{"id":73705,"date":"2024-01-09T08:19:01","date_gmt":"2024-01-09T08:19:01","guid":{"rendered":"https:\/\/www.taxresearch.org.uk\/Blog\/?p=73705"},"modified":"2024-01-09T08:19:01","modified_gmt":"2024-01-09T08:19:01","slug":"the-money-creation-and-regulation-paradox","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2024\/01\/09\/the-money-creation-and-regulation-paradox\/","title":{"rendered":"The money creation and regulation paradox"},"content":{"rendered":"

I make no apology for returning to the stories of money creation that have rather dominated this blog for the last few days.<\/p>\n

I reflected overnight on the posts by Clive Parry<\/a> and me<\/a> yesterday and why they present different views and realised that at its core, the conundrum can be simply summarised.<\/p>\n

As all central bankers agree<\/a>, commercial banks always make loans using newly created money.<\/p>\n

And then, as Clive pointed out<\/a>, banking regulation forces those banks to borrow to cover the loan that they have created as if the funds to make the loan were not newly created money.<\/p>\n

What is obvious is that if banks can create money from nothing (and that is a universally true fact and always the funding mechanism for loans made), then banks never need to borrow to cover those loans. And yet, regulation apparently imposes that wholly unnecessary requirement.<\/p>\n

The questions to be asked are:<\/p>\n

    \n
  1. Why does regulation do that?<\/li>\n
  2. How does it do that?<\/li>\n
  3. Who benefits from it doing so?<\/li>\n
  4. How do they benefit?<\/li>\n
  5. What can be done to resolve this situation, which is obviously absurd?<\/li>\n<\/ol>\n

    I am not saying I have answers as yet. What I do know is that the regulatory requirement is obviously absurd.<\/p>\n","protected":false},"excerpt":{"rendered":"

    I make no apology for returning to the stories of money creation that have rather dominated this blog for the last few days. I reflected
     Read the full article…<\/em><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[70,35],"tags":[],"class_list":["post-73705","post","type-post","status-publish","format-standard","hentry","category-banking","category-economics"],"_links":{"self":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/73705","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/comments?post=73705"}],"version-history":[{"count":1,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/73705\/revisions"}],"predecessor-version":[{"id":73706,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/73705\/revisions\/73706"}],"wp:attachment":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/media?parent=73705"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/categories?post=73705"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/tags?post=73705"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}