The Money View

Insights from Bagehot, for these Trying Times

by Perry G. Mehrling on May 11, 2012 2 comments

Here is a talk I gave recently at Wake Forest University. It is pretty long, but you can page through the video (on the left) by paging through the powerpoint (on the right), and anyway the last twenty minutes are devoted to questions. I couldn't figure out how to embed it in the blog, but the link will get you there.

Banks as creators of money

by Daniel H. Neilson on May 01, 2012 13 comments

In conversation recently, I was called upon to defend the claim that banks are in the business of creating and destroying private money. This has been for me a working hypothesis for so long that I was unable to respond effectively or cogently to the argument. My interlocutor followed up in e-mail with a Cowles Foundation paper by Tobin in support of her case. Here is my response to Tobin, hopefully better articulated than I managed on the fly. In this post, I'll stick to the theoretical claim (the practical context was bank capital requirements).

I agree wholeheartedly with Tobin's dismissal of the Read more

The Clash of Economic Ideas: A Review

by Perry G. Mehrling on April 26, 2012 5 comments

When Paul Krugman paints John Maynard Keynes as a pioneering critic of dominant free-market economics, he exaggerates wildly, both about the rigidity of orthodoxy and about the pioneering character of Keynes’ critique. So says Larry White in his book The Clash of Economic Ideas and, speaking as a sometime historian of economic thought, I am inclined to agree. It's less black and white than Krugman makes it out to be. Read more

Mehrling on Soros

by Perry G. Mehrling on April 16, 2012 5 comments

The text below is the comment I offered on Mr. Soros' opening speech at INET's Berlin Conference April 12, 2012. The text of Mr. Soros' own speech is here. Video of the entire session is below--my bit starts at 55:00.

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World Without Money Reconsidered

by Perry G. Mehrling on April 08, 2012 7 comments

FT Alphaville has picked up on my friend James Sweeney's latest, and since James cites the latest writings by other friends Zoltan Pozsar, Manmohan Singh, as well as my own most recent, the piece reads like a discussant's comments on a shadow banking symposium. Read more

Renminbi Swap Lines

by Daniel H. Neilson on March 28, 2012 2 comments

Last week the central banks of China and Australia announced the creation of a $31bn currency swap line. Like every such agreement, it was hailed as another step towards the renminbi's displacement of the dollar as the world's reserve currency. Are the renminbi swap lines in fact a genuine step forward for the internationalization of the RMB? Read more

Eurocrisis Redux

by Perry G. Mehrling on March 13, 2012 3 comments

Entangling alliances or entangling leagues are nothing to the entanglements of cash owing—Keynes

The recent BIS Quarterly Review article "European Bank Funding and Deleveraging" takes a stab at connecting all the dots in the Eurocrisis. It is only 12 pages, but with 8 (triple) graphs, there is a lot here to digest. Let's take a stab. Read more

Liquidity: Not Like Water (part 1 of many)

by Daniel H. Neilson on March 05, 2012 2 comments

Discussion of the results of the ECB's LTRO2 has revolved around the question of hoarding, specifically whether banks are using the newly-created reserves to fund new lending. Answers to this question usually make reference to the amount of overnight deposits held by eurozone banks at the ECB. Read more

Crisis Averted: Understanding LTRO2

by Perry G. Mehrling on March 01, 2012 3 comments

Fundamentally, the ECB is trying to keep the ongoing sovereign debt crisis from turning into a full-fledged bank credit crisis. Three things they are worried about (see here, here, here). Read more

Fed, ECB balance sheet update

by Daniel H. Neilson on February 24, 2012

Perry and I extend our apologies for the unplanned hiatus. By way of breaking radio silence, it seems appropriate to check in on our two favorite banks. Here's the Fed's balance sheet, asset side first:

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Bank or no bank?

by Daniel H. Neilson on January 30, 2012 7 comments

A money view of SDRs

In a market economy, when you need something, you go out and buy it. Liquidity is no different, in that respect at least. If it is market liquidity that you need, you go to a dealer, who stands ready to buy what you are selling. You pay for the convenience, though—the dealer is getting more for the same asset than you are. If it is funding liquidity that you need, you go to your bank, who stands ready to lend. You pay for the convenience, though—the bank is paying less for its funds than you are. Read more