Hey, Mystic (and/or anyone else who might be interested). Okay, here’s at least one of Keen’s presentations (in writing – very recent, in fact) in which he includes the nitty gritty of double-entry bookkeeping to illustrate the mechanism of bank lending as it actually *increases* the money supply, and, therefore, aggregate demand (at least temporarily).
The accounting aspect is still way too new to me to quite follow him. I don’t really know the stuff of debits and credits (in accounting terms, rather than common use terms). But it sounds like you do, Mystic (and maybe some other folks here know accounting double-entry bookkeeping fairly well too).
So check out the link below, about half way down the page, where the heading reads, “The Mechanism.”
Below that, and following the lead of MMTers, Keen starts with a very simplified model, and then graduates to a more mixed, closer to real world, model. And he shows how various factors relate, which includes the govt. sector (which brings into play the Central Bank – as it sort of straddles the govt. sector and the private banking sector and the private non-bank sector)… and which also includes the banking sector and, ultimately, the non-banking private sector.
And he gets into a discussion of the role reserves play in loan making and (I *think* this is what he’s saying) how they help to facilitate loans, but, more importantly, how they are basically conduits, rather than at the heart of the matter, of created money from the government sector getting out to the private, nonbanking sector and increasing the money supply (temporarily, until the loans are paid back).
As he says it (and works to illustrate):
The flow of loans by the private banking sector to the non-bank public is modeled as a transfer of the banking sector’s assets from reserves to loans, matched by the private non-bank sector depositing the flow in its deposit accounts. The two operations cancel each other out on the aggregate private banking sector reserve account, but increase the loan assets of the banking sector and the deposit liabilities at the same time. Reserves are thus needed to settle transactions between individual banks, and as a conduit for the government sector’s financial dealings with the private non-bank sector, but at the aggregate level are neither a requirement for, nor a constraint upon, private bank lending.” (emphasis mine)
If you (or anybody else who might be interested) get a chance to look at this (especially from about midway down and afterwards, with an eye out for the subheading, “The Mechanism”), I hope you’ll let me know what you think: