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Do shadow banks create money? 'Financialisation' and the monetary circuit

Listed author(s):
  • Jo Michell

    ()

    (UWE Bristol)

The rise of the shadow banking system is viewed throught the lens of Graziani's Monetary Theory of Production. Graziani's categories of 'initial finance' and 'final finance' are used to analyse the new forms of credit created in the shadow banking sector. It is argued that the accumulation of leverage in the shadow banking system and the creation of credit money by the traditional banking sector are symbiotic processes. While Graziani's triangular debtor-bank-creditor relationship remains central, the circuit operates in a perverse form in which household debt is stored on the balance sheets of shadow banks, allowing the banking system to break the historical connection between money creation and productive activity.

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File URL: http://www.postkeynesian.net/downloads/working-papers/PKWP1605.pdf
File Function: First version, 2016
Download Restriction: no

Paper provided by Post Keynesian Economics Study Group (PKSG) in its series Working Papers with number PKWP1605.

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Length: 38
Date of creation: Mar 2016
Handle: RePEc:pke:wpaper:pkwp1605
Contact details of provider: Web page: http://www.postkeynesian.net

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