Comments on: Mish on the Fictional Reserve System

By: dvd_ceccarelli

dvd_ceccarelli — Tue, 19 Jan 2010 12:53:36 +0000

Thanks Mr Keen. I’m reading this paper and I’ll wait other works tomorrow which explain the parameters used.

By: Steve Keen

Steve Keen — Tue, 19 Jan 2010 11:45:02 +0000

re #74 Mish. Ah! So that's where you got the negative from! Yes, in earlier papers I did that but I changed the convention very early on. This paper has a table at the back that fully specifies the equations and the parameters and initial conditions used; and I'll copy you some other work in my morning tomorrow.

By: dvd_ceccarelli

dvd_ceccarelli — Tue, 19 Jan 2010 11:19:42 +0000

Thanks Mr Keen! The model in this paper is different from the model appeared in 2003 (Big Government as an accidental controller in Minsky’s Financial Instability Hypothesis) where debt gdp ratio was negative. Infact I have founded Vissim files of 2003 paper which has a negative debt.
Another question: Could you be so kind to send me the parameters values (coefficients and initial values) used in the simulation reported in the paper which reproduce a positive debt? This is because now I’m excited and interested in reproducing the results in Vensim software!

By: Steve Keen

Steve Keen — Mon, 18 Jan 2010 19:50:39 +0000

Hi David (#72), I think there’s still some mis-reading going no here, so I’ll send you a paper that’s a bit clearer via your email: the pre-Circuit models always had corporate debt as a positive sum when firms owed banks money, and a negative sum when banks owed firms. In the paper I’ll send you from Commerce, Complexity and Evolution–which used the same model as in the JPKE paper–I show that the (unstable for some parameter values) equilibrium debt to output ratio is +7.02% (page 97) while in the simulations of a breakdown from a different set of initial conditions, debt to output reaches +3.75 in the final cycle.

I’ll also put that paper up on the Research Tab here I haven’t had the time to organise all my papers yet and that tab is a bit out of date and incomplete!

By: dvd_ceccarelli

dvd_ceccarelli — Mon, 18 Jan 2010 13:24:45 +0000

Thanks a lot Mr Keen for your reply.
I read some of your papers, but in the simulation models à la Goodwin-Minsky I have seen always a neagative debt gdp ratio. With the term simulation model I intend model not flow consistent such as Circuit Models. In these kind of models I see always a negative debt gdp ratio (for example in 1995 Journal of Post Keynesian model, in your PHD thesis posted on this blog, and 2003 paper “Big Government as an Accidental Controller in Minsky’s Financial”). If you have a more recent simulation model (not stock-flow consistent) with a positive debt GDP ratio, could you be so kind to suggest me the name of the paper? Thanks.

By: Steve Keen

Steve Keen — Sun, 17 Jan 2010 20:01:09 +0000

Welcome aboard David,

I think you are mis-reading the model somewhat: in my models I record debt as a positive quantity, so that when it is greater than zero then some entity (the firm sector) owes money to the banks.

In some runs of the Goodwin-Minsky model I do get negative debt levels, which means that firms accumulate financial resources and receive interest payments from the banks. But in general I get positive debt levels, and therefore firms having a liability to the banking sector. In the Circuit models, debt always remains positive and greater than the deposits of banks, in which case firms have a net liability to the banking sector. This is consistent with Minsky (and somewhat more importantly in this instance, Schumpeter).

All the best, Steve
PS Your English is excellent–far better than my (non-existent) Italian and the bare remnants of my schoolboy French

By: dvd_ceccarelli

dvd_ceccarelli — Sun, 17 Jan 2010 19:34:53 +0000

Hi, My name is Davide and I’m new in this blog. Firstly, I’ll want to say that this blog is fantastic and I’m learning much things from Mr Keen and from other people who partecipate in the network. Secondly, I’ll want to excuse me for my bad english but I’m an italian student and I learned english only by reading academic papers.
Thirdly, I’ll want to raise a question about some results founded by Mr Keen in his academic reaserch. Mr Keen emphasizes, correctly, in his Goodwin-Minsky model the importance of debt and the role played by banks in cyclical process. But in his mathematical model the debt GDP ratio is positive! That is, the firms accumulate assets and the banks play no role in the process. This is the opposite of Minsky theory and results.

By: pb

pb — Mon, 28 Dec 2009 01:06:53 +0000

If what the conspiracy theorists say are true, then the infinitely powerful government would ensure they do not get airplay.

If they are wrong well that is probably why they exist.

By: scepticus

scepticus — Sun, 27 Dec 2009 16:24:15 +0000

ramanan, yes there is – however he is the only prominent austrian type to deny the money multiplier.

he also agrees that loans create deposits, which will sooner or later lead him to question his austrian ideological beliefs.

I think the battle is already being fought in his mind – it is beginning to spill into his posts.

By: Ramanan/superpoincare

Ramanan/superpoincare — Sun, 27 Dec 2009 16:00:26 +0000

Scepticus,

If you go to Mish’s website – there is a petition for balancing budgets!!!