This paper presents the first empirical evidence in the history of banking on the question of whether banks can create money out of nothing.
Surprisingly, despite the longstanding controversy, until now no empirical study has tested the theories. This is the contribution of the present paper.
This study establishes for the first time empirically that banks individually create money out of nothing. The money supply is created as ‘fairy dust’ produced by the banks individually, “out of thin air”.