New answers tagged money-supply
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To counter Frank's argument that "any exchangeable commodity is in fact money"... even the economists of shadow banking (Pozsar, 2014) don't hold that view:
Money is usually defined from a functional perspective as a “unit of account, store of value and medium of exchange.” However, this definition does not take into account the quintessential attribute ...
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I think this simple question needs a simple answer.
So imagine your entire economy is 10 people sitting in a circle. Each guy always buys things (goods/work/services) from the guy sitting on their right.
For example, guy #1 buys farm produce from guy #2, guy #2 buys water from guy #3 etc.
As a circle they are a completely self sufficient economy. You ...
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This is called a "Liquidity Crunch".
There are firms, households, and institutional investors. Households have mortgages, firms have to service their debts and pay suppliers, and institutional investors have to make money on the capital they hold.
We hit this crisis. Suddenly, institutional investors need to get cash out of the market so that they can ...
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Gold backed money had one huge advantage: it prevented trade imbalances and indirectly that helped regulate inflation and the economy. This worked by governments settling their trade deficits in gold, which meant an inflow or outflow of base gold. When this happened the banks had to either reign in or could relax the amount of currency in circulation to ...
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Yes it is. Lets first unpack some myths about about gold standard or commodity money in general.
They dont necessary prevent inflation. Spain managed to have under gold standard a very large inflation compared to other European nations (Ferguson, 2008), and this happened even without debasement.
Furthermore as you yourself mention debasement can occur as ...
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No or not necessarily because you can't know if the actor will save income or pay down debt, or spend more. The interest rate is not a single factor that determines behaviour.
Nearly all of it is privately created debt money (97%), in circulation. Your 'money' is some bank's liability. You trade their IOUs and they are trusted/licensed to create them. (By ...
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A very insightful question. The thing I'll add here is the famous identity, MV=PQ. Essentially you're asking why Q dropped (real goods & services), while M (money supply) likely is the same. There are (at least) two answers:
V (Velocity) could have dropped - which has the same effect as shrinking M. $100 making 10 round trips is very different from $...
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This question is directly equivalent to "If I issue a bearer bond, is this bearer bond money?"
The answer is yes. It is fungible, transferable and a medium of exchange.
The extent to which it is 'money' depends on the extent people trust you.
Money in prisons is often packets of cigarettes. Is a brick money? Yes. By making a brick, you are making money. ...
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No, you didn’t. All money is debt, but not all debt is money.
There are two easy ways of thinking about this. The first is to think about the properties of money: unit of account, store of value, medium of exchange. Focusing on the latter two:
Is the money you owe to me a good store of value? No offense, but I’d rather have cash or keep it in an insured ...
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The Fed is combating liquidity. The risk in the U.S. and most of the developed world is deflation. We are already seeing massive deflation as evidenced by plummeting demand for oil.
Deflation has been the risk for the past 12 years. It’s time to stop listening to your dad/uncle who lived through the devastating effects of inflation in 1970s.
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Does the M2 increase by $2.2T?
Yes
Thus a 12.5% increase in inflation?
not necessarily
those record lifeline (2.2T) will spark risk assets like stocks,
business and company obtain support from authorities to combat effect of the pandemonium
no flight
no hang out in cafe
ultra low occupancy of hotel
in general case, inflation occurs when there is tight ...
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While the fed has dropped interest rates, so have almost all other countries. The US Dollar Index (DXY) is a measure of the value of the US dollar relative to a basket of foreign currencies, so if all countries drop interest rates, the relative change should be zero.
In economically troubled times, a lot of companies and people flock to the US to buy US ...
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Because of forced selling and a scramble for cash. People responding to margin calls, having to repay bonds etc etc. Cash demand went through the roof.
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It is always very hard to precisely identify the causes of a particular index variation. Here, note that the U.S. Dollar Index (DXY) is a measure of the value of the US dollar relative to a basket of foreign currencies. So, the DXY Index goes up when the U.S. dollar gains value when compared to other currencies. Given that the economic slowdown is global, ...
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No chance. The economy is heading for a deep recession, because of an exogenous fall in demand (think of a supply and demand graph, where demand falls drastically, and so Q and P falls). Recessions most of the time mean less inflation (firms sell less). Exceptions are called stagflation and are fairly uncommon, except in totally destroyed economies where ...
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Have you ever gifted your parents a "I'll wash the house" ticket? Or maybe your parents just forced you to do it. In any case, money, or less colloquially a Federal Reserve note, is like a "I'll wash the house" ticket issued by the Federal Reserve. But instead of being able to redeem it for a house wash, you can redeem it to receive a certain amount of gold. ...
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