Macroeconomic textbooks ripe for composting

I have been travelling a lot today – train, car, plane, car – and in between speaking and other commitments so not much time to type some thoughts. Also a detective novel I am reading was quite interesting on the plane, which didn’t help. But I have been thinking about our upcoming textbook and what will differentiate it from the others apart from nearly everything. I have also been looking into what has been sponsored by George Soros’s iNET initiative (the so-called CORE curriculum) and the latest versions of the dominant macroeconomics book Mankiw’s textbook (now in its 8th edition). Juxtaposing those developments (if we can call retrogression development) with some papers that have come out recently from central bank economists and then thinking about my own project with Randy Wray makes it seems as though the so-called progressive development (iNET) is a ‘try hard’ effort to disguise a neo-liberal heart with some comforting concessions to reality, while the avowedly mainstream approach represented by Mankiw has barely learned a thing about reality and essentially aims at business as usual. That business is the business of deception. Here are some thoughts on this.

Mainstream macroeconomics

One of the most popular macroeconomics textbooks is the text by N. Gregory Mankiw (Harvard), Macroeconomics, now in its 8th edition. Mankiw has a record of advising conservative politicians in the US and has railed against the use of fiscal stimulus as a means of addressing the financial crisis.

The 8th edition, which has just come out is very similar to the 7th edition which came out in 2009, and only barely touches on the early parts of the crisis by adding a briefing box and a box in Chapter 11 on fiscal policy which said hardly anything.

The major differences that is observed in the 8th edition are some re-arrangements to the pedagogy, particularly in the area of monetary policy (to allow for QE etc) and a tacked on Chapter 20 – The Financial System: Opportunities and Dangers, which purports to provide students with a “deeper look at this topic”. Once you read it you will see that we are still paddling around in the toddlers pool, which has been largely drained for cleaning!

The core of the theoretical development is largely unaltered. The substantive material in Chapter 4 is very similar to the 7th edition, which is where the quotations below come from. I haven’t the 8th edition with me in the office I am working from this afternoon.

In Chapter 4 Money and Inflation, students are told that:

The quantity of money available in an economy is called the money supply … In an economy that uses fiat money, such as most economies today, the government controls the supply of money: legal restrictions give the government a monopoly on the printing of money … The government’s control over the money supply is called monetary policy.

We will see that governments do not seek to control the money supply. Rather they seek to influence the level of economic activity by setting the interest rate.

Mankiw says that monetary policy is “delegated to” the central bank (the US institution being the Federal Reserve or Fed):

The primary way in which the Fed controls the supply of money is through open-market operations-the purchase and sale of government bonds. When the Fed wants to increase the money supply, it uses some of the dollars it has to buy government bonds from the public. Because these dollars leave the Fed and enter into the hands of the public, the purchase increases the quantity of money in circulation. Conversely, when the Fed wants to decrease the money supply, it sells some government bonds from its own portfolio. This open-market sale of bonds takes some dollars out of the hands of the public and, thus, decreases the quantity of money in circulation.

To learn more about how the government (via the central bank) controls the ‘money supply’, students then have to study the material in Chapter 19 Money Supply, Money Demand and the Banking System, which provides a detailed analytical treatment of the way Mankiw thinks the process works (or at least wants students to think, which is different, of-course).

The Money Supply (M) is the sum of Currency (C) and Bank Demand Deposits (D). So according to Mankiw, the central bank manipulates both C and D to control M.

We learn that “that banks start to use some of their deposits to make loans” (p.549) to make profits. To help students “understand the money supply” the story goes like this.

The ‘Firstbank’ takes deposits and eventually works out it can make loans with the money sitting idle in their vaults. ‘Firstbank’ operates on a fractional-reserve basis, “a system under which banks keep only a fraction of their deposits in reserve” (p.549). So it keeps some of their deposits back in reserve and loan the rest out, hoping that “the amount of new deposits approximately equals the amount of withdrawals” (p.549).

Assuming it attracts deposits of $1,000, it retains 20 per cent on its books as reserves ($200) and makes loans of $800. It now has assets of $1000 (reserves = $200 and loans = $800) and Liabilities of $1,000 (deposits).

The bank only lends what it can attract in the form of deposits – with the causality being in that order.

The ‘Firstbank’ has thus increased the money supply by $800 when it makes the loan and “Before the loan is made, the money supply is $1,000, equaling the deposits in Firstbank”. After the loan, “the money supply is $1,800” so “banks create money” (p.549).

