In an earlier post, I described a contradiction between popular economic theory and statistical data. In this post, I will describe true premises upon which we can develop more accurate theories. Popular Assumptions Reserves held at the Federal Reserve somehow act as money — so goes popular assumption. When the Fed adds dollars to bank … Continue reading Who Actually Makes Money?
Introduction The fact that we perpetuate false or inaccurate theories causes at least one problem for understanding money and its role. For years economic classes have taught that the Federal Reserve controls the supply of money. When they buy government bonds from banks, they pump reserves into the banks’ reserve accounts, and that addition to … Continue reading Money Supply and Bank Reserves