Economics of Money, Credit and Debt

Economics of Money, Credit and Debt

Global Financial Crisis and subsequent Global recession ( Secular Stagnation) has invoked lot of research in the causes of GFC.  Post Keynesian Economists were particularly correct about predicting the GFC.  Main stream Neoclassical Economists and their DSGE models did not predict the crisis.  Great Moderation was the main explanation given by neoclassical economists.  Low volatility in economic growth was seen as calm waters with no turbulence ahead.  GFC proved them wrong.

There are several development prior to GFC.

  • Role of Financial Sector
  • Rise of Credit and Debt
  • Rise of Shadow Banking
  • Securitization
  • Financial Globalization
  • Income Inequality
  • Lowered Credit standards
  • Lowered ratings standards by Rating Agencies
  • Global Capital flows

There are several outstanding researchers who are developing new ideas and thinking about the Banks, Money, Credit and Debt, Shadow Banking, Income Inequality, Effective demand, Low Interest Rates, Endogenous money and others.

  • Hierarchy of Money and Credit
  • Institutionalism
  • Accounting Approach
  • Quadruple Entry system
  • Endogenous Sources of Instability
  • Credit is debt 
  • Inherent Instability of Credit
  • Endogenous Creation of Money
  • Effective Demand
  • Lender of Last Resort
  • Open Economies
  • Interlinkages among economic agents 
  • Effectiveness of Monetary Policies
  • Federal Reserve Open Market operations
  • Shadow Banking
  • Fiscal Policies
  • Global Coordination and Cooperation
  • International Lender of Last Resort
  • Swap Network Among Central Banks
  • Regulation of Banks
  • Liquidity and Solvency
  • Capital, Reserve, Liquidity Ratios
  • Capital Flows across borders
  • Linkages among Financial Markets
  • Cross border Spillovers
  • Impact of Low Interest Rates
  • Stock flow Consistency
  • Essential Hybridity ( Public vs Private Money, Local vs Global )
  • Interdependence among Markets, Institutions and Market Infrastructure
  • Payment, clearing and Settlement Systems
  • Interlinked Balancesheets, Credit Chains, Repo Chains

 

Key People:

  • Steve Keen
  • Marc Lavoie
  • Dirk Bezemer
  • Richard Werner
  • Perry Mehrling
  • Hyun Song Shin

Also see

  • Richard Koo
  • Adair Turner
  • Gennaro  Zezza
  • Wynn Godley
  • Hyman Minsky
  • Zoltan Pozsar
  • Claudio Borio

 

Key Sources of Research:

 

The Inherent Hierarchy of Money

Perry Mehrling

January 25, 2012

 

http://ieor.columbia.edu/files/seasdepts/industrial-engineering-operations-research/pdf-files/Mehrling_P_FESeminar_Sp12-02.pdf

 

 

Economics of Credit and Debt

Daniel H. Neilson†

18 November 2012

 

https://www.cigionline.org/sites/default/files/inet2012neilson_economicsofcredit.pdf

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The New Lombard Street How the Fed became the dealer of last resort

Perry Mehrling April 4, 2010

 

http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.461.6478&rep=rep1&type=pdf

 

 

Why central banking should be re-imagined

Perry Mehrling

 

http://www.bis.org/publ/bppdf/bispap79i.pdf

 

 

A Money View of Credit and Debt

November 4, 2012

Perry Mehrling

https://www.cigionline.org/sites/default/files/inet2012mehrling_amoneyviewofcreditanddebt.pdf

 

 

Why is money difficult?

Perry Mehrling

BCRA, Buenos Aires

June 4, 2015

 

http://www.bcra.gov.ar/Pdfs/BCRA/JMB_2015_Mehrling.pdf

 

 

Central Bank Deleveraging and Financial Sector Regulation

Perry Mehrling

Minsky Conference, DC

April 15, 2015

http://www.levyinstitute.org/conferences/minsky2015/minsky2015_mehrling.pdf

 

 

Modern Money: Fiat or Credit?

Author(s): Perry Mehrling
Source: Journal of Post Keynesian Economics, Vol. 22, No. 3 (Spring, 2000), pp. 397-406

 

https://cas.umkc.edu/economics/people/facultyPages/wray/courses/Econ601%202012/readings/Mehrling%20Fiat.pdf

 

 

Shadow Banking, Central Banking, and the Future of Global Finance

Perry Mehrling

Shadow Banking: A European Perspective City University London
Feb 2, 2013

 

https://www.city.ac.uk/__data/assets/pdf_file/0018/163440/Mehrling_Future-Global-Finance-126sn0t.pdf

 

Five Key Features of Modern Monetary Systems

New Thinking in Finance, London February 12, 2014

Perry Mehrling

 

http://www.hpcfinance.eu/sites/www.hpcfinance.eu/files/20140212_0930_Perry_Mehrling.pdf

 

 

Elasticity and Discipline in the Global Swap Network

Perry Mehrling1∗

Working Paper No. 27 November 12, 2015

 

https://ineteconomics.org/uploads/papers/WP27-Mehrling.pdf

 

 

The Credit Money and State Money Approaches

L. Randall Wray

Working Paper No. 32

April 2004

 

http://www.modernmoneynetwork.org/sites/default/files/biblio/wray_-_state_and_credit_theories_of_money.pdf

 

 

Bagehot was a Shadow Banker:
Shadow Banking, Central Banking, and the Future of Global Finance

Perry Mehrling, Zoltan Pozsar, James Sweeney, Daniel H. Neilson

February 22, 2013

 

http://www.bankofengland.co.uk/research/Documents/ccbs/Workshop2013/Paper_Sweeney.pdf

 

 

The rise of asset management and capital market-based financing: a cyclical or a structural shift?

