by Summary:
Mainstream economics ignores three crucial elements: banks, debt, and money. This omission is like trying to understand bird flight without considering wings. Imagine trying to explain how a car works but ignoring the engine. That's what mainstream economists do when they leave out banks, debt, and money. They assume these elements are irrelevant or will naturally balance out. But that's not how the real world operates. Banks create money through lending, which fuels economic activity. Debt isn't just a passive outcome; it's a driving force. When people and businesses take on debt, they spend more, which boosts the economy. But when they pay it back, spending drops, slowing the economy down. Ignoring this dynamic is like ignoring gravity in physics. It's not just an oversight;
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Mainstream economics ignores three crucial elements: banks, debt, and money. This omission is like trying to understand bird flight without considering wings. Imagine trying to explain how a car works but ignoring the engine. That's what mainstream economists do when they leave out banks, debt, and money. They assume these elements are irrelevant or will naturally balance out. But that's not how the real world operates. Banks create money through lending, which fuels economic activity. Debt isn't just a passive outcome; it's a driving force. When people and businesses take on debt, they spend more, which boosts the economy. But when they pay it back, spending drops, slowing the economy down. Ignoring this dynamic is like ignoring gravity in physics. It's not just an oversight;
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Steve Keen considers the following as important:
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| Mainstream economics ignores three crucial elements: banks, debt, and money. This omission is like trying to understand bird flight without considering wings. Imagine trying to explain how a car works but ignoring the engine. That's what mainstream economists do when they leave out banks, debt, and money. They assume these elements are irrelevant or will naturally balance out. But that's not how the real world operates. Banks create money through lending, which fuels economic activity. Debt isn't just a passive outcome; it's a driving force. When people and businesses take on debt, they spend more, which boosts the economy. But when they pay it back, spending drops, slowing the economy down. Ignoring this dynamic is like ignoring gravity in physics. It's not just an oversight; it's a fundamental flaw. Take the 2008 financial crisis, for example. Mainstream economists, like Ben Bernanke, didn't see it coming because their models didn't account for the role of private debt. They were blindsided. In contrast, those who did consider debt, like myself, predicted the crisis years in advance. Why? Because we understood that excessive debt could lead to a collapse in spending and a financial meltdown. The right approach is to integrate banks, debt, and money into economic models. This gives a more accurate picture of how economies function. It's like adding wings to our understanding of bird flight. Without this integration, we're flying blind. And the consequences aren't just academic. They affect real people. Job losses, home foreclosures, economic instability. These are the daily hardships that result from ignoring these crucial elements. So, let's stop pretending that banks, debt, and money don't matter. Because they do. And our economic models should reflect that reality. |
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