Monday, 24 February 2014

Money is NOT exogenous!

Ok, first of all, money is endogenous. When private debt increases, the Money Supply (MS) increases. When those private debts get paid off, the MS shrinks. The government is the only sector capable of creating and/or destroying NET financial assets via fiscal deficits/fiscal surpluses.

You'll notice that the MS measurements use terms like: HPM, near money, near near money et all.

Private banks create private credit. They DON'T create NEW NET tax-credits (public IOUs/legal tender money). That can only come from the government.

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