We establish a benchmark result for the relationship between the loanablefunds and the money-creation approach to banking. In particular, we show that both processes yield the same allocations when there is no uncertainty and thus no bank default. In such cases, using the much simpler...

By the act of lending banks do not actually intermediate pre-accumulated real resources but rather create new financial resources in the form of deposits. Therefore, bank credit needs to be modelled as a monetary phenomenon, which directly fuels domestic demand and inflationary pressures. So...

The first attempt in the human history to consciously create money ended in a collapse in 1720, well-known as the money mania. This unfortunate start raises doubt on money creation as a whole such that today there are still voices questioning created money even though it is now indispensible for...