Monetary System

By Claus Vistesen Events in Japan and Libya do not seem to have derailed the ongoing positive sentiment in the market. But they just might have alerted various Masters of the Universe that black holes (or was that swans?) are both…

M1 is the narrowest definition of money. It includes currency and coins, traveller's checks, and checking accounts (so-called demand deposits).  The chart below from the St. Louis Fed shows the relationship between base money that the…

This is from the blog Political Irony (hat tip UMKC). Higher consumer price inflation than we see now will probably result in demand destruction and recession before the Fed reacts. The slack in the economy would mean this becomes a…

In a recent post I discuss the limitations of neoclassical economics and the strain of behavioral economics that remains tethered to it. I argue that they fail because the market is inhabited by people, heterogeneous and context-sensitive,…

Today it was revealed that last week the Federal Reserve rejected Bank of America's plan to increase its dividend from its token penny a share in the second half of 2011. Clearly, the Fed is sending a message that it does not believe the…

By Warren Mosler (as posted on the 10th) Also see other similar arguments from Credit Writedowns' on how quantitative easing really works. Background information first, answer later- The Fed sets the fed funds target at their…

If firms that defrauded their customers gained a competitive advantage over their honest rivals private market discipline became perverse and drove honest firms into bankruptcy. The CEOs that lead accounting control frauds create…

The essential idea is that the “money supply” in an “entrepreneurial economy” is demand-determined – as the demand for credit expands so does the money supply. As credit is repaid the money supply shrinks. These flows are going on all the…

If you want an accurate explanation of quantitative easing, here it is. I am going to describe the basic mechanics and the transmission mechanism to the rest of the economy. To the degree there is official documentation on the mechanics, I…

By Marc Chandler The newly created European Banking Authority will be overseeing the stress tests on almost 90 European banks. Recall that the stress tests last year met broad criticism for the lack of rigor. It was anticipated that the…