#Monetary creation & destruction
After the public debt, AJEB offers you today an explanation of the concepts of #creation and #destruction of money. One of the main roles of money (banknotes, current accounts) is to serve as an intermediary for exchanges between economic agents. In general, we all participate in the processes of creation and destruction of money on a daily basis through our actions (bank loans, purchases).
In fact, we speak of money creation when the quantity of money in circulation known as the "money supply" increases. When a bank grants a loan to customers, it creates money: loans make deposits. Conversely, we speak of monetary destruction when the central bank withdraws money in circulation or when banks are reimbursed for loans.
Finally, suppose that instead of depositing a guarantee before obtaining credit, the bank agrees to lend you €10,000 out of trust; this is called ex-nihilo creation (from nothing). However, banks cannot create money and lend it indefinitely because they are constrained by regulations and the monetary policy of central banks.
CJEA