tag:blogger.com,1999:blog-5362801348602268473.post3039965902017114962..comments2023-11-22T00:49:32.887-08:00Comments on Reflections on Monetary Economics: Banks, Non-Banks and the Medium of ExchangeNick Edmondshttp://www.blogger.com/profile/15342983814699700396noreply@blogger.comBlogger15125tag:blogger.com,1999:blog-5362801348602268473.post-14243351800684056542021-03-12T04:34:04.958-08:002021-03-12T04:34:04.958-08:00This is highly informatics. crisp and clear. I thi...This is highly informatics. crisp and clear. I think that everything has been described in systematic manner so that reader could get maximum information and learn many things.<br /><a href="https://bankscreditchat.com/" rel="nofollow">The 3 Best Ways To Pay Off Multiple Credit Cards</a><br />ramizhttps://www.blogger.com/profile/17797483111126042074noreply@blogger.comtag:blogger.com,1999:blog-5362801348602268473.post-3989664926223070922014-05-05T14:56:31.205-07:002014-05-05T14:56:31.205-07:00Late to the party... I liked the post and -- first...Late to the party... I liked the post and -- first time for everything -- understood the balance sheet.<br /><br /><a href="http://newarthurianeconomics.blogspot.com/2014/05/an-important-ratio.html" rel="nofollow">Quoted you</a> (for my purposes). Thanks.<br /><br />ArtThe Arthurianhttps://www.blogger.com/profile/16501331051089400601noreply@blogger.comtag:blogger.com,1999:blog-5362801348602268473.post-59123314812463664722013-09-09T09:23:42.859-07:002013-09-09T09:23:42.859-07:00I have some thoughts on money supply expansion tha...I have some thoughts on money supply expansion that I put into a new post that can be found at<br /><br />http://mechanicalmoney.blogspot.com/2013/09/federal-debt-and-bank-expansion-of.html<br /><br />In the post, I make the assumption that banks expand the money supply (deposits) by creating a new deposit while not affecting any preexisting depositors. The result should be a ratio of two deposits per loan. This is not found in the relevant data. An explanation for the difference is offered.<br /><br />Based on my post comments, I would conclude that NBFIs do not expand the money supply unless they also offer creditable bank-like guarantee for deposits.Roger Sparkshttps://www.blogger.com/profile/01734503500078064208noreply@blogger.comtag:blogger.com,1999:blog-5362801348602268473.post-50420384950957751032013-09-08T02:10:48.276-07:002013-09-08T02:10:48.276-07:00I'd tend to agree with that, Jim. Treating ba...I'd tend to agree with that, Jim. Treating bank money as special and ignoring other financial balances seems arbitrary to me. They may not all matter equally, but they all matter.Nick Edmondshttps://www.blogger.com/profile/15342983814699700396noreply@blogger.comtag:blogger.com,1999:blog-5362801348602268473.post-68835164230206707642013-09-07T14:10:14.681-07:002013-09-07T14:10:14.681-07:00'Reflux' for the simple flow model you hav...'Reflux' for the simple flow model you have set up may not matter, but have you read Minsky (I'm sure you must) on 'hedge' 'speculative' and 'Ponzi' positions that firms can adopt - these positions can include a portfolio of many other 'monies', including what are described as assets, brought into play to support the firm's productive operation. The basic problem that economists have is that they don't understand to the fullest extent that capitalism is a money economy - they don't really understand that money is money of account. Hence a firm with a position with both a NBFI and a bank say, will have a money balance sheet that includes both. Relationships between these positions can be complex - for example a firm may borrow from an NBFI based upon an asset as collateral, to service a loan from a bank. Broadly, the 'money supply' is in part built out of these many types of financial operations, contingencies and necessities.Anonymoushttps://www.blogger.com/profile/12072111230113935984noreply@blogger.comtag:blogger.com,1999:blog-5362801348602268473.post-73042683547888883022013-09-07T08:35:12.937-07:002013-09-07T08:35:12.937-07:00Andrew,
I haven't included much in the way of...Andrew,<br /><br />I haven't included much in the way of equations in this post, as it wasn't necessary for what I wanted to say, but it is certainly implied that, for each sector, demand (meaning expenditure) = income + change in debt - change in savings. Of course, this should be implied by any consistent national balance sheet and is integral to the way the flow of funds are drawn up in the national accounts. I would add that this identity provides the framework for my UK macro model, described on this site. <br /><br />When you say money in circulation, do you mean the balance of sight deposits ("ready" money) as opposed to time deposits. If so, I'm not sure I agree with you. My view is that all assets and liabilities impact on spending (although some may impact more than others). The amount of ready money is more to do with how much of their wealth people choose to keep in that form. <br />Nick Edmondshttps://www.blogger.com/profile/15342983814699700396noreply@blogger.comtag:blogger.com,1999:blog-5362801348602268473.post-6241716192113832592013-09-07T07:48:11.089-07:002013-09-07T07:48:11.089-07:00Nick I think your model is saying in simple terms ...Nick I think your model is saying in simple terms that Agg demand is Income +change in debt (bank credit) -change in savings. Once you understand that drawing down a savings account is disavings you can derive the argument above. This is a change in the amiount of money in circulation, and only money in circulation affects prices, but not a change in the money held in account. I derive an almost identical result from simple identities here http://andrewlainton.wordpress.com/2013/09/03/alternative-ajebraic-definition-of-keens-walras-schumpeter-law/Andrew Laintonhttps://www.blogger.com/profile/04863776210905159811noreply@blogger.comtag:blogger.com,1999:blog-5362801348602268473.post-13456560217219436882013-09-06T00:07:47.614-07:002013-09-06T00:07:47.614-07:00Agreed. I haven't allowed for reflux in this ...Agreed. I haven't allowed for reflux in this model, because I'm assuming that the borrowers (firms) spend everything. In the real world, I think loans get paid down a bit, but I don't think it's a hugely important effect.