Locked-in and Sticky Textbooks: Mainstream Teaching of the Money Supply Process

Current macro-economic textbooks provide a fatally misleading description of the money supply process in modern economies. Over the past 20 years Post Keynesian authors have established conclusively that despite strictly-enforced cash reserve requirements, changes in the supply of bank deposits are not determined exogenously by central bank open market operations, but are endogenously determined by changes in bank borrowers’ demand for credit. Nevertheless the vast majority of undergraduate macroeconomic textbooks continue to teach the high-powered-base “money-multiplier” paradigm that the supply of money is exogenously determined by the central bank. Few texts recognize that interest rate targeting renders the high-powered base endogenous. This paper summarizes the extent mainstream macroeconomic textbooks are “locked in” and “sticky,” and fail both in the teaching of monetary policy and in proper scientific discourse.macroeconomic textbooks, money supply, endogenous money paradigm, EMP, Post Keynesian economics, paradigm shift

Locked-in and Sticky Textbooks: Mainstream Teaching of the Money Supply Process

Current macro-economic textbooks provide a fatally misleading description of the money supply process in modern economies. Over the past 20 years Post Keynesian authors have established conclusively that despite strictly-enforced cash reserve requirements, changes in the supply of bank deposits are not determined exogenously by central bank open market operations, but are endogenously determined by changes in bank borrowers’ demand for credit. Nevertheless the vast majority of undergraduate macroeconomic textbooks continue to teach the high-powered-base “money-multiplier” paradigm that the supply of money is exogenously determined by the central bank. Few texts recognize that interest rate targeting renders the high-powered base endogenous. This paper summarizes the extent mainstream macroeconomic textbooks are “locked in” and “sticky,” and fail both in the teaching of monetary policy and in proper scientific discourse

An Alternative View of Finance, Saving, Deficits, and Liquidity

This paper contrasts the orthodox approach with an alternative view on finance, saving, deficits, and liquidity. The conventional view on the cause of the current global financial crisis points first to excessive United States trade deficits that are supposed to have 'soaked up' global savings. Worse, this policy was ultimately unsustainable because it was inevitable that lenders would stop the flow of dollars. Problems were compounded by the Federal Reserve's pursuit of a low-interest-rate policy, which involved pumping liquidity into the markets and thereby fueling a real estate boom. Finally, with the world awash in dollars, a run on the dollar caused it to collapse. The Fed (and then the Treasury) had to come to the rescue of U.S. banks, firms, and households. When asset prices plummeted, the financial crisis spread to much of the rest of the world. According to the conventional view, China, as the residual supplier of dollars, now holds the fate of the United States, and possibly the entire world, in its hands. Thus, it's necessary for the United States to begin living within its means, by balancing its current account and (eventually) eliminating its budget deficit. I challenge every aspect of this interpretation. Our nation operates with a sovereign currency, one that is issued by a sovereign government that operates with a flexible exchange rate. As such, the government does not really borrow, nor can foreigners be the source of dollars. Rather, it is the U.S. current account deficit that supplies the net dollar saving to the rest of the world, and the federal government budget deficit that supplies the net dollar saving to the nongovernment sector. Further, saving is never a source of finance; rather, private lending creates bank deposits to finance spending that generates income. Some of this income can be saved, so the second part of the saving decision concerns the form in which savings might be held-as liquid or illiquid assets. U.S. current account deficits and federal budget deficits are sustainable, so the United States does not need to adopt austerity, nor does it need to look to the rest of the world for salvation. Rather, it needs to look to domestic fiscal stimulus strategies to resolve the crisis, and to a larger future role for government in helping to stabilize the economy

LGMD2I in a North American population

<p>Abstract</p> <p>Background</p> <p>There is a marked variation in clinical phenotypes that have been associated with mutations in <it>FKRP</it>, ranging from severe congenital muscular dystrophies to limb-girdle muscular dystrophy type 2I (LGMD2I).</p> <p>Methods</p> <p>We screened the <it>FKRP </it>gene in two cohorts totaling 87 patients with the LGMD phenotype.</p> <p>Results</p> <p>The c.826C>A, p.L276I mutation was present in six patients and a compound heterozygote mutation in a seventh patient. Six patients had a mild LGMD2I phenotype, which resembles that of Becker muscular dystrophy. The other patient had onset before the age of 3 years, and thus may follow a more severe course.</p> <p>Conclusion</p> <p>These findings suggest that LGMD2I may be common in certain North American populations. This diagnosis should be considered early in the evaluation of LGMD.</p

