There are fashions in monetary economics, just as there are in most of the social sciences and even in the exact sciences.1 Sometimes these fashions are useful; sometimes they are pernicious, especially if they only serve to render concepts which are already vague and more or less refractory to any rational interpretation even more vague and confused. Such, it seems to me, is the case of one of the latest fashions, which claims that there is no difference between monetary and non-monetary financial intermediaries and which attributes to all institutions that take in savings from the public and make loans the power of creation of payment instruments.2 (1) The development of savings accounts and passbook deposits in the banks, the provision to industry and to other sectors of the economy of long-term loans, the role of ‘transformation’ — ‘borrowing short’ and ‘lending-long’ — carried out by the banking system-all these factors help to explain this trend of modern thinking, especially in the absence of clear and properly based ideas on the way the monetary mechanisms work. The planned introduction of cheque-books and giro transfer orders in savings banks, which has recently been the subject of much discussion, only adds to the confusion.
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