More Money Creation Won’t Create More Economic Growth

by Frank Shostak

The view that more money can revive an economy is based on the belief that money transmits its stimulatory effect through aggregate expenditure. With more money in their pockets, people will be able to spend more and the rest will follow suit. Money, in this way of thinking, is a means of payment and funding.

Money, however, is not a means of payment but a medium of exchange. It only enables one producer to exchange his produce with another producer. The means of payment are always real goods and services, which pay for other goods and services. All that money does is facilitate these payments. It makes the payments for goods and services possible.

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