Money in modern economies is no longer based on gold. Instead, money is created “out of thin air” by governments and banks. Much of our economic policy, though, is still constrained by the old concept of money. Understanding modern money—what it is, how it is created, and how it functions in the economy—gives a surprising amount of insight into policy options. Inflation, unemployment, boom and bust cycles, and the creation of real wealth for ourselves and future generations are all profoundly affected by the ability of governments and banks to create and deploy money and credit.