Cavaliers of Credit

It has been rather odd trying to get my head around the concepts of money creation. Oddly there seems to be some debate about how the monetary system actually works. All jokes about ‘the dismal science’ aside, this surprised me. For something that impacts just about everyone in the modern world to come down to a matter of ideological debate is, to say the least, worrying.

Unfortunately, my reading of this piece would indicate that the stated ideology of the Federal Reserve chairman is, not sure how to put this… er, wrong.

“Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.”

I’m failing to convince myself that anyone could live with that level of delusion, which suggests that it’s probably a belief of choice.

2 thoughts on “Cavaliers of Credit

  1. Conversely, the notion that a seemingly crucial foundation stone of Western civilisation turns out to be an ideology rather than something with fixed substance or form makes it considerably more malleable. A property which will permit, perhaps even encourage, a fluid state of uncertainty, but at the same time enable the market to, eventually, arrive at the point where the same deluded comment can be made all over again. Happy days.

  2. I shouldn’t really have been surprised.. it’s just hard to come to terms with the idea that this thing is out there, functioning (making no quality judgements here) for decades, and yet it’s possible for there to be ‘debate’ about what is actually happening.

    The ‘standard model’ of fractional reserve banking never really did make sense to me, but i’d never taken the next step of finding out what it was actually doing. When i read that reserve growth happens after debt / money creation it made perfect sense… and at the same time was obviously horrifying in it’s implications.

    Having got that far it’s obvious, as you note, why debate and uncertainty is useful…

Wise words...

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