The education business

Two insightful articles by Adam Keesling (Napkin Math) on education and content creation:

Why MasterClass isn’t really about mastery (tldr: MasterClass doesn’t compete against universities, it sells credibility and inspiration)

Why software is more profitable than content (tldr: “Content products talk to humans, while software products talk to computers. That’s why the value of content decays faster than the value of software.”)

Alex Zhu (TikTok) also discusses the challenges of online content and learning at the beginning of this interview:

His key insights:

  • people want light content, both as consumers and as creators
  • education goes against human nature: most people use their smartphone for communication and entertainment, not to learn

So you want to be a banker

Want to be a lawyer? Go to law school.

Want to be a doctor? Go to med school.

Want to be a banker? Go to… bank school?

You don’t have to study economics to get into banking. Many bankers have degrees in philosophy, geography, mathematics, civil engineering, law, or history.

Bank managers don’t care that their employees have studied Old French poetry or Kant’s Kritik der reinen Vernunft. To employers, a university degree indicates perseverance and an ability to learn new things.

However, there are some specific things you can learn to get ahead. The following four skills will boost your career in finance. Continue reading “So you want to be a banker”

Bankers are people, too

My book is published!

Do you think banking is too hard for you? Are you convinced that all bankers are crooks? Would you like to follow the financial news, but you always get stuck on terms like derivatives, cryptocurrency or quantitative easing?

Then I have some good news. Continue reading “Bankers are people, too”

Stop calling banking ‘monetary intermediation’

Banks create money. To be more precise, when a bank grants a loan, it simultaneously creates a deposit. Bank deposits are functionally equivalent to cash.

The insight that bank lending creates money is a direct result of basic accounting, and has been explained many times. See for example the Bank of England, Positive Money, this blog, and most recently the Bundesbank (h/t Benjamin Braun) and Norges Bank (h/t Frank van Lerven).

A while ago, Daniela Gabor pointed out that economists have know this for a long time (see the replies to her tweet for even earlier references):

I wouldn’t be surprised if the Renaissance bankers who understood double-entry bookkeeping were well aware of the fact that they were creating money.

So how is it possible that some famous economists still don’t know that banks really do create money? Why do they insist that banks lend out savings?

Economics education apparantly fails to pass on some elementary knowledge to students.

It doesn’t help that the activities of banks are often described as ‘monetary intermediation’. Intermediation implies that bankers are the middle men between borrowers and savers.

Monetary intermediation is even an official term in the statistical classification of economic activities in Europe:

The English description of NACE code 64.1 is ‘monetary intermediation’. Source

However, there exists a much better description for banks. In Dutch, the formal description of banks is “geldscheppende financiële instellingen”, which literally means “money-creating financial institutions”:

The Dutch description of NACE code 64.1 means ‘money-creating financial institutions’. Source

As far as I can tell, Dutch is the only European language in which banks are described as active money creators1. All other languages use ‘monetary intermediation’.

Maybe everybody should take a cue from Dutch and start saying ‘money creating institutions’ from now on, so we don’t have this debate a hundred years from now 😛

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I explain how banks create money in Bankers are people, too. After you’ve read my book, you’ll know more about banking than many PhD economists!

Update 20 October 2019: the link to the Bank of England paper was broken. It’s fixed now, thanks to Anna for notifying me!