March 30, 2012

Punk Economics - Lesson 3

Posted in News · 15 comments ·

  1. Really well done guys.
    The illustrations are class and perfectly illuminate the commentary.
    Looking forward to Lesson 4.

  2. Tony Brogan

    It is a brilliant discourse but stops short.

    It does not clearly state that this money is issued out of nothing with nothing to back it.
    it is then entered as an entry on the sovereign debt of the nations as national debt.
    That this debt is too large to be paid by the people. that the central bank is using the money to prop up Private institutions.These istitutions , chartered banks, must be allowed to fail.

    Finally, that it appears that this is a deliberate policy, not of blind people, that is designed to take the assets of the nations.

    These people behind the policy are enslaving the common people.

    David, the only way out is to break the chain of the central bank. We must rid us of the central banking system. You must see this but you do not follow to the logical conclusion. It must be said and then promoted. Then it must be acted upon and honest money restored.

    It is a matter of liberty or death.

    Best Regards


    • Grey Fox

      If all the nations in the world are in Debt, where did all the money go?

      • Paul Ferguson

        Good question.

        Not everyone is familiar with the idea that commercial banks create money. If you take a loan from a bank they increase your current account. No one else’s account is lowered and banks create both money and debt in the process.

        Less people are familiar with the following; If you make a loan repayment the bank will lower your current account and lower your debt. Again, this is a stand alone transaction, no-one else’s account is increased and the money no longer exists. Money is deleted from the economy through loan repayments. This is why there is less money during a recession.

        I hope this helps,

        Paul Ferguson
        Sensible Money

  3. Paul Ferguson

    Not a bad analysis but as Tony pointed out it does stop short.

    Central banks can create liquidity for banks in the form of new central bank reserves. Commercial banks use these reserves to pay each other. However they are not in circulation.

    For digital money to enter circulation someone has to organize a bank loan. Once a loan application is approved the bank will increase the borrower’s account without lowering any other account. This is the root cause of the debt crisis since banks create both money and a corresponding debt.

    Even though banks are heavily capitalized and fully liquid this may not lead to inflation since not many people are willing or able to organize bank loans.

    Ending this recession will most likely happen when Central Banks have the power to create digital money, as well as Cash.

    Paul Ferguson
    Sensible Money

    • Grey Fox

      If as you say,(and I agree) the only method for introducing money into circulation is by bank loans and we accept that repaying bank loans plus interest can only lead to borrowing more principle from the bank in order to repay more principle plus interest, does this not indicate that this model is terminal? If so is it possible to forecast the demise of the current model?
      I think we already accept that repaying our current debt is not within the ability of this generation and so I would have to ask, how many generations into the future must we indebt before we realise it is impossible to repay all the debt.
      I also submit that debt forgiveness is not the answer, not because I believe the banks should be repaid but because I believe debt forgiveness is only a sticky plaster and we would find our future generations back in this position again at some point.
      I believe that the banks will not volunteer to a fairer way but rather they will have to be legally/lawfully found to be inherently corrupt, but we had better have some system in place when this happens to replace the current system.
      I am currently studying Mike Montagne’s MPE (Mathematically Perfected Economy) and I am finding it very hard to disagree/argue with his solution, albeit turning conventional banking on its head.

      • Paul Ferguson

        This system is unsustainable and as David McWilliams requoted in Punk Economics 2 ‘If something cannot go on forever, it will stop’. There’s plenty of reason to suspect that we’re witnessing the end of fractional reserve banking as we know it right now, although most economists don’t fully appreciate that banks directly create digital money and even less understand that digital money used to repay bank debts doesn’t exist after the debt is settled. The economics profession is still a long way off acknowledging the source of the debt crisis.

        The main reason why I believe this recession is the last of its kind is that mortgages have always had room to increase in duration. However they take two concurrent careers to repay and cannot increase further.

        For more detail you can read our article published recently by News Beacon Ireland at

        I agree that debt forgiveness would lead to the same problems we’re experiencing today in the future and it would be great to use this opportunity to decide on a better way to run our economy.

        Our proposal for how to run the economy better can be found at

        Can you send me a decent link to MPE because I find the main website so scattered with information that I’m still unsure what it’s getting at.

        Paul Ferguson
        Sensible Money

  4. [...] New Punk Economics -Lesson 3 – is now out. See it on YouTube. tweetmeme_url = [...]

  5. FANTASTIC – I love the whiteboard graphics. They must have taken ages to dream up!

    I want to know how the banks got away with it. After all, $8 trillion isn’t much when compared to the stuff that is off-balance sheet. This was from last October …

    From a reputable source of financial information too.

    • “They must have taken ages to dream up!”


      It takes a lot of hard work to produce something like this. It may have missed a point but it is still a brilliant piece of work.

  6. [...] For an easy way to understand economics check out the new Punk Economics 3 on YouTube. tweetmeme_url = ''; Categories: Articles | Banks | Irish Independent Next Article: Re Eircom Examinership this week, thoughts from 2000 on similarity between Railway Mania and Eircom Upload a Gravatar to include a profile picture with your comment. Add your comment below. Click here to cancel reply. You must log in to post a comment. April 3, 2012 Re Eircom Examinership this week, thoughts from 2000 on similarity between Railway Mania and Eircom April 4, 2012 Our bailed out banks are in process of going bust again March 30, 2012 Punk Economics – Lesson 3 February 10, 2012 Audio: The Champagne is Flowing Again January 4, 2012 David McWilliams Interview with Alistair Darling Speaking News Interviews Podcasts Publications – The Pope's Children – The Generation Game – Follow the Money – Addicted to Money Articles – Banks – Celtic Tiger – Debt – Euro – International Economy – Ireland – Irish Economy – Irish Independent – Markets – People – Politics – Property – Sunday Business Post Home About Contact Register Subscribe Log In Edit your Profile Manage Subscriptions With Bernanke saying no more QE yesterday 'n mtks wobbling, could message of Punk Economic 3 come sooner than expected? David on Twitter © David McWilliams 2011 Web Design by Susan Gallagher Design [...]

  7. Adam Byrne

    What about auctioning off those works of art for a good cause David?

    The art has improved so much, even since the first one.

  8. Adam Byrne


    David will be giving a talk at NUI Maynooth next Tuesday, 24th April at 3pm in lecture hall JH3 (in the John Hume building).

    The title is “Where we have been and Where we might be going”.

    More details on Facebook at:

    Feel free to come along.


    Adam Byrne.

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