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Bank lending creates deposits: Out of thin air, or because of double-entry accounting? A historical re-examination

Alex Young

Accounting History2026https://doi.org/10.1177/10323732261428704article
AJG 2ABDC A
Weight
0.50

Abstract

A recent literature in macroeconomics argues that instead of commercial banks taking in deposits from savers to fund loans, lending itself actually creates deposits. This outcome has been interpreted as lending creating deposits out of thin air or merely because of accounting. I argue that neither interpretation satisfactorily explains the outcome. Rather, I show that a hitherto forgotten explanation from two late nineteenth and early twentieth century scholars can easily demonstrate how lending creates deposits.

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https://doi.org/https://doi.org/10.1177/10323732261428704

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@article{alex2026,
  title        = {{Bank lending creates deposits: Out of thin air, or because of double-entry accounting? A historical re-examination}},
  author       = {Alex Young},
  journal      = {Accounting History},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1177/10323732261428704},
}

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Bank lending creates deposits: Out of thin air, or because of double-entry accounting? A historical re-examination

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

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