The understanding of money and debt have been regressing for one hundred years.

Credit creation theory -> fractional reserve theory -> financial intermediation theory

This monetary theory makes the financial system look much safer than it is and has led to debt being missed out from neoclassical economics and today’s economic models.

This is why no one in the mainstream saw 2008 coming.

“The movement from the accurate credit creation theory to the misleading, inconsistent and incorrect fractional reserve theory to today’s dominant, yet wholly implausible and blatantly wrong financial intermediation theory indicates that economists and finance researchers have not progressed, but instead regressed throughout the past century. That was already Schumpeter’s (1954) assessment, and things have since further moved away from the credit creation theory.”

“A lost century in economics: Three theories of banking and the conclusive evidence” Richard A. Werner

http://www.sciencedirect.com/science/article/pii/S1057521915001477

This is the sort of forecast you get when you leave debt out of your models.

The IMF predicted Greek GDP would have recovered by 2015 with austerity.
By 2015 it was down 27% and still falling.

It makes a big difference.

Luckily Richard Koo has been able to explain things to the IMF
https://www.youtube.com/watch?v=8YTyJzmiHGk

To understand his explanation you need the “credit creation theory” of money.

Neo-liberalism has been a debt fueled success leading to an impoverished future.

To mess things up like this it was essential no one understood the true nature of debt with “financial intermediation theory”

The UK:

https://cdn.opendemocracy.net/neweconomics/wp-content/uploads/sites/5/2017/04/Screen-Shot-2017-04-21-at-13.53.09.png

The US:

https://cdn.opendemocracy.net/neweconomics/wp-content/uploads/sites/5/2017/04/Screen-Shot-2017-04-21-at-13.52.41.png

Unfettered capitalism led to the debt deflation of the Great Depression.

In the 1920s they did exactly the same as we have just done, used debt to maintain consumption and used debt for speculation.

They even used neoclassical economics which doesn’t look at private debt in the economy, so they didn’t see the problem as it was developing.
We can’t get the economy moving again because of the repayments on the debt that already exists.

Ask someone that saw 2008 coming in 2005, like Steve Keen.