Modern Monetary System in Theory and Practice: Who Creates Money?
Modern Monetary System in Theory and Practice: Who Creates Money?
If the story doesn’t match the balance sheets, it isn’t money — it’s mythology.
Everyone talks about money. Few understand how it is actually created.
Modern debates are still shaped by myths that collapse the moment we look at balance sheets.
The Most Common Myths About Money
Money is supplied by the central bank
Banks lend out existing funds or reserves
The state creates most of the money
Central banks simply “print money”
These stories are familiar — and wrong.
How the Monetary System Actually Works
This book shows that modern money is created through accounting operations, not policy slogans:
Banks create new money when they lend
(deposits are born at the moment credit is issued)Reserves move after lending
(they settle payments among banks, not fund loans)Bank money dominates
(for over 150 years, deposits have far exceeded government-issued cash)The state creates large amounts of money when credit collapses.
(QE is emergency money)
Money is not a story.
It is a balance-sheet system.
Why This Book
Modern Monetary System in Theory and Practice: Who Creates Money? rebuilds monetary understanding from the ground up, using accounting logic and historical evidence rather than inherited narratives.
It explains:
Who creates money
When it is created
Where it appears on balance sheets
Why the state steps in during crises
If a model cannot explain money creation, it cannot explain the economy.
About the Book
📘 Modern Monetary System in Theory and Practice: Who Creates Money?
A balance-sheet–grounded framework for understanding how money actually works in the modern economy.
It rebuilds monetary understanding from the balance sheet up:
Credit creation
Payment and reserve operations
Money in crisis
If you study or work with money, you need a framework grounded in how money actually works.
If the model cannot explain creation, it cannot explain the economy.
📘 Modern Monetary System in Theory and Practice: Who Creates Money?
Engin YILMAZ
Amherst
January 2026