The Solanum continually tells us that banks don’t lend out deposits, they don’t in fact need deposits at all. They just invent the money they lend anyway.
The problem with this is that we’ve real world evidence that this isn’t so:
First Republic Bank’s deposits fell by over $100 bn in the first quarter and it said it was exploring options including restructuring its balance sheet, overshadowing market-beating profit and sending its shares down 21% after the bell on Monday.
If deposits are’t needed, if deposits don’t matter, then why would an erosion of the deposit base matter? Ah, but it does matter – therefore there’s some need to deposits and MMT be damned – along with the Solanum.
So, a Q for any silly enough to believe the wilder MMT claims. If banks don’t need deposits then why is a falling deposit base a problem for First Republic?
I wonder how long the Irish Bank of Islington would stay in business? Any advance on three days?
Tim
He hasn’t got the faintest idea how banking actually works. His MMT paper is deeply embarrassing. One of the denizens of these comments posted a commentary by a Canadian blogger which summed it up (although he was far too generous to Murphy in praising his understanding of accounting) as a summary of MMT primers. There have been numerous attempts in the comments in ‘Funding the future’ from people who actually have some experience of working in Corporate Finance or the Liquidity teams in Large Banks or Asset Managers as to why his understanding is wrong. He is pathologically unable to admit error so always ends up deleting them/ banning them. He doesn’t have any answer for you beyond your ‘far right’ or ‘neoliberal’ status invalidating your opinion on an ad hominem basis.
I have a feeling that Murphy’s death will give rise to a missed opportunity for the human race.
If my supposition is right, that there are no surgeons who have any interest in banking or accountancy, it is unlikely that an autopsy will be performed automatically.
We may never find out if there is an organ in that Spud Skull that preforms ordinary human functions like breathing, eating and defecating.
Certainly there is no organ capable of rational thought.