Global Money, a Work in Progress

Today global money is largely private credit money, the issue of a profit-seeking bank that promises ultimate payment in public money which is the issue of some state, quite possibly a different state from the one where the bank is chartered and does its business.  Global money is also largely dollar-denominated, even when the ultimate users of that money lie

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From Keynes to Lucas, and Beyond

A History of Macroeconomics, by Michel De Vroey.  Cambridge University Press, 2016. De Vroey’s book reads like a travelogue recounting his life journey as a macroeconomist, and his considered response to key texts he encountered along the way.  Always thoughtful and penetrating, he stimulates this reader to reflect anew on how we got to where we are today, and what

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Learning to Think About Shadow Banking

In retrospect, it is easy to see why most observers didn’t see the crisis coming.  The crisis was a stress test of shadow banking, “money market funding of capital market lending”.  In most universities, including mine, monetary economics and financial economics are separate fields with their own specialized language and faculty, and the regulatory apparatus is similarly bifurcated.  But the

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Independence versus Accountability?: Evolution of the Fed

Peter Conti-Brown, The Power and Independence of the Federal Reserve (Princeton 2016) A powerful meme has taken possession of popular, and even professional, understanding of the role of the Fed.  To wit, political forces (specifically the US President) are supposedly always pushing for excessive expansion, and the role of the Fed (specifically the Fed Chair) is to resist that pressure. 

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Turbulent Exit Redux

A lot of people have speculated about what would happen when the Fed raised rates, and almost all of them have been surprised. One of them is Zoltan Pozsar, who boldly went on record with the view that corporate cash pools of various kinds would shift out of bank deposits into government-only mutual funds, which would invest the funds in

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“Great and mighty things which thou knowest not” [?]

In his recent paper, “A Lost Century in Economics:  Three Theories of banking and the conclusive evidence”, Richard Werner argues that the old “credit creation theory” of money is true (empirically “accurate”), while both the newer “fractional reserve theory” and the presently dominant “debt intermediation theory” are false.  For him, this matters mainly because the false theories are guiding current

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RMB in SDR, now what?

“Governments propose, markets dispose,” as Charles Kindleberger liked to say. Starting next year the RMB will be included in the official SDR basket, and that inclusion will have some immediate automatic consequences for official government reserve holdings, but that’s all.  History tells us that you don’t get to be a world reserve currency just because a group of finance ministers

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Financialization versus Development? A money view of the 2015 UNCTAD Report

The BIS and the IMF have each weighed in from the center, representing the perspectives of central banks and central Treasuries respectively.  (Interestingly, they don’t agree, see here for a recent sample of the debate.)  Now comes the periphery.  The new Trade and Development Report of the United Nations Conference on Trade and Development is titled “Making the international financial architecture work

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