# Money Matters > Economics, Banking, Finance, and Supply Chains --- ## Pages - [Blog](https://moneymatters42.com/blog/): - [Resources](https://moneymatters42.com/resources/): Resources (videos, book, papers, etc) Video Debt: The First 5,000 Years, by David Graeber This the video that helped me... - [Contact Us](https://moneymatters42.com/contact-us/): What’s on your mind? - [About this blog](https://moneymatters42.com/about/): How did someone who is not an economist come to start a blog about economics, banking, finance, supply chains, and... - [Home](https://moneymatters42.com/): Economics (central banking and banking), supply chains (where stuff comes from and goes), with historical and political context. - [Privacy Policy](https://moneymatters42.com/privacy-policy/): Who we are Our website address is: http://moneymatters42. com. Comments When visitors leave comments on the site we collect the... --- ## Posts - [Ravel Software Tutorial: Page 17](https://moneymatters42.com/economic-modeling/ravel-software-tutorial-page-17/): Transcript (and yes, this IS for SEO purposes) Transcribed by TurboScribe. ai. Hi, this is Kevin, and I’m a student... - [Minsky and Ravel software tutorials](https://moneymatters42.com/economic-modeling/minsky-and-ravel-software-tutorials/): If you’re learning to create dynamic models using the Minsky and Ravel software, you will find these two tutorials to... - [Congressional Hearing: The Implications of a Central Bank Digital Currency and Private Sector Alternative](https://moneymatters42.com/economics/congressional-hearing-the-implications-of-a-central-bank-digital-currency-and-private-sector-alternative/): This post provides my thoughts on a congressional hearing conducted to discuss creating a central bank digital currency in the USA. - [USA Bank Regulation: 1980 to 2000: The Long Boom](https://moneymatters42.com/banking/usa-bank-regulation-1980-to-2000-the-long-boom/): The long boom was not without its bust cycles, but during this 20 year period of general economic expansion, they... - [USA Bank Regulation: 1980: Neoliberalism](https://moneymatters42.com/banking/usa-bank-regulation-1980-neoliberalism/): While most people think of neoliberalism as having started in the late 1970s or early 1980s, its roots go back... - [USA Bank Regulation: 1970: The Great Inflation](https://moneymatters42.com/banking/usa-bank-regulation-1970-the-great-inflation/): The great inflation of the 1970s actually started around 1965 as the chart below shows. And believe it or not,... - [USA Bank Regulation: 1951: After the Accord](https://moneymatters42.com/banking/usa-bank-regulation-1951-after-the-accord/): The Fed-Treasury Accord of 1951 was a bank regulation that created what we refer to as the independence of the... - [USA Bank Regulation: 1951: Treasury-Fed Accord](https://moneymatters42.com/banking/usa-bank-regulation-1951-treasury-fed-accord/): The 1951 Treasury-Fed account wass the resulf of the bank regulation in place as WW2 ended gave the Fed two opposiing mandates. - [USA Bank Regulation: 1944: New World Order](https://moneymatters42.com/banking/usa-bank-regulation-1944-new-world-order/): I know new world order has become a loaded phrase these days with ideas of the great reset, etc, but... - [USA Bank Regulation: 1941: World War Two](https://moneymatters42.com/banking/usa-bank-regulation-1941-world-war-two/): The bank regulations that changed in the United States to help pay for world war two almost exclusively affected operations... - [USA Bank Regulation: 1933: The New Deal](https://moneymatters42.com/banking/usa-bank-regulation-1933-the-new-deal/): This post summarizes the bank regualtions parts of the New Deal legislation of 1933 and 1934. - [USA Bank Regulation: 1929: The Great Depression](https://moneymatters42.com/banking/usa-bank-regulation-1929-the-great-depression/): In what ways did bank regulation lead to the great depression? In what ways did bank regulation change as a... - [USA Bank Regulation: Financing The Roaring Twenties](https://moneymatters42.com/economics/usa-bank-regulation-financing-the-roaring-twenties/): In a very real sense, the roaring twenties was started by world war I, which started an economic boom for... - [USA Bank Regulation: 1917: Financing World War One](https://moneymatters42.com/banking/usa-bank-regulation-1917-financing-world-war-one/): Banks in the United States were the dominant source for financing world war one, which pushed the US into geopolitical dominance. - [USA Bank Regulation: 1873: One bank panic after another](https://moneymatters42.com/banking/usa-bank-regulation-1873-one-bank-panic-after-another/): The bank panic of 1907 was the last straw, being the 5th major bank panic since 1873, each worse than the last. Something had to be done. - [USA Bank Regulation: 1913: Birth of the Federal Reserve](https://moneymatters42.com/banking/usa-bank-regulation-1913-birth-of-the-federal-reserve/): Much has been written about the Federal Reserve. Was it an innovation to stabilize the financial system? A way for bankers to "skim off the top" every time the US government adds more money into the economy? Both? Even more? - [USA Bank Regulation: 1862: Greenbacks](https://moneymatters42.com/banking/usa-bank-regulation-1862-greenbacks/): Bank regulation and the creation of greenbacks... The US free banking era started in 1837 when the second Bank of... - [USA Bank Regulation: 1837: Free banking period](https://moneymatters42.com/banking/usa-bank-regulation-1837-free-banking-period/): Prior to the dissolution of the second Bank of the United States (due to Congress not renewing its charter in... - [USA Bank Regulation: 1791: Bank of the United States](https://moneymatters42.com/banking/usa-bank-regulation-1791-bank-of-the-united-states/): Attempts were made at bank regulation to create a Bank of the United States. First in 1791, next in 1816. For political reasons, both banks closed. - [USA Bank Regulation: 1782: Bank of North America](https://moneymatters42.com/banking/usa-bank-regulation-1782-bank-of-north-america/): Bank regulation for the first bank chartered in the United States (the Bank of North America) allowed it to fund the rest of the war of Independence. - [USA Bank Regulation: 1775 to 1782: Continental currency](https://moneymatters42.com/banking/usa-bank-regulation-1775-to-1782-continental-currency/): Bank regulation in the United States was not designed from a broad perspective. Problems were fixed, caused new problems, which were fixed... - [United States banking and bank regulation history](https://moneymatters42.com/banking/united-states-banking-and-bank-regulation-history/): Bank regulation in the USA has been a 245 plus year long game of fix this, caused that, fix that, caused this other, and it still works that way. - [Foundational economic ideas that are known to be false 2](https://moneymatters42.com/economics/foundational-economic-ideas-that-are-known-to-be-false-2/): Some foundational economic ideas that guide public policy are known to be FALSE and still guide modeling economies and markets. Why? - [Foundational economic ideas that are known to be false](https://moneymatters42.com/economics/foundational-economic-ideas-that-are-known-to-be-false/): Some foundational economic ideas that guide public policy are known to be FALSE and still guide modeling economies and markets. Why? - [The history of banks and banking regulation](https://moneymatters42.com/banking/the-history-of-banks-and-banking-regulation/): There is nothing more fundamental to how modern society works than it's banking rules. This series examines banking and banking regulation. - [The economic and political development of Finland](https://moneymatters42.com/economics/the-economic-and-political-development-of-finland/): This post is part of a series where I examine (which really means “read up on”) the economic and political... - [The economic and political development of Iceland](https://moneymatters42.com/economics/the-economic-and-political-development-of-iceland/): This post is part of a series where I examine (which really means “read up on”) the economic and political... - [The economic and political development of Norway](https://moneymatters42.com/economics/the-economic-and-political-development-of-norway/): This post is part of a series where I examine (which really means “read up on”) the economic and political... - [The economic and political development of Sweden](https://moneymatters42.com/economics/the-economic-and-political-development-of-sweden/): This post is part of a series where I examine (which really means “read up on”) the economic and political... - [The economic and political development of Denmark](https://moneymatters42.com/economics/the-economic-and-political-development-of-denmark/): This post is part of a series where I examine (which really means “read up on”) the economic and political... - [Is Scandinavian socialism really just regulated capitalism?](https://moneymatters42.com/economics/is-scandinavian-socialism-really-just-regulated-capitalism/): I’ve seen many contradictory comments online about “Scandinavian socialism” vs “No, they’re capitalist”. Some feel Scandinavian economies fit modern definitions... - [Saving capitalism by making it more inclusive, part 8](https://moneymatters42.com/economics/saving-capitalism-by-making-it-more-inclusive-part-8/): This post is part of a series about a discussion (framed as a debate) between Gillian Tett and Yanis Yaroufakis... - [Saving capitalism by making it more inclusive, part 7](https://moneymatters42.com/economics/saving-capitalism-by-making-it-more-inclusive-part-7/): This post is part of a series about a discussion (framed as a debate) between Gillian Tett and Yanis Yaroufakis... - [Saving capitalism by making it more inclusive, part 6](https://moneymatters42.com/economics/saving-capitalism-by-making-it-more-inclusive-part-6/): This post is part of a series about a discussion (framed as a debate) between Gillian Tett and Yanis Yaroufakis... - [Saving capitalism by making it more inclusive, part 5](https://moneymatters42.com/economics/saving-capitalism-by-making-it-more-inclusive-part-5/): This post is part of a series about a discussion (framed as a debate) between Gillian Tett and Yanis Yaroufakis... - [Saving capitalism by making it more inclusive, part 4](https://moneymatters42.com/economics/saving-capitalism-by-making-it-more-inclusive-part-4/): This post is part of a series about a discussion (framed as a debate) between Gillian Tett and Yanis Yaroufakis... - [Saving capitalism by making it more inclusive, part 3](https://moneymatters42.com/economics/saving-capitalism-by-making-it-more-inclusive-part-3/): This post is part of a series about a discussion (framed as a debate) between Yanis Yaroufakis and Gillian Tett... - [Saving capitalism by making it more inclusive, part 2](https://moneymatters42.com/economics/saving-capitalism-by-making-it-more-inclusive-part-2/): Since