In this article Keen discusses how, in the modern financial system, credit markets determine the supply of money. I mentioned the same issue in my talk on the financial crisis (slide labeled Leverage). Allowing people to borrow from the future means that the money supply at any moment is a complicated function of beliefs about risk, uncertainty, the future, etc.
By clicking through to the article, you can also find out who wrote the following:
“Talk about centralisation! The credit system, which has its focus in the so-called national banks and the big money-lenders and usurers surrounding them, constitutes enormous centralisation, and gives this class of parasites the fabulous power, not only to periodically despoil industrial capitalists, but also to interfere in actual production in a most dangerous manner— and this gang knows nothing about production and has nothing to do with it.”
Based on his nonstandard view of money and the money supply, Keen identifies four big problems for Bernanke:
1. Banks won’t create more credit money as a result of the injections of Base Money. Instead, inactive reserves will rise
2. Creating more credit money requires a matching increase in debt—even if the money multiplier model were correct, what would the odds be of the private sector taking on an additional US$7 trillion in debt in addition to the current US$42 trillion it already owes?
3. Deflation will continue because the motive force behind it will still be there—distress selling by retailers and wholesalers who are desperately trying to avoid going bankrupt
4. The macroeconomic process of deleveraging will reduce real demand no matter what is done, as Microsoft CEO Steve Ballmer recently noted: “We’re certainly in the midst of a once-in-a-lifetime set of economic conditions. The perspective I would bring is not one of recession. Rather, the economy is resetting to lower level of business and consumer spending based largely on the reduced leverage in economy”