That seems clear enough although incorrect at the elemental level. But there are no nuances.

Students are also told that:

When a bank loans out some of its reserves, it gives borrowers the ability to make transactions and therefore increases the supply of money.

So students are mislead into thinking that banks lend their reserves out when in fact they do not. No nuances there. Just a plain error.

The pedagogy then turns to the factors that determine the money supply. Enter the money multiplier. We won’t go into the detail – the conclusion will do.

Mankiw says that:

… the money supply is proportional to the monetary base.

And the “factor of proportionality … is called the money multiplier:

… Each dollar of the monetary base produces m dollars of money. Because the monetary base has a multiplied effect on the money supply, the monetary base is sometimes called high-powered money.

Mankiw tells us that the:

The monetary base B is the total number of dollars held by the public as currency C and by the banks as reserves R. It is directly controlled by the Federal Reserve.

So the Money Supply (M) = m times B, where m is the money multiplier.

And then:

In fact, the Fed controls the money supply indirectly by altering either the monetary base or the reserve-deposit ratio.

The reserve-deposit ratio is an influence on the value of m. The point is that the central bank is said to control the money supply.

Students learn about open market operations are designed to change the money supply (by swapping government bonds for money); reserve requirements which influence the fraction of each deposit that will be loaned out, and the discount rate (the rate that the central bank lends to commercial banks).

From this much exposition the students (bright or otherwise) will consider the following key propositions to being key parts of their newly gained knowledge about the monetary system.

1. Banks wait for depositors to deposit funds which they then put in their vaults as reserves.

2. These deposits then provide the reserves that banks then lend out for profit.

3. The bank cannot lend if it doesn’t take in deposits (notwithstanding the messy discussion about discount rates).

4. In a fractional-reserve banking system, the money supply is a multiple of the reserves with the causality flowing from reserves to money supply.

5. Reserve requirements whether voluntary or enforced by the central bank restrict the capacity of the banks to lend (and hence create money).

6. The central bank controls the money supply by changing the quantity of reserves in the system.

Keep all that in mind.

Two misconceptions about money creation

In the Bank of England’s Quarterly Bulletin 2014/Q1 there was an interesting article – Money creation in the modern economy – which “explains how the majority of money in the modern economy is created by commercial banks making loans.” That might not sound like a very radical idea but in the context of what is taught in the vast majority of macroeconomics and monetary economics courses around the world it is.

The paper challenges several of the basic building blocks of mainstream macroeconomics:

Money creation in practice differs from some popular misconceptions – banks do not act simply as intermediaries, lending out deposits that savers place with them, and nor do they ‘multiply up’ central bank money to create new loans and deposits.

The reality of how money is created today differs from the description found in some economics textbooks:

  • Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits.
  • In normal times, the central bank does not fix the amount of money in circulation, nor is central bank money ‘multiplied up’ into more loans and deposits.

The Bank of England paper discusses the two misconceptions about money creation.

First, the Bank of England says that “The vast majority of money held by the public takes the form of bank deposits. But where the stock of bank deposits comes from is often misunderstood”.

We learn that “banks do not act simply as intermediaries, lending out deposits that savers place with them”, which means that household saving creates the deposits.

The reality is very different:

… when households choose to save more money in bank accounts, those deposits come simply at the expense of deposits that would have otherwise gone to companies in payment for goods and services. Saving does no by itself increase the deposits or ‘funds available’ for banks to lend.

Uh oh!

Even so-called progressives who think they are on top of the situation like the iNET sponsored Wendy Carlin have embedded in their so-called – The 3-Equation New Keynesian Model – a Graphical Exposition – the view that savers provide the funds that the banks lend out for profit.

This is part of their new approach to macroeconomics curriculum development which “is different” from the “standard macro text/courses” yet looks decidely like the old New Keynesian models with a few ad hoc changes. Nothing much is different therefore.

I will examine the iNET approach on another occasion once they release more detail. But the core 3-equation New Keynesian model is pure drivel and tacking a few trendy additions about financial markets etc with no real understanding of the role of government leaves one cold.

The idea of a loanable funds market is thus rather dodgy. Mankiw wrote in his textbook that “it is important to remember that classical economics provides the right answers to many fundamental questions. In this book I incorporate many of the contributions of the classical economists before Keynes and … Substantial coverage is given, for example, to the loanable-funds theory of the interest rate, the quantity theory of money, and the problem of time inconsistency.”

