The Banking System Creates Instability
Professor Steve Keen says: "Most people are told that government deficits are the danger. But the real problem is the private banking system, which creates most of the money and channels it into speculation, not productive activity. Private banks create most of the money: When banks lend, they create deposits and loans at the same time. That means money is being created by the private sector, and since 2000, most of that new money has come from private credit creation rather than government spending. Government deficits do the opposite of what people think: A deficit adds net financial assets to the private sector, while a surplus removes them. In this framework, government spending can support stability rather than destroy it. Asset speculation is the real danger: A large share of private credit goes into houses, shares, and other assets rather than entrepreneurial investment. That is why the system creates bubbles instead of broad-based economic growth. The system needs repair...