Money from First Principles

Based on Steve Keen’s analysis for engineers

This series breaks down the fundamental principles of money, banking, and government finance using first-principles reasoning and CircuitJS simulations.

Chapters

  1. Introduction: First Principles vs. Reasoning by Analogy
    Why reasoning by analogy fails for government finances and the accounting foundation

  2. Transaction Tables (Godley Tables)
    Modeling economic flows with stock-flow consistent tables

  3. Two Competing Models of Banking
    Part 1: Loanable Funds Model

  4. Adding Government Sector
    Part 2: Loanable Funds with Fiscal Policy

  5. Endogenous Money Model (BOMD)
    Part 3: Bank-Originated Money and Debt

  6. Further Bond Operations
    Part 4: Open Market Operations and Central Bank Tools

  7. The Fundamental Identity
    Sectoral balances and the key insight

  8. Policy Implications
    What each model predicts for government policy

  9. Advanced Topics
    Money supply, inflation, trade, and capital adequacy

  10. Exercises
    Hands-on model building and experimentation

  11. Key Takeaways
    Summary of main insights

  12. Further Reading
    Resources for deeper exploration

TipStart the Series

Ready to begin? Start with the Introduction →

This analysis demonstrates that first-principles reasoning, grounded in double-entry bookkeeping, leads to radically different conclusions than reasoning by analogy from households to governments.