Briefly Revisiting S = I + (S – I)

Introduction Some readers of Pragmatic Capitalism and Monetary Realism have been underwhelmed by the aesthetics of this equation: S = I + (S – I) This says that private sector saving consists of an amount required to fund investment I plus an additional amount (S – I). The structure of the equation is a tautologyRead More

‘Loans Create Deposits’ – in Context

Introduction Loans create deposits. We’ve heard it many times now. But how well is it understood? The phrase is typically invoked accurately, in conjunction with a rejection of the ‘money multiplier’ fable found in economic textbooks. From an operational perspective, banks do not “lend reserves” to their non-bank customers. “Loans create deposits’ is an operationRead More

Krugman on Say’s Law

Here: Still Say’s Law After All These Years “When John Maynard Keynes wrote The General Theory, three generations ago, he structured his argument as a refutation of what he called “classical economics”, and in particular of Say’s Law, the proposition that income must be spent and hence that there can never be an overallRead More