White, William (2015)

William White: I find it extraordinary that some economists still do not recognize that we have a fiat money system. Banks do not lend money that has been saved. They create money by making loans and simply writing up both sides of their balance sheet. This system clearly greases the wheels of commerce, but it can also get badly out of control as we have seen in recent years. There really is an issue here. Do we want to go back to 100% reserve banking, or something of that nature, as suggested by the Chicago school and Irving Fisher in the 1920’s. While I have not thought enough about it to say where I’d come out on this debate, it certainly is an issue that we should be thinking about. This has also been suggested quite recently by Martin Wolf and John Kay of the Financial Times. These are serious people whose suggestions should be treated equally seriously. And, in a similar vein, I repeat what I said a few moments ago. We also need to go back and look at the whole International Monetary System, or Non System as I and others have called it.