09 Apr 2020

Do the Econ Textbooks Get Money & Banking Backwards?

All Posts, Banking, Economics, Money 3 Comments

The latest installment in my series on Understanding Money Mechanics for the Mises Institute. Once I dove into this one, the solutions seemed pretty obvious. Tell me what you folks think. An excerpt:

In chapter 5 we reviewed the textbook analysis of how a central bank buys government debt in “open market operations” to add reserves to the banking system, with which commercial banks can then advance loans to their own customers. In this respect we merely summarized the textbook explanation that economists have given for decades. However, over the years a chorus of critics has alleged that this orthodox view is, if anything, backwards, and that in reality commercial banks take the lead in making loans without regard to their reserves.

In order to have a concrete example of this rival perspective, we will draw on a 2014 report issued by the Bank of England entitled “Money Creation in the Modern Economy.”1 Coming from the UK’s central bank—their counterpart to the United States’s Federal Reserve—this is an authoritative example of the critique of the orthodox explanation for money and banking.

For our purposes in the present volume, we will select three of the alleged “myths” of money creation that the Bank of England report seeks to correct. (The serious student should of course read the original report for a full understanding of the challenge.) Our goal here is neither to affirm the orthodox explanation nor to concede its defeat, but rather to use the Bank of England’s commentary as a springboard for ensuring that current readers truly understand how central banks and commercial banks work together in a fiat-based system to create money.

05 Apr 2020

Bob Murphy Show Double Header on the Coronavirus

Bob Murphy Show, Coronavirus 19 Comments

My interview with Dave Smith, and then my solo episode giving some toilet paper analysis–I am the whole package–but more important, some practical tips that our household has adopted to stay safe.

01 Apr 2020

BMS ep. 113: Interview With Oren Cass

Bob Murphy Show No Comments

This was my ideal type of discussion, where I disagree with the guest and push back on points, but give him a chance to explain himself.

25 Mar 2020

Estimated vs. Actual Mortality Simulation

Coronavirus 58 Comments

[EDIT: I changed the original title on this post, to clarify that I wasn’t giving even a back-of-the-envelope estimate of what I thought was actually going to happen. I am just showing how one particular issue affects observations.]

One big thing about the coronavirus that I didn’t fully appreciate at first, is the lag between (a) exposure, (b) showing symptoms, and (c) death. This obviously affects things like the calculated mortality rate for a given region, etc.

Now to be sure, there are lots of other things going on too. For example, a lot of people probably got it, but were mild cases and so didn’t get picked up as “new cases.”

In any event though, I whipped up the following table just to show how the specific lags I’ve mentioned affect things. Let me know if you see any mistakes.

24 Mar 2020

Bob Murphy Show ep. 111: Winston Ewert Applies Computer Science to Intelligent Design

Bob Murphy Show, Intelligent Design No Comments

Ewert has a PhD in computer science. Audio here, video below.

24 Mar 2020

Bob Murphy Show ep. 112: My commentary on the coronavirus response

Bob Murphy Show No Comments

Sundry thoughts, recorded over the weekend, here.

18 Mar 2020

Murphy Twin Spin

Bob Murphy Show, Lara-Murphy Show 3 Comments

==> In the latest Lara-Murphy Show, Carlos and I talk about financial nuttiness and the coronavirus. We recorded this on Saturday, though, so we didn’t know about the Fed’s Sunday surprise.

==> In the latest Bob Murphy Show, I explain the “scientific” approach to Blackjack, and discuss the controversies among academics over the famous Kelly criterion for optimal bet sizing.

17 Mar 2020

Selgin Responds to Me on NGDP Targeting

George Selgin No Comments

Here.