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What will all this inflation do to us?

Debunking Economics - the podcast

CHAPTER

The Elastic Money Supply

Basel Moore argued that rather than causation going from money to prices it's prices to money because we have an elastic monetary system. We don't have this you know Federal Reserve controlling it and they've got to put the money in the helicopters. The private banks create money. If you have an increase in your production costs you've already negotiated a line of credit with the bank. You access the line of credit. Exactly the same thing we have a credit card. You create if you go out and buy a 10,000 pound stereo system you've created 10,000 pounds. So the money creation process is nowhere near as simple as Milton Friedman's paper made it out to be.

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