<p>Is my understanding correct:</p>

<ul>
<li>In history (ancient, medieval) money was directly created by governments, therefore any monetary expansion meant 100% net profit for government, which could be used to finance whatever governemnt needs. The problem was that government (King) had strong incentive to create too much money, which caused serious inflation.</li>
<li>In modern states money is created by central bank, which lends them to private banks, which lend them further. Profit is generated by interest from this lending. The beneficiary of this profit is whoever owns shares in the involved banks. Those are typically wealthy people who have more savings. The government is typically rather borrowing (and paying interests) due deficit spending.</li>
<li>Monetary expansion and resulting inflation goes at the expense of everybody else in the economy (those who owns money, but does not own money-issuing authorities). While in the old system government benefited at the expense of everybody else, in the new system bankers and share-holders benefit at the expense of everybody else. In the old system monetary expansion was like property-tax (i.e. decreasing inequality). In the new system it increase inequality as mostly rich people own shares of money-issuing authorities. </li>
</ul>

CC BY-SA 4.0
2019-04-01T17:58:40.027Z
I would eliminate the bullet point starting with “in history”. If a country used precious metal coins, they needed precious metals to mint them. Therefore, your summary of the history is misleading, which is a distraction from the question. Otherwise, have you searched for “money creation” on this site? It seems there is some overlap.
Brian Romanchuk
CC BY-SA 4.0
2019-04-02T05:39:09.277Z
Often ruler had monopoly on precious metal production. Also coin alloy was diluted by cheaper metal (e.g. copper). But you are right that possibility to introduce fiat-like currency by ruler was rather limited.
Prokop Hapala
CC BY-SA 4.0
2019-04-02T18:17:50.700Z
The issue is that saying “in history” assumes that every single government did the same thing over all time periods. This is not true, and so it should not appear in the question in the first place.
Brian Romanchuk
<monetary-policy><quantity-theory-of-money>
Who profits from monetary expansion?
Prokop Hapala
# Who profits from monetary expansion?

(Asked by: username_0 on 2019-03-31)

Is my understanding correct:

* In history (ancient, medieval) money was directly created by governments, therefore any monetary expansion meant 100% net profit for government, which could be used to finance whatever governemnt needs. The problem was that government (King) had strong incentive to create too much money, which caused serious inflation.
* In modern states money is created by central bank, which lends them to private banks, which lend them further. Profit is generated by interest from this lending. The beneficiary of this profit is whoever owns shares in the involved banks. Those are typically wealthy people who have more savings. The government is typically rather borrowing (and paying interests) due deficit spending.
* Monetary expansion and resulting inflation goes at the expense of everybody else in the economy (those who owns money, but does not own money-issuing authorities). While in the old system government benefited at the expense of everybody else, in the new system bankers and share-holders benefit at the expense of everybody else. In the old system monetary expansion was like property-tax (i.e. decreasing inequality). In the new system it increase inequality as mostly rich people own shares of money-issuing authorities.

**Tags:** monetary-policy, quantity-theory-of-money

> **Comments:**
> **username_1**: I would eliminate the bullet point starting with “in history”. If a country used precious metal coins, they needed precious metals to mint them. Therefore, your summary of the history is misleading, which is a distraction from the question. Otherwise, have you searched for “money creation” on this site? It seems there is some overlap.  
> **username_0**: Often ruler had monopoly on precious metal production. Also coin alloy was diluted by cheaper metal (e.g. copper). But you are right that possibility to introduce fiat-like currency by ruler was rather limited.  
> **username_1**: The issue is that saying “in history” assumes that every single government did the same thing over all time periods. This is not true, and so it should not appear in the question in the first place.  

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## 0 answers