the death throes of capitalism have been predicted before, why do we need to take the idea of saving capitalism seriously this time? - [Saving capitalism by making it more inclusive, part 1](https://moneymatters42.com/economics/saving-capitalism-by-making-it-more-inclusive/): Saving capitalism: A weird out of touch concept? Or something we need to think about and plan for? Can capitalism adapt? Or will it be replaced? - [Marxist economic theory criticisms of capitalism](https://moneymatters42.com/economics/marxist-economic-theory-criticisms-of-capitalism/): Let me open by saying that it is very recently that I’ve learned anything about Marxist economic theory, but what... - [Modern Monetary Theory explained by Stephanie Kelton](https://moneymatters42.com/economics/modern-monetary-theory-explained-by-stephanie-kelton/): This is a summary of a short talk in which economist Stephanie Kelton explains Modern Monetary Theory, what it is, how it work, what it shows us. - [Money and finance: A talk by Dr. Steve Hail](https://moneymatters42.com/economics/money-and-finance-a-talk-by-dr-steve-hail/): This is a summary of a talk on money and finance given by Dr. Steven Hail (University of Adelaide) about money, central banks, and federal debt. - [Can democratic capitalism (workers coops) benefit investors?](https://moneymatters42.com/economics/can-democratic-capitalism-workers-coops-benefit-investors/): Can workers cooperations and the democratic capitalism they provide save capitalism? Can investors benefit from workers cooperations? - [Nomi Prins on banking fraud and bank bailouts](https://moneymatters42.com/economics/nomi-prins-on-banking-fraud-and-bank-bailouts/): Nomi Prins was a Wall St banker, who after 9/11 reassessed her life choices and became somewhat of a traitor... - [Richard Wolff: Democratic capitalism through workers cooperatives?](https://moneymatters42.com/economics/richard-wolff-democratic-capitalism-through-workers-cooperatives/): This blog post summarizes a talk by Economic Professor Richard Wolff on a book he wrote about how workers cooperatives can cure capitalism. - [What is money and where does it get its value?](https://moneymatters42.com/economics/what-is-money-and-where-does-it-get-its-value/): This post summarzies a talk by L Randall Wray who describes "what is money" and where money gets its value, which hasn't changed in millenium. - [How the federal reserve system clears payments with repos](https://moneymatters42.com/economics/how-the-federal-reserve-system-clears-payments-with-repos/): While understanding the federal reserve system can seem hard, its because the slightly abstract concepts are precise more than complex. - [Angrynomics – The summary: Part 15 (and THE END)](https://moneymatters42.com/economics/angrynomics-the-summary-part-15-and-the-end/): This post is part of a series of posts that summarizes the book Angrynomics by Eric Lonergan and Mark Blyth.... - [Angrynomics – The summary: Part 14](https://moneymatters42.com/economics/angrynomics-the-summary-part-14/): This post is part of a series of posts that summarizes the book Angrynomics by Eric Lonergan and Mark Blyth.... - [Angrynomics – The summary: Part 13](https://moneymatters42.com/economics/angrynomics-the-summary-part-13/): This post is part of a series of posts that summarizes the book Angrynomics by Eric Lonergan and Mark Blyth.... - [Angrynomics – The summary: Part 12](https://moneymatters42.com/economics/angrynomics-the-summary-part-12/): This post is part of a series of posts that summarizes the book Angrynomics by Eric Lonergan and Mark Blyth.... - [Angrynomics – The summary: Part 11](https://moneymatters42.com/economics/angrynomics-the-summary-part-11/): This post is part of a series of posts that summarizes the book Angrynomics by Eric Lonergan and Mark Blyth.... - [Angrynomics – The summary: Part 10](https://moneymatters42.com/economics/angrynomics-the-summary-part-10/): This post is part of a series of posts that summarizes the book Angrynomics by Eric Lonergan and Mark Blyth.... - [Angrynomics – The summary: Part 9](https://moneymatters42.com/economics/angrynomics-the-summary-part-9/): This post is part of a series of posts that summarizes the book Angrynomics by Eric Lonergan and Mark Blyth.... - [Angrynomics – The summary: Part 8](https://moneymatters42.com/economics/angrynomics-the-summary-part-8/): This post is part of a series of posts that summarizes the book Angrynomics by Eric Lonergan and Mark Blyth.... - [Angrynomics – The summary: Part 7](https://moneymatters42.com/economics/angrynomics-the-summary-part-7/): This post is part of a series of posts that summarizes the book Angrynomics by Eric Lonergan and Mark Blyth.... - [Angrynomics – The summary: Part 6](https://moneymatters42.com/economics/angrynomics-the-summary-part-6/): This post is part of a series of posts that summarizes the book Angrynomics by Eric Lonergan and Mark Blyth.... - [Angrynomics – The summary: Part 5](https://moneymatters42.com/economics/angrynomics-the-summary-part-5/): This post is part of a series of posts that summarizes the book Angrynomics by Eric Lonergan and Mark Blyth.... - [Angrynomics – The summary: Part 4](https://moneymatters42.com/economics/angrynomics-the-summary-part-4/): This post is part of a series of posts that summarizes the book Angrynomics by Eric Lonergan and Mark Blyth.... - [Angrynomics - The summary: Part 3](https://moneymatters42.com/economics/angrynomics-the-summary-part-3/): Angrynomics describes the anger people around the world are feeling now that they know their political elites are lying to them. Can we do anything? - [Angrynomics - The summary: Part 2](https://moneymatters42.com/economics/angrynomics-the-summary-part-2/): This post is part of a series of posts that summarizes the book Angrynomics by Eric Lonergan and Mark Blyth.... - [Angrynomics - The summary: Part 1](https://moneymatters42.com/economics/angrynomics-the-summary-part-1/): This series of blog posts is a summary of what I consider to be the excellent book Angrynomics, by Eric... - [Was libertarianism really created by corporate special interests?](https://moneymatters42.com/economics/was-libertarianism-really-created-by-corporate-special-interests/): I keep bumping into this idea online. Here are four articles making this claim What specific claims do they make?... - [How did gigantic ships break our global supply chains?](https://moneymatters42.com/supply-chains/how-did-gigantic-ships-break-our-global-supply-chains/): To learn how the arrival of giant mega-ships (arrival, get it?) broke our global supply chains, read this interview with Marc Levinson. - [Why the rising cost of shipping isn't a surprise, part 5](https://moneymatters42.com/supply-chains/why-the-rising-cost-of-shipping-isnt-a-surprise-part-5/): If you found this post via search, it probably makes sense to start with the first post in this series... - [Why the rising cost of shipping isn't a surprise, part 4](https://moneymatters42.com/supply-chains/why-the-rising-cost-of-shipping-isnt-a-surprise-part-4/): How do mega cargo ships, and mega martitime transport alliances affec the cost of shipping? What problems does this introduce? How do we fix it? - [Why the rising cost of shipping isn't a surprise, part 3](https://moneymatters42.com/supply-chains/why-the-rising-cost-of-shipping-isnt-a-surprise-part-3/): How is the cost of shipping determined? When you look up a price on an exchange, how is that price calculated? - [Why the rising cost of shipping isn't a surprise, part 2](https://moneymatters42.com/supply-chains/why-the-rising-cost-of-shipping-isnt-a-surprise-part-2/): To understand how the cost of shipping is determined, click here. Marc Levinson, who wrote THE book on global shipping, explains. - [Why the rising cost of shipping isn't a surprise](https://moneymatters42.com/supply-chains/why-the-rising-cost-of-shipping-isnt-a-surprise/): For a quick to read summary of why the rising cost of shipping isn't a surprise, read this summary of this Odd Lots podcast episode. - [How do US treasury auctions work and why does it matter?](https://moneymatters42.com/economics/how-do-us-treasury-auctions-work-and-why-does-it-matter/): A little background information on this US treasury auctions explainer video This is a goofy little video published to YouTube... - [Are there state and provincial sovereign wealth funds?](https://moneymatters42.com/economics/are-there-state-and-provincial-sovereign-wealth-funds/): Canadian sovereign wealth funds As a country, Canada does not have any sovereign wealth funds. Alberta But the province of... - [What are examples of national sovereign wealth funds?](https://moneymatters42.com/economics/what-are-examples-of-national-sovereign-wealth-funds/): National sovereign wealth funds are been created by a variety of nations for a variety of purposes. This post talks about the largest national funds. - [What are Sovereign wealth funds and why do they work?](https://moneymatters42.com/economics/what-are-sovereign-wealth-funds-and-why-do-they-work/): We’ve all heard the best way to build long-term wealth is to buy and hold stocks. Can governments do this... - [Is there a pattern to how poor nations create economic value?](https://moneymatters42.com/economics/is-there-a-pattern-to-how-poor-nations-create-economic-value/): In this series of posts, we’ve taken a look at seven nations whose growth in economic value is considered to... - [How did Japan rebuild economic vitality after WW2?](https://moneymatters42.com/economics/how-did-japan-rebuild-economic-vitality-after-ww2/): Germany went from total ruins after WW2 to the 3rd largest economy on earth by 1990. How did such economic vitality happen? - [How did Germany rebuild economic vitality after WW2?](https://moneymatters42.com/economics/how-did-germany-rebuild-economic-vitality-after-ww2/): Germany went from total ruins after WW2 to the 3rd largest economy on earth by 1990. How did such economic vitality happen? - [How did Ireland create high economic value and growth?](https://moneymatters42.com/economics/how-did-ireland-create-high-economic-value-and-growth/): How did Ireland get so rich so fast? The rising economic value of the country is one of capitalism's great success stories. How did it happen? - [How did Hong Kong create high economic value and growth?](https://moneymatters42.com/economics/how-did-hong-kong-create-high-economic-value-and-growth/): How did Hong Kong get so rich so fast? The rising economic value of the region is one of capitalism's great success stories. How did it happen? - [How did South Korea create high economic value and growth?](https://moneymatters42.com/economics/how-did-south-korea-create-high-economic-value-and-growth/): How did South Korea get so rich so fast? The rising economic value of the country is one of capitalism's great success stories. How did it happen? - [How did Taiwan create high economic