Much has changed in the institutional organization of money markets since Fall 2012 when INET filmed my course “Economics of Money and Banking”, but what strikes me most is how well the fundamental analytical structure has held up. The two ideas that I identify as central to the “money view”—the importance of the daily settlement constraint in the payments system,
Read moreThe following was inspired by my attendance at a recent conference, Money as a Democratic Medium, where I gave a short talk. The “Money View”, as regular readers of this blog will know, is my attempt to systematize a way of thinking that has a long history among practitioners, especially central bankers, but that has always remained a minority view
Read moreThe following is in blog form the substance of a talk I gave Sept 7 at a Mercatus conference, “Monetary Policy Rules for a Post-Crisis World.“ “Rules versus discretion” is a hardy perennial of monetary policy debate, dating from earliest debates between Bullionists and anti-Bullionists, to the 19th century Currency School versus Banking School, up to the 20th century monetarists
Read moreYou can title your conference whatever you want, but the actual content will depend on the speaker list. The convenors of the Jackson Hole Economic Symposium apparently hoped to generate discussion about “Designing Resilient Monetary Policy Frameworks for the Future“. Having read all the papers, I can report that only one of them really engages the conference title. Everyone else
Read more“I wouldn’t start from here,” the BIS never says explicitly in its recent Annual Report, but nevertheless it goes on to paint a rather comprehensive and compelling picture of a possible future toward which they think we should be trying to head, and of the present dysfunctional economic policies that are daily making it harder to achieve that possible future.
Read moreToday 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
Read morePeter 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.
Read moreIn the immediate aftermath of the global financial crisis, most people thought that shadow banking was all in the past, and good riddance! Today, however, it is becoming clear that shadow banking is also in our future, even centrally so. The crisis was just one step toward that future, revealing weakness in order to force necessary restructuring. Of course the
Read moreA 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
Read more“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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