Morgan Spurlock has a new set of films out supposedly explaining how the economy works. They’re 20 short films that explain various elements of the monetary system and economy. The only problem is that the films are filled with basic errors. For instance:
- The film on “What is Money” uses a money multiplier model which, as I’ve explained a million times, is totally wrong. The money multiplier is a myth.
- They use a barter economy in an early video to try to explain how the market works. Of course, a barter system is nothing like a monetary system and this obsession with barter is part of why so many people misunderstand how the modern monetary system actually works.
- In the video on the Federal Reserve they state that the Fed “doesn’t even answer to Congress”. The depiction is of a Central Bank that is some reckless and independent entity that does nothing but “print money” and hurt the economy by causing inflation and bailing out banks. Actually, the Fed does answer to Congress, was created by an Act of Congress and does not really “print money” in any meaningful sense as I’ve explained multiple times in my explanations of Quantitative Easing. Also see “Common Myths About the Federal Reserve”.
- The same video says the Fed “controls the money supply”. Actually, the Fed controls the overnight interest rate which only indirectly impacts the supply of money in the banking system at any given time. The banking system controls the supply of money and the Fed only facilitates the use of this money. See here for more details.
- The film even states that the Fed has a triple mandate, one of which is to “help determine interest rates for people trying to buy homes”. That’s a real quote. Of course, the Fed has a dual mandate of full employment and price stability.
That only scratches the surface here. I hate to be overly critical, but this is junk economics that perpetuates dangerous myths and does a great disservice to anyone who has a genuine interest in trying to understand how the economy really works. If you want to watch a useful film on the monetary system and the economy then try Ray Dalio’s 30 minute film. It will save you a ton of time and help you avoid having to unlearn some of the concepts you might think you’re learning from the Spurlock films.