Capital Account Season 1 Episode 117 Steve Keen On Private Money Creation & the Myth of Fractional Reserve Lending

In this episode of Capital Account, host Lauren Lyster sits down with economist Steve Keen to discuss private money creation and the myth of fractional reserve lending. Keen argues that the traditional view of banking as an intermediary between savers and borrowers is incorrect and that banks actually create money through issuing loans. He also challenges the notion of fractional reserve lending, which suggests that banks can only lend out a fraction of the deposits they receive. Instead, Keen argues that banks can create as much money as they want, subject only to regulations and demands for credit from borrowers.

Throughout the episode, Lyster and Keen delve into the historical and theoretical underpinnings of this debate, discussing the different schools of thought that have emerged over time. Keen points out that the current system of private money creation has led to a number of economic and financial crises, and argues that we need fundamental reform to create a more stable and just financial system.

Despite the weighty topic at hand, Lyster and Keen keep the conversation engaging and accessible, using real-world examples to illustrate their points and keeping the discussion grounded in concrete terms. Along the way, they touch on a variety of related topics, including the role of central banks, the impact of financial deregulation, and the potential for alternative currencies like Bitcoin.

Overall, this episode of Capital Account offers a fascinating and thought-provoking look at one of the most fundamental questions in modern economics: how is money created, and who is in control of the process? Whether you're an experienced economist or simply curious about the workings of the financial system, this conversation is sure to leave you with plenty to ponder.