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Bernanke: Fed Must Avoid Greenspan Errors

This is the GOSPEL Georealist:

Banks as a system don’t loan out anything. They create money when they make loans.

Money creation is not self-regulating

You can’t take money out of the banking system (only the FED can)

Savings transferred through the intermediaries never leave the CB system. The intermediaries are the customers of the CBs.

Savings held in the commercial banking system are lost to investment or to any type of expenditure.

From the standpoint of the economy the banks shouldn’t pay for something they already have. Payments on savings raise all interest rates, induce disintermediation among the financial intermediaries, shrink real-gdp, & lower CB profits.

The solution to our current problem is to get the money creating depository institutions out of the savings business.