What is money? How does it grow?

Read the information below and then: Click here to play “Money As Debt” video which has been split into five sessions -  1 of 5; 2 of 5; 3 of 5; 4 of 5; and 5 of 5. Money as Debt II is now available along with an updated version of the first DVD. I highly recommend the purchase of this new set. It can be obtained from: Click here

In an article (RESERVE BANK OF NEW ZEALAND: Bulletin Vol l. 62 No. 2) "Defining money and credit aggregates: theory meets practice" by Sean Collins, Clive Thorp, and Bruce White (with important contributions from W Razzak and C Smith) the following is stated:

'In a modern economy, money comprises "fiat" money, that is paper money, and nowadays mostly "electronic" money (in the form of electronic records of deposits held at banks). Fiat money is to be contrasted with "specie", i.e. money in the form of precious metals.'

'The deposits, or money balances held with the banks are the direct counterpart to the assets that the banks hold on the other side of their balance sheets, namely their loans. When a bank makes a loan it places the amount of the loan (which constitutes "credit") in the borrower's deposit account (which constitutes "money"), and the latter can be "spent". Thus money and credit will often be referred to together. Indeed in many respects they are "different sides of the same coin." '

'It will be apparent from this account of money and credit that banks play a dual role in the economy. They act as intermediaries between savers and borrowers, and bank deposits, which are mostly either directly transferrable (through chequing and electronic payments systems) or readily convertible into a transferable form, serve as the principal form of money in the economy.'

It is then obvious from the above article, that every time a loan or an overdraft is approved and drawn on the money supply is increased when the loan ("credit") is placed into a deposit account. It also follows that the money supply is decreased when a deposit is withdrawn and used to repay a loan.

Also a must read: “Banking in New Zealand” by the New Zealand Banking Association Read Chapter 4 “Creation of Money and Credit” Page 18 and especially page 19.

New Zealand’s Money Supply Information:

The Reserve Bank, private sector banks and the creation of money and credit. (Pdf)

Modern Money Mechanics (pdf)

Money Supply Data

C3 Monetary and credit aggregates components

Click here to play “Money As Debt” video which has been split into five sessions -  1 of 5; 2 of 5; 3 of 5; 4 of 5; and 5 of 5.  Money as Debt II is now available along with an updated version of the first DVD. I highly recommend the purchase of this new set. It can be obtained from: Click here