Money - Obson/MicroSim-GUI GitHub Wiki

In a sovereign nation money is created by Government and passed into the economy by the following principal methods:

1. Direct support of Government-owned businesses such as the Civil Service, the NHS, and the armed forces.
2. Indirect support of businesses by acting as one of their customers and purchasing their goods and services.
3. Payment of interest to financial institutions which have purchased Government 'bonds'.
4. Payment of 'welfare' to individuals
5. Supporting borrowing from banks via the Treasury and the Central Bank.

It is also created by banks when they make loans, and destroyed when the loans are repaid. In this context note the Paradox of Interest . Note however, that banks create 'bank money' and government creates 'High Powered Money'. The distinction will be explained when I have time!

Definition

A sovereign nation is one whose Government creates the money legally recognised as the nation's currency, and levies taxes in that currency.