The last three or four decades have seen a remarkable evolution in the institutions that comprise the modern monetary system. The financial crisis of 2007-2009 is a wakeup call that we need a similar evolution in the analytical apparatus and theories that we use to understand that system. Produced and sponsored by the Institute for New Economic Thinking, this course is an attempt to begin the process of new economic thinking by reviving and updating some forgotten traditions in monetary thought that have become newly relevant. Three features of the new system are central. Most important, the intertwining of previously separate capital markets and money markets has produced a system with new dynamics as well as new vulnerabilities. The financial crisis revealed those vulnerabilities for all to see. The result was two years of desperate innovation by central banking authorities as they tried first this, and then that, in an effort to stem the collapse. Second, the global character of the crisis has revealed the global character of the system, which is something new in postwar history but not at all new from a longer time perspective. Central bank cooperation was key to stemming the collapse, and the details of that cooperation hint at the outlines of an emerging new international monetary order. Third, absolutely central to the crisis was the operation of key derivative contracts, most importantly credit default swaps and foreign exchange swaps. Modern money cannot be understood separately from modern finance, nor can modern monetary theory be constructed separately from modern financial theory. That's the reason this course places dealers, in both capital markets and money markets, at the very center of the picture, as profit-seeking suppliers of market liquidity to the new system of market-based credit.
Payment Example: Money and Credit
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来自 Columbia University 的课程
Economics of Money and Banking
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从本节课中
Introduction, continued
The next two lectures are meant to introduce a key analytical tool, the balance sheet approach to monetary economics, that we will be using repeatedly throughout the course. As inspiration, first I provide a concrete example of how the approach works by "translating" the Allyn Young reading into the balance sheet language. I follow that with a more systematic introduction to this essential tool.
与讲师见面
Perry G MehrlingProfessor
Economics, Barnard College
Actually, I think an example's going to make this all a lot...a lot clearer.
So, let's just say that before class, I went to get
a cup of coffee at Oren's Daily Roast, which I did.
This is late in the evening for me, okay?
And at Oren's Daily Roast, a small cup of coffee costs $2
and I paid in cash. So this is a money, a money transaction.
How would we, characterize this in these balance sheets?
Well, there's basically two participants to this thing.
There's me, and there's Oren's Daily Roast.
[SOUND].
The company that was selling me the coffee.
And, it's pretty clear what happened, in terms of the coffee.
Okay, that I made an expenditure on the coffee.
And that, Oren's Daily Roast has a receipt on that.
[SOUND].
They sold the coffee. Good or service, okay?
That was a source of funds.
And that I just told you, that this was all done with money, okay?
So that was dis-hoarding for me of $2. Okay, and that $2 went right
in the cash register, and so, that was. Hording, for
Orin's Daily Roast.
Okay, you can see here in work, I, I mean in practice, both of
those rules right The rule number one,
every, every use has a corresponding source.
Okay?
Rule number two, every use has a corresponding source on another agent.
Okay?
So to describe, one simple transaction is always going to take at least
4 entries in order to explain this, it's just a consequence of these,
of these rules. Here.
We're building intuition that's what this is about.
It's building intuition about the inside character of money.
About the inter, interlocking quality of the monetary system.
The money flow character of it.
These are not natural intuitions, particularly for economists, okay,
who've been trained to see money as a veil.
Okay.
We're not seeing money as a veil, we're
seeing money as the entity we're focusing on.
We're going to be ignoring for most of this class stuff that's above the line.
And focusing on that's below the line.
Here there's not much action below the line in
this simple money transaction, but watch the next one.
What's the next one?
The next one's a credit transaction.
Okay, the credit transaction gets kind of interesting already.
Okay?
So let's say that I, after class I go to Varelli.
And I order their wonderful lamb burger. and,
some other things, and the bill comes to $20, and I charge it.
[SOUND].
I charge it.
[SOUND].
Well, we're going to, let me erase all of this.
' because now, we're going to need somebody else.
There's not just me and Varelli. There's also the MasterCard.
[SOUND].
