Category Archives: Eric Tymoigne

Money and Banking – Part 5

By Eric Tymoigne

Previous posts studied the balance sheet of the fed, definitions and relation to the balance sheet of the fed, and monetary-policy implementation. In this post, I will answer some FAQs about monetary policy and central banking. Each of them can be read independently.

Q1: Does the Fed target/control/set the quantity of reserves and the quantity of money?

The Fed does not set the quantity of reserves and does not control the money supply (M1). It sets the cost of reserves; that’s it.

In terms of reserves, the Fed was created to provide an “elastic currency,” i.e. to provide monetary base according to the needs of the economic system in normal times and panic times. It would be against this purpose to implement monetary policy by unilaterally setting the monetary base without any regards for the daily needs of the economy system.

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Money and Banking Blog – Part 4

By Eric Tymoigne

For convenience, I have put the balance sheet of the Fed below. A previous post examined the balance sheet and another one provided important information about the meaning of reserves and other basic concepts and their relation to the balance sheet of the Fed. Now let’s look at monetary-policy implementation.

1

What does the Fed do in terms of monetary policy and why? Continue reading

Money and Banking – Part 3

By Eric Tymoigne

(A quick note: I noticed that the M&B posts get posted on other blogs. If you want me to respond to you, you should comment at NEP.)

MONETARY BASE AND THE BALANCE SHEET OF THE FED.

The previous post examined the balance sheet of the central bank:

f1

Now that we have an understanding of how the balance sheet of the Federal Reserve works, it is possible to go into the details of how the Fed operates in the economy in terms of monetary policy.

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Money and Banking – Part 2

By Eric Tymoigne

[Revised 1/18/16 – updated t-account images]

Central bank balance sheet and immediate implications

The previous post reviewed basic balance-sheet mechanics. This post begins to apply them to the Federal Reserve System (Fed).

Balance Sheet of the Federal Reserve System

For analytical purpose, the balance sheet of the Fed can be presented as follows:

f1

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Money and Banking – Part 1

By Eric Tymoigne

I struggled a few years to get a Money and Banking (M&B) course together. It lacked coherency and students had difficulty linking the different parts of the class. A good part of the problem comes from the M&B textbooks that, besides having outdated presentations, are a disparate collection of chapters without a coherent core. So I gave up with textbooks and went my own way.

The core of the financial system consists of financial documents and among them are balance sheets. Balance sheets provide the foundation upon which most of an M&B course can be taught: monetary creation by banks and the central bank, nature of money, financial crises, securitization, financial interdependencies, you name it, it has to do with a balance sheet. As Minsky used to note, if you cannot put your reasoning in terms of a balance sheet there is a problem in your logic.

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FUNDAMENTALS: Monetary Policy, Interet-Rate Targeting and the Corridor

The latest in a series of class project videos from Eric Tymoigne’s upper division Modern Money Theory class at Lewis and Clark College. Over the next several days, we will be posting  select videos created by his most recent class. Eric has created a YouTube channel to be the home of MMT videos created by L&C students. You can check it out here.

FUNDAMENTALS: Monetary Instruments, Principles and Logic of Acceptance

The latest in a series of class project videos from Eric Tymoigne’s upper division Modern Money Theory class at Lewis and Clark College. Over the next several days, we will be posting  select videos created by his most recent class. Eric has created a YouTube channel to be the home of MMT videos created by L&C students. You can check it out here.

Fundamentals: Automatic Stabilizers and “Clinton’s Surplus”

The latest in a series of class project videos from Eric Tymoigne’s upper division Modern Money Theory class at Lewis and Clark College. Over the next several days, we will be posting  select videos created by his most recent class. Eric has created a YouTube channel to be the home of MMT videos created by L&C students. You can check it out here.

US Treasuries auction: method and implications

The latest in a series of class project videos from Eric Tymoigne’s upper division Modern Money Theory class at Lewis and Clark College. Over the next several days, we will be posting  select videos created by his most recent class. Eric has created a YouTube channel to be the home of MMT videos created by L&C students. You can check it out here.

Penny Hoarders: A Contemporary Example of a Problem with a Gold/Silver Standard

By Eric Tymoigne

Yesterday National Public Radio ran a segment on penny hoarders. These are people whose hobby is to hoard pre-1982 pennies. Some even go to their local banks and ask to convert dollar bills into pennies and then spend their evenings triaging boxes of pennies. Why would they do that would you ask? Well, pre-1982 pennies are made mostly of copper and, given the price of a pound of copper tripled over the past ten years, the face value of a penny is half the value of the content of copper: face value is 1 cent, intrinsic value is 2 cents. 100% profit from selling pennies for their copper content!

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