Monetary Realism

Understanding The Modern Monetary System…

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The Unpleasant Fiscal Arithmetic of Eurozone QE with Risk of Sovereign Defaults

Paul De Grauwe has written about potential fiscal effects from an anticipated ECB quantitative easing (QE) program: http://voxeu.org/article/quantitative-easing-eurozone-its-possible-without-fiscal-transfers The analysis is excellent to a point, but doesn’t go far enough. In fact, there are problems with the methodology and the conclusion. The subject involves complex aspects of Eurozone monetary policy – multiple sovereigns, the prospect… Read More

Monetarism

This is rather impressive: “Cash still exists in rather surprising quantity – about a trillion dollars, or more than $3,000 per capita, 77% of it in hundred-dollar bills. But you and I, corporate businesses, and financial markets use trivial amounts of cash. The legal, and especially corporate and financial economies, have moved to electronic, interest-bearing… Read More

The Full Monty on Naked Short Selling

JP Koning has written an interesting post that depicts banks as engaging in “naked short selling” when they simultaneously create new loan assets and new deposit liabilities. For example, he compares the idea of systemic deposit creation with the case of selling Microsoft stock without owning the stock (shorting the stock) and also without borrowing the… Read More

Market Monetarism – Monetary Base Overdrive

Martin Wolf has written (HT Cullen Roche) an excellent article on the recent Bank of England paper. Here are his key summary points from that article: First, banks are not just financial intermediaries. The act of saving does not increase deposits in banks. If your employer pays you, the deposit merely shifts from its account to yours. This… Read More