Here is Steve Keen’s reply:
Here is Steve Keen's reply:
Quote:
Very quickly Adam, because I don’t have time for individual email queries (1) the intermediaries story is used by mainstream economists (Bernanke, Krugman etc) to argue that credit (change in bank debt/year) can be macroeconomically ignored: this is overwhelmingly contradicted by the data, which you’ll see if you read my book of the same name; (2) the essence of the intermediary story is that lending shuffles bank liabilities around but doesn’t create new assets and liabilities: that is also categorically false.Cheers, SteveProfessor Steve Keen
Clearly, he is sticking to his guns and is not prepared to be contradicted. He does admit, though, that there are others who don't accept his theory. But, then, he prides himself on being "unorthodox".It is rather his assertion that banks "create new assets and liabilities" that is categorically false (except in the trite double-entry bookkeeping sense). In fact he virtually admits this in the interview Alan drew our attention to when he says:
Quote:
central banks are the only banks that can legally run negative net asset balances, i.e. whose liabilities are allowed to exceed their assets.
In other words, only central banks can create money for which there is no corresponding outside liability.Which is precisely what the ECB stated ("outside" money is money created by the central bank):
ECB wrote:
Commercial banks can also create so-called “inside” money, i.e. bank deposits – this happens every time they issue a new loan. The difference between outside and inside money is that the former is an asset for the economy as a whole, but it is nobody’s liability. Inside money, on the other hand, is named this way because it is backed by private credit.