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So folks like Thom have beliefs in things like fractional reserves and the money multiplier effect. Steve Keen just says "that's all baloney", which is of course true, but I wish he would point out that their beliefs have merit under fixed exchange rates, which there have been in the past. It's a matter of framing, but it usually comes across better and is easier to digest when you tell someone "Hey, yeah that was true in the past, but not for quite some time" as opposed to "nah, your money multiplier and fractional reserve banking is all total shite".
ReplyDeleteDoes it though? Are you saying that banks behave differently under a fixed exchange rate system? Money is endogenous regardless of floating or fixed exchange rates.
DeleteThere is a basic sense in which "fractional reserve banking" has real meaning: a banking system where the very liquid assets/reserves of the bank are a fraction of the total liabilities of the bank.
DeleteBanks can have reserve requirements even under floating exchange rage systems, but that wouldn't stop the endogenous nature of money due to banks being able to borrow reserves from the central bank. I guess the question I have is, under a fixed exchange rate, would the central bank put a halt to this process and grind the banking system to a halt?
Delete!-!-!
ReplyDeleteDespite some of the arguments, and disagreements, I've had with you in the comments section LK of your social commentary regarding the modern left.
I must say your work on summarising, collecting and even theorising on Post-Keynesian economics should go down in Post-Keynesian internet history.
Cool that you are expressing yourself in many ways.
But I think many of us (at least me) miss your smackdown of nonsense economics. (and UnlearningEconomics but he doesn't blog anymore)
The rise of these market monetarists must be beaten down.
Cullen Roche and JKH are doing it well.
Fingers crossed you summarise and debunk those fools at some time.
Thanks for everything man. I am Post-Keynesian and proud because of people like you :)