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Salient. The Newspaper of Victoria University College. Vol. 19, No. 6. May 31, 1955

Bank Creations

Bank Creations

It is useless to discuss this theory of the flaw until we are agreed on certain basic facts. One of these facts is that practically all money comes into existence as the result of borrowing from the banking system. Once upon a time even orthodox economists believed that banks only loaned money deposited with them. Apparently no one ever asked where the depositors got the money from to make the deposits. The truth is of course that the banking system creates the money in the act of lending by means of book entries. I am not going to expand on this theme nor am I going to argue about it. If any reader does not believe this statement that the banking system creates practically all the money in existence then I suggest that he or she goes no further into this matter of financial reform until they have clarified their minds on the [unclear: tter.]