value and growth?](https://moneymatters42.com/economics/how-did-taiwan-create-high-economic-value-and-growth/): How did Taiwan get so rich so fast? The rising economic value of the island is one of capitalism's great success stories. How did it happen? - [How did Singapore create high economic value and growth?](https://moneymatters42.com/economics/how-did-singapore-create-high-economic-value-and-growth/): How did Singapore get so rich so fast? The rising economic value of the small nation is one of capitalism's great success stories. How did it happen? - [How do poor nations create high economic value?](https://moneymatters42.com/economics/how-do-poor-nations-create-high-economic-value/): We have several success stories of poor nations becoming rich fairly quickly: Singapore, Taiwan, Korea, Hong Kong, Ireland, etc. What happened? - [Why what the World Trade Organization does matters](https://moneymatters42.com/economics/why-what-the-world-trade-organization-does-matters/): What is the World Trade Organization and why do they matter? How do they affect the everyday lives of people around the world? - [Are we now in a world of competition between supply chains?](https://moneymatters42.com/supply-chains/are-we-now-in-a-world-of-competition-between-supply-chains/): Our manufacturing supply chains are now so intertwined that it's fair to say that we now live in a world of competition between supply chains. - [How the evolution of supply chains increased our wealth](https://moneymatters42.com/supply-chains/how-the-evolution-of-supply-chains-increased-our-wealth/): To give you an idea of the complexity of modern supply chains, and the evolution of supply chains over time,... - [Why do the economics of supply chain management matter?](https://moneymatters42.com/supply-chains/why-do-the-economics-of-supply-chain-management-matter/): Warning, this blog post is a bit of a rant. Consider yourself warned. And why is the economics of supply... - [Why is the rational expectations theory of inflation worth paying attention to?](https://moneymatters42.com/economics/why-is-the-rational-expectations-theory-of-inflation-worth-paying-attention-to/): The rational expectations theory of inflation is part of the neoclassical focus of modern economics (the word “rational” probably gave... - [Does the structural theory of inflation show up in reality?](https://moneymatters42.com/economics/does-the-structural-theory-of-inflation-show-up-in-reality/): First, I wish to state that the structural theory of inflation is the one that I personally understand the least.... - [What are the Demand-Pull and Cost-Push Inflation Theories?](https://moneymatters42.com/economics/what-are-demand-pull-and-cost-push-inflation-theories/): The demand-pull and cost-push theories of inflation take the idea of "supply and demand" in a literal sense, and apply them across the economy. - [Does the market power theory of inflation explain reality?](https://moneymatters42.com/economics/does-the-market-power-theory-of-inflation-explain-reality/): What does the market power theory of inflation say? What evidence supports it being true? How compelling is that evidence? - [Why is the quantity theory of money inflation known to be wrong?](https://moneymatters42.com/economics/why-is-the-quantity-theory-of-money-inflation-known-to-be-wrong/): I admit the title of this post is hyperbolic, as the quantity theory of money is not flat out wrong,... - [How we can better understand what causes inflation?](https://moneymatters42.com/economics/how-we-can-better-understand-what-causes-inflation/): To examine what causes inflation, we must first define what inflation is, and believe it or not, there is some... - [Why our economic vocabulary is in the way of progress: 5](https://moneymatters42.com/economics/why-our-economic-vocabulary-is-in-the-way-of-progress-5/): Our economic vocabulary causes us to focus heavily on things that matter very little, and not focus at all on things that matter a lot. - [Why our economic vocabulary is in the way of progress: 4](https://moneymatters42.com/economics/why-our-economic-vocabulary-is-in-the-way-of-progress-4/): Our economic vocabulary causes us to focus heavily on things that matter very little, and not focus at all on things that matter a lot. - [Why our economic vocabulary is in the way of progress: 3](https://moneymatters42.com/economics/why-our-economic-vocabulary-is-in-the-way-of-progress-3/): Our economic vocabulary causes us to focus heavily on things that matter very little, and not focus at all on things that matter a lot. - [Why our economic vocabulary is in the way of progress: 2](https://moneymatters42.com/economics/why-our-economic-vocabulary-is-in-the-way-of-progress-2/): Our economic vocabulary causes us to focus heavily on things that matter very little, and not focus at all on things that matter a lot. - [Why our economic vocabulary is in the way of progress: 1](https://moneymatters42.com/economics/why-our-economic-vocabulary-is-in-the-way-of-progress/): When we talk about economics, we talk about the wrong stuff. Our economic vocabulary causes us to focus heavily on... - [Why reverse logistics is WAY better than recycling](https://moneymatters42.com/supply-chains/why-reverse-logistics-is-way-better-than-recycling/): Reverse logistics is a phrase a first stumbled across about a week ago. When I googled for what it means,... - [Why is it dangerous to NOT enforce existing antitrust laws?](https://moneymatters42.com/antitrust/why-is-it-dangerous-to-not-enforce-existing-antitrust-laws/): Republican Congressman Ken Buck (now retired) believed in enforcing antitrust laws, to the point of creating new ones when the... - [Why do federal reserve Repos matter? Why do they exist?](https://moneymatters42.com/banking/why-do-federal-reserve-repos-matter-why-do-they-exist/): If this concept is new to you, the first question is what is a federal reserve repo? Federal reserve repo... --- # # Detailed Content ## Pages ### Blog - Published: 2024-07-06 - Modified: 2024-07-06 - URL: https://moneymatters42.com/blog/ --- ### Resources - Published: 2023-05-20 - Modified: 2025-04-24 - URL: https://moneymatters42.com/resources/ Resources (videos, book, papers, etc) VideoDebt: The First 5,000 Years, by David GraeberThis the video that helped me to realize that what I thought I knew about how nations finance themselves was not only wrong, but so far wrong that I previously had no frame of reference for how wrong I was. At some point in the video he describes the invention of state issued money during the early bronze age, and I suddenly realized what the phrases “currency issuer” and “currency user” mean. BookDebt: The First 5,000 Years, by David GraeberLater I bought and read the book. It’s a bit dry at times as it’s very “scholarly”, but it contains more information than the above video does. BookThe Deficit Myth, by Stephanie KeltonAfter reading this book I realized MMT is just the analysis of macroeconomic activities/behaviors through the “magic” of double entry bookkeeping. It’s quite literally just analyzing economics taking into account the realities that money, banking, and accounting exist, and shape economies. YouTube channelCowboy Economist, by John T HarveyI wish this dude was better known. He has a way of explaining complex economic ideas in simple terms using the persona of the Cowboy Economist complete with cowboy hat and an “aw shucks” demeaner. Be forewarned, as Covid pushed him into remote teaching, he filled this channel with lecture videos for his students, but you can just skip those. YouTube channelMoney & Macro, by Joeri SchasfoortHe is an economist who apparently gave up working in academia to make his... --- ### Contact Us - Published: 2021-09-27 - Modified: 2025-02-18 - URL: https://moneymatters42.com/contact-us/ What's on your mind? --- ### About this blog - Published: 2021-09-27 - Modified: 2022-06-22 - URL: https://moneymatters42.com/about/ How did someone who is not an economist come to start a blog about economics, banking, finance, supply chains, and politics? Like many weird stories, it happened by accident. Some years ago, I ran across a set of crazy ideas known as Modern Monetary Theory, or MMT. Ideas like: Monetary sovereigntyCurrency issuerCurrency usersEvery deficit is a surplus to someone elseEtc, etc I found these ideas both foreign and interesting, so I signed up for email notifications from some MMT blogs and started skimming the weird stuff they were saying. All money is debtWhat makes money money is tax obligationsAnyone can issue money, the hard part is getting someone else to accept itGold-backed money was never fully backed by gold anywayEtc, etc Then, one day, I got a bad case of the flu, so much so that reading gave me a headache. So I lay in bed and listened to YouTube videos that I thought were interesting. An anthropologist (David Graeber) gave a talk about a book he had written on the history of debt. That sounded interesting. At some point in the video (at about 20 minutes if I recall correctly), he talks about the origin of money during the early bronze age. And when he described why and how bronze age societies created money, all those disparent weird statements the MMT people were saying suddenly snapped into a coherent whole. I literally sat up in bed with a "Woah! How did I never see this before? " reaction. It... --- ### Home > Economics (central banking and banking), supply chains (where stuff comes from and goes), with historical and political context. - Published: 2021-09-25 - Modified: 2024-07-06 - URL: https://moneymatters42.com/ --- ### Privacy Policy - Published: 2021-09-23 - Modified: 2022-06-01 - URL: https://moneymatters42.com/privacy-policy/ Who we are Our website address is: http://moneymatters42. com. Comments When visitors leave comments on the site we collect the data shown in the comments form, and also the visitor’s IP address and browser user agent string to help spam detection. An anonymized string created from your email address (also called a hash) may be provided to the Gravatar service to see if you are using it. The Gravatar service privacy policy is available here: https://automattic. com/privacy/. After approval of your comment, your profile picture is visible to the public in the context of your comment. 