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Bank credit, financial intermediation and the distribution of national income all matter to macroeconomics

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  • Brett Fiebiger

    (University of Ottawa, Canada)

Abstract

The Great Recession has exposed several failings in the mainstream economics profession, including a generalised neglect of the macro role of debt and of banking. Steve Keen has proposed an alternative approach to macroeconomics which he sometimes labels as the 'Walras–Schumpeter–Minsky Law'. His key claim seems to be that – as a consequence of endogenous money – the concepts of effective demand and aggregate supply should be redefined to include the 'change in [private] debt' as well as financial asset transactions. This paper cautions that doing so may generate more confusion than what the redefinitions seek to clarify. Further, while endogenous money is a fact, it is important to recognise the roles of financial intermediation and adverse trends in income distribution in shaping the macro patterns and financing relations that preceded the Great Recession in the United States.

Suggested Citation

  • Brett Fiebiger, 2014. "Bank credit, financial intermediation and the distribution of national income all matter to macroeconomics," Review of Keynesian Economics, Edward Elgar Publishing, vol. 2(3), pages 292-311, July.
    • Handle: RePEc:elg:rokejn:v:2:y:2014:i:3:p292-311
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    Cited by:

    1. Antonin Pottier & Adrien Nguyen-Huu, 2017. "Debt and investment in the Keen model: a reappraisal of modelling Minsky," Review of Keynesian Economics, Edward Elgar Publishing, vol. 5(4), pages 631–647-6, October.
    2. Jacob Assa, 2017. "Leveraged Growth: Endogenous Money and Speculative Credit in a Stock-flow Consistent Measure of Output," Working Papers 1727, New School for Social Research, Department of Economics.

    More about this item

    Keywords

    endogenous finance; endogenous money; nonbank credit; inequality;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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