Endogenous Money in the Media

Last night, we aired two segments on endogenous money on Boom Bust, the TV show I am now producing on RT, the Russian broadcaster. Frances Coppola and Cullen Roche do a good job of explaining the details. Take a look

I don’t think this is a topic I have seen covered at all in mainstream media. But it has got a lot of play ever since the Bank of England released a seminal paper and two videos on the topic in March.

Following the Bank of England’s blitz, Steve Keen and Andrea Terzi wrote two good articles on this topic that I carried here at Credit Writedowns. I suggest you read those pieces to get a fuller view. This is an important topic because we are in an unprecedented period of monetary policy in response to the Great Financial Crisis. A lot of what you read about the monetary blitz since 2008 suggests that banks are reserve constrained and that simply creating base money can lead to inflation through the money multiplier process. Here’s one example from Richard Koo that I saw in 2011. And while I like a lot of what Richard Koo says, it is clear that he is using a money multiplier model that gets the money creation process wrong and therefore lessens his ability to understand the implications of monetary policy in these times. There are many examples of this. Cullen Roche wrote a post calling some of them out.

If you want further reading on this, look at my posts tagged money multiplier or endogenous money. Here are a few posts at Credit Writedowns I recommend.

• On the persistence of inadequate ideas like the money multiplier
• What about all those excess reserves at the Fed?
• Progress on the monetary policy and banking debate
• Krugman’s Flashing Neon Sign
• Ptolemaic Economics in the Age of Einstein
• Banks are never reserve constrained

Maybe these ideas will catch on enough in the mainstream media one day and help increase our understanding of how money actually works. Let’s hope.