miércoles, 21 de marzo de 2012

Gran debate sobre los bancos y el sistema financiero (sobre Minsky también)

Paper de Steve Keen: 'Instability in financial markets: Sources and remedies'. Y un resumen

Crítica de Krugman

Randall Wray responde (explicando a Minsky):

"Minsky took a broad approach to money creation, arguing that “everyone can create money; the problem is to get it accepted.” (2008b p. 255) Money is really just an IOU denominated in the money of account, but there is a hierarchy of monies—some are more widely accepted than others—with the monetary IOUs issued by the treasury and the central bank sitting at the top of the money pyramid. He saw banking as essentially the business of “accepting” IOUs, making payments on behalf of customers and holding their liabilities. Banks make payments in their own IOUs, which are then cleared using the central bank’s reserves."

"...In other words, the “money supply” expands and contracts as bankers accommodate the demands of their customers in a pro-cyclical manner."

"This pro-cyclical behavior amplifies the business cycle, increasing the thrust toward instability. Minsky’s theory can be summarized as “an investment theory of the cycle and a financial theory of investment”; the first is the usual Keynesian view, and the second stresses that modern investment is expensive and must be financed—and it is the financing that generates structural fragility. During an upswing, profit-seeking firms and banks become more optimistic, taking on riskier financial structures. Firms commit larger portions of expected revenues to debt service. Lenders accept smaller down-payments and lower quality collateral. Financial institutions innovate new products and finesse rules and regulations imposed by supervisory authorities. Borrowers use more external finance (rather than retained earnings), and increasingly issue short-term debt that is potentially volatile (it must be “rolled-over” so there is risk that lenders might refuse to do so). As the boom heats up, the central bank hikes its interest rate—and with greater use of short-term finance, borrowers face higher debt service costs."

"While Minsky’s FIH is usually interpreted as a theory of the business cycle, he also developed a theory of the long-term transformation of the economy. Briefly, capitalism evolves through several stages, each marked by a different financial structure. The 19th century saw “commercial capitalism” where commercial banking dominated—banks made short-term commercial loans and issued deposits. This was replaced by the beginning of the 20th century, with “finance capitalism,” after Rudolf Hilferding, where investment banks ruled. The distinguishing characteristic was the use of long-term external finance to purchase expensive capital assets. The financial structure was riskier, and collapsed into the Great Depression—which he saw as the failure of finance capitalism. We emerged from WWII with a new form of capitalism, “managerial welfare-state capitalism” in which financial institutions were constrained by New Deal reforms, and with large oligopolistic corporations that financed investment out of retained earnings. Private sector debt was small, but government debt left over from war finance was large—providing safe assets for households, firms, and banks. This system was financially robust, unlikely to experience deep recession because of the Big Government and Big Bank constraints discussed above."

Sobre la discusión

Crítica a Krugman

Steve Keen le responde a Krugman.

Keen:

"Why does it matter that “once you include banks, lending increases the money supply”? Simply, because the endogenous increase in the stock of money caused by the banking sector creating new money is a far larger determinant of changes in aggregate demand than changes in the velocity of an unchanging stock of money. And in reverse, the reduction in demand caused by borrowers repaying debt rather than spending is the cause of the downturn we are now in—and of the Great Depression too."

Keen, Krugman and National Accounting

"Borio and Disyatat have written a nice article outlining the differences between the concept of saving and investment on one side and ‘financing’ on the other side. and its indeed telling that when it comes to money and lending these practical economists from the Bank of International Settlements/Central Bank of Thailand use the same concepts as Post-Keynesians and, to an extent, Austrians – but not the same concepts as neo classical economists."

