The article, “Money creation in the modern economy,” published by the Bank of England’s Monetary Analysis Directorate, seeks to clarify how money is created in modern economies, emphasizing the role of commercial banks in this process. The article debunks common misconceptions, such as the idea that banks simply act as intermediaries lending out existing deposits, and explains that most money is created when banks make loans. It also explores the role of central banks in regulating and influencing money creation through interest rate setting and quantitative easing. The article aims to provide a clear understanding of these complex economic processes, dispelling myths and offering insight into the real workings of money creation in a modern economy.

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