7 thoughts on “Monday Message Board (on Tuesday)

  1. I’m not sure what the status is of Zombie Economics, Second edition, since the last update on December 28th. But given that it’s been updated against one zombie (Austerity) currently clawing its way out of the grave, I wonder if there’d be room to put in another couple of zombies with direct policy relevance.
    The first is on the origin of money in the “double coincidence”, which Prof Quiggin discusses here in the Crooked Timber symposium on Graeber’s “Debt” – which I recall JQ mentioning he might include in the updated bibliography.

    I think Graeber’s laying out of the case against the double coincidence deserves JQ’s restating (along with its relevance for economics) because, as Graeber implies in his book, origin stories, no matter how ostensibly empirical they are, are always about justifying the current state of affairs. The “Metallist” account stemming from the double coincidence argues that money – hence markets, trade, etc – arose privately out of economic-agent-efficiency seeking eventually settling on gold/silver. By implication, it justifies a much weaker role for the state in managing monetary policy. The rival Chartalist account, which Graeber pretty clearly subscribes to, shows that money is a creation of states. Ergo, a much more interventionist state on monetary policy is justified, the case for all-wise independent central banks is weakened, etc. You don’t have to be a full-blown neo-Chartalist or “Modern Monetary Theorist” to think that, from the left, more democratic government control over money is probably a good thing at this point.

    Similarly, another zombie which has taken a shellacking and deserves a guernsey on its gravestone (or rather, a shovel to the head) is the idea of the “Fractional Reserve System”, that deposits create loans, etc, which Ron Paul and the Austrians/goldbugs are still dining out on. Most people don’t know that the Australian banking system has a 0% reserve (which, if the fractional idea was right, would mean our money supply was infinite). Most people don’t know that the aggregate supply of loans goes up before the aggregate supply of bank deposits; because the banks make loans first, and then get the cash to supply the loan from each other on the inter-bank market or the reserve discount window, then see the loan deposited back in their coffers to serve as its own reserve. Several good papers have been published by the US Fed and the Aus treasury on this. Importantly, this explains why the velocity of money is not fixed, why QE didn’t cause inflation, and why giving the US banks huge cash handouts directly through quantitative easing did little to stimulate growth – they didn’t lend it, their lending wasn’t constrained by reserve requirements but by a shortage of credit-worthy loan-seekers. By contrast, Australia handed the stimulus cash directly to consumers, stimulating business, who then kept up their bank borrowing and investment, said banks being able to loan because the cash ended up being deposited with them after being spent (and so on).

  2. @James Haughton
    Yes, I asked Chris Warren about that 2nd issue in the “The zombie economics of austerity in Australia (updated again)” thread regarding the instability discussion but it probably took too long for the link to come through.

  3. Dinner time conversation here, crowdsourcing:

    Does anyone know who was the first person on the Labor senate ticket not to get a seat in 2010?

    Worth considering for the seat that Carr got?

  4. Humm… Maybe the “Monday Message Board” should be renamed to the “Tuesday Message Board” or the “Maybe Monday Message Board” 😛

  5. Following on Wayne Swan’s critism of the large corporations in Australia having too much political influence and is threatening democracy; apparently the mining company is going to put through an advertising campaign against Swan arguing that they do not hold such powers and critising Swan’s understanding on the economy. I sincerely hoping to see that more of general public can see the hypocrisy behind this advertising campaign than the poker reform.

  6. @Tom
    Yeah, agreed. I was disappointed by the interview on Lateline last night by Emma Alberici. It wasn’t too dissimilar to some of the ultra right “shock jock” rubbish that’s been widely criticised lately. Geez I miss Ali Moore 😦

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s