If only Ritchie understood his subject….

The only improvement I’d suggest is that ‘the politician’ fails to point out that the private banks create new money whenever they lend – yet somehow this goes unmentioned so the implication seems to be that this never creates any inflation. Hence, when the government creates new money we are always going to end up like Zimbabwe or Venezuela but never, ever when the private banks do it.

We do tend to mention it quite a lot actually. The bank creation of credit – note, not money – being the thing we influence, temper or encourage, by changing interest rates.

The Senior Lecturer has noted that we do in fact change interest rates in order to change credit creation, has he?

17 comments on “If only Ritchie understood his subject….

  1. The Senior Lecturer has noted that we do in fact change interest rates in order to change credit creation, has he?

    Capt. Potato’s corpuscule of knowledge at any time is derived from the sparking of random synapses and so there is no telling what he knows and whether what he knows today will still be something he knows tomorrow or whether something that he knows at any point corresponds to anything that anyone else knows.

  2. Isn’t it also the case (absent the good old State stepping in of course) that any private bank creating money (or credit, whatever you want to call it) stands the very high risk of going bust if it fucks it all up? Whereas the State can keep printing money until the wheel barrows are full, because it owns the guns?

  3. Yes, banks create credit not money. But if you keep feeding credit into a market, and the credit buys assets then, unless the supply of assets increases along with the supply of credit, asset prices must rise. See housing market.
    It’s not creating money, as such. It’s moving money in time. From the future to the present. All those loans must be repaid, sometime.
    It maybe tomorrows money. But it spends like today’s money. I’m spending it today. Proceeds of a UK house bought from me with the help of a mortgage. Delightfully ample thanks to all that credit creation’s effect on UK house prices. Maybe tomorrow’s money but looks exactly the same as any other money in my bank account. And no doubt contributing to the inflation in the hooker & coke markets 😉

  4. In think it’s clear from his varied ramblings that among the many things he’s nicer understood is that there are different definitions of ‘money’ and why they exist and how they interact/relate to each other.
    I’m sure he’s read it and may even know some of the technical definitions, but information and knowledge aren’t the same thing and he’s sadly lacking in the latter. The shame being that is what you should be paying a lecturer for as anyone can regurgitate a text book

  5. BniC: anyone can regurgitate a text book

    You’d think so, wouldn’t you, but is there any evidence that the tuberous tutor can do so?

  6. TMB, but as Dick Tater readily admitted last week he merely speed reads books. Comprehension on the other hand….

  7. BniC

    His grasp of even the difference between M0 and M4 seems to me almost non-existent and from speaking to several of his collaborators they seem utterly clueless about anything outside these definitions. In fairness I work in the Financial Services industry and many of the more complex instruments would tax even knowledgeable people within the industry let alone someone who in terms of economic understanding is analagous to a caveman being confronted with an Ipad.

  8. As any fule kno, Captain Potato thinks that existing economics’ textbooks are all wrong and/or neo-liberal. So he doesn’t even need to go to the trouble of speed-reading them – he knows already that they are wrong

  9. I briefly thought that this Cambridge Analytica that’s getting into trouble was linked with Murphy, but I’d got it confused; it’s Cambridge Econometrics that he’s involved with.

    Makes sense; I couldn’t quite see Murphy as some global election Svengali.

  10. Jim, I used to have a friend who worked in Bolivia. He used to go to the bank with a wheelbarrow to get money. He was once almost mugged for the wheelbarrow – it was more valuable than the contents.

  11. I won’t bother reading his post, but he does know (or perhaps more likely not) that every time a bank lends it has to add to its reserves(get a deposit of ten and you can only lend out 9, get the nine back as a deposit and you can only lend out 8.1, etc), so while it does create money, its power to do so is both limited and rooted in actual dosh?

  12. As no doubt the Tater will confirm, much of this debate is clouded by what are known as ‘false facts’. Things that are true but don’t fit his narrative.

    false facts can be ignored.

  13. VP – applause for this, very good!

    let alone someone who in terms of economic understanding is analagous to a caveman being confronted with an Ipad.

  14. If only Ritchie understood his subject….

    It’s not his subject he understands, it’s his subjects.

  15. As the BoE made clear” the majority of money in the modern economy is created by commercial banks making loans”.
    Also Adam Smith stipulated that a market economy needs a zonking great Land Value Tax.
    But just one more push; your work is nearly done.

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