Or maybe not. But either way I'm going to say it.

There's a fine line somewhere between: just fixing obvious typos in what someone actually said; and totally changing what they actually said. Or maybe there is no line, and it's just a continuous slope. Anyway, I'm going to cross that fine line here, and go a long way down that slope. But I don't really care. Because ideas are more important than our fallible attempts to express them. So while it would be sorta neat if Steve said "That's exactly what I was trying to say!", it probably won't happen, and it doesn't really matter, and it's much more important if people say "Saying it that way makes sense". Because it does make sense, if we say it this way.

So with that very big caveat understood, here's what I think Steve Keen is maybe trying to say:

Aggregate planned nominal expenditure equals aggregate expected nominal income plus amount of new money created by the banking system minus increase in the stock of money demanded. (All four terms in that equation have the units dollars per month, and all are referring to the same month, or whatever.)

And let's assume that people actually realise their planned expenditures, which is a reasonable assumption for an economy where goods and productive resources are in excess supply, so that aggregate planned nominal expenditure equals aggregate actual nominal expenditure. And let's recognise that aggregate actual nominal expenditure is the same as actual nominal income, by accounting identity. So the original equation now becomes:

Aggregate actual nominal income equals aggregate expected nominal income plus amount of new money created by the banking system minus increase in the stock of money demanded.

Nothing in the above violates any national income accounting identity.

Here's the intuition:

Start with aggregate planned and actual and expected income and expenditure all equal. Now suppose that something changes, and every individual plans to borrow an extra $100 from the banking system and spend that extra $100 during the coming month. He does not plan to hold that extra $100 in his chequing account at the end of the month (the quantity of money demanded is unchanged, in other words). And suppose that the banking system lends an extra $100 to every individual and does this by creating $100 more money. The individuals are borrowing $100 because they plan to spend $100 more than they expect to earn during the coming month.

Now if the average individual knew that every other individual was also planning to borrow and spend an extra $100, and could put two and two together and figure out that this would mean his own income would rise by $100, he would immediately revise his plans on how much to borrow and spend. Under full information and fully rational expectations we couldn't have aggregate planned expenditure different from aggregate expected income for the same coming month.

But maybe the average individual does not know that every other individual is doing the same thing. Or maybe he does know this, but thinks their extra expenditure will increase someone else's income and not his. Aggregate expected income, which is what we are talking about here, is not the same as expected aggregate income. The first aggregates across individuals' expectations of their own incomes; the second is (someone's) expectation of aggregate income. It would be perfectly possible to build a model in which individuals face a Lucasian signal-processing problem and cannot distinguish aggregate/nominal from individual-specific/real shocks.

So at the end of the month the average individual is surprised to discover that his income was $100 more than he expected it to be, and that he has $100 more in his chequing account than he expected to have and planned to have. This means the actual quantity of money is $100 greater than the quantity of money demanded. And next month he will revise his plans and expectations because of this surprise. How he revises his plans and expectations will depend on whether he thinks this is a temporary or a permanent shock, which has its own signal-processing problem. And these revised plans may create more surprises the following month.

It doesn't matter for this story what that "something" was that changed and started the whole thing rolling. It might have been: a change in the central bank's behaviour; a change in commercial banks' behaviour; or some change from outside the banking system.

We know that a sensible central bank would eventually do something else to stop the whole thing rolling before aggregate planned nominal expenditure gets too big for consistency with the inflation or whatever target. Because there is a supply-side and Phillips Curve out there somewhere. If this process doesn't stop by itself, the central bank will make it stop. This is not a long run story. It won't explain long run increases in money or debt. And it is not a story about all growth in income, because it is perfectly possible to have income growth where planned and expected and actual expenditure and income are all the same. It's a demand-side story of the transition from one growth path to another, where expectations may be false during that transition.

We are talking about a Hayekian process in which individuals' plans and expectations are mutually inconsistent in aggregate. We are talking about a disequilibrium process in which people's plans and expectations get revised in the light of the surprises that occur because of that mutual inconsistency. We are talking about what Old Keynesians talk about when they zig-zag slowly to the equilibrium point in the Keynesian Cross diagram. We are talking about what monetarists talk about when they talk about the hot potato process where the actual stock of money is greater than the quantity of money demanded.

I have blogged about this before. And again before that.