Hey Joe, Banks Can’t Lend Out Reserves

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I began another post crit­i­cal of Joe Stiglitz’s analy­sis with the caveat that I like Joe. I’ll add to that that I respect his intel­lect too, both because he’s very bright—you don’t win a Nobel Prize (even in Eco­nom­ics!) with­out being very bright—and because com­pared to some other win­ners, he is very capa­ble of think­ing beyond the lim­i­ta­tions of the main­stream.

But there are some main­stream con­cepts that are so deeply embed­ded in even highly intel­li­gent, flex­i­ble thinkers like Joe, that they con­tinue think­ing in terms of them, when a bit of really seri­ous thought would show that the con­cepts are in fact non­sense.

For Kingston “Becom­ing An Econ­o­mist” stu­dents

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I’m post­ing videos of lec­tures given by my Kingston col­leagues to the intro­duc­tory “Becom­ing an Econ­o­mist” course, since the Study­S­pace soft­ware Kingston uses doesn’t sup­port MP4 files. The first is Devrim Yilmaz’s lec­ture last week on “Data Col­lec­tion and Pre­sen­ta­tion”.

My Kingston Inau­gural Lec­ture with slides and data

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I’ve been Head of School at Kingston Uni­ver­sity Lon­don for over 18 months now, but these things do take time: last Wednes­day I gave my inau­gural Pro­fes­so­r­ial lec­ture to an audi­ence of about 200 peo­ple. My screen-record­ing video of the talk is below. Click here to down­load the Pow­er­point slides; Min­sky cri­sis model; Min­sky Loan­able Funds model; Min­sky Endoge­nous Money model; Pri­vate Debt lev­els (6 coun­tries); Pri­vate Credit growth (6 coun­tries); USA Pri­vate Debt change & Unem­ploy­ment; Pri­vate Debt Accel­er­a­tion & Asset Prices.

Note To Joe Stiglitz: Banks Orig­i­nate, Not Inter­me­di­ate, And That’s Why Aggre­gate Demand Is Stuffed

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I like Joe Stiglitz, both pro­fes­sion­ally and per­son­ally. His Glob­al­iza­tion and its Dis­con­tents was vir­tu­ally the only work by a Nobel Lau­re­ate econ­o­mist that I cited favourably in my Debunk­ing Eco­nom­ics, because he had the courage to chal­lenge the pro­fes­sional ortho­doxy on the “Wash­ing­ton Con­sen­sus”. Far more than most in the eco­nom­ics main­stream—like Ken Rogoff for exam­ple—Joe is capa­ble of think­ing out­side its box.

But Joe’s lat­est pub­lic con­tri­bu­tion—“The Great Malaise Con­tin­ues” on Project Syn­di­cate—sim­ply echoes the main­stream on a cru­cial point that explains why the US econ­omy is at stall speed, which the main­stream sim­ply doesn’t get.

The Power And The Impo­tence Of The ECB

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I’ve attended two con­fer­ences in two days where both the power and the impo­tence of the Euro­pean Cen­tral Bank (EBC) have been on vivid dis­play.

Its polit­i­cal power is con­sid­er­able, both in form and in sub­stance. At both sem­i­nars, the ECB speaker—ECB Board mem­ber Peter Praet at the first, and ECB Pres­i­dent Mario Draghi at the second—spoke first, and then left. In form, the ECB has no need to defend its poli­cies because it is unim­peach­able in its exe­cu­tion of them. In sub­stance, it does not even con­sid­er­ing engag­ing with its subjects—I use the word deliberately—in open and robust dis­cus­sion.

Lec­ture05 Why Econ­o­mists Dis­agree: The com­mon blindspot on the Envi­ron­ment

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The posi­tion of the econ­omy in the envi­ron­ment is a shared blindspot in eco­nom­ics: no exist­ing school han­dles the topic well, and yet this is the key issue we need to under­stand. I explain the Laws of Thermodynamics–as well as I could in an intro­duc­tory class with­out using mathematics–and pro­vide some links to impor­tant top­ics that stu­dents wouldn’t nor­mally hear about in an eco­nom­ics degree.

Click here for the Pow­er­point slides.

Becom­ing An Econ­o­mist Lec­ture 4: Post Key­ne­sians

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This lec­ture cov­ers the Post Key­ne­sian school of thought in eco­nom­ics, focus­ing mainly on its mod­ern empha­sis upon endoge­nous money, sec­toral bal­ances, and Minsky’s Finan­cial Insta­bil­ity Hypoth­e­sis. I also show how to do non-equi­lib­rium mod­el­ing (using my Open Source mod­el­ing pro­gram Min­sky of course).

Click here to down­load the Pow­er­point slides.

The Unnat­ural Rate Of Inter­est (Ultra-Wonk­ish)

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Paul Krugman’s lat­est col­umn—“Check Out Our Low, Low (Nat­ural) Rates” (which he didn’t flag as “Wonk­ish”, even though it is so in spades—noted that the “nat­ural real rate of inter­est” was falling, and that this jus­ti­fied the low inter­est rate set by the Fed­eral Reserve.

And this made me think about Karl Marx.

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Econ­o­mists Prove That Cap­i­tal­ism Is Unnec­es­sary

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Actu­ally they’ve done no such thing. But they do effec­tively assume that it’s unnec­es­sary all the time.

This tran­scen­den­tal truth became appar­ent to me in the reac­tions I have had from main­stream econ­o­mists to a lec­ture I gave to my Kingston stu­dents this month (which is posted on my YouTube chan­nel and blog).

Click here to read the rest of this post.