Inside and Outside Money
A distinction is drawn between outside money, which is either of a fiat nature or backed by some asset that is not in zero net supply within the private sector, and inside money, which is an asset backed by any form of private credit that circulates as a medium of exchange.
KeywordsBanking theory Bonds Commitment Fiat money Finance theory Inside and outside money Money Open market operations Patinkin, D Private credit
JEL ClassificationD4 D10
I thank Narayana Kocherlakota and Warren Weber for comments. I also thank the C.V. Starr Center for Applied Economics at New York University for financial support. The views expressed herein are those of the author and not necessarily those of the Federal Reserve Bank of Minneapolis or the Federal Reserve System.
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