A big part of Monetary Realism is about explaining things through what I refer to as stylized facts. And one way to hone in on stylized facts is by focusing on accounting. We do a lot of that with MR. Whether it’s the sectoral balances, S=I+(S-I), explaining banking concepts or trying to explain QE.
JKH rightly says “If you can’t explain it with accounting, you can’t explain it.” And that brings me to a very important blog that a MR reader started earlier this year. Tom Brown has provided the world with an invaluable resource for understanding money and banking. He has gone through the accounting in excruciating detail to help better educate people about how banking actually works. I don’t know of a much better resource on banking.
So, if you haven’t checked it out then go here and check it out. It’s in the dropdown under education here permanently. And remember, if someone tries to explain banking to you without the right accounting then tell them they’re not explaining it correctly. And then point them to Tom Brown’s site so they get it right.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.