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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  • Mich

    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.

  • F. Beard

    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?

  • Bhaskara II

    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. 


  • Tim Ward

    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.

  • F. Beard

    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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