Lending, velocity and aggregate demand

Steve Keen le responde a Krugman otra vez

Nick Rowe: "The supply of money is demand determined". Krugman comenta

Banking mysticism and the hot potato

Slack Wire critica a Keen

"First, he argues that a tradition running from Minsky back to Keynes and Schumpeter (and, I would add, Wicksell and on back to the "caps" in 17th century Sweden) sees money as endogenously created by the banking system, rather than exogenously set by central banks (or, earlier, by the supply of gold). This means that banks can lend to borrowers without a prior decision by anyone to save, which in turn means that changes in the terms on which banks extend credit are an important source of fluctuations in aggregate demand that drive movements in output and prices. With all this, I am in perfect agreement.

Keen repeatedly says that "aggregate demand is income plus change in debt." There are many variations on this through his writing, he evidently regards it as a central contribution. But what does it mean? To a non-economist, it appears to be a challenge to another, presumably orthodox, view that aggregate demand is equal to income. But if you are an economist you know that there is no such view, whether neoclassical, Keynesian or radical.

What economist do believe, across the spectrum, is that total expenditure = total output = total income, or Y = Z = C + I + G + X - M. Given the way our national accounts are set up, this is an identity. The question, as always, is which way causality runs. The term "aggregate demand" is shorthand for the argument that causality runs from aggregate expenditure to aggregate income, whereas pre-Keynesian orthodoxy held that causality ran strictly from income to expenditure. (It's worth noting that in this debate Krugman is solidly with Keen -- and me -- on the Keynesian side.) But there isn't any separate variable called "aggregate demand"; AD is just another name for aggregate expenditure insofar as it determines output. Nobody ever says that AD is equal to income; what they typically say is that AD is a function of income, along with other variables such as interest rates, wealth, and changes in sentiment. (People do say that income is equal to AD, but that is a very different claim, and it's true by definition.)

Krugman vs Scott Fullwiler

Banks are not mystical

Comentario en el blog de Keen

Más de Randall Wray sobre Minsky

"From the 1920s a peculiarly American misunderstanding developed according to which the quantity of bank reserves issued by the Fed could somehow control bank lending and deposit creation. This was called the “exogenous money” approach (the money supply is “exogenously” controlled by the central bank through restriction of the quantity of reserves supplied). It became the starting point for Milton Friedman’s monetarism—which finally ended in the disastrous Great Monetarist Experiment of the early 1980s in the US and the UK in which the central banks tried formal targeting of growth of the money supply.

There was always another tradition, dating back to the Banking School of the early 19th century through Marx and then Keynes, and on to Schumpeter, Gurley&Shaw, Minsky, N. Kaldor, B. Moore and finally to yours truly at the end of the 1980s. It is called the “endogenous money” approach that insists central banks cannot control private money creation by banks through control over reserves.

This stuff is way too wonky for this particular blog. But very briefly the idea runs like this. Modern central banks are responsible for maintaining a smoothly operating payments system, which among other things requires that bank liabilities clear “at par” (a one dollar deposit at Chase is valued the same as a one dollar deposit at Bank of America). The Fed makes sure that checks clear among banks and that depositors can use the ATM machines. That means banks must have reserves as required. So the Fed’s control is based on “price”, not “quantity”: it can set the interest rate at which it lends reserves to banks, but cannot determine the quantity.

Nick Rowe: "Monetary policy is just one damn interest rate after another"


Krugman: A teachable money moment


A propósito de la discusión: 'The bank lending channel revisited' de Piti Disyatat


Resumen del debate


Is Paul Krugman a verticalist? Más


Daniel Kuehn opina


Ultima respuesta de Keen


Who is right? Krugman or Keen or / and 9 Central Bank economists?


Edward Harrison: Endogenous or exogenous money? y resumen del debate

Not so Keen on Krugman (muy buen post)

Slaves of some defunct economist

Keen vs Krugman and why it matters

The strange case of the Nobel economist who doesn’t understand how banks work (wonkish)

Más sobre Minsky de Randall Wray. Y otro

David Glasner What about all those excess reserves at the Fed? Otro en contra de Krugman Crítica a la metodología de la economía

Keen cree que Krugnman ha cambiado su postura sobre la deuda y la demanda agregada

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