Our Dysfunctional Monetary System

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The great tragedy of the global economic malaise is that it is caused by a shortage of something that is essentially costless to produce: money.


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About Steve Keen

I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous private debts accumulated globally, and our very low rate of inflation.
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6 Responses to Our Dysfunctional Monetary System

  1. Mich says:

    The cost of ads is in everything I buy, I have to pay for it already. I don’t want this crap on my screen. So when you post your articles on forbes they block me from reading them. Fine then, I won’t read them.

  2. F. Beard says:

    The money system is unethical from the get-go. Consider that individuals, businesses, etc. MAY NOT deal with their Nation’s fiat except in the form of awkward, unsafe physical cash (bills and coins) because fiat accounts at the central bank are reserved (pun intended) for the commercial banks including credit unions.

    Who benefits from this unethical arrangement? Why the rich, of course, since they are the most so-called creditworthy.

    The result is that the commercial bank cartel becomes so bloated with fiat (aka reserves) that those reserves must be drained by paying interest on sovereign debt including interest on reserves (IOR) which is another government subsidy for the commercial banks and the rich.

    And we wonder why we have runaway wealth inequality?

  3. Bhaskara II says:

    RE Professor Keen’s tweet:

    Steve Keen ?@ProfSteveKeen 9 feb.
    Steve Keen Retwitteó Timothy Tan
    No it’s not. Reserves can’t be lent, however they are created. A fallacy I’ll address in a future @Forbes column. Steve Keen agregado,

    Because private bank reserves are a deposit (or maybe a loan to) with the central bank. So, it is already with an other entity. Lending would be lending it twice. This is basically an accounting “personal account” of the privat bank with the central bank.


  4. Tim Ward says:

    Reserves at the central bank can’t be lent, but they are subject to transfers. And they can be exchanged for government bonds. (Unless I’ve gotten it wrong.) E&OE.

  5. F. Beard says:

    Reserves at the central bank can’t be lent, Tim Ward

    They can be lent but only to other account holders* at the central bank or to the central bank itself. If converted to cash, they cease to be reserves hence reserves cannot be lent outside the central bank.

    but they are subject to transfers. Tim Ward

    Yes, that’s how checks clear between commercial banks, etc. and between the monetary sovereign and the commercial bank, etc. cartel.

    *which includes the monetary sovereign itself (eg US Treasury), the commercial banks, credit unions, etc. (ie. other depository institutions) but NOT individuals, businesses, etc. since we are apparently unworthy to deal with our Nation’s fiat except in the form of unwieldy, unsafe physical cash (paper bills and coins) thus forcing us to deal through the commercial bank cartel.

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