Library

Myths vs mechanics

Widely repeated claims about money and banking, checked against how the system actually works.

Myth: banks lend out the deposits people save

The intermediation story is intuitive, but it gets the balance sheet backwards. Loans create deposits.

QE creates reserves, not free spending power for the government or households. The costs and risks are real.

Falling prices can be benign, but when debt is high they can trigger a self-reinforcing contraction.