Introduction to the origins of the endogenous money approach

L. Randall Wray ()

Chapter 5 in Understanding Modern Money Theory, 2025, pp 94-121 from Edward Elgar Publishing

Abstract: This chapter begins with a brief overview of the history of the endogenous money approach. It includes a discussion of the 19th-century debates between the banking and currency schools of thought and then turns to a discussion of the endogenous money approaches of Marx, Keynes, and Schumpeter. The endogenous approach is contrasted with the exogenous approach (represented by the currency school and later by the monetarists) that dominated most economics textbooks in the postwar period up to the 1990s. The exogenous approach argues that even on a fiat money standard, the central bank controls the quantity of privately created money. By contrast, the endogenous money approach insists that even on the gold standard, bank money was endogenous. Historically, attempts by the government to control the quantity of money only worked by driving up interest rates and creating credit problems—not by reducing the ability to create money.

Keywords: Currency school vs Banking school; Exogenous money; Endogenous money; Credit money; Deposit multiplier; Fiat money; Gold standard; Reflux and redemption; Liquidity premium (search for similar items in EconPapers)
Date: 2025
ISBN: 9781800375147
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