Briefly Noted – The Deficit Myth: The Biggest Lie In Politics | 1Dime

This video from 1Dime is a very good introduction to the actual workings of money in the economy. Though for my tastes, the video is burdened with way too many gratuitous visual gimmicks and fluffery, it is very well researched and presented. You will get a solid introduction to most of the important concepts in Modern Money Theory (aka neo-Keynesianism). Much to my satisfaction the description field on YouTube provides a serious list of sources to back up the production.

The one story that 1Dime left out that is important to understanding the banking system is the facts of how banks actually lend money. Orthodox economics and popular culture imagines the process as the banks acting as middlemen between savers and borrowers. Banks lend out savings deposits. This is simply wrong.

Banks create money with digital keystrokes. This is just the same as the Federal Reserve’s practices. If you are the borrower, they credit your checking account with the amount of the loan and simultaneously create an asset on their balance sheet for the identical sum. The limitation on this process is the bank’s evaluation of the risk of you not paying the money back. The risk that you will default on the loan.