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on 31 October 2013
As other reviews, i really advice this book. Is a must read if you really want to understand how the system works, and what is money now days. Worths every penny, and i would say that is the best book in Amazon describing perfectly this subject. It outdates all books written before.

The book describes how the models used by institutions as IMF, World Bank or economists researchers, are totally outdated. They still study the 'machine' (macroeconomics) describing banks as neutral models agents in money supply. They still think that central banks can manipulate money supply thanks to the multiplier effect. And that are one of the big holes. First at all, banks are not neutral, because they are very important allocating resources. And more than that, they allocate more credit ('money') for operations with collateral (real state), than for business (they do not have collateral/asset at all if business fail). In regard to the second point, central banks can't control credit creation anymore. Banks do not need new deposits to create new credit anymore, because now days the procedure is in reverse: banks ask for reserves on demand.

The book is superb, and i would give 5 or 10 stars. The reason i give 4 in stead of 5, is that it leaves some important points that are a must if you want to understand the 'machine'.

1. the book do not cover in depth how banks dont need bank deposits anymore to create credit, but use collateral chains (shadow banking). Collateral chains are securities, debt, bonds, REPOs... pledged from one party (Banks, Hedge Funds etc...) to another for credit. If now days QEs and LTROs are not injecting inflation into the economy is because all this liquidity is being used to fill the banks hole in the shadow economy (used as reserves).

2. How central banks manipulate artificially interest rates providing reserves to interbank market. They don't let the market decide if high or low interest rates are needed or not, it means, if society needs more savings & productivity investment, or more consumption.

3. How central banks refinance indefinitely commercial banks short debts in case they can not refinance its own liabilities. It provides the wrong incentives to continue getting short debt (for instance, deposits), and invest in the long term (for instance, 30 year real state credit), creating an incredible unsustainable iliquidity banking system.

4. The authors also doesn't study how the system is designed with the wrong incentives. Because CBs back up commercial banks in case of liquidity issues, they can continue extending the risk even when interbank market is not financing this procedures.

5. from my point of view, the book provide the image that this system is a deregulation of banking system, when its obvious that is a monopoly privileged concede by governments. All this pile of debt started at the end of 70's, when the world finished gold standard, that at least, was constraining the credit creation (there is a limited amount of gold reserves in the system). I am not advocating for gold, but just saying that you can not argue that this is a deregulation of the system, when you permit a commercial bank leverage 25:1 to its own reserves thanks to central banks providing reserves on demand and refinancing indefinitely their short debt.

6. there is a point in the book that is not very clear at all, and is one of the conclusions core. Banks tend to allocate more investment in assets backed up by collateral that do not influence directly in GDP creation as real state, than allocating resources for business, that normally doesn't provide collateral. What i do not understand (or its not clear in the book) is the reason they catalog real state investment as a non GDP booster, when the industry behind real state is one of the biggest in the world. Economies that experience real state bubbles, experience also an important growth in their GDP.

7. At the end of the book, it focus in fiat nation money as one possible solution for money creation, since 97% of 'money' (electronic money) is created by commercial banks, and sometimes wrong allocated. They claim that governments know better how to allocate resources than private investors, so they should be, through governments treasury, the agents in charge of issuing money into the society through public investment, and not through commercial banks. But on this area, you really miss other kind of possible systems and solutions than the actual fiat economic system, as one based on a pattern, that could be gold, silver, oil barrels or commodities basket (Keynes solution). It means, a system where the interbank market balances the risk by itself thanks to the reserves scarcity. A system that really lets banks bankrupt, so provides banks the incentives to manage the system in a sustainable way. If a bank extend more than normal its risk, it will have to return to a sustainable position since the interbank do not refinance (or increases the interest rate for a particular bank). Now days, if a bank is not refinance by interbank, central bank will do indefinitely, creating really big monsters that are really 'big to fail'. This is a huge black hole in or actual fiat system, and is not covered in the book.