The Continuing Legacy of John Maynard Keynes

This working paper examines the legacy of Keynes's General Theory of Employment, Interest, and Money (1936) on the occasion of the 70th anniversary of its publication and the 60th anniversary of Keynes's death. The paper incorporates some of the latest research by prominent followers of Keynes, presented at the 9th International Post Keynesian Conference in September 2006

Strategies to improve control of sexually transmissible infections in remote Australian Aboriginal communities: a stepped-wedge, cluster-randomised trial

BACKGROUND: Remote Australian Aboriginal communities have among the highest diagnosed rates of sexually transmissible infections (STIs) in the world. We did a trial to assess whether continuous improvement strategies related to sexual health could reduce infection rates. METHODS: In this stepped-wedge, cluster-randomised trial (STIs in remote communities: improved and enhanced primary health care [STRIVE]), we recruited primary health-care centres serving Aboriginal communities in remote areas of Australia. Communities were eligible to participate if they were classified as very remote, had a population predominantly of Aboriginal people, and only had one primary health-care centre serving the population. The health-care centres were grouped into clusters on the basis of geographical proximity to each other, population size, and Aboriginal cultural ties including language connections. Clusters were randomly assigned into three blocks (year 1, year 2, and year 3 clusters) using a computer-generated randomisation algorithm, with minimisation to balance geographical region, population size, and baseline STI testing level. Each year for 3 years, one block of clusters was transitioned into the intervention phase, while those not transitioned continued usual care (control clusters). The intervention phase comprised cycles of reviewing clinical data and modifying systems to support improved STI clinical practice. All investigators and participants were unmasked to the intervention. Primary endpoints were community prevalence and testing coverage in residents aged 16–34 years for Chlamydia trachomatis, Neisseria gonorrhoeae, and Trichomonas vaginalis . We used Poisson regression analyses on the final dataset and compared STI prevalences and testing coverage between control and intervention clusters. All analyses were by intention to treat and models were adjusted for time as an independent covariate in overall analyses. This study was registered with the Australia and New Zealand Clinical Trials Registry, ACTRN12610000358044. FINDINGS: Between April, 2010, and April, 2011, we recruited 68 primary care centres and grouped them into 24 clusters, which were randomly assigned into year 1 clusters (estimated population aged 16–34 years, n=11 286), year 2 clusters (n=10 288), or year 3 clusters (n=13 304). One primary health-care centre withdrew from the study due to restricted capacity to participate. We detected no difference in the relative prevalence of STIs between intervention and control clusters (adjusted relative risk [RR] 0·97, 95% CI 0·84–1·12; p=0·66). However, testing coverage was substantially higher in intervention clusters (22%) than in control clusters (16%; RR 1·38; 95% CI 1·15–1·65; p=0·0006). INTERPRETATION: Our intervention increased STI testing coverage but did not have an effect on prevalence. Additional interventions that will provide increased access to both testing and treatment are required to reduce persistently high prevalences of STIs in remote communities.James Ward, Rebecca J Guy, Alice R Rumbold, Skye McGregor, Handan Wand, Hamish McManus, Amalie Dyda, Linda Garton, Belinda Hengel, Bronwyn J Silver, Debbie Taylor-Thomson, Janet Knox, Basil Donovan, Matthew Law, Lisa Maher, Christopher K Fairley, Steven Skov, Nathan Ryder, Elizabeth Moore, Jacqueline Mein, Carole Reeve, Donna Ah Chee, John Boffa and John M Kaldo

Endogenous Money: Structuralist and Horizontalist

While the mainstream long argued that the central bank could use quantitative constraints as a means to controlling the private creation of money, most economists now recognize that the central bank can only set the overnight interest ratewhich has only an indirect impact on the quantity of reserves and the quantity of privately created money. Indeed, in order to hit the overnight rate target, the central bank must accommodate the demand for reserves, draining the excess or supplying reserves when the system is short. Thus, the supply of reserves is best characterized as horizontal, at the central bank's target rate. Because reserves pay relatively low rates, or even zero rates (as in the United States), banks try to minimize their holdings. Over time, they continually innovate, as they seek to minimize costs and increase profits. This includes innovations that reduce the quantity of reserves they need to hold (either to satisfy legal requirements, or to meet the needs of check cashing and clearing), and also innovations that allow them to increase the rate of return on equity within regulatory constraints, such as those associated with Basle agreements. Such behavior has been a central concern of the structuralist approachwhich argued that it is too simplistic to hypothesize simple horizontal loan-and-deposit supply curves