Explaining money creation using my Minsky software to Sweden's Positive Money

This was my second talk to Positiva Pengar, Sweden's version of the UK's Positive Money. Since I'd given a prepared talk just a few weeks before, I did this one in a more extempore fashion, with a lot of it being a dialogue between myself and the organizer Jussi Ora.

I used Minsky to lay out the accounting behind money creation--by both banks and governments--and made the general point that, since money is (aside from cash) the liabilities of the banking sector to the non-bank sector, to create money, an operation must affect both the Assets and the Liabilities side of the banking sector's ledger.

This is the case for government deficits and bank lending, but not to the sales of bonds by the Treasury to Banks, or of Central Bank purchases of bonds from the Banks.

It's always rather intimidating to try something like this live--what if something you don't expect turns up? But it all went smoothly, and there was a good discussion, including with one of my Patreon supporters who rejects my argument--which is 100% consistent with MMT--that the deficit itself creates money.

[duncanmckeown]

Steve in top form! I'm glad he got to talk about climate change as well.

[JeanNoelAvila]

Wow! War bonds removed money from the economy, while the State buying for armies operated a reorientation of economy towards war effort. That's mind blowing.

[shourjyaghosh]

32:37 there is an accounting mistake from the non-bank's point of view. When the banks sell a bond to a non-bank, it is an asset swap from the non-bank point of view. The non-bank trades some deposit money for the bond, it does not lose any equity like it does in the case of a tax. Additionally, I think this goes to show that the operation of the deficit does NOT increase the money supply. Deposits are drained by taxes AND lending to the government via bond purchases (either directly from the Treasury website or using the bank as a middleman) and deposits are replenished via government spending. No net increase in deposits.

[shawn]

When nations adopt blockchain technologies, that will be the debt jubilee. History before it happens 👊🇦🇺😂