Debunking Economics - the podcast Does monetary policy work?
16 snips
Feb 11, 2026 They debate whether higher interest rates actually tame inflation when supply and capacity limits are the real problem. They explore how mortgage-driven house-price growth and bank credit fuel asset bubbles. They question mainstream monetary theory and highlight fiscal, tax and housing-policy levers that could better target inflation. They discuss redirecting bank lending toward productive investment and protecting vulnerable borrowers.
AI Snips
Chapters
Books
Transcript
Episode notes
Policy Encourages Excessive Mortgage Leverage
- Government incentives for high mortgage leverage push people into large debts and inflate house prices.
- Steve Keen highlights mortgage insurance and deposit-subsidy policies as bank-friendly and inflationary for assets.
Interest-Rate Changes Hit Marginal Borrowers
- Many households don't change monthly payments when rates fall, so rate moves unevenly affect spending.
- Rate hikes mostly hurt marginal borrowers and can later cause bankruptcies if unemployment rises.
Banks Create Money, Not Just Savers
- DSGE models and loanable-funds thinking ignore banks' role in creating money and the debt-driven cycle.
- Steve Keen argues central banks control an illusionary 'steering wheel' while private credit fuels booms and busts.
