Naturally, I support the endogenous money theory, as it has all the evidence behind it. Economists even seem to acknowledge that the standard textbook story is somewhat behind the times, although they then cling to the money multiplier model, choosing to add epicycles instead of abandoning their core theory (they have a habit of doing this).
As far as I’m concerned, the evidence is so overwhelmingly opposed to exogenous money the burden of proof is on them. So here are a couple of questions:
(1) Why do expansions of the broader measures of money generally precede rather than succeed expansions of the base? Surely in the money multiplier model banks would require reserves before expanding lending? Evidence:
There is no evidence that either the monetary base or M1 leads the cycle, although some economists still believe this monetary myth. Both the monetary base and M1 series are generally procyclical and, if anything, the monetary base lags the cycle slightly.
(2) A corollary of (1): why do fiat expansions not necessarily result in M1+ expansions? For example 2008:
and similar results can be found during the onset of the Great Depression:
(3) Surely, if banks can create deposits with loans (which they simply can in the real world), by definition a loan adds new purchasing power and increases nominal demand? So by extension, the level of private debt in the economy is crucial to understanding it? How else do you explain the robust empirical link between private debt growth and indicators such as unemployment, housing prices and GDP?
Attempts to answer this framework should also avoid the standard circular tactic of assuming the money multiplier, then describing everything in terms of the money multiplier. But even when doing that, I just don’t see how you can square all the evidence with the exogenous money model. Prove me wrong.