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Login cookies last for two days, and screen options cookies last for a... --- --- ## Posts ### Ravel Software Tutorial: Page 17 - Published: 2025-02-19 - Modified: 2025-06-03 - URL: https://moneymatters42.com/economic-modeling/ravel-software-tutorial-page-17/ - Categories: Economic Modeling https://youtu. be/yFPoGFMenmw Transcript (and yes, this IS for SEO purposes) Transcribed by TurboScribe. ai. Hi, this is Kevin, and I'm a student in Steve Keen's Revel Economist Challenge, where, amongst other things, we're learning to use two pieces of software. One is called Minsky, and it's a systems dynamic analysis software, and the other is called Ravel, and it's a data display software. What you're looking at right now is page 17 of a PDF document, which is the Ravel tutorial, and I've been going through the tutorial and considering the examples provided to be exercises, which I'm doing, and apparently some other students are now doing that as well, and someone sent me a message and said that he was having trouble with the exercise on page 17, which is this. So this is my attempt to make a step-by-step video of how, starting from nothing, you build this. I break the process down into a series of discrete steps. The first step is, out there on the internet somewhere, find the data file that you need and download it. Step two is to pre-edit the file and delete the columns that you're not going to import into Ravel anyway. Step three is to complete the import of that data file into Ravel, attach it to a Ravel. This is the icon for data import. This is the Ravel. This is a table display of the data in the Ravel or passing through the Ravel. So the final step... --- ### Minsky and Ravel software tutorials - Published: 2025-01-29 - Modified: 2025-01-29 - URL: https://moneymatters42.com/economic-modeling/minsky-and-ravel-software-tutorials/ - Categories: Economic Modeling If you're learning to create dynamic models using the Minsky and Ravel software, you will find these two tutorials to be of value. Modeling with Minsky, 3rd Release: 3 March 2022 ModellingWithMinsky202207Download The Little Book of Ravelations RavelTutorialDownload --- ### Congressional Hearing: The Implications of a Central Bank Digital Currency and Private Sector Alternative > This post provides my thoughts on a congressional hearing conducted to discuss creating a central bank digital currency in the USA. - Published: 2023-09-20 - Modified: 2024-07-06 - URL: https://moneymatters42.com/economics/congressional-hearing-the-implications-of-a-central-bank-digital-currency-and-private-sector-alternative/ - Categories: Economics Here is a video of a hearing of the Congressional Subcommittee on Digital Assets, Financial Technology and Inclusion, help on 14 Sep 2023, on the idea that the US should, or should not, pursue the creation of a Central Bank Digital Currency. The first 26:22 of the video is waiting for the hearing to start. https://www. youtube. com/live/RnW5EJ18550? si=N20OKaYdKrfWF3BX The witnesses Four witnesses openly state their opposition to the Federal Reserve creating a CBDC. The fifth witness states his support for the idea. The witnesses is opposition to the idea are: Mr. Yuval Rooz, Co-Founder and Chief Executive Officer, Digital Asset Ms. Paige Paridon, Senior Vice President and Senior Associate General Counsel, Bank Policy Institute Ms. Christina Parajon Skinner, Assistant Professor, The Wharton School of the University of Pennsylvania Dr. Norbert Michel, Vice President and Director, Center for Monetary and Financial Alternatives, Cato Institute The witness in support of the idea is: Mr. Raúl Carrillo, Academic Fellow, Lecturer in Law, Columbia Law School Reasons for stated opposition The reasons stated for being in opposition fall into two broad categories: If the Fed does retail banking, it could severely disrupt our credit expansion banking system, in which 95% to 97% of all USD are created and exist I consider this issue to be legitimate. For what it's worth, I do believe the US will eventually create a digital USD, for various reasons, but I personally believe it needs to be a Decentralized Digital Currency that mirrors how our existing credit expansion banking system works... --- ### USA Bank Regulation: 1980 to 2000: The Long Boom - Published: 2022-03-13 - Modified: 2025-05-17 - URL: https://moneymatters42.com/banking/usa-bank-regulation-1980-to-2000-the-long-boom/ - Categories: Banking The long boom was not without its bust cycles, but during this 20 year period of general economic expansion, they were fairly short and fairly shallow. ———————————— This post is part of a larger series and sub-series. Here is a link to the series: The history of banks and banking regulation and to the sub-series: United States Banking and Bank Regulation History ———————————— Yes, there was a recession in the early 1980s which is considered to be a direct result of the Federal Reserve increasing interest rates to dampen the stagflation of the 1970s. Yes, there was a savings and loan crisis where numerous savings and loans failed in the mid to late 1980s and early 1990s. Yes, there was a dot com stock bubble that burst in the late 1990s. But notwithstanding those financial shocks, the overall trend during this twenty-year period was one of greater prosperity for the American economy overall. In July of 1991, US GDP peaked after 92 months of expansion, and in March of 2001 US GDP peaked again after 120 months of expansion. However, this economic rising tide did not lift all boats, as you can see from the graph below. 1980 was around the time that the share of US pre-tax income started to sharply rise for the top 1% of income earners, while the share of US pre-tax income for the bottom 50% of income earners started to sharply fall. Why did this happen? In short, neoliberal policies combined with major advances in IT,... --- ### USA Bank Regulation: 1980: Neoliberalism - Published: 2022-02-22 - Modified: 2023-02-07 - URL: https://moneymatters42.com/banking/usa-bank-regulation-1980-neoliberalism/ - Categories: Banking While most people think of neoliberalism as having started in the late 1970s or early 1980s, its roots go back to the end of world war I, when the idea of the modern nation-state took over from the prior era of empires. The idea was further solidified as world war II was coming to an end as the rules and global institutions implementing neoliberalism were created as part of the Bretton Woods Agreement. Perhaps the best place to start is by defining what neoliberalism is, but on this point, there is not universal agreement. ———————————— This post is part of a larger series and sub-series. Here is a link to the series: The history of banks and banking regulation and to the sub-series: United States Banking and Bank Regulation History ———————————— The common themes among the various definitions seem to be: privatization, deregulation, government austerity, markets, and globalization. There is a general consensus that neoliberalism was born out of the ideas of a few Austrian economists, most notably Ludwig von Mises and Friedrich Hayek. Early in the neoliberal economic school of thought, the ideas pushed were that a high (perhaps the highest) form of freedom is participating in a marketplace as a consumer and any government intervention in the operation of markets leads to problems. Of course, the idea that governments should not intervene in markets ignores the reality that there is no such thing as markets without rules, that the rules matter, and that the rules are made up by people.... --- ### USA Bank Regulation: 1970: The Great Inflation - Published: 2022-02-14 - Modified: 2023-02-07 - URL: https://moneymatters42.com/banking/usa-bank-regulation-1970-the-great-inflation/ - Categories: Banking The great inflation of the 1970s actually started around 1965 as the chart below shows. And believe it or not, the consensus on what caused it is not as strong as I used to think. Of all the economic and banking topics I've researched so far, I've found more papers on this topic than any other, but it seems to me the cause of this inflation must lie somewhere between "we're not really sure" and "it's complicated". You're probably aware of the "Inflation is always and everywhere a monetary phenomenon" quote made famous by Milton Friedman that a lot of people to this day buy into, but even Friedman himself later observed that in diagnosing the problem of inflation... many factors other than money that politicians, economists and journalists write about... attribut the acceleration of inflation to special events—bad weather, food shortages, labor-union intransigence, corporate greed, the OPEC cartel... Nelson, Edward. “The Great Inflation of the Seventies: What Really Happened? ” SSRN Electronic Journal, 2004, p. 2. Crossref, https://doi. org/10. 2139/ssrn. 762602. Below is a list of the studies I reviewed before writing this post, along with a summary of their ideas about what caused the great inflation of the 1970s. ———————————— This post is part of a larger series and sub-series. Here is a link to the series: The history of banks and banking regulation and to the sub-series: United States Banking and Bank Regulation History ———————————— THE GREAT INFLATION OF THE 1970s The overall conclusion is the Federal Reserve did... --- ### USA Bank Regulation: 1951: After the Accord - Published: 2022-02-04 - Modified: 2022-06-22 - URL: https://moneymatters42.com/banking/usa-bank-regulation-1951-after-the-accord/ - Categories: Banking The Fed-Treasury Accord of 1951 was a bank regulation that created what we refer to as the independence of the Fed. We say this because compared to what was before, it made the Fed independent of the Treasury. A little background Working under the belief that currency-issuing governments actually borrow the currency they issue, the Treasury "borrowed" US dollars from the Fed (for now let's ignore the fact that the independence of the Fed is what Congress says and that all Fed profits are deposited into an account used by the Treasury), the Treasury wanted a low-interest rate, as the Fed interest rate was something the Treasury paid, and they wanted that number to be as low as possible. ———————————— This post is part of a larger series and sub-series. Here is a link to the series: The history of banks and banking regulation and to the sub-series: United States Banking and Bank Regulation History ———————————— As Treasury bonds also influence the amount of reserves in the banking system, when the Treasury buys and sells bonds they affect the availablity of credit through commercial banks. The 1951 Fed-Treasury Accord separated the Treasury borrowing from the Fed, from the Fed's mandate to manage the availability of private credit in the commercial banking system. This was done by releasing the Fed from its mandate to keep Treasury security interest rates low. Renewed focus on price stability The Fed now had one primary mandate. Managing the level of reserves in the banking system... --- ### USA Bank Regulation: 1951: Treasury-Fed Accord > The 1951 Treasury-Fed account wass the resulf of the bank regulation in place as WW2 ended gave the Fed two opposiing mandates. - Published: 2022-02-02 - Modified: 2022-02-02 - URL: https://moneymatters42.com/banking/usa-bank-regulation-1951-treasury-fed-accord/ - Categories: Banking When World War 2 came to an end, the Federal Reserve had a dual mandate to 1) keep the interest rates on government securities low as desired by the Treasury