8. Finally, the books doesn't really take into consideration other alternatives to the issue of money creation as a government, private monopoly (CBs), or commodity standard (gold, silver). Why societies can't decide what is money? Why not a free monetary system? citizens creating as much currencies as they need, letting the society decide which ones are better than others. The issue in here is the word 'legal tender', and how governments impose societies how we have to pay taxes. For people really interested on this subject, i really advice Bernard Lietaer bibliography.

except this subjects, that are complementary core issues that are not cover in the book, the authors have created an amazing tool for understanding the 'system' like never before.

regards
17 people found this helpful
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on 31 December 2013
Fascinating insight for the un-initiated to where the north atlantic crisis came from and why its still a problem. Should be handed out at railway stations and in schools.
My only beef is the rather poor quality of the binding - which I suspect is print on demand...
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on 16 May 2017
very good.
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on 15 September 2015
this book opens your eyes to the way the banking system really works in the UK... it's scary when you finally read the info in this book
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on 29 April 2013
I can't really add anything of value to what has already been said about this excellent book. While it may be short on pages it is very long on content: a really clear and concise explanation of the mystery of money; its origin and workings. If you have any interest in the subject, as any responsible person should, it's a no brainer. Buy it, read it and revel in the mystery unraveled!
3 people found this helpful
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on 20 November 2015
Purchased as a gift. All arrived on time and as described. Good introduction to an interesting area of study.
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on 17 December 2012
NEFs book deals with a topic - banking and money creation - misunderstood not just by most of the public, but by most politicians, many economists (some extremely prominent) and many bankers. 97% of the money in the British economy is ultimately credit created by commercial banks, which is then destroyed upon repayment. To understand why credit *is* money - legal tender - read this book. To understand what limits the amount of money commercial banks can create, and why those restraining mechanisms broke down, or to understand the role of commercial money creation, when combined with modern financial instruments, in the crash of 2008, or to understand the unique legal privileges given to banks and the critical role this can play in inflation - read this book.

Its accessible, brilliantly researched and written, relatively short and is essential reading for anyone who wants to understand modern banking and how it affects the economies we all work within.

I reviewed the book at length at openDemocracy, I dont know if links are allowed in reviews but a search for "The Uneconomics guide to money creation" will bring it up.

This is a superb book, and great to see a second edition out. Highly recommended.

Oliver Huitson
Co-editor
openDemocracy
23 people found this helpful
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on 13 December 2013
Could not get this last year for my fiance so managed to this year and he has not even asked for it ha!! It will be lovely surprise for him. Great Book and came well packaged and excellent condition.
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on 18 December 2012
A PhD in Economics, I understood the functioning of the banking system only by reading this book.
An absolute must-read for anyone studying economics.
13 people found this helpful
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on 12 March 2013
N.B. This review refers to the hardback edition, which I got direct from the NEF today.

I really expected to like this book. Having read a lot on the subject of Money Reform, I haven't been surprised by much of the content of the book, although I'm intrigued by some details, and will be going back to re-read a lot of it.

But I was very disappointed by the presentation, in particular, the typeface.[I meant the effective size of the typeface, BTW].

I may be wrong, but this bears all the hallmarks of a book which has been produced by taking the pages of an earlier edition and simply photo-reducing the size of the pages to fit a smaller page size. The giveaway is the typeface size of the footnotes and end-notes - microscopic. No one would have chosen that consciously, so this is an unintended side-effect.

Well, some people won't have problems with it, but I certainly did. It just makes reading it hard work, and it needn't have been. And I'm interested in the subject and WANT to read it. Some hope of getting less enthusiastic audiences to read it.

And take the graphics: they clearly were designed to be displayed in colour, but have been rendered in greyscale. If you know you are going to use black and white for your graphics, then you plan accordingly, so that for example, the divisions in pie-charts and graphs / histograms show up more clearly. The way they've done it, several of the graphics are virtually useless or meaningless.

I'm sad, and very, very disappointed.

Updated Review, 28th March 2013:
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Having made a further determined attempt to read it (either under a good reading lamp or in good daylight), I have revised my rating from 3 to 4 stars. I'd actually give it 5 stars for content, but only 3 stars for presentation, so 4 stars is my compromise.

The text content really is excellent, and although perhaps they could have made the layout a bit more imaginative in places, this really is a worthwhile book, and everyone who is even remotely interested in money should read it.

My criticism of the effective typeface size stands - it's very offputting, especially given the potentially obscure subject, and also of the greyscale rendering of the graphics - some aren't badly affected, but some others are hard to interpret, misleading or just useless. If you know it's going to end up in B&W or greyscale, then you design it to be as clear as possible in those "colours". That takes some skill, but it can be done.

If there is a third edition, I would gladly forgo the hard cover for a larger, good quality paperback (e.g. "trade paperback") with graphics properly designed for whichever "colour" system it will finally be rendered in.

By the way, slightly off topic (but not much): anyone interested in this subject should read the following paper:

[...]

"How to End the European Financial Crisis - at no further cost and without the need for political changes " by Professor Richard Werner, one of the 4 co-authors of "Where Does Money Come From".

...

I will just repeat, to compensate for my earlier negativity:

This really is a worthwhile book,
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and everyone who is even remotely interested in money should read it.
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