Lost and Found: Some History of Endogenous Money in the Twentieth Century

  • Victoria Chick


This chapter started in an airport waiting room. I happened on Tim Congdon, and we talked about Keynes’s monetary theory while we waited for our flight. The conversation brought into sharp focus an idea that had been festering in the back of my mind for some little time: that I had been brought up to take the endogenous generation of money (deposits) by banks for granted; why was it necessary for the modern theory of endogenous money to re-invent the concept? But Tim had been given a very different understanding. An informal survey of other economist friends of roughly his age (currently (2003) around the age of fifty), showed a pretty uniform experience of having been taught that ‘the central bank provides money and the banks multiply it’, as Roger Backhouse (in conversation) succinctly characterised the money-base theory of the money supply. Clearly something had happened somewhere between the time of my under- and post-graduate education in the late 1950s-early 60s to theirs some 15 years later.


Central Bank Banking System Federal Reserve Money Supply Cash Holding 
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© Victoria Chick 2005

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  • Victoria Chick

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