which paid that interest rate, and 2) target a low inflation rate. This was a bank regulation that created a dual mandate problem. The dual mandate problem The problem was those two mandates had opposing prescriptions. To keep interest rates low it was necessary that demand for Treasury securities not outstrip the supply of Treasury securities, thereby causing an increase in the cost of these securities (the interest rate), but these very same Treasury securities were used to increase and/or decrease banking reserves, which affected the availability of private credit, which influenced the level of inflation. ———————————— This post is part of a larger series and sub-series. Here is a link to the series: The history of banks and banking regulation and to the sub-series: United States Banking and Bank Regulation History ———————————— At first glance, it might seem that increasing the supply of Treasury securities would remove reserves from the banking system as it does today, so why didn't that one prescription target both mandates? Because the Federal Reserve can buy and hold Treasuries, thereby providing funds to the US government, while simultaneously not selling treasuries to or buying from the primary dealers, which is what affects the level of banking reserves. In summary, it's complicated. Perhaps excessively so. Perhaps intentionally so. The Fed policy during, and after WW2... --- ### USA Bank Regulation: 1944: New World Order - Published: 2022-02-01 - Modified: 2022-02-01 - URL: https://moneymatters42.com/banking/usa-bank-regulation-1944-new-world-order/ - Categories: Banking I know new world order has become a loaded phrase these days with ideas of the great reset, etc, but I don't have a better phrase to describe what the Bretton Woods Agreement did in July of 1944. The institutions and policies reshaped the global financial system and continue to be the foundation of what we call market economies to this day. The phrase world trade system is also appropriate. The principal outcomes of the Bretton Woods Agreement were the establishment of the International Monetary Fund (IMF), the establishment of the World Bank, and a system of currency convertibility that lasted from 1944 to 1971, and was replaced by floating exchange rates only after the US discontinued the gold standard. The Bretton Woods Agreement also laid the foundation for the General Agreement on Tariffs and Trade (GATT) which in 1995 was changed into the World Trade Organization (WTO). To this day the policies of the IMF, the World Bank, and the WTO drive global finance for what is called the western world. ———————————— This post is part of a larger series and sub-series. Here is a link to the series: The history of banks and banking regulation and to the sub-series: United States Banking and Bank Regulation History ———————————— US Domestic banking also changed The US response to world war 2 resulted in a stronger federal government, and closer cooperation between the Treasury and the Federal Reserve. During the war, the Fed committed to low interest rates (2. 5% for long-term bonds... --- ### USA Bank Regulation: 1941: World War Two - Published: 2022-01-31 - Modified: 2024-08-05 - URL: https://moneymatters42.com/banking/usa-bank-regulation-1941-world-war-two/ - Categories: Banking The bank regulations that changed in the United States to help pay for world war two almost exclusively affected operations of the Federal Reserve, which makes sense when you consider that the war was managed by the federal government, and that's where they bank. The government saw a need to provide A LOT of cash, keep the industries of war manufacturing going, and keep inflation as low as possible. For the latter, I say "as low as possible" because in an environment where a government simultaneously adds a lot of money to an economy while buying much of what is available to buy (for the war effort), shortages, and hence inflation, seem inevitable. ———————————— This post is part of a larger series and sub-series. Here is a link to the series: The history of banks and banking regulation and to the sub-series: United States Banking and Bank Regulation History ———————————— However, the changes to US banking regulation kind of pale by comparison to how banking systems all over the world changed as the war was coming to a close, and how international agreements would change finance from then on. Using reserves (bank regulation) to adjust aggregate credit The federal reserve started using bank reserve requirements to expand, and contract, the availability of credit in the US banking system. The US economy shrunk pretty significantly after the stock market crash in Oct of 1929. This was accompanied by four years of deflation during which some months experienced an annualized deflation rate of over... --- ### USA Bank Regulation: 1933: The New Deal > This post summarizes the bank regualtions parts of the New Deal legislation of 1933 and 1934. - Published: 2022-01-29 - Modified: 2022-01-30 - URL: https://moneymatters42.com/banking/usa-bank-regulation-1933-the-new-deal/ - Categories: Banking How big was the problem? The economic impact of the great depression is illustrated by the two charts below. The first shows the US GDP with the depression time period shadowed in pink and the second shows the US unemployment rate with the depression time period shadowed in blue. These graphs illustrate why the new deal was considered both important and urgent. US annual real GDP from 1910 to 1960, with the years of the Great Depression (1929-1939) highlighted Unemployment rate in the US 1910–60, with the years of the Great Depression (1929–39) highlighted; accurate data begins in 1939, represented by a blue line. ———————————— This post is part of a larger series and sub-series. Here is a link to the series: The history of banks and banking regulation and to the sub-series: United States Banking and Bank Regulation History ———————————— How did it happen? Two things became apparent fairly quickly: #1) Buying stocks on margin (with debt) had gotten out of hand, creating massive amounts of debt that would not be repaid in the event the stock market valuations took a dive, which did, in fact, occur in Oct of 1929, which ground the financial system to a halt and triggered an enormous number of insolvencies and bankruptcies. By 1932, one-quarter of the banks in the United States had failed. #2) Financial institutions speculated with customer deposits. Can it be prevented from happening again? As a result of the above, the federal government made some significant changes. In aggregate, these changes... --- ### USA Bank Regulation: 1929: The Great Depression - Published: 2022-01-26 - Modified: 2022-01-30 - URL: https://moneymatters42.com/banking/usa-bank-regulation-1929-the-great-depression/ - Categories: Banking In what ways did bank regulation lead to the great depression? In what ways did bank regulation change as a result OF the great depression? Many financial crises are caused by debts that can't be paid, at an enormous scale, which causes the inability to meet payment obligations to ripple through a financial system, which in turn causes a wave of insolvencies and bankruptcies. Then, in the aftermath, banks and other institutions who make loans pretty much stop, partly because they don't have the capital to allow them to do so, and partly because they got so badly burned just a little while ago by having done so. ———————————— This post is part of a larger series: The history of banks and banking regulation and sub-series: United States Banking and Bank Regulation History ———————————— The run up to the great depression The trigger for the great depression was loans that could not be paid as a result of people trading stock on margin, which means the broker loaned the investor/speculator money to buy the stock, and after the stock value fell, they didn't have the money to "top up" their margin accounts which by law investors are required to do. So, how did it happen that so many people bought stocks with borrowed money? In short, not only was it "within the rules", but the rules allowed investors/speculators to borrow up to 90% of the value of the stock. Now, strictly speaking, this isn't the result of bank regulation, as... --- ### USA Bank Regulation: Financing The Roaring Twenties - Published: 2022-01-25 - Modified: 2024-07-21 - URL: https://moneymatters42.com/economics/usa-bank-regulation-financing-the-roaring-twenties/ - Categories: Economics In a very real sense, the roaring twenties was started by world war I, which started an economic boom for the United States. European nations needed goods and services to fight the war, much of which was supplied by American firms. During the war, the financial center of the world shifted from London to New York. And after the war ended, Europe needed to be rebuilt, and American firms provided goods and services to these reconstruction efforts. As some of the financing of the war was done via Liberty Bonds (the US stayed on the gold standard during this war), the US government successfully deferred demand by removing money from the US economy. They started redeeming those bonds after the war, thereby putting money back into the US economy, and stimulating demand. ———————————— This post is part of a larger series: The history of banks and banking regulation And sub-series: United States Banking and Bank Regulation History ———————————— The combination of technological advances in industrial processes, improved manufacturing processes developed for war mobilization, and deferred demand due to Liberty Bonds, led to the ability to produce more stuff, for less investment, at a time when there was increasing demand. Consumer demand started driving economic growth, as people bought labour-saving devices for their homes, such as washing machines and electric irons, as well as cars. The 1920s is when the "personal automobile" became a reality for millions of Americans. Investing in the production of goods and services generated good returns, this... --- ### USA Bank Regulation: 1917: Financing World War One > Banks in the United States were the dominant source for financing world war one, which pushed the US into geopolitical dominance. - Published: 2022-01-23 - Modified: 2022-01-24 - URL: https://moneymatters42.com/banking/usa-bank-regulation-1917-financing-world-war-one/ - Categories: Banking Financing world war one started simply, as people expected the war to be quick. As months dragged on, things got more complex. The United States was neutral during the first two years of the war, from 1914 to 1916, and during that time provided supplies to European nations through the neutral country of Sweden. These supplies went mostly to Britain and her allies, which the Germans did not appreciate. Germany then extended its shipping blockade of Europe to include neutral countries, including Sweden and started destroying American