Download Economia (post)

You can now download the book Economia as a pdf file.

See the tag at the top of the page.

The Peaking of Climate Denialism and the Resurgence of the Sensible

Despite the ascent of Tony Abbott to the Liberal Party leadership and some recent unhelpful comments by the Chair of the ABC, Maurice Newman, there are some glimmerings that the irrational backlash against global warming science may be peaking.

The backlash can be seen as part of a broader attack on evidence-based, sensible debate that has been systematically promoted in Australia over the past several decades.  The attack has ranged over many social and political topics, including asylum seekers and the “history wars”, which concern our forebears’ treatment of indigenous people.  It has also taken on an explicitly anti-science tone in recent years.

It is revealing to examine the nature of the climate controversy, and to spell out exactly what the approach of climate “sceptics” implies about how we should determine policy.  There are also lessons on how our political process can be distorted by disinformation and by superficial interpretations of “balance” in reporting.

How Banks Create Money Out of Nothing

A little-known or poorly understood fact about our banking system is that banks create money.  Out of nothing.

That in itself need not be a bad thing.  We need a medium of exchange, which is the basic function of money, and the money has to come from somewhere.  However the creation of new money is buried within our fractional-reserve system of banking.  This makes it invisible to most people.  Also, banks create the money in the course of making loans, which means they can charge interest on money they create at essentially no cost to themselves.  That is a guarantee of unearned profits, even apart from the myriad fees banks charge for other services.

Because the fact and the process are obscure, I post here an explanation of how it comes about.

[Update 18 March 2010:  this is the text-book explanation, but Steve Keen argues persuasively that this is only a minor part of the modern money creation process, most of which is beyond the control of central banks.  See Kevin Cox's comment below, including his proposed remedy.]