>

Richard Werner: Supply of Money Controls the Economy

March 22nd, 2013
in econ_news, syndication

Econintersect:  Richard Werner, proofitfund.com investment advisor, says that you should throw away your economic textbooks.  The idea that interest rates control economic activity is entirely wrong.  It is a theoretical construct that is contradicted by empirical data.  Werner says the problem derives from the assumption of economic equilibrium and the construction of macroeconomic supply and demand curves for money.

RichardWernervideo

[Two part video interview after the Read more >> jump.]

Follow up:

The reality that has empirical support is that interest rates follow economic activity.  Once the economy strengthens interest rates rise.  After the economy weakens interest rates fall.  Werner says that erroneous assumption of supply and demand curves for money obscures the truth that supply of money is economically limiting.  Demand for money always exceeds supply and there is never an equilibrium.

Bloomberg interview, part 1.

Bloomberg interview, part 2.  Here Werner explains why traditional money (M1, M2 and M3) have no relationship to economic activity.  He says economic activity is virtually all driven by credit creation by central banks and the banking sector.

 

Hat tip to Roger Erickson.









Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.















Proud contributor to:


Finance Blogs
blog

Econintersect Website Search:

Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2014 Econintersect LLC - all rights reserved