Dr. Russell Standish and I have been working on Minsky now for almost two years now–ever since we received the $125K from INET’s Spring 2011 grant round: Russell as builder (coding in C++ and Tcl/Tk) and me as architect (playing with each release, spotting bugs and suggesting features). It’s been a part-time endeavor: Russell, as a contract programmer, has to keep more than one iron in the fire, while I have a fair few balls in the air myself. Russell has put in about 2000 hours of coding over that time, and we still have funds to support about another 250 hours after the successful Kickstarter campaign earlier this year.
Broadcast on March 11 2009 by ABC Radio National Big Ideas
A blog member has kindly produced a transcript of the off-the-cuff talk I gave at this forum. I’ve made minor corrections to the punctuation below, but the text is otherwise as delivered on the night without speaking notes–so there are some grammatical slips. For those who want to listen to this alone–without also listening to Bernie Fraser beforehand–here is a link to the MP3 of my talk.
It seems we’ve moved from Stanley Kubrick to John Cleese. Rory Robertson’s reply to my “Rory Robertson Designs a Car” post reminds me of one of my many favourite scenes from Monty Python, the fight between King Arthur and the Black Knight:
King Arthur: [after Arthur’s cut off both of the Black Knight’s arms] Look, you stupid Bastard. You’ve got no arms left.
Black Knight: Yes I have.
King Arthur: *Look*!
Black Knight: It’s just a flesh wound…
Note: This post has been modified ni the light of comments that the initial version quoted Bernanke out of context.
A link to this blog from a US legal advisory website the Practising Law Institute’s In Brief ( “DEFLATION IN THE REAL WORLD”) reminded me of Bernanke’s book Essays on the Great Depression, which I’ve been aware of for some time but have yet to read. I’ll make amends on that front early this year; fortunately, an extract from Chapter One is available as a preview on the Princeton site (I couldn’t locate the promised eBook anywhere!; in what follows, when I quote Bernanke it is from the original journal paper published in 1995, rather than this chapter).
In the previous post, I outlined my basic model of a pure credit economy, in which a single initial loan allowed a continous flow of economic activity (at a constant level) over time. The basic flowtable of that system was:
||Firm Loan (FL)
||Firm Deposit (FD)
||Bank Deposit (BD)
||Worker Deposit (WD)
|Interest on Loan
|Interest on Deposit
|Pay Interest on Loan
This is an unplanned post that partly pre-empts what I’ll be writing in the February Debtwatch Report, where I will explain in full my theory of money creation in a pure credit economy. So this is somewhat out of sequence, and will undoubtedly be badly explained compared to what I put together for February.
I will also have to finish this in a later post–probably in the first couple of days of the New Year–because Sydney’s fireworks beckon, and we have to be on board the cruiser we’re watching them from at 7pm. But what is here is part of a long-promised explanation of my model of money creation. In a couple of days I’ll publish the punch line, which is a newly developed model of a Ponzi Scheme.
Most conventional and unconventional commentators on money believe that money is destroyed when debt is repaid. I disagree–but explaining why takes some time. I received an email this morning from a Ecological Economics discussion list in the USA on this issue, and wrote the following explanation of my position. I thought that readers of this blog might find it instructive.
On the money issue, this is one where I beg to differ both with the response Josh put forward, and most of my fellow economists as well–non-orthodox and non-orthodox. I think it’s wrong to say that money is destroyed when debt is repaid–but to explain why, I need to both put forward a dynamic model, and find an appropriate analogy.