Mainstream econ says:
Households save → banks lend savings → firms invest.

Robinson flipped it: investment comes first, savings follow.

Once you see how money & banking work, it’s hard to unsee.
🧵1/10 The Goodwin growth cycle shows it:
Investment drives output & jobs → higher employment boosts wages → rising wages can squeeze profits → investment slows → cycle repeats.

It starts with investment decisions, not household savings.
🧵2/10

Mainstream macro blames crises on public debt or bad policy.

History tells a different story, The biggest crashes follow private debt booms , when households & firms load up on credit faster than incomes grow.
🧵1/8 1929, Japan’s 1990s bust, the 2008 GFC, all preceded by surging private debt-to-GDP.

In each case, public debt rose after the crisis, as governments absorbed the fallout.

Cause and effect are backwards in the textbook story.
🧵2/8

Fractional reserve banking" still shows up in textbooks, news, and even heterodox debates.

But the concept is dead.

Modern banking doesn’t work that way, and clinging to the term misleads more than it explains.
🧵1/9 Traditionally, it meant banks held a fixed % of deposits in reserve (say 10%) and lent out the rest.

But today?

There are no reserve requirements in countries like the U.S.

Banks aren’t lending most of your money. They aren’t required to hold any.
🧵2/9

Neoclassical models treat fiscal policy as neutral in the long run, only useful in “crises.”

But this idea rests on flawed assumptions: full employment, crowding out, Ricardian equivalence, and perfect markets.

Let’s unpack why none of these hold.
🧵1/7 Assumption: the economy naturally returns to full employment.

Reality: underemployment, labor market hysteresis, and demand shortfalls are persistent.

When you assume away slack, you assume away the need for fiscal intervention.
🧵2/7

Mainstream macro relies on rational expectations: agents are assumed to know the model and forecast the future accordingly.

But real economies aren't solved backwards.
The Deep Minsky model throws this out, and models how expectations actually evolve.
🧵1/7 Instead of perfect foresight, Deep Minsky agents adapt using feedback:
-Flows inform future behavior
-Perceived trends shift confidence
-Expectations are path-dependent

This lets the model evolve historically, not jump from equilibrium to equilibrium.
🧵2/7

In the 1960s, MIT's Jay Forrester created a simulation that changed how we think about supply chains: the Beer Game.

It revealed that even stable demand can cause wild production swings—now known as the bullwhip effect.
🧵1/10 The game has 4 roles: Retailer, Wholesaler, Distributor & Factory.

Each tries to meet demand & manage inventory—but only sees demand after it’s placed. That delay leads each player to guess, and missteps quickly multiply.
🧵2/10

Mainstream macro uses the NAIRU, or the Non-Accelerating Inflation Rate of Unemployment, as a constraint.

If unemployment falls “too low,” inflation is expected to rise uncontrollably.

But this framework misrepresents both data and Phillips’ original insight.
🧵1/7 In 1958, Phillips published a paper showing a statistical relationship between wage inflation and unemployment in the UK, not a structural law.

He didn’t claim there was a “natural” rate or a threshold.

It was a historical pattern, not a causal rule.
📎 Phillips (1958)
🧵2/7

Macroeconomic Price Level Theories.

I've been trying to develop a coherent set of equations for the price level in my #systemdynamics model.

My conclusion on the matter: Its important to understand that these theories are not mutually exclusive. 🧵Thread 1/8 Quantity Theory of Money (QTM):

QTM suggests that the price level is directly linked to the money supply. More money = higher prices (assuming other factors remain constant). It's a fundamental idea in monetary economics.🧵Thread 2/8

I'm about 80% done my National Economic #systemdynamics model, Still have some subsystems that need to be added.

Should have a beta version for download (Using Minsky software) sometime in the next week on my Patreon page. 🧵Thread 1/16 It's stock flow consistent with a foreign sector. There is over 300 variables and parameters at this point. and about 90 feedback loops. I have 17 units of measure including time. 🧵2/16

Can we spend our way to a greener future? The World models demonstrate we can't. GDP and CO2 (and other pollutants) fit pretty tightly. We might just spend our way into a climate disaster. Let's be clear were sacrificing our existence for a material standard of living.🧵1/4 In the world model, if I increase capital investment in the aggregate by 25% in 2025, I am able to maintain the material standard of living at the cost of the biosphere. Notice the food ratio does not increase with the additional capital investments. 🧵2/4

A little message for "some of you economists out there". Let’s say you borrow $100,000 to build a home and the homebuilder banks at your bank. The bank ends up with a $100,000 asset and a $100,000 liability (the loan and the deposit – loans create deposits). 🧵 Thread 1/14 The homebuilder will end up with $100,000 in retained earnings and you will end up with $100,000 in debt. If you net out the investment then the private sector has no change in financial assets and you might presume the private sector is no better off than it was before. 🧵 2/14

Bonds always finance government spending, which is beyond what the balance is in the "Treasury Account" at the Central Bank. Governments DO NOT create reserves, and Governments DO NOT create deposits. #Page1 #MMT Let’s start with the assumption that the Gov wants to spend $60 billion, but the treasury account only has a $50 billion balance in it. I will also assume by law the treasury account cannot go negative to adhere to some self-imposed law. #Page2

Loanable Fund vs Endogenous Money.

A short film stylized in an old fashion silent movie-type format and utilizing the #Minsky #systemdynamics software.

Download Minsky for free: sourceforge.net/projects/minsk… (1/16) Let's start with what you learn in the textbooks and hear on the news. It's the loanable fund's fallacy. (2/16)

I have been reading some comments from the #MMT community about @AnnPettifor latest blog in relation to taxes that don't fund government spending but bonds do. I think I can reconcile both Ann's position and MMTs. It is true taxes are collected after gov spending (1/6) Even coming from a non MMT position, it is obvious the tax collection and spending never match, as spending bills are announced and some plan of tax rates are proposed to balance the gov spending after the fact. (2/6)

Thanks for all the support in my first year on Twitter. The likes and retweets really helped and I'm forever grateful. Look forward to all the interactions next year!
@ProfSteveKeen, @systemdynamics_, @WPISDclub, @JoYohana, @planksip, @samvega, @adeelecon, (1/4) @CheeseMacro, @cchristinektang, @BokcvO_ok, @sdgrumbine, @StevenHailAus, @banjopaddler, @paradigms_new, @BrianDRPM, @RobinOfBroccoli, @DarrellKwei, @MarkFabian21, @FancyandTheCity, @thwittig, @JonathanKadmon, @WilesWj, @AvisM, @rick_carmody, @robjpearce, @tomfoster66 (2/4)