Christopher Kent: Money - born of credit?
The views expressed in this speech are those of the speaker and not the view of the BIS.
Most of us would put cold hard cash at the top of our list when we think of money. Others would include funds they have on deposit at a bank. Some might contemplate broader measures of their wealth. Historians would be tempted to tell us about the role of precious metals, coins, salt, shells and even rum when the topic of money is raised. When thinking about the role that money plays in an economy, economics teachers and academics might educate us about money multipliers, the velocity of money and money demand and supply functions. Keen students of episodes of high inflation would discuss Milton Friedman and the notion that inflation is ‘always and everywhere’ a monetary phenomenon. Given this, concerned citizens might be worried about what they see as the ability of private banks to create money via the extension of credit, seemingly at will.