…is from an interview with Eugene Fama, Nobel laureate and Professor of Finance at the University of Chicago. Hat tip Alex Tabarrok at the Marginal Revolution blog:
Dr. Fama is making a somewhat esoteric point about how central banks work. I believe he is referring to the fact that central banks create money by making loans. The money so created doesn’t really “exist” in the sense that it is only a credit offset by a debit.
It’s a good point, wryly made. It just needs to be added that it matters immensely how the “non-existant” money, once created, is subsequently used. There are basically two options: production (e.g., making food, clothing and shelter), and consumption (e.g., war and cigarettes).