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The End of Alchemy

Money, Banking, and the Future of the Global Economy
in: Economics
Summary:

The book critically examines the financial system, particularly the role of banks in creating money through lending, and argues that this alchemy is a source of economic instability. It proposes reforms to the banking sector to prevent future crises, including the adoption of a new financial architecture that separates the provision of payment services and the creation of money from risky investment activities.

Key points:

1. Banking Alchemy: Mervyn King describes how banks create money by giving out long-term loans while keeping a small amount of cash, which can cause instability if people lose trust and want to withdraw their deposits all at once.

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