Banking and “The Money Multiplier”

I decided to model “Fractional Reserve Banking” in my Minsky software for this talk I gave at DMU University in Leicester. The result was somewhat different to what I expected: you can create money the Money Multiplier way: it’s not impossible, as some Post Keynesians claim (see http://www.paecon.net/PAEReview/issue80/DiMuzioNoble80.pdf). But for this to work, all bank loans have to be “cash only”–which clearly they’re not.

I cover the money multiplier model from about the 25 minute mark in this video, and I’ll do a slower, more detailed set of videos on it shortly. You can download the Minsky files I use here from my Patreon site www.patreon.com/ProfSteveKeen.