Key Takeaways

Summary

1. Structure Matters: The location of debt on balance sheets (Loanable Funds vs. BOMD) completely changes system dynamics

2. Accounting Identity: Government deficit = Private sector surplus (always true, regardless of model)

3. Money Creation: In BOMD, both credit and government deficits create money; in Loanable Funds, money is only redistributed

4. Crisis Predictions:

   • Loanable Funds → inevitable crisis with sustained deficits
   • BOMD → stable debt/GDP ratio with sustained deficits

5. Evidence: Central banks endorse BOMD model; real-world operations match BOMD, not Loanable Funds

6. Policy Implications: Believing the wrong model leads to harmful policies (e.g., austerity reducing private wealth)

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