Introduction |
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Most students are very surprised when they learn that when banks make loans they create money. Yes, banks create money whenever they make a loan. If I get a loan from a bank to buy a new boat, the money I get has been CREATED by the bank. The US government does not create money. The Federal Reserve does not create money. BANKS CREATE MONEY. BUT, the Fed can control how much money banks can create. We will learn how the Fed does this in the next lesson (16a). Here we learn HOW BANKS CREATE MONEY |
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