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 […]

John Cochrane’s “Monetary Policy with Interest on Reserves”

John Cochrane has written a very interesting paper on monetary policy under conditions of “abundant liquidity”, including substantial excess bank reserves and interest paid on those reserves (IOR). The central idea behind the paper is the fiscal theory of the price level (FTPL), which is a valuation equivalence relationship between the real values of government […]

Why so down, Oil?

You’ve seen the charts on oil, and they are grim. Oil fell over 10% after OPEC announced they were not cutting production, and this is after an already dramatic drop since July. Some people are saying it’s all supply related – that we have a glut of oil now (or maybe a glut of high […]

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 […]

Inflation Fears and a Coin Flip

Steve Waldman has a new post up on why rich people, and not so rich people, might prefer hard money over greater wealth. This post was a response to Paul Krugman, and Cullen adds some good thoughts too. Here’s Steve: ““Full employment” means ungrateful job receivers have the capacity to make demands that could blunt […]