How is monetary policy sustainable, or even fair, in the current economy?

IMO I think this is a good question. It's thought out and asks some interesting questions.

However, it covers several topics which makes it difficult to answer in a single answer.

I suggest we break it down, perhaps into five questions.

Additionally, the phrasing of some of the questions aren't really economics.

For example:

How is this fair for every other constituent in the economy who has earned money the hard way, by working and not by generating it so freely like interest returns on this free money do for commercial banks? How is inflation fair, as populations increase and every time someone gets a bank loan, new money is added to the economy over time, de-valuating everyone else's existing money?

Economics isn't really about assessing 'fairness', that would be perhaps philosophy.se.

However, this question could ask 'Do banks create money out of thin air?', or 'What value are banks contributing to the economy?'.


I think this question has three problems (that is why I voted to close it):

  • It is not one question but 5, so he should ask 5 questions (or less if he is able to combine some of them).

  • In parts it is more a rant than a question and does not even try to be objective. (i.e., "This means that we are destroying the world for our kids who are growing up in completely unsustainable times as the value of everything will approach infinity.")

  • The last one is only a minor thing: To be answerable someone should replace the "non-economic terms" (as you have mentioned) into economic terms.

So, I would say: Close, as it is not a SE-style question; If it is split up into 5 questions then reopen and edit to remove the rant part (any maybe clarify the language).


Agreed it should be split.

As a researcher in this area there are a number of simple mistakes that keep getting made about banking operations - the author's interpretation of interest rates being one of them - which also keep coming up. It would be nice to have answers to these kinds of issues we could just refer back to.


I agree that this question should have been asked in five separate installments. I also voted to close.

However I am worried that some people will think that we are defending economic dogma and hiding behind technicalities to do so. Granted the people thinking this are probably not economists or researchers. I am guessing that the OP, who has not commented since, will not repost the question. Perhaps we should each take one fifth and repost it ourselves?

  • $\begingroup$ I have wondered about doing exactly this. Part of the problem is that 'economic dogma' is unfortunately also incorrect in part. While this is being corrected - the Bank of England paper is part of an effort to do this - there is huge confusion. I think if we do take the time to explain the issue in a well founded way, we can help with this. F.ex. where does interest come from? Well it's [debit customer, credit bank] the bank then recognises the income, spends it on salaries etc., and it flows around the economy back into customer accounts. $\endgroup$ – Lumi Jun 2 '15 at 16:55

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