Relearning Economics
@relearningecon.bsky.social
A system dynamicist specializing it's application for Macroeconomic Forecasting. I am the Chief Research Officer at Modern Macro Technologies
https://www.relearningeconomics.com
https://www.relearningeconomics.com
Economists don't misunderstand money because it's mysterious.
They misunderstand it because their models assume it away.
If you want to understand the real economy, follow the balance sheets, not the textbooks.
🧵12/12
www.patreon.com/c/relearning...
They misunderstand it because their models assume it away.
If you want to understand the real economy, follow the balance sheets, not the textbooks.
🧵12/12
www.patreon.com/c/relearning...
Relearning Economics | Patreon
Complex Real World Economics using System Dynamics
www.patreon.com
November 15, 2025 at 8:00 AM
Economists don't misunderstand money because it's mysterious.
They misunderstand it because their models assume it away.
If you want to understand the real economy, follow the balance sheets, not the textbooks.
🧵12/12
www.patreon.com/c/relearning...
They misunderstand it because their models assume it away.
If you want to understand the real economy, follow the balance sheets, not the textbooks.
🧵12/12
www.patreon.com/c/relearning...
Until macro takes money seriously, banks, balance sheets, liquidity, payment systems, instability, it'll keep missing what actually drives modern economies.
📎 Minsky (1986)
🧵11/12
📎 Minsky (1986)
🧵11/12
November 15, 2025 at 8:00 AM
Until macro takes money seriously, banks, balance sheets, liquidity, payment systems, instability, it'll keep missing what actually drives modern economies.
📎 Minsky (1986)
🧵11/12
📎 Minsky (1986)
🧵11/12
The reality is simple:
Money is a set of balance-sheet relationships.
Its creation is institutional.
Its effects are distributional.
And the real constraint is resources, not financial assets.
🧵10/12
Money is a set of balance-sheet relationships.
Its creation is institutional.
Its effects are distributional.
And the real constraint is resources, not financial assets.
🧵10/12
November 15, 2025 at 8:00 AM
The reality is simple:
Money is a set of balance-sheet relationships.
Its creation is institutional.
Its effects are distributional.
And the real constraint is resources, not financial assets.
🧵10/12
Money is a set of balance-sheet relationships.
Its creation is institutional.
Its effects are distributional.
And the real constraint is resources, not financial assets.
🧵10/12
Why does all this persist?
Because the models came first, and reality was squeezed in later.
It's easier to bolt on frictions than rethink the core assumptions about equilibrium, rational expectations, and loanable funds.
🧵9/12
Because the models came first, and reality was squeezed in later.
It's easier to bolt on frictions than rethink the core assumptions about equilibrium, rational expectations, and loanable funds.
🧵9/12
November 15, 2025 at 8:00 AM
Why does all this persist?
Because the models came first, and reality was squeezed in later.
It's easier to bolt on frictions than rethink the core assumptions about equilibrium, rational expectations, and loanable funds.
🧵9/12
Because the models came first, and reality was squeezed in later.
It's easier to bolt on frictions than rethink the core assumptions about equilibrium, rational expectations, and loanable funds.
🧵9/12
Inflation gets the same treatment.
It’s still framed as too much money chasing too few goods, ignoring energy, supply chains, administered prices, and global shocks.
Money is blamed because it's the simplest story.
📎 Storm (2022)
🧵8/12
It’s still framed as too much money chasing too few goods, ignoring energy, supply chains, administered prices, and global shocks.
Money is blamed because it's the simplest story.
📎 Storm (2022)
🧵8/12
November 15, 2025 at 8:00 AM
Inflation gets the same treatment.
It’s still framed as too much money chasing too few goods, ignoring energy, supply chains, administered prices, and global shocks.
Money is blamed because it's the simplest story.
📎 Storm (2022)
🧵8/12
It’s still framed as too much money chasing too few goods, ignoring energy, supply chains, administered prices, and global shocks.
Money is blamed because it's the simplest story.
📎 Storm (2022)
🧵8/12
When the government sells bonds, it’s not raising money, it's just swapping bank reserves for interest-bearing securities.
All that changes is the form of the private sector's assets, not the government’s ability to spend.
The accounting moves, the capacity doesn't.
🧵7/12
All that changes is the form of the private sector's assets, not the government’s ability to spend.
The accounting moves, the capacity doesn't.
🧵7/12
November 15, 2025 at 8:00 AM
When the government sells bonds, it’s not raising money, it's just swapping bank reserves for interest-bearing securities.
All that changes is the form of the private sector's assets, not the government’s ability to spend.
The accounting moves, the capacity doesn't.
🧵7/12
All that changes is the form of the private sector's assets, not the government’s ability to spend.
The accounting moves, the capacity doesn't.
🧵7/12
The confusion gets worse when it comes to government finance.
A currency-issuing government doesn't borrow like a household.
It spends by creating new liabilities and taxes by deleting them.
Bond sales just swap one type of private asset for another.
📎 Kelton (2020)
🧵6/12
A currency-issuing government doesn't borrow like a household.
It spends by creating new liabilities and taxes by deleting them.
Bond sales just swap one type of private asset for another.
📎 Kelton (2020)
🧵6/12
November 15, 2025 at 8:00 AM
The confusion gets worse when it comes to government finance.
A currency-issuing government doesn't borrow like a household.
It spends by creating new liabilities and taxes by deleting them.
Bond sales just swap one type of private asset for another.
📎 Kelton (2020)
🧵6/12
A currency-issuing government doesn't borrow like a household.
It spends by creating new liabilities and taxes by deleting them.
Bond sales just swap one type of private asset for another.
📎 Kelton (2020)
🧵6/12
Yet macro models keep leaning on a representative household whose savings supposedly fund investment.
