No Free Lunch: Economics for a Fallen World: Third Edition, Revised

Chapter Eleven: Money, Money, Money! 250 DESIRED LEARNING OBJECTIVES At the conclusion of this chapter, the student should be able to... § § Explain how money solves the “double coincidence of wants” problem of exchange § § Describe the process of how money was originally created § § List and explain the attributes and functions of money § § Describe how fractional reserve banking works and its origins (how fraud was initially involved) § § Summarize the ways that sovereigns have historically debased their monies § § Explain the requirements for new money creation in the U.S. today, to include the role of (1) the Federal Reserve in creating reserves, and (2) banks creating new loans, with (3) borrowers’ willingness to increase debt levels § § Outline the basics of T-accounts. (The student is not expected to duplicate the T-account analysis herein, but should understand that banks monitor assets and liabilities to obtain the most profit; the result is that additional money is created.)