Peter Stella



Articles, Notes, and Book Chapters


 When a Bank Makes a Loan, Where Does the Money Come from and Where Does it Go? 

In this article I discuss how banks sometimes create money when they originate a loan, what happens to that money when it is used and how the banking system indirectly funds the original loan. I distinguish two types of money--Type 1 that may be held only by banks and held only at the central bank, and Type 2 that is essentially all other money that may be held by anyone anywhere. Making a distinction between these two types of money illuminates the analysis of monetary policy as well as of banks' roles as money creators/destroyers and financial intermediaries.

Exiting Well

In this paper I discuss the negative impact of large excess reserves for global financial intermediation and argue that the substitution of treasury securities for excess reserves would allow central banks to exit well their unconventional balance sheet policies. There is a particular focus on the Federal Reserve and illustrations with US data.

Teacher Writing a Formula on a Blackboard

Slides from a Presentation of Exiting Well at the

Swiss National Bank

These slides provide a quick overview of the highlights of Exiting Well

Typewriter Keys


My presentation at the Institute for Humane Studies Seminar "Global Monetary Issues in a Low-Interest-Rate World"

San Diego, California 2 January 2020

How Would "Helicopter Money" Impact the Central Bank Balance Sheet--Some Surprising Arithmetic

In this note I demonstrate that "Helicopter Money"  has no impact on the size of the central bank balance sheet. This points to the importance of focusing on changes to the composition of the balance sheet--and the fiscal aspect of helicopter money--when analyzing its impact.

How Money Crosses Borders

How Does Type 1 and Type 2 Money Cross Geographical and Regulatory Borders? All You Need to Know about "Eurodollar" markets and capital flows. WORK IN PROGRESS

Properly Explaining the Quantity Theory of Money

"The truth of this, properly explained and qualified, it is foolish to deny."

J.M. Keynes: A Tract on Monetary Reform,

(page 42 Prometheus Books 2000 edition. Originally published London: Macmillan 1924)


A Short Law to Enhance the Efficiency and Stability of the US Financial System

A Simple 1/2 Page of Legal Text Would Enable the Fed to Transition Toward a More Conventional Operating System and Alleviate the Global Safe Asset Shortage.


Using US CPI weights to help assess the macroeconomic impact of the COVID 19 response or:

"What happens to the CPI when there is no toilet paper?"

The Quadrillion Dollar Helium Coin

Larger for Longer:

How Countries Manage Large Central Bank Balance Sheets

Slides from a presentation given at the Federal Reserve Bank of Kansas City discussing how different countries have managed the rapid expansion of central bank balance sheets

Typewriter Keys

Believing in Monetary Madness: How Roosevelt's Treasury Changed Inflation Expectations

Slides from a presentation at the Bank of Japan discussing the unprecedented method Roosevelt's Treasury employed to successfully engender a controlled increase in US inflation


Sifting through Central Bank artifacts, from financial statements to speeches, trying to explain the past and gain insight into the future of money and payments systems.

Empty Chairs in Lecture Room

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