The economic crisis occurred because of a failure of both economic theory and economic management. Economic theory is dominated by the “Neoclassical” school of thought, and this school’s understanding of banks, money and debt is seriously deficient. Attempts to control the macroeconomy have been based upon this theory, and have therefore failed. Policies to control the banking system need to be based on a realistic model of how it operates, and this is the model of endogenous money.
Read also: The Debt and Financial Crisis