Category Finance
Fractional reserves, capital, communism, and the optimum quantity of money
Just trying to get my head clearer on some related stuff. I have a weird thought-experiment, that I think helps us understand fractional reserve banking better. Even though, paradoxically, there are no commercial banks in my thought-experiment. There is just One Big Bank, owned and controlled by the government, that issues the only form of […]
Balancing the Premiers
Apparently, ten out of ten premiers (13 out of 13 if we count the territories) can agree that Canada is suffering from a “fiscal imbalance” between Ottawa and the provinces. At their annual meetings, which are wrapping up in Charlottetown today, the provincial premiers are arguing that since the Federal budget is moving into surplus […]
Employment and Investment: the great Canadian disconnect
[This is a guest post by Hashmat Khan of Carleton University and Nyamekye Asare of the University of Ottawa.] Can policies stimulating private investment deliver higher employment? Maybe, but investment and employment have become disconnected recently in Canada. John Taylor has noted a strong negative correlation between investment and the unemployment rate, and argued that […]
Repeat after me: people cannot and do not “spend” money
John Maynard Keynes famously wrote that: "Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist." A modern example of that dictum, relevant to the economy, policy, and markets, is the widespread view that people can "spend" their money, as if money represented a […]
Bank runs, keynesian multipliers, monetarist cold potatoes
They are all the same. Do bank runs cause recessions, or do recessions cause bank runs? Both. Neither. They are the same thing. (This post isn't as clear as I want it to be, because my mind isn't as clear as I want it to be, so read at your own risk.) I was making […]
100% reserves via interest on reserves
Start with a fractional reserve banking system, like Canada's for example. Canadian banks are not required by law to hold any reserves, and choose to hold very little. They hold a small amount of currency, plus a very small amount of deposits at the Bank of Canada. Those deposits pay interest, but that rate of […]
Interest, capital, MRScc=(1+r)=1+(MPK/MRTci)+(dMRTci/dt)/MRTci
That's the equilibrium condition for the real rate of interest in a competitive economy. I will explain what it means a little later. This is intended as a simple "teaching" post, and because I have a strange feeling that the theory of interest and capital is becoming topical again in the blogosphere, and that a […]
Money, barter, the clearing house, and balance sheet recessions
I think David Beckworth is onto something important here. What looks like a balance sheet recession can in fact be caused by an excess demand for money. The hairdresser cuts the hair of the manicurist, who does the nails of the masseuse, who massages the hairdresser. We have a Wicksellian triangle, with no double coincidence […]
Secular stagnation and the end of retirement?
Retirement is weird, when you think about it. We consume small amounts of leisure for most of our lives, then suddenly stop working completely and consume a big bunch of leisure for the rest of our lives. We smooth our consumption of all other goods, but we don't smooth our consumption of leisure. Instead we […]
Shadow banking as required reserve tax avoidance?
This is speculative. I don't know whether it works empirically. Or, I should say, I don't know how much it works empirically. The effect I am talking about here might be large, and explain almost everything. Or it might be small, and explain almost nothing. I'm just throwing it out there. Legally required reserves, if […]
Worthwhile Canadian Initiative 
Recent Comments