The Irrelevance of Deposit Creation for Prices and Allocation: Comments on Selgin
02 Jan 2020 Leave a comment
by Arash Molavi Vasséi
In a previous post, Andreas refers to George Selgin’s recent discussion of the place of fractional reserve banking in the Austrian Business Cycle Theory (ABCT). There, Selgin takes a swipe at the monetary pillar of the ABCT. According to the Austrian model, fractional reserve banking is inclined to create money out of “thin air” and, therewith, admits investment spending in excess of “voluntary saving”. This imbalance, allegedly induced by a decline in reserve ratios, is reflected in a Wicksellian interest rate gap, which is supposed to impact prices and the allocation in a systematic way (the real pillar of the ABCT). Selgin argues that fractional reserve banking does not account for the Austrian business cycle, and Andreas expresses sympathy for this view.
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The problems with the MMT-derived banking theory
01 Jan 2020 Leave a comment
(Update: Following Scott Fullwiler’s comment, I published an update here, in which I provide extra clarifications and introduce what I see as the fallacy of composition of the endogenous money theory (I moved this update to the top of my post following a few questions I received).)
Today will be a little long and technical… Many people have heard of the classic textbook story of the banking money multiplier, a characteristic of fractional reserve banking systems. Banks obtain reserves (i.e. central bank-issued high-powered money – HPM, which forms the monetary base) as customers deposit their money in, then lend out a fraction of those deposits that gets redeposited at another bank, effectively creating money in the process, and so on. In fine, reserve requirements at central banks prevent banks from expanding lending (and hence money supply) beyond a certain point. This led to the view that banks’ expansion…
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Another year of gender gaps
01 Jan 2020 Leave a comment
in discrimination, economics of crime, economics of education, gender, health and safety, health economics, human capital, labour economics, labour supply, law and economics, occupational choice, politics - Australia, politics - New Zealand, politics - USA, poverty and inequality Tags: gender wage gap, reversing gender gap
Meanwhile, Waring spent her career as a windbag
01 Jan 2020 Leave a comment
in applied price theory, discrimination, economic growth, economic history, economics of education, economics of information, economics of love and marriage, economics of media and culture, gender, health and safety, human capital, industrial organisation, labour economics, labour supply, law and economics, macroeconomics, minimum wage, occupational choice, poverty and inequality Tags: household production, real business cycles, The Great Enrichment
Safe Spaces & Campus INSANITY (Pt. 2) | Christina Hoff Sommers | WOMEN’S ISSUES | Rubin Report
01 Jan 2020 Leave a comment
in politics - Australia, politics - New Zealand, politics - USA Tags: gender wage gap, political correctness, regressive left
Could We Live Without GPS?
01 Jan 2020 Leave a comment
in defence economics, transport economics Tags: GPS
Climate Prediction Swings and Misses: A Decade of Alarmist Strike Outs, 2010-2019
01 Jan 2020 Leave a comment
in economic history, environmental economics Tags: pessimism bias
New Year surprise for @AOC @SenSanders @SenWarren @Greens @NZGreens @OxfamNZ @GreenpeaceAP
01 Jan 2020 Leave a comment
Waring mustn’t read any economics for over 30 years @women_nz
01 Jan 2020 Leave a comment
in applied price theory, business cycles, econometerics, economic growth, economic history, economics of education, economics of love and marriage, gender, human capital, labour economics, labour supply, law and economics, macroeconomics, Marxist economics, monetary economics, occupational choice, poverty and inequality, public economics, unemployment Tags: household production, real business cycles
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