Galbraith argues in The Great Crash that embezzlement actually creates money: The embezzler has money, and the victim thinks that he has money. And if you think that you have money, then you actually have got money... just as long as you don't try to use that money. He calls this duplicated money (that the embezzler has but the victim doesn't yet realise that he's lost) "the Bezzle."

He also notes that the bezzle is inherently pro-cyclical: In good times, people don't actually need their money, so they don't check as often that they still have their money, so it becomes easier to embezzle them, and the bezzle grows. As soon as trouble starts, people begin to take a hard look at their balance sheets... and the bezzle evaporates.

I think much of the money being destroyed right now is the bezzle getting smaller. So it was stolen over the last thirty years. But it's disappearing overnight.

- Jake

If you only spend 20 minutes of the rest of your life on economics, go spend them here.