New Tutorial: How Loans Create Money

Here is the first part of a new narrated visual tutorial:

How Bank Loans Create Money — Explained Visually in 3 Minutes

This part covers the very basics, so you’re not likely to learn anything if you’ve followed this topic recently in the blogosphere or used the Macroeconomic Balance Sheet Visualizer… but I hope it might be helpful to those less familiar with the topic. The format also introduces a little more interactivity — the last page lets you create and repay loans, pay interest, and default on loans. I believe the non-video format has more potential than I’ve used it for so far — for example, it could include built in gamification and quizzes.

Part 2 will show the central bank’s involvement — including how reserve requirements, capital ratios, and cash withdrawals do not limit economy-wide lending — and other related topics that distinguish the Post-Keynesian understanding from the mainstream.

Since the How the Economy Works tutorial turned into a bit of a monster (at half an hour of narrated content plus lots of text-only additional details) I’m going to try making new tutorials as short as I possibly can… 2-5 minutes per tutorial seems to me a good upper limit to attempt, but I am happy to have feedback on this (or anything EconViz related!)

  • Sergei

    I just would call it money 🙂 Otherwise perfect!

    • Sergei

      sorry, would *NOT*

      • econviz

        Thanks, Sergei!

        I realize some people avoid the term “money” when discussing these topics in order to reduce potential confusion, and also that it’s more common to say “loans create deposits”… but a beginner-level tutorial that shows visually what is being discussed when “money” is mentioned seemed like a case where the phrasing “loans create money” might be preferable — and still accurate. If you still disagree, please let me know.

        -hbl