I'll put MasterCard in the middle.
OK, you, you see where this is going right.
I am doing what I did to begin with,
okay, and MasterCard is being kind a like the bank.
They are the third party and support. Here's me
[INAUDIBLE]
every though how exactly do credit cards work?
Well, I am going to show you.
[COUGH]
And here's Valeli.
Okay.
The simplest part of whole thing is the dinner.
Expenditure on dinner.
Okay, and a receipt,
for dinner. But what
happened, at the end of that dinner. Okay.
What happened at the end of that dinner was they brought
me a slip and I signed it, I just signed it.
What was I doing?
I was, I was not paying, I was borrowing. This is an IOU, I'm promising to pay.
Who am I promising to pay?
MasterCard, exactly. I'm promising to pay MasterCard.
Okay.
So let's, so that's an IOU, so that's borrowing.
So there's an IOU here and that, that becomes a financial asset of MasterCard.
I'm keeping these lined up in those rows there, okay?
So that's, my debt.
It's
[INAUDIBLE]
an additional debt for me.
It's additional financial asset for MasterCard.
Okay? But why did Varelli say, okay, fine.
You're free to go now.
Okay, they got something, they got something,
they didn't get it from me, okay.
They got it from MasterCard.
they got a, IOU, and I'll put MasterCard
there, just to make clear that there
are two people borrowing here, okay.
[INAUDIBLE]
that that MasterCard has an agreement, okay, with Varelli.
That if I sign, if I sign, okay, MasterCard will make good on this.
MasterCard will pay for my dinner.
Okay, but they're not paying for it right away necessarily.
Okay, it's not, it's not necessarily, I mean there are some smart
cash registers where it immediately comes out of some bank account somewhere.
Okay, but, they're not, they're not
paying it right away.
But they're paying it faster then I'm paying it, okay.
If I, I, I, I have a credit card that
I pay at the end of the month sometimes, okay?
But this, this merchant, wants their money, right, right away.
So perhaps next day, or, or at the end of the week or something.
so, so this is, this is, this is how the actual transaction.
Works, first of all. This is how the dinner gets paid for.
Everything else though, is below the line, and there's a lot below the line.
Because there is a couple of IOU's that have to be settled here.
Notice how this payment happened by an expansion of credit.
Okay?
An expansion of credit, in fact, two credits.
Okay?
There's, there's a lot more credit in the
world now after this payment than there was before.
And, where did it come from?
Came out of thin air, just me signing my name, that was it, expansion of credit.
So the first thing that happens to clear this credit, okay, is the next day or
something or the next week Varelli and MasterCard do business, okay.
And Varelli says
I'm, I present
this. So let me just put.
I'll put a 2 next to that. This is stage 2 here, okay?
Cashing in the IOU.
And those things have entry points over here, right?
So that dishoarding have corresponding entries here.
I'll put a 2 there.
Okay and and so and this is repayment here.
Okay?
So now from Verelli's point of view, all done.
It's as if I was paid in cash, right.
Verelli says, that's all done. But it's not all done.
It's not all done.
There's another IOU still there, okay? Which is my IOU.
It's not all done.
From my point of view, and from Master,
MasterCard's point of view, it's not all done.
There's more to go, okay?
And that happens at the end of the month, if, if,
presumably, I repay. And again, there is going to be.
MasterCard is going to be hoarding.
They're going to be, in this there's going to be 3, decumulateing.
They're going to be decumulating a financial asset, this IOU.g.
And, and, and using that, sale of that
financial asset to accumulate money balances here, okay.
And that is dishoarding here.
[SOUND].
And repayment here.
[SOUND].
These are simple examples, okay, of the payment mechanism.
Here what happened, credit expanded and then, and then in, two credits at
once and then in two, in two different phases it collapsed back down.
And at the end of the day, there's no credit anymore.
At the end of the day cash was settling these used debts, cash moved, okay.
Elasticity came from the credit.
Discipline, these debts though, they got paid, that's the discipline.
So there's this balance, in
the system always, between the
discipline and the elasticity.
