Chester A. Phillips and the forgotten history of bank credit

dc.contributor
Universitat de Barcelona. Departament d'Història Econòmica, Institucions, Política i Economia Mundial
dc.contributor.author
Black, Jes
dc.date.accessioned
2022-04-01T15:09:08Z
dc.date.available
2022-12-21T23:46:25Z
dc.date.issued
2021-12-20
dc.identifier.uri
http://hdl.handle.net/10803/673952
dc.description
Programa de Doctorat en Història Econòmica
en_US
dc.description.abstract
This thesis studies the main contributions to monetary theory by Chester A. Phillips in the 1920s and 1930s which deal with the expansion of the money supply when commercial banks use the creation of bank credit to purchase a loan or asset. Chapter one deals with his doctoral thesis from 1919, A Study in Bank Credit, done at Yale under the supervision of Irving Fisher, which was then published as a book in 1920 and quickly won general acceptance as the definitive exposition on the multiple expansion of bank credit. This pioneering work dealt with the multiple expansion of deposits that results in the banking system when commercial banks originate loans and overturned nearly a century of muddled thinking regarding the interaction of bank credit and the money supply. Economists of this time were still struggling to formulate a complete theory when Phillips devised an innovative mathematical theorem to calculate the lending potential of any individual bank based on the required reserve ratio and the ability of that individual bank to retain this newly created money. Chapter two explores the rise and fall of Phillips’s original equation. By tracking the evolution of bank credit theory as presented by introductory textbooks from 1877 to 2017, the data clearly shows how the consensus view of bank credit creation has changed over time. The findings reveal that the predominant view for over a century - that banks create money in the act of purchasing a loan or an asset - was only recently replaced in the 1980s by the new view that banks are mere intermediaries of preexisting deposits. Chapter three deals with Phillips’s other major contribution, Banking and the Business Cycle, written in 1937, which expanded on his previous work to show that the purchase of either government or corporate securities by the commercial banks had the same effect on the expansion of money supply. Here, Phillips explains that the effort to finance the First World War through the commercial banking system led to a multiple expansion of deposits which then required an unorthodox operational policy in the 1920s to avoid credit deflation. Phillips contends that the Federal Reserve’s open-market operations in the 1920s were intended to stabilize the economy and the price level, but also inadvertently allowed bank credit to flow into long-term assets instead of short-term revolving loans as was originally intended under the Federal Reserve Act. Phillips’s conclusion is that that the decision to target price stability alone is not a sufficient central bank policy, and this critique is still relevant today.
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dc.format.extent
178 p.
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application/pdf
dc.language.iso
eng
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dc.publisher
Universitat de Barcelona
dc.rights.license
ADVERTIMENT. Tots els drets reservats. L'accés als continguts d'aquesta tesi doctoral i la seva utilització ha de respectar els drets de la persona autora. Pot ser utilitzada per a consulta o estudi personal, així com en activitats o materials d'investigació i docència en els termes establerts a l'art. 32 del Text Refós de la Llei de Propietat Intel·lectual (RDL 1/1996). Per altres utilitzacions es requereix l'autorització prèvia i expressa de la persona autora. En qualsevol cas, en la utilització dels seus continguts caldrà indicar de forma clara el nom i cognoms de la persona autora i el títol de la tesi doctoral. No s'autoritza la seva reproducció o altres formes d'explotació efectuades amb finalitats de lucre ni la seva comunicació pública des d'un lloc aliè al servei TDX. Tampoc s'autoritza la presentació del seu contingut en una finestra o marc aliè a TDX (framing). Aquesta reserva de drets afecta tant als continguts de la tesi com als seus resums i índexs.
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TDX (Tesis Doctorals en Xarxa)
dc.subject
Història econòmica
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dc.subject
Historia económica
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Economic history
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Crèdit
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Crédito
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Credit
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Operacions bancàries
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Operaciones bancarias
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Bank transactions
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Teoria econòmica
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Teoría económica
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Economic theory
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Mercat monetari
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Mercado monetario
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Money market
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Phillips, Chester Arthur, 1882-1976
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dc.subject.other
Ciències Jurídiques, Econòmiques i Socials
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dc.title
Chester A. Phillips and the forgotten history of bank credit
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dc.type
info:eu-repo/semantics/doctoralThesis
dc.type
info:eu-repo/semantics/publishedVersion
dc.subject.udc
336
en_US
dc.contributor.director
San Julián Arrupe, F. Javier
dc.contributor.tutor
Herranz Loncán, Alfonso
dc.rights.accessLevel
info:eu-repo/semantics/openAccess


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