The myth of the money multiplier

The hysteria over hyperinflation is predicated on the notion that injecting government money into the economy will have a massive multiplier effect. But without willing borrowers or lenders, the fruits of Bernanke's printing presses are piling up in bank coffers.

Three Business Spectator readers contacted me directly about one topic last week – bank money creation, and how bank reserves work. Following an old journalism adage that three direct enquiries about a topic from the public means that everybody’s interested in it, I’m diving into wonkdom to answer their queries in detail here. Ignore this post if the adage isn’t true for you, but if it is and you haven’t yet had your morning Java, now’s the time for that stroll to the barista.

OK, caffeinated? Here we go.

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