tag:blogger.com,1999:blog-6245381193993153721.post4596361145555448797..comments2024-03-28T17:08:15.784-07:00Comments on Social Democracy for the 21st Century: A Realist Alternative to the Modern Left: Mises on Marginal Cost: A CritiqueLord Keyneshttp://www.blogger.com/profile/06556863604205200159noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-6245381193993153721.post-48229890575023905352013-12-03T21:29:31.348-08:002013-12-03T21:29:31.348-08:00...we have a mainly endogenous monetary system, th...<i>...we have a mainly endogenous monetary system, then why doesn't the banking system create MORE money when there is a shortage?</i><br /><br />Because credit money creation (bank money, the largest type of money) requires demand from private sector agents for loans to be created: in a recession that demand falls, is stagnant, or insufficient to drive an economy back to full employment.<br /><br />And Keynes in the GT assumed exogenous money. In the Treatise on Money he did understand endogenous money.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-62279971567955603552013-12-03T21:27:13.997-08:002013-12-03T21:27:13.997-08:00Imagine you own a small bank and there is an econo...Imagine you own a small bank and there is an economic downturn. Would you give more loans to the customers, even if it is very likely you are going to write-off those loans due to bankruptcies? Would the customers take those loans knowing that their circumstances are bad and they might go broke because of the loan?<br />Essentially, if all debtors and creditors coordinated to create more credit and investment during recessions, they'd have mitigated economic downturns alright. But discoordination is fundamental and unavoidable. Anonymoushttps://www.blogger.com/profile/13978734648230292076noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-66064504639787028422013-12-03T18:59:56.125-08:002013-12-03T18:59:56.125-08:00A little off topic, but here goes
There is somet...A little off topic, but here goes <br /><br />There is something that has always bothered me about the endogenous money folks. If we accept, for the sake of argument, that a recession is a minskyite flight to credit-risk free assets, (like cash and government bonds) and we have a mainly endogenous monetary system, then why doesn't the banking system create MORE money when there is a shortage? In other words, why isn't endogenous money creation counter cyclical instead of pro-cyclical? Thats why I am so skeptical when i see post Keynesians stoutly assert that we 'have and ENDOGENOUS monetary system!" Keynes wrote about it in the GT, Im not sure where, saying that if money were an asset completely created by the private sector, recessions would be eliminated, because producers enter a market where there is high demand for an asset and produce that asset eventually in abundant quantitiesJasonnoreply@blogger.com