Oddbean new post about login | logout @43d7c4ea I also disagree with the notion that a commodity-based money equates to a barter economy (if I understand the article correctly). An actual exchange of gold for food is indeed barter, but as soon as loans are made you have the creation of new money that isn't gold. The original "bank notes" were effectively IOUs issued by banks; hence the "promise to pay" language on them. But they promptly became money, exchanged just like the gold they supposedly represented. /6
@f915ade0 The article I linked to was a quick (not necessarily the best) choice... For me responding to your thread, a couple of key points: Banks are specialised institutions empowered by the state to create credit - which is why you cannot lend me £1m because you are not a specialised institution empowered by the state. However, Keen's key point (which appear late on in the article), is provided the loan is 'performing' - the borrower is paying the instalments... 1/2
@f915ade0 So, banks can create credit (money) by finding willing borrowers - while even Central Bankers seem to miss this sleight of hand, more recently a paper from the BoE did recognise & agree with Keen's argument. The key thing is the money supply is no longer really in the Govt's control, and interest rates more by what would be needed to be borrowed to cover the position if a loan defaults, than a direct immediate causality - hence rates dropping while mortgage lenders see borrowers
@43d7c4ea I'll look into this more over the weekend.
@f915ade0 This might be a good way to spend half an hour... @de8f6ab9 is pretty good on this stuff.... https://www.youtube.com/watch?v=hSeHXldwQus