Thieves Emporium

For most of mankind's existence, there was a frontier. Those who didn't fit in always had one option: Cross it. Leave. Walk away and live outside ordered society. That gave the rest of us a way to deal with the misfits and the outlaws: Banishment. Throw them out, or just let them go.

For our ancestors, living in small tribes, the border was always close. Crossing it meant leaving for unsettled lands. Those who did were the first explorers, the first to settle in Europe or Asia or Oceania or the Americas. For them, land was plentiful. They picked the best places, the fields of milk and honey.

As mankind grew, those fertile lands were all occupied by regulated societies. Crossing the border came to mean either moving to another country or going to lands that were too rough, hard, or dangerous for any settled country to want.

And still the world became more crowded. Even the harshest places were claimed by some government. Crossing the border came to mean going from England to France, China to Japan, or the U.S. to Canada. No longer did it mean leaving structured society to trade security for opportunity, regulation for risk.

Finally, about a hundred years ago, regulated societies won. All lands, no matter how rocky or dry or cold, became patrolled, regulated and governed. The wild men, the misfits, the outlaws and the eccentrics lost their final refuge.

Now, that has changed. Once again, there is a place for misfits. Wild and brutal, beyond the reach of any government, it's the last hope for those who have no other option.

Once again, there is a badlands.

 source

Can banks individually create money out of nothing? — The theories and the empirical evidence

Abstract

This paper presents the first empirical evidence in the history of banking on the question of whether banks can create money out of nothing. The banking crisis has revived interest in this issue, but it had remained unsettled. Three hypotheses are recognised in the literature. According to the financial intermediation theory of banking, banks are merely intermediaries like other non-bank financial institutions, collecting deposits that are then lent out. According to the fractional reserve theory of banking, individual banks are mere financial intermediaries that cannot create money, but collectively they end up creating money through systemic interaction. A third theory maintains that each individual bank has the power to create money ‘out of nothing’ and does so when it extends credit (the credit creation theory of banking). The question which of the theories is correct has far-reaching implications for research and policy. Surprisingly, despite the longstanding controversy, until now no empirical study has tested the theories. This is the contribution of the present paper. An empirical test is conducted, whereby money is borrowed from a cooperating bank, while its internal records are being monitored, to establish whether in the process of making the loan available to the borrower, the bank transfers these funds from other accounts within or outside the bank, or whether they are newly created. This study establishes for the first time empirically that banks individually create money out of nothing. The money supply is created as ‘fairy dust’ produced by the banks individually, "out of thin air".

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