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 […]

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 […]

Thomas Palley on Steve Keen’s Model of Aggregate Demand

Thomas Palley’s paper is here: http://www.thomaspalley.com/docs/research/ad_and_debt.pdf (HT: Ramanan) Some time ago, a few of us were after Steve Keen in respect of his newly defined aggregate demand function, pointing to a time-inconsistency in its income and non-income flow of funds components. He has since corrected this, with a model whose principal defining equation is now […]

Money Creation in the Modern Economy (Bank of England)

This is an excellent paper: http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf The paper is written in easy to understand language and helpful balance sheet graphics. It does a particularly good job in simplifying several technical issues. As Cullen Roche notes, the money multiplier is dispatched to the ash can of history, where it belongs. It is reassuring to see this sort […]

Negative Money

This post is just for fun – or negative fun – or something. It follows from a Nick Rowe post with the same title: http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/02/negative-money.html I’m going to tell a story that should be similar in concept to Nick’s, but described in quite a different way. I think it should end up in about the […]