Tell me what the wires do”

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This arti­cle begins with a tweet from the US eco­nomic blog­ger Noah Smith, who posts at Noah­pin­ion:

Here we go, I thought – yet another main­stream attack on my non-main­stream eco­nom­ics. But why on earth would he see Min­sky – my sim­u­la­tion pro­gram for mod­el­ling the econ­omy as a fun­da­men­tally mon­e­tary sys­tem – as basi­cally absurd? Because “DSGE mod­el­ling is so much bet­ter”, per­haps? Or because there are so many other good sys­tem dynam­ics pro­grams already, why pro­duce another one?

Guess­ing that it was the for­mer rather than the lat­ter, I fired back:

The bat­tle was then started:

And then, sud­denly, I realised that this wasn’t going to be a bat­tle at all:

Tell me what the wires do”? Oh dear…

Click here to read the rest of this post

About Steve Keen

I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous private debts accumulated globally, and our very low rate of inflation.
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  • Bhaskara II

    @ Mmb, Jan­u­ary 15, 2013 at 10:01 am

    An answer to a ques­tion on trans­fer between cus­tomers of a sin­gle bank, and a cus­tomer cash­ing a check at the writer’s bank, and if the cen­tral bank is involved:

    In short such trans­ac­tions do not require check clear­ing out­side the bank, so the cen­tral bank could pos­si­bly not be involved at all.

    If a bank’s reserves are defined as the sum of cur­rency on hand and it’s demand (check­ing) account with the cen­tral bank the answer could be sim­ple. (There might be a bet­ter def­i­n­i­tion of reserves.) 

    In one case you asked about if cus­tomer, A, of bank X gives a check to B. Then B endorses the check to the bank and Deposits it in her account at bank X. There is no cash involved and only credit is trans­ferred from A to B. There is no change in reserves.

    In the sec­ond case, where cus­tomer, A, of bank X gives a check to B. Then B endorses the check to the bank X, who takes cur­rency out of the drawer and hands it to B. 

    Because of the def­i­n­i­tion of reserves above. Bank X’s liq­uid­ity reserves has decreased by pay­ing cur­rency to B, but bank X’s the (demand) reserve account at the cen­tral bank is not touched.

    If you want more detail you could ask me for more details.

    Here is an inter­est­ing blog­ger
    She might be able to help on fur­ther ques­tions as she claims a back­ground in bank­ing and seems to under­stand book­keep­ing. She may be get­ting back in to bank­ing. She might know how one learns this stuff too.

  • Bhaskara II
  • Robert Budidng

    Looks like he should rename his site to Noah Clue.

  • Ted Stead

    This is worth hav­ing a look at (in rela­tion to the Min­sky pro­gram) if you haven’t seen it already: Inter­ac­tive Explo­ration of a Dynam­i­cal Sys­tem