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Banks don’t “lend out” your deposits, they create money when they lend.

In this video, Steve Keen dissects the classcial economist's fractional-reserve story, responds to critics, and uses Ravel to show why the classic money-multiplier only “works” if loans are made in cash. Once you enforce real double-entry bookkeeping, the narrative collapses — and the real mechanics of bank-originated money and debt come into focus.

What you’ll learn

• Why the textbook money-multiplier breaks under proper accounting

• How bank lending creates deposits (new money) on both sides of the ledger

• Why reserves ≠ “loanable funds” and why deposits aren’t lent out

• Where popular explanations violate assets = liabilities + equity

• Why getting money creation right matters for debates on deficits, QE/QT, and “can we afford it?”

• How Ravel exposes hidden assumptions in neat verbal stories — step by step

Key takeaways

• If a model can’t balance the T-accounts, it’s wrong, regardless of how often it’s taught.

• Loans create deposits; deposits aren’t a stockpile that gets parcelled out.

• Cash is the only way to make the textbook multiplier arithmetic “work”, which tells you the model is not how modern banking operates.

• Misunderstanding bank money leads to bad policy: deficit panic, confused takes on QE/QT, and misguided bank rules.

About Steve Keen

Steve Keen is an economist known for accounting-consistent, data-driven models of money, debt, and instability. Creator of the Minsky and Ravel tools, he replaces classroom myths with operational mechanics you can simulate and test.

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#economicseducation #moneycreation #banks #doubleentrysystem #ravel #macroeconomics #fiscalpolicy #monetarypolicy #banking101 #stevekeen

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⌛️ Ends on Monday Dec 1st 11:59PM EST.

Why are homes unaffordable from London to Sydney?

Steve Keen shows why the standard “supply & demand” story misses the engine underneath modern housing bubbles: bank-originated mortgage credit. Using long-run BIS datasets, Steve tracks how real house prices decoupled from consumer prices after the 1980s as banks ramped mortgage lending. The kicker: it’s not just the level of mortgage debt that drives prices — it’s the change in the change of mortgage debt. That credit pulse explains booms, busts, and today’s squeeze.

What you’ll learn

• Why real house prices were flat for a century… then went vertical after the 1980s

• How bank lending (not “savers’ deposits”) creates new purchasing power for housing

• The critical driver: ΔΔ Mortgage Debt → Δ Real House Prices (UK, US, Australia, more)

• Why simple correlations mislead — and why differencing reveals the true causal link

• How rising inequality and speculative demand amplify bank-fueled price cycles

• Policy levers that actually bite: credit guidance, LTV/DTI caps, and curbing mortgage speculation

Key takeaways

• Housing became a credit-fueled asset: prices outran CPI and wages because banks created the demand.

• The credit impulse (change in the change of household debt) best explains house-price swings.

• Countries without a visible “crash” can still be in an oversized, fragile credit cycle.

• Taming bubbles means steering bank credit toward productive uses — not bidding wars for existing homes.

Policy ideas discussed

Credit guidance for banks: prioritize business working capital & durable goods; restrict mortgage speculation.

Macroprudential limits: tighten LTV/DTI during upswings; countercyclical buffers that lean against credit booms.

Re-align incentives: discourage flipping/empty-home speculation; reward new supply without turbo-charging land prices.

Measure what matters: track private-debt ratios and the credit impulse alongside CPI/unemployment.

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About Steve Keen

Steve Keen builds accounting-consistent, data-driven models of money, debt, and instability. Creator of Minsky and Ravel, he replaces classroom myths with the operational mechanics you can simulate and test.

Get exclusive Cyber Monday bonuses including Unlimited Ravel use (the software I use in this video), Q&A calls with me, 100-Day Guarantee and other exclusives at 👉 https://cyber.stevekeen.com

⌛️ Ends on Monday Dec 1st 11:59PM EST.

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(Bonus: accepted students who join get Ravel — the double-entry, macro visualization tool used in this video.)

Steve Keen sits down with Sky’s Ed Conway to stress-test the OBR’s terrifying long-run debt charts (274%… 600%+ of GDP) and shows why they rest on a false banking model. Using Ravel, Steve compares the textbook “loanable funds” view with the Bank of England’s 2014 statement on how money is actually created (banks create deposits when they lend). The result: debt-panic projections collapse, and a saner policy mix comes into view.

What you’ll learn

• Why “banks as mere intermediaries” breaks macro logic — and the forecasts built on it

• The BoE’s money creation mechanism vs. the textbook story — and why it matters for deficits

• How government deficits create fiat money, and why that’s a feature, not a bug

• Why secondary bond sales by banks to non-banks destroy deposits (and how to rein that in)

• How QE/QT and rate hikes ripple through bond prices, bank balance sheets, and yields

• Why private debt and credit growth are the true cyclical drivers — and why policymakers ignore them

• Practical fixes: deficit-fund essential services, cap secondary bond offloads, guide credit away from asset bubbles

Key takeaways

• OBR-style “debt to the sky” charts depend on a loanable-funds world that doesn’t exist.

• In the real world, bank lending creates deposits; credit affects demand and GDP.

• Deficits add fiat money to private balances and need not imply a debt doom loop.

• Private debt and credit swings drive unemployment and crises; government debt usually reacts after the fact.

• QT plus rapid rate hikes compress bond prices and can destabilize banks; policy must account for this transmission.

Policy prescriptions discussed

Run deficits to fund real needs (healthcare, winter heating, critical services).

Limit banks’ secondary bond sales to non-banks (or sell new gilts directly to the central bank and pay interest on reserves).

Use credit guidance: allow lending for productive business working capital and major consumer durables; restrict mortgage/asset-price speculation.

Target private-debt/credit metrics in macro policy (e.g., keep private debt ≤ ~100% of GDP).

About Steve Keen

Steve Keen is an economist known for accounting-consistent, data-driven models of money, debt, and instability. Creator of the Minsky and Ravel tools, he replaces classroom myths with operational mechanics you can simulate and test.

Try the Seven-Week Rebel Economist Challenge

Apply here: https://www.stevekeen.com

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