1934Sir Ralph Hawtrey (1879-1975) | Secretary of the British Treasury

When a bank lends, it creates money out of nothing.

When a bank lends, it creates credit. Against the advance which it enters amongst its assets, there is a deposit entered in its liabilities. But other lenders have not the mystical power of creating the means of payment out of nothing. What they lend must be money that they have acquired through their economic activities.

1st para: from 'Trade Depression and the Way Out', 1934.

2nd para: from the 'Art of Central Banking', 1931 (2nd ed 1933).

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