The Real Story of Money and Banking

Scientific Macroeconomics & The Quantity Theory of Credit

The source originates from a 2018 workshop at the University of Southampton's Centre for Banking, Finance & Sustainable Development, featuring a presentation by Professor Richard A. Werner. It primarily critiques conventional macroeconomic theories, particularly their reliance on the deductive method and the assumption of market equilibrium, which the source argues fails to account for real-world "anomalies" like recurring banking crises and the breakdown of the money-economy relationship. The presentation asserts that banks are not mere intermediaries but are the primary creators of money, specifically 97% of the money supply, through credit creation. This leads to Werner's Quantity Theory of Disaggregated Credit, which posits that the allocation of bank credit (between GDP and non-GDP transactions) is the crucial determinant of economic outcomes, including asset bubbles and crises. The source advocates for "credit guidance" and "enhanced debt management" as effective policies to prevent crises and foster sustainable growth by directing credit towards productive investments, drawing lessons from East Asian economic models and historical examples.