Category Monetary policy
Green Bitcoin vs Red=Green LETS: Nominal Anchor vs Needs of Trade
Both Bitcoin and LETS are monetary exchange systems. There are many differences between Bitcoin and LETS. I am going to ignore all of those differences except the one I want to focus on. Those other differences are off-topic. [Yes, this post is not really about Bitcoin vs LETS. I am just using Bitcoin and LETS […]
Why I=S is a bad place to start doing macro, again
I was reading Philip Cross's article "The Limits of Economic 'Stimulus': How monetary and fiscal policy have sown the seeds of the next crisis". I came to this bit in the Executive Summary: "Low interest rates also depress savings and therefore investment." It is clear from the context that he is talking about the Bank […]
Red/green money, Bank of Canada settlement balances, and TARGET2
This post is about something I don't understand. Let's start out simple. There are two parallel imaginary worlds: the green world and the red world. In the green world people use positively-valued green money as the medium of exchange. If I buy something I give the seller my green money in exchange. Green money flows […]
My Cunning Plan to reform New Keynesian Macro
Brad DeLong calls it my "self-imposed Sisyphean task". He's probably right. But it seems worth a try, as long as there's a small chance he's wrong. I have a Cunning Plan. Like it or not (and there is much to like as well as dislike), New Keynesian macro has become the […]
Assignment of targets to instruments, stability, and Functional Finance
J.W. Mason and Arjun Jayadev have a paper making a new (to me) point about the assignment of targets to instruments. First I'm going to present an (over-?) simplified version of their model, to explain the gist of it. [I think I've got the gist of it, but I'm not 100% sure, and I know […]
Synchronisation and the Gross Money Supply
You decide to make a new monetary system from scratch. You give everyone a chequing account on your computer, with an initial balance of 0 units. If Andy buys bananas from Betty and pays her 100 units, Betty now has a positive balance and Andy now has a negative balance. The Net money supply remains […]
Monetary Science Fiction
Chris Dillow says that economics is like literature. Maybe it is, and maybe it isn't. But if it is literature, economics needs more science fiction. Paradoxically, imagining radically different worlds can help us understand better how the actual world works, as well as helping us consider policy alternatives. Imagine a world where all borrowing and […]
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 […]
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 […]
Worthwhile Canadian Initiative 
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