Perry Mehrling

ECMI, Brussels October 20, 2015

 

http://www.eurocapitalmarkets.org/system/files/Perry%20Mehrling.pdf

 

 

 

Credit theory of money

http://research.omicsgroup.org/index.php/Credit_theory_of_money

 

 

The Credit Theory of Money

By A. Mitchell Innes

From The Banking Law Journal, Vol. 31 (1914), Dec./Jan., Pages 151-168.

https://www.community-exchange.org/docs/The%20Credit%20Theoriy%20of%20Money.htm

 

 

WHAT IS MONEY?

By A. MITCHELL INNES

From The Banking Law Journal, May 1913.

https://www.community-exchange.org/docs/what%20is%20money.htm

 

 

Schumpeter Might Be Right Again: The Functional Differentiation of Credit

 

Dirk J. Bezemer

 

http://www.rug.nl/staff/d.j.bezemer/the_functional_differentiation_of_credit.pdf

 

 

The post-Keynesian economics of credit and debt

Marc Lavoie
Department of Economics, University of Ottawa

November 2012

 

 

https://www.cigionline.org/sites/default/files/inet2012lavoie_post-keynesianeconomics.pdf

 

 

The role of State and the Hierarchy of Money

Stephanie Bell

2001

https://cas.umkc.edu/economics/people/facultyPages/wray/courses/Econ601%202012/readings/Bell%20The%20Role%20of%20the%20State%20and%20the%20Hierarchy%20of%20Money.pdf

 

 

THE HIERARCHY OF MONEY

Stephanie Bell

1998

 

http://www.levyinstitute.org/pubs/wp/231.pdf

 

 

Towards a theory of shadow money

Daniela Gabor and Jakob Vestergaard

https://ineteconomics.org/uploads/papers/Towards_Theory_Shadow_Money_GV_INET.pdf

 

 

The economic consequences of “market-based” lending

Carolyn Sissoko

May 24, 2016

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2766693

 

 

Money creation in the modern economy

Michael McLeay, Amar Radia and Ryland Thomas

 

http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf

 

 

Money in the modern economy: an introduction

Michael McLeay, Amar Radia and Ryland Thomas

http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneyintro.pdf

 

 

Banks are not intermediaries of loanable funds — and why this matters

Zoltan Jakab  and Michael Kumhof

http://www.bankofengland.co.uk/research/Documents/workingpapers/2015/wp529.pdf

 

 

Where Does Money Come From?

NEF

2012

http://www.neweconomics.org/publications/entry/where-does-money-come-from

 

 

Explaining money creation by commercial banks: Five analogies for public education

 

Ib Ravn

http://www.paecon.net/PAEReview/issue71/Ravn71.pdf

 

 

The Truth about Banks 

Michael Kumhof and Zoltán Jakab

2016

 

http://www.imf.org/external/pubs/ft/fandd/2016/03/pdf/kumhof.pdf

 

 

How do banks create money, and why can other firms not do the same? An explanation for the coexistence of lending and deposit-taking 

Richard A. Werner

2014

http://www.sciencedirect.com/science/article/pii/S1057521914001434

 

 

Can banks individually create money out of nothing? — The theories and the empirical evidence 

Richard A. Werner

http://www.sciencedirect.com/science/article/pii/S1057521914001070

 

 

A lost century in economics: Three theories of banking and the conclusive evidence

Richard A. Werner

2016

http://www.sciencedirect.com/science/article/pii/S1057521915001477

 

 

Money and credit as means of payment: A new monetarist approach 

Sébastien Lotza, , Cathy Zhang

http://www.sciencedirect.com/science/article/pii/S0022053115001441

 

 

Head and Tail of Money Creation and its System Design Failures

– Toward the Alternative System Design

2016

Kaoru Yamaguchi, Ph.D.

