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[Discussion] Questions on “Banks as Intermediaries of Loanable Funds” (Good amount of reading required)

July 25, 2020 at 04:03PM

Happy Saturday, everyone. for the sake of saving time I will be pasting from an email that I wrote yesterday to an economist. I have not received a reply yet. Also I realize this may be a better question for a general economics sort of a subreddit. However, I figured I might as well go to people who know about thinking is this is all related to banking.

I've been following Prof. Steve Keen and his media appearances for some time. I just noticed today, while reading Wikipedia, that you're mentioned as a critic of Prof. Keen or at least of some of his work, such as his book 'Debunking Economics'. I thought I'd ask [if you have the time/resources available to reply to this probably complex issue] – does Prof. Keen have the right idea on banks not being "intermediaries of loanable funds"? I'm just going to provide a URL to the Bank of England paper, the more current one, which you may be familiar with. In addition, a relatively short criticism of this idea that banks are not intermediaries of loanable funds by someone who I don't think is an economist. However, they seem to know what they're talking about.

Bank of England Paper:

Rebuttal by Paul Gringon: In short, are of these correct? It seems most likely to me that banks are intermediaries of loanable funds, at least sometimes. I would appreciate any reading recommendations. Relating to fractional reserve lending and the "deposit multiplier" or "money multiplier", it seems the accuracy of the BoE's working paper is tied heavily to whether FRB is a real phenomenon as well.

Thank you for your time.

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