My gosh!

Mankiw requires students to think that:

Saving is the supply of loanable funds – households lend their saving to investors or deposit their saving in a bank that then loans the funds out. Investment is the demand for loanable funds-investors borrow from the public directly by selling bonds or indirectly by borrowing from banks. Because investment depends on the interest rate, the quantity of loanable funds demanded also depends on the interest rate.

Changes in the interest rate thus brings saving into line with investment because the former increases with rising interest rates and the latter does the opposite.

I won’t detail for you here how the classical economists used this theory to deny that economic crises or unemployment could occur. Essentially they claimed that if consumption spending fell as saving rose, more funds would be made available to the loanable funds market. The higher saving would drive down interest rates because there would be an oversupply of funds to the market relative to the current investment level.

The lower interest rates would stimulate higher investment and eventually the saving and investment changes would become equal at some lower rate than before and the spending lost to consumption would be made up by the higher investment spending. Therefore there could never be any deficiency in demand.

You will read that with a certain amount of incredulity I am sure as I did when I studied the rubbish. Basic first question – How does a firm that produces consumption goods suddenly become an investment (capital) goods producer? What about sectoral imbalances? What happens when the dynamic is the opposite?

The Bank of England doesn’t have much time for these theories it seems.

The Bank is now according to what Modern Monetary Theory (MMT) has noted for many years:

… in reality in the modern economy, commercial banks are the creators of deposit money … rather than bank lending out deposits that are placed with them, the act of lending creates deposits – the reverse of the sequence typically described in the textbooks.

They detail the process:

1. The central bank has assets equal to its liabilities (bank reserves held with it and currency on issue). This is called base money.

2. A commercial bank makes a loan and creates a new deposit.

3. The bank now has more assets (the new loan) but matching higher liabilities (the new deposit).

4. Consumers have more assets (the new deposit) but higher liabilities (the new loan).

5. New broad money has been created because deposits have risen.

6. No new net financial assets have been created (“both sides of the commercial banking sector’s balance sheet increase as new money and loans are created.

7. The new money has been created “without – in the first instance … any change in the amount of central bank … ‘base money'”.

8. The banks will as a consequence of the higher deposits “want, or are required, to hold more central bank money in order to meet withdrawals by the public or make payments to other banks”. That is, the bank will need to increase its ‘reserves’ held at the central bank to facilitate the payments system.

9. But “reserves are … supplied ‘on demand’ by the Bank of England to commercial banks in exchange for other assets on their balance sheet”.

10. And … “In no way does the aggregate quantity of reserves directly constrain the amount of bank lending or deposit creation”.

Time to round up the vast majority of macroeconomic textbooks and put them into the compost bin so that they may have some use in their after life.

Students should not be taught the stuff that Mankiw or even Carlin think is an appropriate curriculum.

Bank reserves

You will have read in many financial columns and economic papers that if banks have more reserves they have a greater capacity to lend. Recall above that Mankiw teaches students that banks lend out their reserves.

First, the Bank of England notes that:

… description of money creation contrasts with the notion that banks can only lend out pre-existing money … Bank deposits are simply a record of how much the bank itself owes its customers. So they are a liability of the bank, not an asset that could be lent out.

Second, “a related misconception is that banks can lend out their reserves”:

Reserves can only be lent between banks, since consumers do not have access to reserves accounts at the Bank of England.

Why do economists claim that banks lend out their reserves. The only clue that the Bank of England provides is that “Part of the confusion may stem from economists’ use of the term ‘reserves’ when referring to ‘excess reserves’ – balances held above those required by regulatory reserve requirements.”

Accordingly, they claim that ‘lending out reserves’ “could be a shorthand way of describing the process of increasing lending and deposits until the bank reaches its maximum ratio”.

That is being very generous to economists. The fact is that the mainstream courses tell students that bank reserves increase the sector’s capacity to make loans. The reality is that loans are not so constrained.

On March 24, 2010, the Vice Chairman of the US Federal Reserve System, Donald L. Kohn gave a speech in North Carolina – Homework Assignments for Monetary Policymakers – to college students.
The Federal Reserve has funded its purchases by crediting the accounts that banks hold with us. Those deposits are called “reserve balances” and are part of bank reserves … The huge quantity of bank reserves that were created has been seen largely as a byproduct of the purchases that would be unlikely to have a significant independent effect on financial markets and the economy. This view is not consistent with the simple models in many textbooks or the monetarist tradition in monetary policy, which emphasizes a line of causation from reserves to the money supply to economic activity and inflation.

