The Livable Blog

Yes. I am a "trained economist". But you must know that anyone can call themselves an economist. There is no regulated profession as there is with doctors or engineers. Many people who call themselves economists have very little formal education in the science - often only Econ101. And even fewer are monetary economists.

I did once work for banks, and I did spend the second year of my degree on monetary economics - and I did work for the UK government as an Economic Adviser.

The program itself says it is an introduction - and as far as it goes it is accurate, but it misses some important issues including the velocity of money - which is as important as the volume - and the whole concept of "value added".

The greatest fear of governments has been to avoid a repeat of the "dirty thirties" - when no-one could borrow money. At the same time inflation has been seen as the something to be allowed (as better than deflation) but controlled. It turns out that trying to measure monetary parameters is exceedingly difficult, especially to get timely data in order to "fine tune" the system - and since the system is based on confidence shadows of doubt in public discussion have to be kept to a minimum. Hence the appeals to Americans to "go shopping" after 9/11.

There is also no discussion on the property market - and what happens when the paper cannot be valued, as has happened in the US market for mortgage backed securities. Foreclosures may not produce enough to cover the capital value of the debt, let alone the accrued interest.

It is also very weak on the prescriptive side. For instance zero population growth is just thrown out there as though it was easy to achieve. Governments have been also very wary of barter systems, since people do not pay tax on barters. And so on.

But on the fundamentals of how banks create money, it is correct.

The other thought that occurs to me is that it is the banks who are behind the current vogue for P3 projects. Greedy swine, aren't they?