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    • Home
    • Money Creation
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  • Home
  • Money Creation
  • Money Myths
  • Inflation
  • Banking Pros and Cons
  • Letter to Parliament
  • Our Central Bank
  • Money Creation by the BoC
  • CBDC
  • Our National Debt
  • How can we do it better?
  • McGeer examines Towers
  • Textbook Fallacies
  • Documents
  • communications BoC/OSFI
  • Doughnut Economics
  • PMC Podcast
  • Debunking MMT
  • Links
  • Update Archives
  • Videos and Updates

A healthy economy should be designed to thrive, not grow!

Who Wants to be an Economist? My own story, Jeff Eder

  

My own interest in economics began sometime in my late forties, I don’t know exactly when. I have always been curious about how things work and eventually it turned to the economy. What I noticed is that predictions by mainstream economists rarely came true, so I started to dig deeper to satisfy the question of why? I always felt something was missing in the explanations of how the economy works. The main reason they err in predictions is that many cling to the macroeconomic textbook description of how money is created through the fictional fractional reserve banking system and the money multiplier model attached to it, in addition to treating banks as simply intermediaries. There are other problems with neoclassical economists and some of it is just plain hubris. If you ask a neoclassical economist why his models do not reflect reality and he will probably say there is something wrong with the economy. The most dangerous people on the planet are those who sincerely believe something that is false.

I was first introduced to the concept of fractional reserve banking in a video titled “Money as Debt.” Digging further I discovered that fractional reserve banking no longer exists in Canada and hasn’t since July of 1994. Although even when there were reserve requirements which were supposed to restrict the amount of money that a commercial bank could create through the loans process, operationally it did not work that way. Reserve requirements meant that commercial banks were required to hold a certain percentage of reserves relative to the amount of liability deposits which is consistent with the money multiplier model in macroeconomic textbooks and is still taught the same way today! However, empirical research initiated by Basil Moore (Moore 1979, 1983, 1988a, 1997, 2001) and later independently corroborated by numerous researchers, including Kydland and Prescott (1990) discovered that banks extend credit first and then go looking for reserves later, exactly opposite to what is suggested in the textbooks.

Understanding real economics became clearer to me after reading Steve Keens “Debunking Economics.” Arguably the most difficult read in my life as I hadn’t taken any previous economic courses and was unfamiliar with the jargon. It motivated me to enroll at a local college and take both micro and macro economics thereby confirming the nonsense taught in these courses, mind you not all of it. I was lucky enough to have an economics professor that was open to challenges of the status quo and he even allowed me to speak in front of his own classes directly challenging the money multiplier model and the myth of fractional reserve banking. Since then, I have distanced myself from Steve as he has supported MMT's S(TAB) hypothesis which gets government financing completely backward. For a better understanding of what I am talking about you can read the following:

https://img1.wsimg.com/blobby/go/ff93be0f-e4df-4288-8750-c2891b9cb7ea/downloads/Modern%20Money%2C%20Forget%20Theory.pdf?ver=1739380377959

What I have come to understand, is that if one does not understand how the money creation process works and the debt relationship tied to it, one can never fully understand how the macro economy works, even if that is at all possible. However, in all I have read the most inspiring and innovative way of moving forward into the future is an economy based on the ideas put forward by Kate Raworth in her book “Doughnut Economics: Seven Ways To Think Like a 21st Century Economist."

We need a paradigm shift in the way we see ourselves, our relationships with people, and the environment on which we depend.  


Kate Raworth author of Doughnut Economics: 7 ways to think like a 21st century economist.

Kate Raworth author of Doughnut Economics: 7 ways to think like a 21st century economist.

The Doughnut

Kate Raworth Explains The Doughnut

 https://www.kateraworth.com/doughnut/ 

A SUMMARY OF "DOUGHNUT ECONOMICS"

1. Change the Goal: from GDP to the Doughnut

  • GDP (Gross Domestic Product) has long been used as a leading indicator of economic health. Kate Raworth answers the question why we have accepted this cuckoo in the nest and why it shouldn’t live there.  

2. See the Big Picture: from self-contained market to embedded economy

  • Debunking the circular flow of income as stated in macroeconomic textbooks and the neoliberal narrative of laissez faire (free markets which don’t exist and cannot exist when humans are involved, no government involvement, and deregulation). 

Instead:

  

The Embedded Economy, which nests the economy within society and within the living world while recognizing the diverse ways in which it can meet people’s needs and wants.

3. Nurture Human Nature: from rational economic man to social adaptable humans

  

  • Rational economic man stands at the heart of mainstream economic theory.

Instead:

  • First, rather than narrowly self-interested, we are social and reciprocating. 
  • Second, in place of fixed preferences, we have fluid values. 
  • Third, instead of isolated, we are interdependent. 
  • Fourth, rather than calculate, we usually approximate. 
  • Fifth, far from having dominion over nature, we are deeply embedded in the web of life.

4. Get Savvy with Systems: from mechanical equilibrium to dynamic complexity

  

  • Raworth suggests moving away from equilibrium models to more dynamic and reflective models of the actual economy.

5. Design to Distribute: from ‘growth will even it up again’ to distributive by design

  

  • Debunking so called economic laws that encourage constant growth and income inequality. In addition to moving the economic power from a few to the many.

6. Create to Regenerate: from ‘growth will clean it up again’ to regenerative by design

  

  • It’s time to put aside the search for economic laws demonstrating that growing national output will eventually deliver ecological health.

7. Be Agnostic about Growth: from growth addicted to growth agnostic

  • Design an economy that promotes human prosperity whether GDP is going up, down, or holding steady.

  

Kate Raworth “A healthy economy should be designed to thrive, not grow”

You are now an Economist

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