I had a two hour debate with a colleague today. We got to the heart of some of the disagreement when I asked "do you agree with the statement that money and credit is unimportant when thinking about economic policy." He said yes. I, on the other hand, think money and credit is important when thinking about the economy.
I watched a Steve Keen video on the debt problem and coincidentally he mentions many of the same points we discussed. But the reason I'm posting any of this is because of a point Steve makes in the video, quoted below. Really makes clear why credit is important in economic analysis. Keen explains that this is what he added to the analysis of endogenous money stock, introduced by Basil Moore in 1979.
"Nobody borrows for the sheer pleasure of being in debt. You borrow to spend. so when you borrow, that change in money becomes a change in demand, and credit therefore is an essential part of aggregate demand."
Simple and brilliant.
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