merchant vessels through submarine attacks. This led the United States to declare war on Germany which occurred on April 4, 1917. ———————————— This post is part of a larger series and sub-series. Here is a link to the series: The history of banks and banking regulation and to the sub-series: United States Banking and Bank Regulation History ———————————— When Britain declared war on Germany in August of 1914, Britain and the US decided they needed their currencies to retain parity with each other, so both nations decided to stay on the gold standard. At the time London was the center of the global financial system and the architect of the gold standard. Since staying on the gold standard limited the amount of money in the American economy, the United States had to raise money to fund the war, which they did through taxes, borrowing, and "money printing" through the selling of Treasury Securities through the newly created Federal Reserve. Taxes raised about one-fourth of the... --- ### USA Bank Regulation: 1873: One bank panic after another > The bank panic of 1907 was the last straw, being the 5th major bank panic since 1873, each worse than the last. Something had to be done. - Published: 2022-01-21 - Modified: 2022-01-21 - URL: https://moneymatters42.com/banking/usa-bank-regulation-1873-one-bank-panic-after-another/ - Categories: Banking After the US government created a national currency in 1863, the US dollar (also known as the greenback) the banking system of the United States had one currency with decentralized payment clearing and a decentralized system of "lender of last resort" which was who provided liquidity (money) when it was feared a financial crisis had to be averted or one had occurred. Financial and bank panics were frequent from 1873 until 1907. The 1907 crisis was so large, and so quick, and caused such damage, that it was felt something had to be done. It was in fact the straw that broke the camel's back and led to the birth of the US central bank, the Federal Reserve. ———————————— This post is part of a larger series and sub-series. Here is a link to the series: The history of banks and banking regulation and to the sub-series: United States Banking and Bank Regulation History ———————————— While US national banks in the latter part of the 19th century were authorized to issue US dollars in the form of banknotes, that practice was not yet common. When a US national bank made a loan, it took the money out of reserves. This rippled through that bank's branches, such that overall reserves were down, and therefore they were more limited in the amount of dollars they could loan out. This tended to occur every fall, at harvest time. Farmers had to pay migrant labour in cash, which they recouped when the harvest was... --- ### USA Bank Regulation: 1913: Birth of the Federal Reserve > Much has been written about the Federal Reserve. Was it an innovation to stabilize the financial system? A way for bankers to "skim off the top" every time the US government adds more money into the economy? Both? Even more? - Published: 2022-01-21 - Modified: 2022-01-21 - URL: https://moneymatters42.com/banking/usa-bank-regulation-1913-birth-of-the-federal-reserve/ - Categories: Banking Much has been written about the Federal Reserve, and much will be in the future. Was it an innovation to stabilize the financial system? A way for bankers to "skim off the top" every time the US government adds more money into the economy? Both? Maybe even more? I know that I too will write much more about the Fed as I continue this series of posts, but for now, I wish to talk about why a central bank was deemed appropriate, and how it came to be born. ———————————— This post is part of a larger series and sub-series. Here is a link to the series: The history of banks and banking regulation and to the sub-series: United States Banking and Bank Regulation History ———————————— As stated earlier in this series of posts, bank regulation in the United States was never thought out in advance. It grew like a fungus, one problem, one solution, one new problem, one new solution, etc, at a time. So, what problem occurred that made the creation of a central bank seem like an appropriate solution? In a nutshell: bank panics. Payment processing and clearing between banks was done by private banks, some of which were for-profit, some of which were non-profit, and they acted as lenders of last resort within limited geographies. Because they were "just" privately owned banks, there were limits to how much money they could inject into the economy when the demand for cash was high, as happened when people... --- ### USA Bank Regulation: 1862: Greenbacks - Published: 2022-01-20 - Modified: 2022-01-19 - URL: https://moneymatters42.com/banking/usa-bank-regulation-1862-greenbacks/ - Categories: Banking Bank regulation and the creation of greenbacks... The US free banking era started in 1837 when the second Bank of the United States dissolved after Congress failed to renew its charter. While the Bank of the United States was not a central bank, it was the closest such bank in the US at that time. It was a private bank, Congressionally chartered, had branches in most states, and by the late 1850s issued about 20% of all the money in use. Their very success made them a target of politicians who preferred all banks be state banks, and felt this national bank was taking too much of their business. In a fairly protracted political fight between President Andrew Jackson and Senator Henry Clay, Jackson won, the bank was dissolved. ———————————— This post is part of a larger series and sub-series. Here is a link to the series: The history of banks and banking regulation and to the sub-series: United States Banking and Bank Regulation History ———————————— For the next 25 years, all the money in the United States was issued by state banks, and while it was all denominated in dollars, not every dollar banknote was worth a dollar. Some were, while others were worth ninety cents. It had to do with the reputations of the various banks. It was a chaotic patchwork system with shops listing which banknotes from which banks they would accept and what value they would accept them for. Then, the question over whether Texas could be admitted... --- ### USA Bank Regulation: 1837: Free banking period - Published: 2022-01-19 - Modified: 2022-01-19 - URL: https://moneymatters42.com/banking/usa-bank-regulation-1837-free-banking-period/ - Categories: Banking Prior to the dissolution of the second Bank of the United States (due to Congress not renewing its charter in 1836), bank regulation for state banks was lax, and afterwards, it stayed so, for quite a while. Between 1829 and 1837 the number of state banks in the United States more than doubled. ———————————— This post is part of a larger series and sub-series. Here is a link to the series: The history of banks and banking regulation and to the sub-series: United States Banking and Bank Regulation History ———————————— New York removed the requirement for a special charter before a new bank could be incorporated. Several other states followed this policy of "free banking". In 1829, New York did set up a bank supervisory authority, and a more formal banking commission was created after the panic of 1837, which created reserve requirements. The first deposit insurance was passed by the state of New York in 1829, but for some reason, it did not work. From 1836 until the civil war, the currency used in the United States was the banknotes issued by state banks By the time of the civil war, there were 8,000 kinds of money in the United States. Due to so many different banks issuing so many bills which all looked different, counterfeiting was both easier than today and much more prevalent. The values of the banknotes fluctuated from bank to bank, and from time to time, depending on their perceived quality. Since not every $1... --- ### USA Bank Regulation: 1791: Bank of the United States > Attempts were made at bank regulation to create a Bank of the United States. First in 1791, next in 1816. For political reasons, both banks closed. - Published: 2022-01-19 - Modified: 2022-01-18 - URL: https://moneymatters42.com/banking/usa-bank-regulation-1791-bank-of-the-united-states/ - Categories: Banking Early in the history of the United States, bank regulations were created for the existence of a national central bank. This was actually tried twice, and both times, for political reasons, the banks were shut down. Alexander Hamilton because the first Secretary of the Treasury of the United States, in 1790. Being a proponent of a strong central bank, he recommend a national bank be created that would be the "Bank of the United States", modelled on the Bank of England. He wanted it to be a private bank. Congress approved his recommendation and chartered this bank in 1791. While this bank was new in the United States, banking was not. A number of banks were created after the War of Independence ended. ------------------------------------ This post is part of a larger series and sub-series. Here is a link to the series: The history of banks and banking regulation and to the sub-series: United States Banking and Bank Regulation History ------------------------------------ The United States had no national currency, and banks issued their own. These notes circulated in the various states, and their value fluctuated from bank to bank and time to time. Sometimes rather significantly. The situation was so bad that in 1799 John Adams was quoted as saying: "the fluctuations of our circulating medium have committed greater depredations upon the property of honest men than all the French piracies. "https://en. wikisource. org/wiki/A_History_of_Banking_in_the_United_States/Chapter_3 The individual states started efforts at bank regulation. In 1799 Massachusetts and New Hampshire prohibited unincorporated banks. New... --- ### USA Bank Regulation: 1782: Bank of North America > Bank regulation for the first bank chartered in the United States (the Bank of North America) allowed it to fund the rest of the war of Independence. - Published: 2022-01-18 - Modified: 2022-01-18 - URL: https://moneymatters42.com/banking/usa-bank-regulation-1782-bank-of-north-america/ - Categories: Banking How did bank regulation allow the United States to fund the rest of the War of Independence? Robert Morris was appointed Superintendent of Finance of the United States in May of 1781, about two months after the Articles of Confederation were ratified. The War of Independence was in its 6th year and the end was not yet in sight (although it was about two years away). The American economy was in ruins, partly due to the war disrupting production, partly because the interim Continental Currency had become worthless, and partly because the United States didn't yet have any currency or monetary policy. So the first bank in the United States was chartered. The