Where does all that leave the majority of students studying undergraduate macroeconomics and using books like Mankiw, which is representative? In a fantasy land that implants dangerous lies in their heads that pervert the course of public policy if these students ever get close enough to influence it.


Time is up. I hope that our textbook provides something that is truly different, ground in reality and has evidential support. We will see – it will be out later this year.

That is enough for today!

(c) Copyright 2014 Bill Mitchell. All Rights Reserved.

This Post Has 16 Comments

  1. Strikes me the Bank of England’s description of what commercial banks do is more accurate than Bill’s. The BoE suggests that commercial banks BOTH act as intermediaries between lenders and borrowers, AND create new money. I.e the Bank of England is right to say “banks do not act simply as intermediaries, lending out deposits that savers place with them”.

    In contrast, Bill seems to suggest that commercial banks DON’T ACT as intermediaries. That’s where he says “Even so-called progressives . . . have embedded their . . . view that savers provide the funds that the banks lend out for profit.” And “in reality in the modern economy, commercial banks are the creators of deposit money … rather than bank lending out deposits that are placed with them..”.

    The reason why commercial banks DO INTERMEDIATE is as follows. Suppose the economy is at capacity and banks spot a set of viable lending opportunities. The extra spending / demand that that involves when the new money is spent is just not allowable unless someone else saves, i.e. abstains from spending / reduces demand.

    If the above new spending DOES GO AHEAD without anyone else saving then the central bank will just raise interest rates so as to rein in demand and borrowing. Alternatively, inflation takes off, which means the REAL VALUE of all existing loans declines, which in turn means the total REAL VALUE of loans stays approximately constant. A third alternative (as suggested by Manciw) is that if new borrowers appear, without new savers appearing, the market forces drive up interest rates, with the result that there is no NET NEW borrowing.

  2. Bill,

    Carlin’s model is not quite loanable funds — at least, not in the sense that Mankiw’s is. They have replaced the LM-curve with a central bank reaction curve. This was suggested some time ago by David Romer. Thus they recognise that the central bank sets the interest rate.

    So, we are back to the Wicksellian version of loanable funds where money is endogenous but there is a ‘natural rate of interest’ that will ensure full employment equilibrium. In order to criticise this construction you must start talking about Keynes’ liquidity preference theory of interest rates and the animal spirits theory of investment behavior.

    Given that the profession seem to be moving back to Wicksell it might be worthwhile discussing in your textbook these issues.

  3. ” Suppose the economy is at capacity”

    Every time I see that from Ralph I replace it with ‘Suppose we are at the Event Horizon’.

    You can then ignore everything that follows, because ‘at capacity’ is not something you ever design a system to get to. You pull it up short before then. MMT’s contribution is that it has a way of pulling up short somewhat nearer to the event horizon than the mainstream

    ‘At capacity’ arguments are like arguing you need to design a jet engine to work outside the atmosphere. Doesn’t even need consideration because you never go near the edge of the atmosphere.

    Banks will always back off to the default position of borrowing from the lender of last resort, and the central bank will always back off to the default position of accommodating that, under any circumstances where there is significant systemic stress. Otherwise the payment system starts to fail and depressions happen.

    Which is why MMT suggests it is probably pointless allowing the banks to operate in anything other than the default position. It doesn’t add any control value, and people who don’t actually understand banking see things in the structure that aren’t really there.

  4. Ralph-

    What evidence do you have that shows that minute changes to the interbank rate by the CB actually control inflation? This is one of the greatest myths perpetuated by the mainstream. There is no empirical support for fine tuning at all. Interest rate change dynamics are so complicated, nobody understands them.

  5. Neil says, “at capacity’ is not something you ever design a system to get to”. Really? So designers of power stations or oil refineries never have a maximum capacity in mind? Or perhaps Neil is saying there is no limit to the amount of electricity a power plant can generate, which is brilliant news. If Neil can expand on that and prove the point, he’ll get a Nobel Prize.

    “MMT’s contribution is that it has a way of pulling up short somewhat nearer to the event horizon than the mainstream.” Wrong again. It’s JG that can raise numbers employed above the maximum number it’s possible to employ under conventional policies, not MMT as such. And as Warren Mosler pointed out, MMT and JG are separate ideas: e.g. you can have JG without MMT. For the benefit of those who know nothing about economic history, they did that in the 1930s with the WPA.

