Bailouts, Moral Hazard, and Market Discipline

Economists Bob Murphy & Steve Keen come from very different camps. Today they sit together and pull back the curtain on how money really comes into being, piece by piece. Their exchange moves with a quiet intensity, uncovering the places where theory drifts from the world we live in. They trace the fault lines between stability and collapse, each from his own hard-won perspective. By the end, the familiar landscape of banking feels slightly altered, as if something hidden has stepped into view.

Part 1: https://youtu.be/fKgiKFfnPqE

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00:00 Go!

00:02:01 – How Banks Really Create Money

00:03:39 – Support & Merch Break

00:07:34 – What Is Fractional Reserve Banking?

00:10:06 – The 100% Reserve Ideal

00:12:27 – Why the Textbook Model Fails

00:15:00 – Base Money vs Bank-Created Money

00:18:46 – The Textbook Story Falls Apart

00:21:07 – Loans Create Deposits: The Core Mechanism

00:22:44 – Why Economists Get This Wrong

00:25:56 – Public Confidence as the Real Constraint

00:29:07 – Reserves Are Lubricant, Not Fuel

00:35:09 – Policy & Logic Undermine the Multiplier

00:36:46 – Who’s Actually to Blame for Crises?

00:39:18 – The Real Issue: Loan Quality & Targets

00:41:00 – Diverging Philosophies on Ideal Systems

00:44:12 – Modeling Real-World Lending Mechanics

00:48:53 – The Austrian Full-Reserve Vision

00:53:03 – Commodity-Backed Private Currency

00:54:37 – Ending Centralized Monetary Control

00:56:58 – A Regulated Credit Framework

01:01:12 – Elastic vs Fixed Money Supply

01:02:22 – Political Obstacles to Reform

01:03:16 – Market Discipline vs Regulation

01:05:08 – Limited Liability as a Core Distortion

01:08:23 – Asset Purchases, Bailouts, and Moral Hazard

01:11:26 – Policy Mistakes from Bad Models

01:13:16 – Productive Credit vs Asset Inflation

01:15:05 – Is Elastic Credit Even Necessary?

01:17:35 – Fixed Money Supply Lending Mechanics

01:19:15 – Closing Reflections

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