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…

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About Steve Keen

I am a professional economist 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 debts accumulated in Australia, and our very low rate of inflation.
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29 Responses to Tell me what the wires do”

  1. Bhaskara II says:

    @ 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 http://coppolacomment.blogspot.com/
    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.

  2. Robert Budidng says:

    Looks like he should rename his site to Noah Clue.

  3. Ted Stead says:

    Steve,
    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

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