    What I mean by “at capacity” was “at capacity under any regime: conventional or JG or any other regime”. Thus the fact that “at capacity” output under a JG regime is higher than under a conventional regime is irrelevant. Output might be even higher if we reintroduced slavery for all I know. That, wouldn’t alter my above points one iota.

    As for Neil’s last two paragraphs, if anyone knows what they mean, please let me know.

  6. Every time I mention MMT to an iNet aficionado, I get treated like I have the plague. And that’s especially true if the person is a Marxist. What I’m guessing is that whomever the power is, they really don’t want MMT going anywhere (scarce money is more expensive than fiat?), and that the Marxists, having finally been let back through the pearly gates once again, aren’t interested in any other new competition going through with them.


  7. Most of our so called Marxists wouldn’t be able to differentiate between Marx and Engels.
    Just bring up the transformation problem and put them back in their boxes Benedict.

  8. “Suppose the economy is at capacity”

    We seem to be working with two real world models at present – both flawed.
    A European America nightmare and a American Americas nightmare that MMt people claim is sovereign
    Both systems extract purchasing power via the inflation or deflation mechanisms so as to overbuild capacity and thus keep ahead of the people who do not reside in the inner circle. …ie they are no different.

    Suppose societies who developed under the American century of materialism and have nothing remaining to bind them together other then purchasing power are subseqently robbed of that power.
    What have they got now other then dystopia ?

    Spanish oil consumption 1965 – 2013 ( 2009 & 2014 BP stat figures)

    1965 : 278
    1970 : 552 ( consumption doubled within a half a decade!!!!!! – this period was the flaming heart of the so called Spanish Miracle)
    1975 :840
    1980 :1,070
    1985: 927 ( 80s euro structural adjustment depression)
    1990 : 1,040
    1995 : 1,177
    2000 : 1,452
    2005 : 1,619 (peak consumption ) in the 2013 BP stat overview this has changed to 1,594 with peak in 2007 at 1,613
    2010 : 1,394
    2013 : 1,200 ( return to 1995/6 consumption levels)

    What has destroyed Spain ?????
    Modernism in whatever form takes your fancy

    The remains of the Spanish hilltop village system was destroyed by it.
    What have they got now . ???
    Not agrarian poverty ………… – its much worse then that – they now live in a Industrial system without enough chips.
    I suggest yee get your asses out of the textbooks and walk around the gaff.
    Perhaps a walk on the GR 15 in Aragon if you are to understand these massive population movements and its role in changing society and indeed the entire production and distribution system vectored towards a vast centralizing authority that in truth resides outside the state and perhaps always has.

    Many of these villages now have nobody living in them.
    They may however have a summer tourist office where tourists many of them Spanish drive up 1,000+ meters to listen to a young girl explain to them that people actually lived here and stuff.
    No shops exist up here so no commerce can be engaged in – everything is centralized below in the interests of apparent efficiency
    A utterly surreal experience for a observer on foot.

    Spanish people now have no personal sovereignty , they never really had state sovereignty.

    The slightly funny but sad story of the Valle de Chistau.
    One of the strangest places I have ever walked through.
    The place is a dead zone – the desperate 1980s quest for women that the men engaged in was a utter failure.
    The women drifted back down the slopes to gain access to artifical credit.

  9. Ralph, there is a difference to maximum operating capacity, which is what you are alluding to, and the true maximum capacity after which things start to fail. Your car hits the redline well before the engine explodes.

  10. Auburn,

    Re interest rates, I was just temporarily going along with the conventional wisdom, namely that interest rates influence demand and inflation. No doubt I should have mentioned that. Actually, I have long argued on my blog that interest rates are a poor way of influencing demand. See:

    Mattew B,

    Not a bad analogy. Your “maximum operating capacity” is the equivalent of employment being at the maximum that is consistent with acceptable inflation (whether we’re talking about a conventional economy, one that operates under MMT or one that incorporates JG). As to your “true maximum capacity” (when the engine is liable to explode), that’s the equivalent of trying to squeeze extra output from an economy by having grossly excessive demand, and which probably results in nothing more than excess inflation with no improvement in real output or living standards.

  11. @ralph
    It appears MMT types have a poor time understanding the arrow of time.

