Economic Reform Australia Blog

Critical capital doesn’t have to be foreign

Foreign investment is not critical for Australia’s agribusiness, and existing savings are only one part of our potential capital. During the Global Financial Crisis the impromptu network of financial transactions was hundreds of times greater than savings. Money can be added to the economy by … [Read more...]

The sectoral accounting equation

The sectoral accounting equation is (I - S) + (G - T) + (X - M) = 0     where (I – S) = private sector balance,  (G – T) = public sector balance,  (X – M) = foreign sector balance. The term (I-S) represents productive investments (I is total investment, S is total savings).  In monetary terms … [Read more...]

Paul Krugman doesn’t understand banking

The influential U.S. economist Paul Krugman may think that he understands banking, however his comments in two very recent articles -- in response to Steve Keen's criticism of him -- reveals that he does … [Read more...]

The money multiplier model does not explain credit expansion

        A money multiplier is one of various closely related ratios of commercial bank credit money to central bank money ("base money" consisting of creditary reserves and currency) under a fractional reserve banking system. Most often, it measures the minimal quantity of reserves required to be … [Read more...]