | ||||
Source | Bank of England: Quarterly Bulletin Q1/2014: Money creation in the modern economy (archived PDF). | ||||
Author | Michael McLeavy, Amar Radia, Ryland Thomas & Monetary Analysis Directorate of Bank of England (Lewis Kirkham) | ||||
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current | 07:56, 26 August 2023 | 1,210 × 849 (136 KB) | Carlbrandner (talk | contribs) | == {{int:filedesc}} == {{Information |description= '''Commercial Banks Balance Sheet pics comparing ''aggregated view'' (modern credit theory) with ''single bank view'' (loanable funds theory).'''<br> Pics by Bank of England (stylized), McLeavy et al. (2014) postulating money creation by commercial banks, both balance sheet pics fusioned and helplines added by CGB. A ''synthesis'' of both credit theories you can find within "credit mechanics" (german: [https://www.saldenmechanik.info/index.ph... |
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