Rebel Capitalist News
Interview: George Selgin (The Secret Method Banks Use To Create Money)
Sep 16, 2024
In this engaging conversation, George Selgin, a prominent expert on banking and monetary policy, unpacks the secretive methods banks use to create money. He challenges conventional views on bank operations, exploring how banks fund loans and manage risks. Selgin also discusses the evolution of electronic money and the complexities of the Federal Reserve’s interest rate policies. The talk touches on the implications of innovations like FedNow versus private payment systems, culminating in a humorous reflection on future economic debates.
01:00:25
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Quick takeaways
- George Selgin argues that banks primarily function as intermediaries, requiring real resources for settlement even while creating money.
- The podcast critiques the notion that banks operate solely on credit creation, emphasizing the essential role of empirical evidence in understanding banking practices.
Deep dives
Debate on Bank Intermediation
The podcast delves into the long-standing debate over whether banks are intermediaries that borrow to lend or if they create money without needing to borrow. One side, represented by George Selgin, argues that banks are intermediaries and must secure funds from depositors or other sources to finance their loans. Conversely, critics claim that banks create money independently, negating the need for borrowing. Selgin emphasizes the significance of the settlement process in this argument, asserting that despite banks’ ability to create deposits, they ultimately require real resources for settlement.
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