Library
Explainers
Short, direct answers to the questions readers ask most often about money, banking, and central banks.
Do banks create money out of thin air?
Yes — in the precise sense that a loan creates a deposit. No — in the sense that banks can create unlimited money without constraints.
ReadWhat is the money multiplier, and why is it misleading?
The textbook multiplier treats reserves as the raw material of lending. Modern banking does not work that way.
ReadWhat is the difference between reserves and deposits?
Reserves are central-bank money used for settlement. Deposits are commercial-bank money used by households and firms.
ReadWhat is quantitative easing?
QE is large-scale central-bank asset purchasing. It can ease financial conditions, but it is not a precise or unlimited tool.
ReadWhat is a bank run?
A bank run is a self-fulfilling panic in which depositors withdraw because they expect others to withdraw.
ReadInflation, disinflation, and deflation: what is the difference?
Inflation is rising prices, disinflation is slower inflation, and deflation is falling prices. The distinctions matter for policy.
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