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Should we have tighter controls on money supply?

Regular listeners will know that most money in circulation is created, bot by central banks, but by commercial banks when they issue loans. In this week’s podcast Phil Dobbie asks Steve Keen how fundamental this is to the slow growth, low interest economy the world has found itself in. Isn’t there a danger that banks will limit the supply when times are bad when, in fact, what the economy needs at those times is more money? Just how much influence do central banks have on the activities of commercial banks these days? Should there be more regulation to control how much money banks create? The answer is yes, but only for money created to fund certain times of loans.

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