How 90% of the Money Is Created | Steve Hanke

In normal times, around 85-90% of the money supply, known as broad money, is created by private banks, not the Federal Reserve. This money is created through credit in the form of loans and leases. Even if the Federal Reserve is reducing the size of its balance sheet and leaving the federal funds rate unchanged, if commercial banks are not contributing much, it can result in a contraction in the money supply and prolong the recession. In short, private banks create most of the money supply through credit, and if they are not contributing much during a recession, it can make the recession last longer.

Watch more of this short video from Inflation To End As Arriving Recession Now 'Baked In' | Steve Hanke.

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