How Banks Create Money When They Lend
11 min readJul 29, 2021
The prevailing theory of banking for the past century holds that banks function as intermediaries, collecting deposits from depositors and lending them out for interest. This view is maintained, with minor differences, by all neo-classical schools of economic thought regardless of ideological bent. Austrians, Monetarists, and New Keynesian economists alike operate under the assumption that commercial banks merely lend out…