When a bank lends 1 million euros to a company, it simultaneously creates a deposit of 1 million euros for its client. In other words, it creates an additional purchasing power of 1 million euros in the local economy. In order to be able to grant this loan, the bank does not need to have previously collected savings for an equivalent amount. It simply taps some numbers into a computer and credits 1 million euros – which are effectively created ‘out of thin air’ – to the account of its client. Only later does the bank worry about collecting the required reserves. In modern economies, therefore, ‘fresh’ money is created when commercial banks grant loans. This leads to the surprising consequence that credit – the creation of money ex nihilo – is what finances investment, not savings. In fact, it works the other way round: the investment is what creates the savings, as the economic growth induced by the increase in the investment rate tends to increase the national saving rate as well.

Fanny Pigeaud_ Ndongo Samba Sylla, Africa's Last Colonial Curr…, loc. 139