The role of commercial and central banks in the process of providing credit may seem to be clearly understood by economists, bankers, and policymakers. But there are common misunderstandings about money creation, equilibrium, public money, central banks, and interest rates. The outlook for the global monetary system is not overly optimistic in the absence of overcoming these misunderstandings and altering the philosophies of bankers.

This presentation comes from the 67th CFA Institute Annual Conference held in Seattle on 4–7 May 2014 in partnership with CFA Society Seattle.

The liberalization of finance after the 1970s led to a significant buildup of debt in many parts of the world, especially in Africa, Latin America, and parts of Asia. The inexorable rise in private corporate, household, and individual debt leads to the question of whether professional economists truly understand money, finance, and credit. Good predictions and sound investments cannot, in my view, be made without a solid understanding of money. Continue reading →