Thank you, Matthew Klein! In the course of critiquing Robert Hall’s paper for Jackson Hole, he mentions and links to another half-century-old paper by James Tobin, Commercial Banks as Creators of “Money” (pdf), that I had forgotten about, and is even more precisely on point than the Tobin-Brainard piece I’ve been citing.
All the points I’ve been trying to make about the non-specialness of
banks are there. In particular, the discussion on pp. 412-413 of why the
mechanics of lending don’t matter — yes, commercial banks, unlike other
financial intermediaries, can make a loan simply by crediting the
borrower with new deposits, but there’s no guarantee that the funds stay
there — refutes, in one fell swoop, a lot of the nonsense one hears
about how said mechanics of bank lending change everything about the
role banks play in the economy. Read more...
