Category Finance
Deflationary banks
It's good to think about weird worlds, which you know are different from the real world. It helps you understand the real world better. Here is a weird world where commercial banks' wanting to expand loans and deposits would reduce aggregate demand and cause deflation. But the only weird assumption is that currency and deposits […]
There can be an excess supply of commercial bank money
Commercial banks are typically beta banks, and central banks are typically alpha banks. Beta banks promise to convert their money into the money of alpha banks at a fixed exchange rate. Alpha banks make no such promise the other way. It's asymmetric redeemability. This means there cannot be an excess supply of beta money in […]
Liquidity pile-ups on the Wicksellian roundabout
I'm trying to model something, and failing miserably. So I'm going to try to articulate my vision, hoping for inspiration. Imagine a large number of cars forever circling around a very large roundabout. Initially they are all going the same speed, and are evenly spaced. What happens if one car slows down temporarily? (I saw […]
Macro savings vehicles
An individual who decides to save for retirement has a choice between a number of different savings vehicles: stocks, bonds, real estate, etc. What are the choices when we aggregate up to the economy as a whole? I write this post in response to an email from someone who is knowledgeable about the savings vehicle […]
Coordination and the demand for money
Why do financial (and other) crises (sometimes) cause a recession? Because they increase the demand for money and so cause an excess demand for the medium of exchange. But why do financial crises increase the demand for money? Because the demand for money depends on the synchronisation of payments and receipts of money, and synchronisation […]
US Budget 2015: Some Quick Thoughts
The Budget of the U.S. Government for the 2015 fiscal year was presented at the White House today and unlike Canada, we are not looking at a balanced budget by 2015. Indeed, the forecast is for a small decline in the deficit but the rest of the decade looks like deficits all the way down. […]
Should Municipalities in Canada Get More Money?
In the tradition of the fur traders of the Northwest Company, the Federation of Canadian Municipalities is holding their board meeting “Rendezvous” at the head of the Great Lakes in Thunder Bay from March 5th to 8th. It was difficult task trying to find an agenda on their website but no doubt they will be […]
Fiscal Federalism: A Cross-Border Comparison
As a federal country, one of Canada’s hallmarks is a well-developed system of intergovernmental transfers. Indeed, we often remark that Canadian provinces are dependent on federal transfers for large chunks of their spending and there is some debate over whether Canada’s provinces should engage in more own-source revenue effort rather than plead for more transfers. […]
The 2014 Federal Budget
With so much commentary out there on the 2014 Federal Budget, there is probably not much left to contribute but here are a couple of thoughts.
Two interest rates, and one simple question.
Most simple macro models have just one (nominal) interest rate. I want to complicate it, just a little, by talking about two (nominal) interest rates: 1. There is the rate of interest you get paid if you hold money. Call it Rm. 2. There is the rate of interest you get paid if you lend […]
Worthwhile Canadian Initiative 
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