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Are banks really magic money trees?

In a wide-ranging attack on the economics profession published in the New York Review of Books, David Graeber, the anthropologist, paid particularly close attention to the concept of money.He pointed to Theresa May’s claim, during the UK general election in 2017, that “there is no magic money tree,” which was part of the debate on austerity and government spending:The truly extraordinary thing about May’s phrase is that it isn’t true. There are plenty of magic money trees in Britain, as there are in any developed economy. They are called “banks.” Since modern money is simply credit, banks can and do create money literally out of nothing, simply by making loans. Almost all of the money circulating in Britain at the moment is bank-created in this way.Graeber, reviewing a new book from Robert

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