by Keeper quote from Joseph Schumpeter. He nailed endogenous money as "credit money" and observed correctly how "money" gets created by banks' extending credit — "they create deposits in their act of lending." This effect is now amplified through non-bank and quasi-bank financial institutions. The contemporary financialized economy runs largely on privately created credit. This has an even greater effect than Schumpeter likely anticipated. Economists' ignoring this unduly limit the scope of their models by failing to include money & banking, and finance. The result is "surprise resulting from exogenous shock." In other words, the conventional economists were looking in the wrong direction owning to oversimplification of their models of an economy. To say that this resulted in "great
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Mike Norman considers the following as important: credit money, endogenous money, loanable funds theory, loans create deposits, MMT, theory of money
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Keeper quote from Joseph Schumpeter. He nailed endogenous money as "credit money" and observed correctly how "money" gets created by banks' extending credit — "they create deposits in their act of lending." This effect is now amplified through non-bank and quasi-bank financial institutions.
Incidentally, the chapter in which this quote occurs is worth reading in full. Here is the citation:
Joseph Schumpeter, History of Economic Analysis, Allen & Unwin, 1954, reprinted by Tayor & Francis, 1986, p. 1080
in CHAPTER 8 Money, Credit, and Cycles, 7. BANK CREDIT AND THE ‘CREATION’ OF DEPOSITS, pp. 1076-1083.
Schumpeter doesn't take credit for originality in this, citing Keynes's Theory of Money and the work of Francis Crick, for example. He does criticize Keynes for again mudding the waters in the General Theory. See footnote on page 1080.