"Modern Money Mechanics" was a public educational publication created by the Federal Reserve Bank of Chicago, first published in the 1960s and updated in later decades. Its purpose was to explain how the U.S. fractional reserve banking system works, including how money is created, multiplied, and circulated through the economy.
While it's not an official policy statement, it became widely cited for its clear explanation of money creation, especially by economists, educators, and critics of the Federal Reserve alike.
🔑 Key Concepts from the Booklet
1. Fractional Reserve Banking
2. Money Creation Through Lending
3. The Money Multiplier
4. Limits on Money Creation
5. Role of the Federal Reserve
⚠️ Why It’s Controversial
Critics of the monetary system (like G. Edward Griffin, author of The Creature from Jekyll Island) use Modern Money Mechanics to highlight how money creation is not tied to physical assets like gold, and argue that it contributes to:
Inflation
Debt-based economies
Concentration of financial power