Our debt crisis explained by Bezemer

Debt: The Good, the Bad and the Ugly is an explanation of the monetary system by Dutch economist Dirk Bezemer (University Groningen). A must see for anyone who wants to understand the current crisis. It consists of four parts. Dirk explains the history of money, bubbles, crises and gives some solutions.

Main message: we are in a debt crisis because banks created too much money (in the form of loans) for speculative assets. In other words, most bank credit is not used for the real economy (productivity), but for price speculation. Unfortunately most of our politicians propose measures that do not address this private debt problem. They extend the crisis by ignoring the cause.

Dirk states we can solve the crisis if we restructure debt, regulate banks and  increase credit for productive activities. These are good ideas. My main criticism of Bezemer is that he doesn’t question the privilege of banks to create money. He wants to regulate and to shrink current banks in stead of changing the system. But his analysis is strong. His final remark is even brilliant:

“But we can only do this, when we first start thinking again about how our economy is shaped by credit and debt.”