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Article: The Reserve Bank, private sector banks and the creation of money and credit.
- Article from:
- The Reserve Bank of New Zealand Bulletin
- Article date:
- March 1, 2008
- Author:
CopyrightCOPYRIGHT 2008 Reserve Bank of New Zealand. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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1 Introduction
Money and credit, the products of the financial system, are important parts of our economy. The financial system enables 'real' activity--that is, the processes of production and trade of goods and services--to take place smoothly. Financial activity is thus part and parcel of economic growth and improvement in overall living standards. (1)
Money itself is not a modern innovation. Records of money date back 5,000 years to the Babylonians, who distinguished legally between 'exchangeable goods' and 'non-exchangeable goods'. Exchangeable goods included precious metals as well as certain commonly used goods such as oil and wine. It is likely ...