<br /><br />I was just picking out one part of blog discussions, being one that particularly interested me. I specifically focused on NBFIs as that had seemed to be the subject of the debates, but I agree that this point applies to credit generally.Nick Edmondshttps://www.blogger.com/profile/15342983814699700396noreply@blogger.comtag:blogger.com,1999:blog-5362801348602268473.post-11885260687485816382013-09-05T13:51:48.306-07:002013-09-05T13:51:48.306-07:00There's a lot of things that went on during th...There's a lot of things that went on during the various blog debates. I think the "mainstream" argument was that if the banks extend loans, and investors redistribute their portfolios, you could see that others would pay down their loans to cancel out the expansionary impact of the original loan. Yes, it is possible. Your model appears to preclude such behaviour (I believe) as the total cancellation appears unlikely (which seems to be good match with actual data).<br /><br />However, bank finance is not the only way to create demand via credit. Industrial firms routinely extend credit via receivables and vendor finance. The line between "financial" and "nonfinancial" firms is somewhat blurred.<br /><br /> Brian Romanchukhttps://www.blogger.com/profile/02699198289421951151noreply@blogger.comtag:blogger.com,1999:blog-5362801348602268473.post-77069261975983433102013-09-05T00:13:22.130-07:002013-09-05T00:13:22.130-07:00I agree, but this idea of only transferring purcha...I agree, but this idea of only transferring purchasing power seems to have a real hold, even with some professional economists.Nick Edmondshttps://www.blogger.com/profile/15342983814699700396noreply@blogger.comtag:blogger.com,1999:blog-5362801348602268473.post-39297213562345396122013-09-04T12:28:41.639-07:002013-09-04T12:28:41.639-07:00I don't get how NBFI lending can be - in any w...I don't get how NBFI lending can be - in any way that is important for economics - just a transference of purchasing power. If money is deposited with the NBFI then the intention of its owner is that it isn't going to be spent in this period. It could be of course, but their decision is that it isn't going to be, in some latent sense there is purchasing power there but it isn't being used to purchase anything.<br /><br />Instead the NBFI is acting as something of an intermediary and the deposited money is being lent to a firm, in this model, who intends to invest it productively. That then sets into action a set of monetary flows that would not have otherwise occurred.SpiritSkillhttps://www.blogger.com/profile/12225172385830110611noreply@blogger.comtag:blogger.com,1999:blog-5362801348602268473.post-27812237904012262902013-09-04T08:54:30.966-07:002013-09-04T08:54:30.966-07:00I didn't really include cash in this model, in...I didn't really include cash in this model, in order to keep it simple. However, we could quite easily assume that what I call money represents a mix of checking account balances and privately-issued banknotes. The latter could obviously then be kept under the mattress or in wallets, so this would be part of Mh.<br /><br />There are of course different measures of the money supply. Most measures beyond the narrowest include some form of bank deposit, so would be increased by the deposit resulting from a loan.Nick Edmondshttps://www.blogger.com/profile/15342983814699700396noreply@blogger.comtag:blogger.com,1999:blog-5362801348602268473.post-42935939060197118512013-09-04T08:12:11.565-07:002013-09-04T08:12:11.565-07:00Money can be saved by the owner under-the-mattress...Money can be saved by the owner under-the-mattress, in bank accounts, in NBFIs, and in wallets. Banks and NBFIs differ from under-the-mattress and wallets in that they can make loans based on deposits without the direct action of the deposit owner. <br /><br />Now, does a deposit resulting from a bank loan add to the money supply, or does a bank loan merely move savings into actively trading hands? <br /><br />It seems to me that BOTH options complete. This then would offer two methods of measuring money supply, both accurate. <br /><br />If correct, our challenge is to develop data and correlated models for both measures of money supply.<br /><br />Roger Sparkshttps://www.blogger.com/profile/01734503500078064208noreply@blogger.comtag:blogger.com,1999:blog-5362801348602268473.post-64934106992637438222013-09-04T04:46:32.750-07:002013-09-04T04:46:32.750-07:00Possibly not. Yet the idea that non-bank lending ...Possibly not. Yet the idea that non-bank lending merely transfers existing purchasing power around comes up time and time again. Nick Edmondshttps://www.blogger.com/profile/15342983814699700396noreply@blogger.comtag:blogger.com,1999:blog-5362801348602268473.post-11872478097149894552013-09-04T03:28:52.048-07:002013-09-04T03:28:52.048-07:00Is it any more complicated than understanding that...Is it any more complicated than understanding that bringing finance to a productive process by creating deposits through bank-lending is similar to bringing existing balances in deposits and terms deposits into circulation by applying these to finance a productive process through NBFI lending can be similar in their effect on aggregate demand? Anonymousnoreply@blogger.com