bank regulation was "creatively done" to allow the bank to continue financing the war. ------------------------------------ This post is part of a larger series and sub-series. Here is a link to the series: The history of banks and banking regulation and to the sub-series: United States Banking and Bank Regulation History ------------------------------------ Alexander Hamilton had read Adam Smith's book The Wealth of Nations, which was published in 1776 and had become a strong proponent of a central bank that would help American become a world power. Hamilton proposed the creation of such a bank in a letter to Robert Morris written in 1781 while the Continental Army was in winter quarters. Morris set this plan in action through the creation of The Bank of North America which started operations in January of 1782, which created the means of... --- ### USA Bank Regulation: 1775 to 1782: Continental currency > Bank regulation in the United States was not designed from a broad perspective. Problems were fixed, caused new problems, which were fixed... - Published: 2022-01-17 - Modified: 2024-02-08 - URL: https://moneymatters42.com/banking/usa-bank-regulation-1775-to-1782-continental-currency/ - Categories: Banking When the American colonies were British, each colony issued their own currency, denominated in the British currency units: pounds, shillings, and pence. The values of each currency varied between colonies. A pound issued in Massachusetts for example was not equivalent to a pound issued in New York. ------------------------------------ This post is part of a larger series and sub-series. Here is a link to the series: The history of banks and banking regulation and to the sub-series: United States Banking and Bank Regulation History ------------------------------------ When the American War of Independence started in 1775, the Continental Congress, needing a way to buy stuff for the war effort, started issuing paper money, Continental currency, commonly called Continentals. This was full fiat currency, not backed by any commodity such as gold or silver. The American colonies had a successful experience of issuing such fiat currency during the earlier French and Indian War. It was however considered, perhaps with hindsight, that the success of the currency during the prior war was due to a government (the British) limiting the quantity of currency issued, and replacing it with "better" currency after the war ended. Continental currency was denominated in various values from $1/6 (16. 7 cents) up to $60. This continental currency was valued per the colonies/states currencies at various rates: New Hampshire: $1 = 6 shillings Massachusetts: $1 = 6 shillings Rhode Island: $1 = 6 shillings Connecticut: $1 = 6 shillings New York: $1 = 8 shillings New Jersey: $1 = 7 1/2... --- ### United States banking and bank regulation history > Bank regulation in the USA has been a 245 plus year long game of fix this, caused that, fix that, caused this other, and it still works that way. - Published: 2022-01-17 - Modified: 2022-03-13 - URL: https://moneymatters42.com/banking/united-states-banking-and-bank-regulation-history/ - Categories: Banking Bank regulation in the United States was never designed from a big picture perspective. Rather, a problem was identified and solved. This generally created more problems. Which were identified and solved. Which created more problems. Which were identified and solved. This pattern continues to this day. Bear in mind, many of these problems were serious: depressions, financial panics, large-scale bank insolvencies, etc. For that reason, solving them effectively was important, and our regulatory responses sometimes worked out well, and sometimes didn't. And, since banks and other financial services had, and have, the freedom to work around legal loopholes in pursuits of profits, it's been a 245 year plus game of regulatory wack a mole, that continues to this day. This series of blog posts is about the history of banking and bank regulation in the USA, from the formation of the union to today. The objective is a "just the facts ma'am" approach where I describe what was, what problems were seen to exist, what regulations were put in place to fix them, and what problems were subsequently created. USA Bank Regulation: 1775 to 1782: Continental currency USA Bank Regulation: 1782: Bank of North America USA Bank Regulation: 1791: Bank of the United States USA Bank Regulation: 1837: Free banking period USA Bank Regulation: 1862: Greenbacks USA Bank Regulation: 1873: One bank panic after another USA Bank Regulation: 1913: Birth of the Federal Reserve USA Bank Regulation: 1917: Financing World War One USA Bank Regulation: Financing The Roaring Twenties USA... --- ### Foundational economic ideas that are known to be false 2 > Some foundational economic ideas that guide public policy are known to be FALSE and still guide modeling economies and markets. Why? - Published: 2022-01-16 - Modified: 2023-12-28 - URL: https://moneymatters42.com/economics/foundational-economic-ideas-that-are-known-to-be-false-2/ - Categories: Economics Yet these economic ideas are still used as the basis for public policy. This blog post identifies some and clarifies how we know they're false. This post is also part of a larger extended series of blog posts on banks and banking regulations, the lead post of which can be found via the link earlier in this sentence. We know these economic ideas to be false, yet... Economies are the aggregate of "rational agents" making decisions The rationality postulate figures in every neoclassical economics model. The idea is that we make the best decision possible, to further our own interests, with the information we have available to us. This means acting with good reasons, with as much information as we have access to, for our desired outcomes. The problem is, in 2017, Richard Thaler was awarded the Nobel Prize in Economic Science for his work in integrating economics with psychology, where he demonstrated that people make economic decisions based on "limited rationality". This idea is something we know to not be true, yet economists still assume it is true and use it in their models and when drafting public policy. There is a Non Accelerating Inflation Rate of Unemployment This is called the NAIRU. The idea is that if unemployment drops too low, inflation is inevitable, is created as a result of unemployment being too low. How do we know it's not true? By watching inflation since the mid-1980s and observing that this just isn't true. As explained in this... --- ### Foundational economic ideas that are known to be false > Some foundational economic ideas that guide public policy are known to be FALSE and still guide modeling economies and markets. Why? - Published: 2022-01-15 - Modified: 2024-02-28 - URL: https://moneymatters42.com/economics/foundational-economic-ideas-that-are-known-to-be-false/ - Categories: Economics Yet these economic ideas are still used as the basis for public policy. This blog post identifies some and clarifies how we know they're false. This post is also part of a larger extended series of blog posts on banks and banking regulations, the lead post of which can be found via the link earlier in this sentence. We know these economic ideas to be false, yet... Money was invented by early societies because barter was inefficient Adam Smith told us this. Chapter 4 of The Wealth of Nations tells this story. In his defence, if I lived in the mid 18th century and I was reverse engineering money and trying to figure out why it was invented, I might have come up with the same idea. However, since then we've learned from anthropologists there is zero evidence this ever actually happened. Primarily because these early barter societies did not exist. In early bronze age pre-money societies, people within communities kept track of obligations to each other, without any need for money tokens. They just kept track of who owed what to whom, and this was the basis of commerce. Barter was not involved. There was no "double coincidence of wants" problem that had to be solved. To learn why money was invented, read: The existence of money: It's not due to barter being inefficient. Competition is between individuals The belief being challenged here is not that competition increases prosperity, but that competition is between individuals. One of the foundational... --- ### The history of banks and banking regulation > There is nothing more fundamental to how modern society works than it's banking rules. This series examines banking and banking regulation. - Published: 2022-01-15 - Modified: 2022-03-13 - URL: https://moneymatters42.com/banking/the-history-of-banks-and-banking-regulation/ - Categories: Banking This blog follows my interests in learning about money, banking, economics, supply chains, etc. This interest started a few years ago when I was made aware, by an anthropologist (David Graeber), that a foundational belief about money, is not based on empirical evidence, but rather is based on intuition. And, not only did we just make it up, we got it wrong. And, it turns out many false ideas influence banking regulation, but more on that later. Specifically, there is zero evidence money was invented to be more efficient than barter because there is zero evidence these pre-money barter societies existed. Rather, there is evidence, in various ancient societies, that money and taxes were coinvented together as the means whereby the king provisioned the army. And that what the use of money replaced was a system of commerce based on obligations, rather than money tokens. After I learned this, I started paying attention to economists, anthropologists, political economists, etc, and I learned that there are other foundational ideas within the field of economics that are known to be false, and yet are still used as the basis for formulating economic policy. As I've learned more, I've come to realize that money is a shared fiction, made real by law. It's fiction in that we just made it up. It's real in as much as in doing so we've declared it to be real, and made it a centrepiece of how we live. And, there is one area of law that... --- ### The economic and political development of Finland - Published: 2022-01-14 - Modified: 2024-02-28 - URL: https://moneymatters42.com/economics/the-economic-and-political-development-of-finland/ - Categories: Economics - Series: Scandinavian socialism This post is part of a series where I examine (which really means "read up on") the economic and political development of the Scandinavian (or Nordic) nations from the end of WW2 to today, and summarize what I've learned into these blog posts. Why am I doing this? Because the ongoing debate about "Scandinavian socialism" vs "Scandinavian capitalism" interests me. I'm curious for information devoid of ideological rhetoric. If you found this post via an Internet search, it