Yokei Yamaguchi

http://www.vollgeld-initiative.ch/fa/img/Vertiefung_deutsch/Head-and-Tail-2016_WP__-_Japan_Futures_Research_Center.pdf

 

 

Applying the Quantity Theory of Credit: The role of the ECB in the propagation of the European financial and sovereign debt crisis and the policy implications

Professor Richard A. Werner

http://www2.euromemorandum.eu/uploads/werner_qtc_ecb_and_policy.pdf

 

 

Towards a New Research Programme on ‘Banking and the Economy

Implications of the Quantity Theory of Credit for the Prevention and Resolution of Banking and Debt Crises

Richard A. Werner

http://eprints.soton.ac.uk/339271/1/Werner_IRFA_QTC_2012.pdf

 

 

ECONOMICS AS IF BANKS MATTERED: A CONTRIBUTION  BASED ON THE INDUCTIVE METHODOLOGY

RICHARD WERNER

 

http://www.banccentraldecatalunya.ch/wordpress/wp-content/uploads/2013/03/Richard%20Werner/41_Man_Sch_2011_Werner_Disaggregated_Credit.pdf

 

 

The Quantity Theory of Credit and Some of its Applications

Richard Werner

 

http://postkeynesian.net/downloads/Werner/RW301012PPT.pdf

 

 

Banks As Social Accountants And Social Controllers: Credit and Crisis in Historical Perspective

Dirk J Bezemer

 

https://mpra.ub.uni-muenchen.de/15766/1/MPRA_paper_15766.pdf

 

 

MONETARY POLICY AND FINANCIAL STABILITY IN THE MODERN ECONOMY

Adair Turner

2016

 

http://jrc.princeton.edu/sites/jrc/files/aturner_2016.pdf

 

 

Towards a New Monetary Paradigm: A Quantily Theorem of Disaggregated Credit evidence from Japan

Richard A. Werner

1997

 

http://eprints.soton.ac.uk/36569/1/KK_97_Disaggregated_Credit.pdf

 

 

Do shadow Banks Create Money?

Jo Michell

2016

 

https://www.postkeynesian.net/downloads/working-papers/PKWP1605.pdf

 

 

The political economy of repo markets

Daniela Gabor

 

https://info.brot-fuer-die-welt.de/sites/default/files/blog-downloads/gabor_political_economy_of_repo_markets_0.pdf

Bezemer, Dirk J.

 

 

“This is Not a Credit Crisis–It is a Debt Crisis.”

Economic Affairs 29.3 (2009): 95-97.

https://www.researchgate.net/profile/Dirk_Bezemer2/publication/46537728_THIS_IS_NOT_A_CREDIT_CRISIS_-_IT_IS_A_DEBT_CRISIS/links/0deec52ce89025980b000000.pdf

 

 

Explaining the Great Moderation: Credit and the Macroeconomy Revisited

D Bezemer

2009

 

https://mpra.ub.uni-muenchen.de/15893/1/MPRA_paper_15893.pdf

 

 

Understanding financial crisis through accounting models

Dirk J. Bezemer

2010

 

https://www.researchgate.net/profile/Dirk_Bezemer2/publication/227411453_Understanding_financial_crisis_through_accounting_models/links/00b4952ce88deab0d2000000.pdf

 

 

“No One Saw This Coming”

Understanding Financial Crisis Through Accounting Models*

Dirk J Bezemer

http://izvor-denarja.si/wp-content/uploads/2012/08/Study-Bezemer-No-one-saw-this-coming.pdf

 

 

Credit In Current Orthodoxy: An Appraisal

Dirk J Bezemer

http://sugarhoover.co.uk/articulosrecibidos/Bezemer.pdf

 

 

From Boom to Bust in the Credit Cycle: the Role of Mortgage Credit

By DIRK BEZEMER AND LU ZHANG

September 4, 2014

https://pure.rug.nl/ws/files/19400441/14025_GEM_def.pdf

 

 

A Monetary Minsky model of the Great Moderation and the Great Recession

Steve Keen

2011

http://keenomics.s3.amazonaws.com/debtdeflation_media/papers/JEBO_2672.pdf

 

 

Balance Sheet Recession as the Other-Half of Macroeconomics

Richard C. Koo

Chief Economist Nomura Research Institute

October 14, 2012

The World in Balance Sheet Recession: What Post-2008 West Can Learn from Japan 1990-2005

 

Richard C. Koo Chief Economist

2012
Central Banks in Balance Sheet Recessions: A Search for Correct Response

 

Richard C. Koo

Chief Economist Nomura Research Institute

March 31, 2013

 

 

 

DEBT, MONEY AND MEPHISTOPHELES: HOW DO WE GET OUT OF THIS MESS?

ADAIR TURNER

2013

http://ineteconomics.org/uploads/downloads/DEBT-MONEY-AND-MEPHISTOPHELES-HOW-DO-WE-GET-OUT-OF-THIS-MESS.pdf

 

 

 

DEBT AND LENDING: A CRI DE COEUR

wynne godley and gennaro zezza

2006

http://www.levyinstitute.org/pubs/pn_4_06.pdf

 

 

 

Are Housing Prices, Household Debt, and Growth Sustainable?
Dimitri B. Papadimitriou  Edward Chilcote  Gennaro Zezza

January 2006

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1833609

 

 

 

How Fragile is the U.S. Economy?

DIMITRI B. PAPADIMITRIOU, ANWAR M. SHAIKH, CLAUDIO H. DOS SANTOS

and GENNARO ZEZZA

2005

http://www.levyinstitute.org/pubs/stratan-feb-05-draft.pdf

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Author: Mayank Chaturvedi

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