Thursday , September 29 2022
Home / Video / Banks as intermediaries versus banks as loan originators

Banks as intermediaries versus banks as loan originators

Summary:
This short video illustrates why banks, debt and credit matter in macroeconomics, by starting from the Neoclassical vision of the world in which it’s OK to ignore those issues. I model the Neoclassical “Loanable Funds” model in my system dynamics program Minsky, and it’s easy to see why they ignore banks, debt and money in ...

Topics:
Steve Keen considers the following as important:

This could be interesting, too:

WARREN MOSLER writes Durable goods, housing permits, new home sales, consumer confidence

Eric Kramer writes What’s the math on inflation?

run75441 writes September 26, 2022, Letters from an American

Dan Crawford writes Open thread Sept. 27, 2022











This short video illustrates why banks, debt and credit matter in macroeconomics, by starting from the Neoclassical vision of the world in which it’s OK to ignore those issues.



I model the Neoclassical “Loanable Funds” model in my system dynamics program Minsky, and it’s easy to see why they ignore banks, debt and money in their macroeconomics. If they were right about banks merely being intermediaries, then private debt wouldn’t matter to the macroeconomy.



However, it takes about 30 seconds to go from this fictional model of the world, to the real world in which banks are loan originators, and not merely interemediaries between savers and borrowers. In this (real!) world, the level of bank lending has a direct impact on both the amount of money in the economy, and the level of economic activity.



Steve Keen
Steve Keen (born 28 March 1953) is an Australian-born, British-based economist and author. He considers himself a post-Keynesian, criticising neoclassical economics as inconsistent, unscientific and empirically unsupported. The major influences on Keen's thinking about economics include John Maynard Keynes, Karl Marx, Hyman Minsky, Piero Sraffa, Augusto Graziani, Joseph Alois Schumpeter, Thorstein Veblen, and François Quesnay.

Leave a Reply

Your email address will not be published. Required fields are marked *