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Tag Archives: currency / money

Can Lachmann’s Arbitrage Save the Austrian Theory of the Interest Rate?

by Philip Pilkington Fixing the Economists Article of the Week This is the second part of my criticism of Glasner and Zimmerman’s paper. The first part can be found here and should be read and understood before proceeding with the second part. Glasner and Zimmerman note that Ludwig Lachmann tried to rescue Hayek’s theory by introducing market arbitrage. Follow up: Please share this article - Go to very top of page, right hand side, for social media buttons. They quote Lachmann thusly:...

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The Bankers and the Euro

by Rudo de Ruijter  After 18 years following its launching the euro still doesn't work well. An essential element is still lacking to make it a durable currency. Behind the scene the central banks are still keeping it upright with temporary emergency solutions. Follow up: Please share this article - Go to very top of page, right hand side, for social media buttons. Subject in short: Banks lend out money that doesn't exist. Borrowers receive a balance, a voucher of their bank. With it,...

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The Natural Rate of Interest Does Not Exist

by Philip Pilkington I just want to make a quick note on the multiplier and the theory of liquidity preference that is not generally recognised. When the full implications of this argument are recognised and integrated with marginalist theories of savings and investment (including the Austrian theory) these theories basically fall apart unless some very restrictive assumptions are put in place. Follow up: Please share this article - Go to very top of page, right hand side, for social...

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I’m Pointing at the Moon, You’re Looking at My Finger: Janet Yellen on Post-Keynesian Economics

by Philip Pilkington Here’s an interesting fact that I’ll bet many of you didn’t know: the current head of the Federal Reserve, Janet Yellen, wrote a short paper in 1980 examining the theories of the Post-Keynesians. You can find it here. Follow up: Please share this article - Go to very top of page, right hand side, for social media buttons. The paper is very clear and logically articulated. But it also manifests quite a few sicknesses of the mind that, for example, the current...

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Is the Speculative or the Precautionary Demand for Money More Important in Real World Capital Markets?

by Philip Pilkington In Keynes’ General Theory is is famously stated that the demand for money relies on three distinct functions. These are: the transactions demand for money; the precautionary demand for money; and the speculative demand for money. Follow up: Please share this article - Go to very top of page, right hand side, for social media buttons. Or, more formally: M = Mt + Mp + Ms In that work Keynes — as he regularly did in his monetary theories — laid rather a lot of...

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Macroeconomics in Germany: The forgotten lesson of Hjalmar Schacht

by Voxeu.org -- this post authored by Biagio Bossone and Stefano Labini Despite facing many of the same challenges, Germany’s current macroeconomic policy is substantially different to those of other countries, in part due to the economy legacy of Walter Eucken. This column considers the economic policy of Hjalmar Schacht, whose ‘MEFO-bills’ monetary solution ended the years of economic struggle caused by the Treaty of Versailles’ reparations commitments. By tying the bills to output,...

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The Interaction of Economists and Money Cranks in the Depression Years

by Philip Pilkington Article of the Week from Fixing the Economists Recently I ran a post that briefly delved into the connection between Keynes and the money cranks of the 1920s and 1930s. There I showed that Keynes’ ideas cannot be said to have been influenced in any substantial way by the money cranks. Rather they were an outgrowth of a modifying of his earlier views, put forward in his Treatise on Money and taken from the Swedish economist Knut Wicksell. Follow up: Please share this...

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Helicopter Money: The Illusion of a Free Lunch

by Voxeu.org -- this post authored by Claudio Borio, Piti Disyatat and Anna Zabai Appeared originally[link to source] at Voxeu.org 24 May 2016 Seven years on from the great financial crisis and despite central banks being seen by many as ‘the only game in town’, there has been a renewed push for monetary policy to experiment even further. One of the latest proposals is the revival of Milton Friedman’s ‘helicopter money’. But have all the implications of what many see as central banks’...

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The Economics of Counterfeit Money

by Philip Pilkington Endogenous money theory, which is usually associated with the Post-Keynesian school of economics, has long told us that central banks do not control the supply of money in the economy. Instead the amount of money is determined by the demand for money which, in turn, is determined by the demand for credit. This idea, however, leaves out what is actually a rather important component: counterfeiting. Follow up: Of course, endogenous money theory is not at odds with the...

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Money and Banking, Part 16: FAQs about Monetary Systems

by Eric Tymoigne, New Economic Perspectives  The following answers a few question in order to illustrate the previous post and to develop certain points. Q1: Can a commodity be a monetary instrument? Or, does money grow on trees? Follow up: Let us tackle the idea that “gold is money”. Clearly, a gold ingot is not a monetary instrument. There is no issuer, no denomination, no term to maturity or any other financial characteristics. A gold ingot is just a commodity, a real asset not a...

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