    Whats the point in pushing a economy to maximum capacity lets say over 10 years if the long term consequences veer towards the Biblical.
    The trade & population dynamics between countries which are at the center of banking power (UK) and are on the receiving end of these inflation deflationary periods.(Spain) destroys all things of true value over time.

    The inertia in systems causes destruction on a vast scale as real physical systems periodically hit walls between banking inflationary and deflationary periods.
    Spains population increased most rapidly during the Euro years as migration followed the (global) capital dump known as the Spanish economy.
    It was 39~ million in 1995 when oil consumption was last at its present levels.
    It is 46.7 in 2013
    It peaked in 2012 at 47.82.
    Having regard for the amount of young external people of child bearing age who remain in Spain this decline is remarkable and may be a result of many native young population stopping family formation altogether which is certainly the case in Ireland
    Although perhaps Spain is on the verge of another catastrophic inflation as banking centers which the MMT people consider as Sovergin seek a yield.
    No doubt the future losses from another dastardly injection of overproduction will be socialized on the society.

  12. I hope the textbook deals with this attack from an anti-MMTer:
    “The problem with MMT is that because it is based on accounting identities is doesn’t consider that the capital structure of the economy is a complex jigsaw. So, those 15% unemployed need to be combined with resources which are currently employed to be of any use. Capital is heterogeneous. The other problem with MMT is that it doesn’t understand time and that capital production is a sequential process, where idle resources are an essential feature of production and there are opportunity costs. I recommend anyone who has caught the mmt virus to undergo a treatment of understanding capital theory and time preference.”

  13. Warren
    I think the attack using time preference is a bit rich, especially if coming from a neoclassicist.

  14. Dear Warren Ross (at 2013/07/21 at 8:20)

    All of the main proponents of MMT are well-schooled in so-called Capital Theory and understand the implications of the Cambridge Controversies in the 1960s and 1970s, which rendered neo-classical capital theory bereft of any applicability or credibility. That theory was shown to be internally inconsistently and circular and could not possibly be used as an explanatory framework for the rate of profit in a capitalist economy.

    Most mainstream economists would not even understand the implications of those controversies and still persist as if nothing happened.

    The quote you offer is consistent with that interpretation and is not worth repeating. First, MMT is not based on accounting identities. It uses them but is a behavioural theory in essence. The person you quote clearly doesn’t understand that. Second, idle capacity constitutes idle labour resources and idle machines, equipment and other capital resources. The physical capital might be owned but is not ‘currently employed’. Third, capital labour ratios can be altered to fulfill the same task depending on their relative availability. A Job Guarantee, for example could be very capital intensive or the opposite. I have direct experience in employment programs that establish that fact. Fourth, capital is heterogenous and of different time vintages, so what? Fifth, idle resources (some free capacity) is normal in a capitalist production system, so what? Sixth. there are opportunity costs if something is being used to its advantage and is then to be used elsewhere, so what? Seventh, time preference just means that one values time differently depending on whether something is now or later. We all have different time preferences. So what?

    Be careful in propagating nonsense.

    best wishes

  15. Warren
    I saw that comment on the Guardian piece. That person is a typical internet Austrian so really not worth bothering about. As Bill mentions the CCC I actually linked to the wiki page to that commenter last month, seems they didn’t get the message or actually even understand it.

  16. >>Bill
    Almost the same as in the paper of the Bank of England you can find in a schoolbook (!) issued by the Deutsche Bundesbank (!) to use in High school:
    Geld und Geldpolitik Schülerbuch für die Sekundarstufe II
    I think you read German so let me quote:

    “Wie entsteht dieses Buch- oder Giralgeld?
    Der Vorgang entspricht der Entstehung von Zentralbankgeld: In der Regel gewährt die Geschäftsbank einem Kunden einen Kredit und schreibt ihm den entsprechenden Betrag auf dessen Girokonto als Sichteinlage gut.
    Wird einem Kunden ein Kredit über 1.000 Euro gewährt (z. B. Laufzeit 5 Jahre, 5 % p.a.), erhöht sich die Sichteinlage des Kunden auf seinem Girokonto um 1.000 Euro. Es ist Buchgeld entstanden oder es wurden 1.000 Euro Buchgeld geschaffen: Die Buchgeldschöpfung ist also ein Buchungsvorgang.” p76

    Perhaps neoclassic economist should read schoolbooks?

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