Wednesday, August 14, 2013

Paul Sheard — Repeat After Me: Banks Cannot And Do Not "Lend Out" Reserves

"Although the "money multiplier" view of central banking and credit creation is the dominant one, largely I would posit because its pedagogical attractiveness makes it a "dominant meme," other schools of thought have long existed in economics and have come to the fore more recently in the guise of "modern monetary theory (MMT)." See, for instance, Wynne Godley and Marc Lavoie, 2007: Monetary Economics: An Integrated Approach to Credit, Money, Income, Production and Wealth (Palgrave Macmillan); L. Randall Wray, 1998: Understanding Modern Money: The Key to Full Employment and Price Stability (Edgar Elgar); L. Randall Wray, 2012: Modern Monetary Theory: A Primer on Macroeconomics for Sovereign Monetary Systems (Palgrave Macmillan)". — endnotes, p. 12
Standard and Poor's — Ratings Direct
Repeat After Me: Banks Cannot And Do Not "Lend Out" Reserves
Paul Sheard | Chief Global Economist and Head of Global Economics and Research, New York
(h/t y in the comments)


3 comments:

Unknown said...

Yep. Reserves are the real money and as such only the banks are worthy of them. [/sarc] Oh yeah, us peons can drain reserves by obtaining physical cash for them but then what? Stuff it in our mattress?

Those who oppose a government provided fiat storage and transaction service are in favor of the current fascist system whereby the banks deal in reserves between themselves and we get to deal in our own stolen purchasing power - bank credit.

Wake up and smell the injustice! You know who you are.

mike norman said...

This is amazing coming from an S&P guy. They are so out of paradigm on everything else. Remember the U.S. credit downgrade? It's shocking to see someone over there get something right.

Roger Erickson said...

Didn't Marriner Eccles or his staff write that down ~1933?

Biggest point of interest here is how long it's taken for awareness of altered context to filter into institutions like S&P.

Don't hold your breath waiting for public policy logic to rapidly expand. We're talking masses of Luddites here.