The Real Story of Money and Banking

Scientific Macroeconomics & The Quantity Theory of Credit2 sources

This academic presentation from the University of Southampton's Centre for Banking, Finance & Sustainable Development, authored by Professor Richard A. Werner, examines macroeconomic anomalies and proposes solutions based on the Quantity Theory of Credit. The document asserts that conventional economic theories fail to explain phenomena like recurring banking crises and the breakdown of the money-economy relationship, largely due to flawed assumptions about money creation and market equilibrium. It argues that banks create money ex nihilo through credit, rather than merely intermediating deposits, and that the allocation of this credit (to productive vs. unproductive sectors) is the primary driver of economic stability or instability. The presentation advocates for an inductive research methodology in economics and suggests policies like credit guidance and Enhanced Debt Management to foster sustainable growth and prevent financial crises by influencing how banks direct newly created money.