| This is always a contested subject because economics has so many competing branches, many of them with more or less overt ideological overtones. IMHO, you should listen to economists that (a) emphasize looking at the operational realities of what actually happens in the monetary system, and (b) tell you that banks matter for what happens in the economy. (If you find it hard to believe that a majority of economists ignore banks in their models of the economy, good for you and your common sense!) This means you should read what Steve Keen writes and listen to what he says (he blogs at http://www.debtdeflation.com/blogs/), and what the Modern Monetary Theory crowd write, as they explain such basic things as what role reserves and bonds play, from first principles (start here: http://neweconomicperspectives.org/p/modern-monetary-theory-...). More generally, "endogenous money" is an important keyword to look out for, because our monetary systems are endogenous in the sense that money is mostly created by banks, not by the government. If you venture into online economics resources, you will run into a lot of (economic) Austrians. I believe this is mostly because of the Mises institute, which is well funded by people with an ideological ax to grind. It's good to reflect on their messages occasionally, but they should be taken with a grain of salt. (And since they are hardcore gold bugs, they don't get endogenous money, which means that much of what they say simply doesn't apply to our current economic framework.) |