Debunking Economics - the podcast More Central Bank Independence?
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Apr 22, 2026 
Steve Keen, economist famous for critiquing neoclassical theory and studying debt-driven instability, challenges claims for greater central bank independence. He disputes mainstream money models and stresses bank-created money, private debt dynamics, non-bank lending risks, and the need to refocus central banks on realistic financial-stability policing rather than micromanaging GDP.
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Mainstream Monetary Theory Is A Fantasy
- Mainstream monetary theory relies on a fantasy model that assumes perfect foresight and money neutrality.
- Steve Keen argues this leads central banks to over-rely on interest rates while ignoring real money creation and private debt dynamics.
Greenspan Put Created Expectation Of Bailouts
- Greenspan created a practical precedent by intervening after the 1987 crash, effectively establishing a 'Greenspan put' rescuing merchant banks.
- Keen recounts that intervention changed expectations and made authorities routinely prevent merchant bank failures.
Money Supply Comes From Banks And Fiscal Deficits
- Banks and government deficits are the two domestic drivers of money supply growth, not central bank interest rates alone.
- Keen stresses bank lending creates deposits (money) and private debt rises with money, so rate changes often fail unless raised to extreme levels.
