The Gift of 'Access into the Marketplace'

 Money would be much easier to understand if everyone started thinking about 'access into the marketplace'. Especially, it would easier to understand the creation of money.

The essence of the creation of money is the gift of 'assess into the marketplace'. Ownership of money is ownership of tangible evidence that intangible 'access into the market' has been granted. 

Owning money is like owning a ticket. If we characterized money as a 'ticket', we would intuitively understand that money embodies evidence of intangible 'assess into the marketplace'. Numbers on the ticket would represent the increment of access granted by each ticket.

We can still talk about money as we presently do. Just don't think of money as being debt or an IOU. Think of money as having the characteristics of a ticket which carries within it the intangible of access.

A Logically Coherent Theory of Retail Banking and the Creation of Modern Money

 You don't need to be a banker to put together a logical theory of banking and money. You just need to lay all the clues into an interlocking order. We will try to do that in this article.

This becomes a story of banking and the creation of modern money. Printed money is not part of this story, nor is the valuation of money.

Adding Private Banks to the Mechanical Exercise

This is a follow-on for the recent post "A Mechanical Exercise Tracking the Creation and Lifespan of Fiat Money" (METC). In the original exercise, the user made all of the economic decisions. Private banks were money users. In this post, we introduce private banks into the role of decision-making for the process of creating money.

Figure 1. The raw material for money
creation by private banks.

In METC, we needed a virtual storehouse to store real tokens that we could later call "money". Here we introduce a private bank's version of a virtual storehouse which is, of course, real all the time.

In the drawers of this new storehouse (Figure 1), we have existing money sources that the banks can use to ensure that new borrowers have access to existing money. So how is it that new fiat money can be created in this new version of METC? Private banks take systematic advantage of the pool of money on deposit by making a loan without linking loan risk or deferred spending to any one account. The loan is made by creating a deposit account for the borrower. Loan risk is spread to the entire body of depositors, including the lending bank. Deferred spending is transformed into accelerated spending. As a result of the loan, the amount of money on deposit in the banking system is measured as increasing. *