As many will know I’m an ‘amateur economist’. And happy to be amateur as I think that if the economy is important, then anyone interested should be able to understand it.
Yet I’ve long been mystified by some of the terms used with regard to money. In particular ‘Exogenous’ and ‘Endogenous’ money…..
And these turn out to be the same as ‘Vertical’ and ‘Horizontal’ money.
Exogenous and Vertical money are the ones that can be helicoptered in. Simply they are created by the Central Bank, on behalf of the government, out of thin air. Thus they are presumed to be exogenous – or outside the actual economy. In Vertical money the economy is presumed to be on the Horizontal so this Vertical money is a completely new, unforeseen addition!
Endogenous and horizontal money is just that money created by the private commercial banks working in the everyday economy – the sort of stuff Barclays creates out of thin air.
Whereas the Bank of England works on an Exogenous or Vertical plane.
So at least now I know and (if you didn’t) I hope you do too!
I’ve no intention of adopting the terms but at least when I’m reading elsewhere I know what they are talking about.
Indeed those that speak of Exogenous and Vertical money, when you deconstruct the jargon, are actually being quite honest about money creation.
It is just a pity they cannot say so!