Monthly Archives: September 2016
Front vs Rear Wheel Steering for Monetary Policy
You are driving a car with rear-wheel steering and no reverse gear. You are driving alongside a wall. If you drive too close to the wall you are trapped, because you would need to steer your rear wheels into the wall in order to get your front wheels to move away from the wall. If […]
What is investment today worth tomorrow?
Once upon a time, canals were the latest thing in infrastructure investment. During the early years of the Industrial Revolution, they made it possible to move heavy goods, like coal, from mines to factories, using a fraction of the energy required by road transport. Delicate goods, like pottery, could be shipped with little breakage. Enterprising engineers and industrialists built […]
Cheshire Cats and New Keynesian Central Banks
How can the Cheshire Cat disappear, but its smile remain? How can money disappear from a New Keynesian model, but the Central Bank still set a nominal rate of interest and create a recession by setting it too high? Ignore what New Keynesians say about their own New Keynesian models and listen to me instead. […]
Is it Banking Crisis Season?
One really has to wonder if having the season move into “fall” is correlated with the fall of the financial sector. While some time in the making, the 2007-08 subprime financial crisis moved into crisis mode during August of 2007 and by early fall central banks had moved to lower discount rates and pump liquidity […]
Do “Monetary Shocks” matter much?
The central bank is on the Gold Standard. The discovery of new gold increases the supply of gold, which causes an inflationary boom. People blame the inflationary boom on the gold discoveries. It can't have been a monetary shock, because the central bank wasn't doing anything different from what it always does. The central bank […]
Private vs Public Nominalism, and Interest on Money
Suppose I want to borrow money. So I issue a financial asset I call "NRUnits". You can buy NRUnits from me at $1 each. I consider two different policies to give people sufficient incentive to want to hold NRUnits: I promise to peg the exchange rate between NRUnits and the dollar, so they are always […]
Money stocks and flows
Because "stock-flow consistency" makes me think of money. [Here's Simon Wren-Lewis' and Jo Michell's good posts, but I've got a one-track mind.] 1. If you want to increase the stock of land in your portfolio, there's only one way to do it. You must increase the flow of land into your portfolio, by buying more […]
The educational smorgasbord
At the Green Door restaurant, customers line up, take a plate, then fill it with their choice of items from the restaurant's vegetarian buffet. At the cash each plate is weighed, and the customer's bill is calculated: price per gram*grams of food taken=cost of dinner. This pricing scheme creates an interesting choice problem. It might […]
University budget surpluses: irreversible investment and uncertain demand
Unless it has a massive endowment fund, a university's biggest asset is its reputation. If it loses its reputation and students stop coming and paying, a university has only got a bunch of buildings that often aren't well-suited for any alternative use. That asset is not on the books. Unless it has a massive debt, […]
Worthwhile Canadian Initiative 
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