Excerpt
February 26, 2020, Paper: "This is a curious debate on which much seems to turn on “the stroke of a pen.” Do banks create money or are they intermediaries between depositors and borrowers? Marc Lavoie is spot on. Banks create money, and, yes, they do it with the stroke of a pen. This is true even if banks are constrained by reserve requirements and can only “lend out what they have already received in deposits.” Even if the money is out the door before the ink is dry on the loan documents by which it was created. Banks are uniquely able to create money because the loans they make create a means of payment acceptable for discharging “all debts public and private,” just like every piece of paper money issued by the Federal Reserve. And they have privileged access to a pool of funds provided by the banking system."
Non-HKS Author Website - Stephen Marglin