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

Jo Michell

No PKWP1605, Working Papers from Post Keynesian Economics Society (PKES)

Abstract: 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.

Keywords: monetary circuit; endogenous money; shadow banking; financialization; Graziani (search for similar items in EconPapers)
JEL-codes: E12 E40 G21 (search for similar items in EconPapers)
Pages: 38
Date: 2016-03
New Economics Papers: this item is included in nep-ban, nep-mac, nep-mon, nep-pay and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Do Shadow Banks Create Money? ‘Financialisation’ and the Monetary Circuit (2017)
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