I wrote a post a couple of weeks ago (Economists on the Skids) about the clear testability of counterintuitive ideas about mechanics and the much less clear testability of counterintuitive theses in economics.
As I understand it, all money is really an IOU created and issued by someone. When McDonald’s gives you coupons, you’re taking their credit; similarly with Frequent Flier Miles, and similarly with a bank that lends you U.S. dollars. All of these institutions are creating money, their own currency.
Economists keep battling it out.
Martin Wolf in the latest FT comes across with heartfelt empathy for the difficult life of a central banker, someone whose limitless narrow power over the economy doesn’t extend to troubled individual consumers. Wolfe is against austerity but recognizes the political difficulties.