Accounts Quote by Mervyn King
“When banks extend loans to their customers, they create money by crediting their customers’ accounts.”
About This Quote
Source Speech: Monetary Policy Forum, Bank of England, 2015
Banks generate new money by extending credit, expanding the money supply through customer deposits
In simple terms: Loans create money by adding to account balances
Key Takeaway
Understand credit creation to assess financial risk
Themes
economics
banking
money supply
Mood
analytical
concerned
Type
educational
informative
When to use this quote
- business loans
- mortgage lending
- government stimulus
- personal finance
Key Concepts
Fractional reserve
monetary policy
Questions to Reflect On
- How does credit creation affect inflation?
- What limits should be placed on bank lending?
A Different Perspective
Credit creation can lead to inflation if unchecked
![“What I think is bugging this guy [Steven Lerner] is the belief that debt - forced debt upon middle-class people, students (i.e., student loans and so forth) - has made Wall Street bankers and financial people excessively, unfairly, out-of-proportionally rich.” quote by Rush Limbaugh](https://sms4smile.com/quotes/img-quotes/f15/rush-limbaugh-28_bankers_what-i-think-is-bugging-this-guy-steven_28590.jpg)
