The money knowledge revolution
2026-06-28 01:28:45 +07:00 by Mark Smith
Like a lot of people I have only really started paying attention to how money really works the past few years. There is so much content online these days. But it‘s worth remembering this is a very new state of affairs. Two quotes from recent podcast illustrate the point.
First we have Richard Werner, who apparently invented Quantitive Easing. He was on the Liz Truss podcast [9:22]:
And of course the money creation is driven by bank credit, bank credit creation, that’s the more detail, the more precise way of looking at it. Of course that’s not by accident, they are not entirely uninformed at the Bank of England. For example when I published...well I was about to publish my first proof that banks create money out of nothing when they give a loan, each individual bank will create new money. Until then it was controversial. It was debated for a whole century its been debated. Is this true, is this not true.
Well let’s do an empirical test, that’s the scientific thing to do. So I did an empirical test, and it was found out that I was about to publish this, so the bank of England rushed out, to beat me to it, of course they vastly control their own publications, and in March 2014 they put out their own report saying, “oh we just discovered banks create money!”, and they did a video on it, which they had never done, they got all the publicity and that was their goal, and my paper came out later that year, called “Can banks individually create money out of nothing?”. It’s open access so one can google it [...] and so of course they knew this before.
It would be nice to get more info on what exactly his "empirical test" consisted of, but let‘s assume for a second it‘s genuine. Isn‘t it mind boggling that it was only in 2014 that we discovered that banks create money? I still can‘t quite get my head around this fact.
The second one is from Matt Dines on the What Bitcoin Did Podcast [1:04:03]:
I was just an analyst starting out, we were still talking about replacing LIBOR and moving to something else. We knew LIBOR had to go away, and SOFR was already on the table [...] as early as those days, and most of us at the not executive level, we didn‘t understand what the heck was going on.
Like coming through university, I did a masters in finance, it was quantitative focussed, we didn‘t go through any of this, like how the dollar structure worked, this was just not there. You are learning quantitative formulas, number crunching, pricing exotic derivatives. How the system actually works isn't taught to you. It‘s not the focus, maybe that's changing. Actually it‘s the podcast circuit, now that it‘s talked about people can find this and that‘s made all the difference.
It‘s really the explosion of content online by independent media and content creators that has created the situation where we are all learning how these previously very opaque systems are actually organised. Including for the people who work in the finance industry!
This recent surge in interest in the finance industry in general is a quiet revolution. I think it‘s also been happening because so many folks are into crypto and Bitcoin and so are having to figure things out from first principles, and it‘s all been made possible by independent podcasting. #