This imaginary person is doing the work actual balance sheets do.
It's sh#tty physics envy. Nothing more than that.
🧵5/12
This imaginary person is doing the work actual balance sheets do.
It's sh#tty physics envy. Nothing more than that.
🧵5/12
November 15, 2025 at 8:00 AM
Yet macro models keep leaning on a representative household whose savings supposedly fund investment.
This imaginary person is doing the work actual balance sheets do.
It's sh#tty physics envy. Nothing more than that.
🧵5/12
This imaginary person is doing the work actual balance sheets do.
It's sh#tty physics envy. Nothing more than that.
🧵5/12
This isn’t fringe.
Central banks are clear, loans create deposits, the need for reserves comes after and reserves are supplied as needed.
The whole sequence runs opposite of what most economists still learn.
📎 Bank of England (2014)
🧵4/12
Central banks are clear, loans create deposits, the need for reserves comes after and reserves are supplied as needed.
The whole sequence runs opposite of what most economists still learn.
📎 Bank of England (2014)
🧵4/12
November 15, 2025 at 8:00 AM
This isn’t fringe.
Central banks are clear, loans create deposits, the need for reserves comes after and reserves are supplied as needed.
The whole sequence runs opposite of what most economists still learn.
📎 Bank of England (2014)
🧵4/12
Central banks are clear, loans create deposits, the need for reserves comes after and reserves are supplied as needed.
The whole sequence runs opposite of what most economists still learn.
📎 Bank of England (2014)
🧵4/12
Banks don't lend out savings.
They create new deposits when they make a loan, literally by typing numbers into an account.
What actually constrains them is capital rules, regulation, and credit risk.
📎 BIS (2016)
🧵3/12
They create new deposits when they make a loan, literally by typing numbers into an account.
What actually constrains them is capital rules, regulation, and credit risk.
📎 BIS (2016)
🧵3/12
November 15, 2025 at 8:00 AM
Banks don't lend out savings.
They create new deposits when they make a loan, literally by typing numbers into an account.
What actually constrains them is capital rules, regulation, and credit risk.
📎 BIS (2016)
🧵3/12
They create new deposits when they make a loan, literally by typing numbers into an account.
What actually constrains them is capital rules, regulation, and credit risk.
📎 BIS (2016)
🧵3/12
The textbook story starts with loanable funds: households save, banks lend those savings, and interest rates tidy everything up.
Nice f#$king story.
Also wrong.
🧵2/12
Nice f#$king story.
Also wrong.
🧵2/12
November 15, 2025 at 8:00 AM
The textbook story starts with loanable funds: households save, banks lend those savings, and interest rates tidy everything up.
Nice f#$king story.
Also wrong.
🧵2/12
Nice f#$king story.
Also wrong.
🧵2/12
By the system exhibiting chaotic behavior vs periodic behavior
October 3, 2025 at 3:46 AM
By the system exhibiting chaotic behavior vs periodic behavior
Crazy part: photons move only through space, so from their perspective no time passes at all. Mind = blown....
September 22, 2025 at 1:48 AM
Crazy part: photons move only through space, so from their perspective no time passes at all. Mind = blown....
If you want to prevent crises, track private debt-to-GDP, not just inflation.
The warning signs are always there if you’re willing to look.
Check out all my blogs out on this topic an more on my Patreon:
🧵8/8
www.patreon.com/c/relearning...
The warning signs are always there if you’re willing to look.
Check out all my blogs out on this topic an more on my Patreon:
🧵8/8
www.patreon.com/c/relearning...
Get more from Relearning Economics on Patreon
Complex Real World Economics using System Dynamics
www.patreon.com
August 12, 2025 at 5:09 AM
If you want to prevent crises, track private debt-to-GDP, not just inflation.
The warning signs are always there if you’re willing to look.
Check out all my blogs out on this topic an more on my Patreon:
🧵8/8
www.patreon.com/c/relearning...
The warning signs are always there if you’re willing to look.
Check out all my blogs out on this topic an more on my Patreon:
🧵8/8
www.patreon.com/c/relearning...
Policy failure #2: obsessing over public debt while letting private debt run wild.
It’s the household mortgage bubble, not the deficit, that crashes economies.
🧵7/8
It’s the household mortgage bubble, not the deficit, that crashes economies.
🧵7/8
August 12, 2025 at 5:09 AM
Policy failure #2: obsessing over public debt while letting private debt run wild.
It’s the household mortgage bubble, not the deficit, that crashes economies.
🧵7/8
It’s the household mortgage bubble, not the deficit, that crashes economies.
🧵7/8
Policy failure #1: ignoring private credit growth in macro models.
DSGE model frameworks treat debt as neutral or irrelevant.
The cycle is driven by leverage, but the models are blind to it.
🧵6/8
DSGE model frameworks treat debt as neutral or irrelevant.
The cycle is driven by leverage, but the models are blind to it.
🧵6/8
August 12, 2025 at 5:09 AM
Policy failure #1: ignoring private credit growth in macro models.
DSGE model frameworks treat debt as neutral or irrelevant.
The cycle is driven by leverage, but the models are blind to it.
🧵6/8
DSGE model frameworks treat debt as neutral or irrelevant.
The cycle is driven by leverage, but the models are blind to it.
🧵6/8
Minsky called it the “financial instability hypothesis”:
Stability breeds complacency, risk-taking rises, debt loads grow, until the system tips.
🧵5/8
Stability breeds complacency, risk-taking rises, debt loads grow, until the system tips.
🧵5/8
August 12, 2025 at 5:09 AM
Minsky called it the “financial instability hypothesis”:
Stability breeds complacency, risk-taking rises, debt loads grow, until the system tips.
🧵5/8
Stability breeds complacency, risk-taking rises, debt loads grow, until the system tips.
🧵5/8