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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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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Why is money difficult?

As regular readers know, I emphasize two central functions of monetary systems:  payments and market-making. These are the foundation pillars of what I call the “money view”. In my teaching, I have come to appreciate a variety of barriers that people bring with them to the study of money, and to appreciate the necessity of bringing these barriers up to

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Regulatory Silos, and also Intellectual Silos, hold back financial reform

A month ago, the Volcker Alliance issued a report intended to address a central issue that had been purposely left to one side in the Dodd-Frank reform legislation, namely the inadequacy of the regulatory system that will be tasked with implementing any future financial reform.  Titled “Reshaping the Financial Regulatory System:  Long Delayed, Now Crucial”, the report got respectful notice

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Exit strategy, Part One: ZIRP

The Fed has announced plans to raise rates in the imminent future, but the market does not believe it.  Why not?  Conventional wisdom appears to be that the Fed will chicken out, just as it did during the so-called Taper Tantrum.  The Fed has signaled its appreciation that “liftoff” will involve increased volatility, and has stated its resolve this time

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