Creation and destruction of money is an ongoing process in the modern economy. (Image: Envato) Show Quick Read Summary is AI Generated. Newsroom Reviewed

We grew up believing a story that banks collect money from people like us, keep that money safe, and then lend some of it to others. The functions are right, but the sequence is not.

Deposits don’t create money; the lending does. Once you get this, a lot of the economic world suddenly stops becoming mysterious.

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The Two Kinds of Money

Broadly, there are two kinds of money. The first is central bank money . This is cash

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