In this lecture I continue the development of the QED model of a pure credit economy began in the last lecture, including modelling production and developing a pricing equation to produce a combined monetary-physical model. (see NOTE below if you can’t see this video in your browser)
In the second half of the lecture, I use the model developed in the first half to show that money is not neutral in a credit-based economy–a higher rate of money creation results in a fall in unemployment–and also model a credit crunch. I also model two government policies to counter a crunch: giving money to the banks (which Obama did) and giving it to the debtors (which the Australian government did). Conventional money multiplier theory argues that the former is more effective; I show that the latter is about three times better than the former.
It appears that I’ve been uploading these videos in HTML5 format, which isn’t supported on some browsers–specifically Internet Explorer 6–8! Fortunately there is a workaround for this: installing Google Chrome Frame (as a plugin to IE I expect).