L. Randall Wray, “Introduction to an Alternative History of Money,” Working Paper No. 717, Levy Economics Institute of Bard College, May 2012.From p. 4 onwards there is a very useful discussion of the origins of money. One minor thing that strikes me is that the remarks on what mainstream theory says about the goldsmiths and the origin of fractional reserve banking could have used the critique of George Selgin:
Selgin, G. “Those Dishonest Goldsmiths,” revised January 20, 2011But otherwise this is an excellent paper.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1589709
Unrelated Note
Just glancing at the sidebar, I noticed that my blog has just hit 100 members! Thanks to everyone concerned!
Good stuff and histories as usual.
ReplyDeleteYes, as I get more and more into money and its history I am coming more and more over to the endogenous concept the way post-Keynesians say the money supply works. In case you haven't seen this part of Keen's book:
"...while they believe that the money supply should be determined endogenously... they argue that the current stystem of state money means that the money supply is entirely exogenous and under the control of the state authorities. They then attribute much of the cyclical behaviour of the economy to government meddling with the money supply and the rate of interest.
The Post-Keynesian schoool...argues that though it may appear that the state controls the money supply, the complex chain of causation in the finance sector actually works backwards. Rather than the state directlly controlling the money supply via it's control over the issue of new currency, private banks and other credit-generating institutions largely foce the state's hand.
Thus the money supply is largely endogenously determined by the market economy, rather than imposed upon it exogenously...Statistical evidence about the leads and lags between the state-determined compnent of money supply and broad credit show that the latter 'leads' to the former (Kydland and Prescott 1990). If the Austrians were correct, state money creation would instead precede private credit creation,"
and
"the claim that inflation is always and everywhere caused by increases in the money supply, and that the rate of inflation bears a stable, predictable relationship to increases in the money supply is ridiculous." [Paul Ormerod, The Death of Economics, p. 96]
Kaldor's summarization:
"there is no reason to suppose that the ultimate effect on the amount of money in circulation or on incomes would bear any close relation to the initial injections."
The only thing is I think having a mainstream knowledge of money and banking might be a prerequisite to understanding MMT or even post-Keynesians as a lot of their time is spent debunking this stuff. Not sure if they'd agree.
--successfulbuild.
Thus the money supply is largely endogenously determined by the market economy, rather than imposed upon it exogenously...Statistical evidence about the leads and lags between the state-determined compnent of money supply and broad credit show that the latter 'leads' to the former (Kydland and Prescott 1990). If the Austrians were correct, state money creation would instead precede private credit creation. " -- Keen, debunking economics.
ReplyDeleteWhat "Austrian" believes that state money MUST precede private credit creation? All Austrians do, in fact, know that "private" banks create fiat funny-money out of nothing. Why couldn't/wouldn't most new funny money come from banks? Doesn't it? Even if it didn't in certain circumstances, what does that have to do with Austrian theory?
"What "Austrian" believes that state money MUST precede private credit creation?"
ReplyDeleteAny Austrian who holds to the exogenous money theory.
"All Austrians do, in fact, know that "private" banks create fiat funny-money out of nothing."
LOL... I thought you said voluntary FRB where money created is a type of debt instrument is something you don't object to?
Which is it?
I've posted a few thoughts/criticism on this paper.
ReplyDeleteWhat I've neglected to say is that its a pretty neat summary of one school of thought on the history of money, and well worth reading.
Thanks for bringing it to my attention LK.