Steve Keen: What Is Money And How Is It Created?

These should be two of the easiest questions to answer in economics; after all, money is the one thing that we all use in an economy—surely we know what it is, and where it comes from?, writes Professor Steve Keen in Forbes, 28th February 2015

Here’s a short extract:

Unfortunately, we know what money is the same way the fabled Blind Men of Hindustan know what an elephant is: the one who grabbed the trunk knows it is “like a tree”, while the one who grabbed the tusk knows that it is “like a spear”, and so on. Money is such a multi-faceted and all-pervasive element of our system—the figurative “elephant in the living room”—that our capability to obsess about one aspect of it prevents us developing a proper appreciation of what it actually is.

Not knowing what it is, we develop “creation myths” about where it came from as well—and then we clash with each other over them, like a bands of rival religious zealots. At one extreme, you get people like Paul Rosenberg who argue that our monetary system is based on fraud (“That Couldn’t Possibly Be True”: The Startling Truth About the US Dollar).

At the other extreme, you get mainstream economists like Paul Krugman, who argue that how money is created is no big deal, and that it’s in fact OK to ignore money when modelling the economy (There’s Something About Money (Implicitly Wonkish))

Read the whole article here.