How do banks actually create money? We explain
Cash and Nigeria’s e-naira are already circulating. China’s trial of its digital currency, e-is looking into the design and scope of a digital euro. “My preference is to see something in place by 2025,” says Christine Lagarde, its president. In Sweden a parliamentary inquiry will opine on the desirability of an e-krona soon. President Biden has issued an executive order asking the government and the Fed to explore the idea of a.
s in their most radical form would be serious. They might make central banks responsible for how credit is intermediated. Because public money is safer than commercial-bank money, deposits could trickle out of banks towards the central bank. In bad times that could become a flood, made easier because money can be transferred between wallets at the mere click of a mouse.
The danger, says Princeton’s Markus Brunnermeier, is that lenders’ dependence on central banks would alter the balance of relations by giving central banks power to determine who gets credit. Randal Quarles, the former Fed vice-chairman, points out that America’s Troubled Asset Relief Programme was meant to have no strings attached, but after it went through the political wringer, all sorts of conditions were added.
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