probably makes sense to start with the first post in this series, the link to which is both above, and here. A summary of major economic changes, 1945 to the present Pre WW2 Finland was part of Sweden until 1809. Finland then became a Grand Duchy of Russia which lasted until 1917. During that time, Finland had broad economic autonomy. In 1917 Finland became independent and largely sat out WW1 due to there being a civil war occurring inside Finland from January of 1918 to mid-May of 1918. The non-socialist Whites won against the socialist Reds. WW2 Finland was not neutral during WW2 but had an unusual pattern of involvement which is sometimes described as "switching sides" but that seems to be an overly simplistic view. When WW2 started, the Soviet Union demand access to a naval base in Finland (1939). Finland refused and this resulted in Finland going to war against the Soviet Union. Who was also at war with Germany. Finland very quickly lost this war and provided the territory... --- ### The economic and political development of Iceland - Published: 2022-01-12 - Modified: 2025-04-28 - URL: https://moneymatters42.com/economics/the-economic-and-political-development-of-iceland/ - Categories: Economics - Series: Scandinavian socialism This post is part of a series where I examine (which really means "read up on") the economic and political development of the Scandinavian (or Nordic) nations from the end of WW2 to today, and summarize what I've learned into these blog posts. Why am I doing this? Because the ongoing debate about "Scandinavian socialism" vs "Scandinavian capitalism" interests me. I'm curious for information devoid of ideological rhetoric. If you found this post via an Internet search, it probably makes sense to start with the first post in this series, the link to which is both above, and here. A summary of major economic changes, 1945 to the present Iceland deserves recognition as one of, if not THE, only nation to respond to the 2008 great financial crisis by the direct government takeover of the largest banks, allowing the three largest banks to fail, and issuing arrest warrants for bankers. More on this later, but this was such a different response relative to other nations that it deserves special mention. Pre WW2 Before WW2, Iceland was a sovereign kingdom in personal union with Denmark. As someone who doesn't really understand monarchy well, I don't really know what that means, but I do know that the economy of Iceland was supported by fish, sheep, and geothermal energy. Fish was sufficiently important that apparently, a famous Icelandic saying is "Life is salt fish", which I do understand having lived two years in Newfoundland as a teenager, someplace else where salt fish is... --- ### The economic and political development of Norway - Published: 2022-01-08 - Modified: 2025-04-10 - URL: https://moneymatters42.com/economics/the-economic-and-political-development-of-norway/ - Categories: Economics - Series: Scandinavian socialism This post is part of a series where I examine (which really means "read up on") the economic and political development of the Scandinavian (or Nordic) nations from the end of WW2 to today, and summarize what I've learned into these blog posts. Why am I doing this? Because the ongoing debate about "Scandinavian socialism" vs "Scandinavian capitalism" interests me. I'm curious for information devoid of ideological rhetoric. If you found this post via an Internet search, it probably makes sense to start with the first post in this series, the link to which is both above, and here. A summary of major economic changes, 1945 to the present Pre WW2 While Norway was officially neutral during WW1, that did not prevent half of all Norweigan merchant shipping vessels from being destroyed during the war. The allied powers were in a position to control Norway's foreign trade, and they used that leverage to force Norway to stop exports to Germany, some of which Germany needed for their war efforts. In retaliation, Germany sank Norweigan merchant vessels. While this loss in shipping capacity led to a recession during WW1, that recession was followed by a post-war boom in which demand outstripped supply leading to high inflation, trade deficits, currency depreciation, and an overheated economy. When the great depression arrived in Europe in 1930, Norway shared in the downturn. The worst year for Norway was 1931 when GDP per capita fell by 8. 4% and the bottom of the business cycle for... --- ### The economic and political development of Sweden - Published: 2022-01-04 - Modified: 2024-05-24 - URL: https://moneymatters42.com/economics/the-economic-and-political-development-of-sweden/ - Categories: Economics - Series: Scandinavian socialism This post is part of a series where I examine (which really means "read up on") the economic and political development of the Scandinavian (or Nordic) nations from the end of WW2 to today, and summarize what I've learned into a blog post. Why am I doing this? Because the ongoing debate about "Scandinavian socialism" vs "Scandinavian capitalism" interests me. I'm curious for information devoid of ideological rhetoric. If you found this post via an Internet search, it probably makes sense to start with the first post in this series, the link to which is both above, and here. A summary of major economic changes, 1945 to the present Pre WW2 Like Denmark, Sweden was neutral in WW1 and as such avoided the economic devastation of the war. During the war, Sweden exported to nations involved in the war which interestingly provided both economic growth to Sweden and led to shortages and its accompanying inflation. Wartime trade barriers within Europe came down after the war, other European nations needed less of what Sweden offered, and Swedish economic shortages turned to surpluses, which in turn led to rapid deflation and decreasing profit margins for Swedish firms. This drove firms into liquidation, production fell by 25%, and unemployment rose to about 30%. This peaked in 1921-22, after which the Swedish economy started to grow again until the effects of the Great Depression reached Sweden in 1930-31 when the unemployment rate rose to about 25%. WW2 neutrality Sweden was also neutral during WW2,... --- ### The economic and political development of Denmark - Published: 2022-01-01 - Modified: 2025-04-05 - URL: https://moneymatters42.com/economics/the-economic-and-political-development-of-denmark/ - Categories: Economics - Series: Scandinavian socialism This post is part of a series where I examine (which really means "read up on") the economic and political development of the Scandinavian (or Nordic) nations from the end of WW2 to today, and summarize what I've learned into a blog post. Why am I doing this? Because the ongoing debate about "Scandinavian socialism" vs "Scandinavian capitalism" interests me. I'm curious for information devoid of ideological rhetoric. If you found this post via an Internet search, it probably makes sense to start with the first post in this series, the link to which is both above, and here. A summary of major economic changes, 1945 to the present Pre WW2 First, I did not realize that Denmark was neutral during WW1, and as such, they escaped the devastating effects of the war and also (the irony is strong here) missed out on the economic growth of the post-war reconstruction. During WW1, Denmark exported goods to nations on both sides of the conflict. WW2 German occupation Denmark was occupied by German forces from April of 1940 to May of 1945, during which time the Germans ran the Danish central bank and doubled the money supply. Immediate post WW2 reconstruction As Denmark escaped the worst consequences of WW2, its post-war reconstruction was quick and Danish GDP recovered its highest prewar level in 1946. The Marshall plan Additionally, Denmark received support through the Marshall plan from 1948 to 1952. Pre ECC Europe (1950 to 1957) The precursor to the European Common Market... --- ### Is Scandinavian socialism really just regulated capitalism? - Published: 2021-12-28 - Modified: 2022-01-14 - URL: https://moneymatters42.com/economics/is-scandinavian-socialism-really-just-regulated-capitalism/ - Categories: Economics - Series: Scandinavian socialism I've seen many contradictory comments online about "Scandinavian socialism" vs "No, they're capitalist". Some feel Scandinavian economies fit modern definitions of socialism, others feel they're capitalist economies with strong social safety nets, sometimes described as "European welfare states". I've wondered how much people's preferred ideological rhetoric matches reality. Believing that no meaningful answers are likely to appear in any social media comments, I decided to look into, what, independent of these labels, are the important and interesting characteristics of Scandinavian economies? Analyzing "Scandinavian socialism" This is the first post in a series whose intention is to examine Scandinavian economies devoid of ideological rhetoric. The purpose is to compare what's similar between them, and what's different. The nations we tend to think of as Scandinavian are: DenmarkSwedenNorwayIcelandFinland Since the post-WW2 world is drastically different from what preceded it, my intention is to analyze these economies starting at the end of WW2. I'm thinking the following topics merit review: Summary of major economic changes, 1945 to present This will be a very brief overview with which to start. The structure of the government The overall structure, branches of, interactions between, etc. The political climate How many political parties are there? How many of these parties dominate the political discourse? Where do they "fit" on the political spectrum? How do the people tend to interact with them? And how does their voting system work? The business sector Is the economy dominated by large multinational mega-corporations? Small family-owned firms? Some combination thereof? What laws... --- ### Saving capitalism by making it more inclusive, part 8 - Published: 2021-12-27 - Modified: 2021-12-27 - URL: https://moneymatters42.com/economics/saving-capitalism-by-making-it-more-inclusive-part-8/ - Categories: Economics - Series: Saving Capitalism This post is part of a series about a discussion (framed as a debate) between Gillian Tett and Yanis Yaroufakis on the subject of saving capitalism. If you found this post via an Internet search, it probably makes sense to start with the first post in the series, the link to which can be found above, and here. Saving capitalism: Q&A session In some cases, multiple questions were requested from the audience before answers were provided. Since highly concentrated capitalism was fixed through regulation in the 1890s (Standard Oil, etc) why can't regulation fix the current tech concentration of power? and What are you thoughts on emerging socialist societies, like the Zapatistas in Mexico? and Why does today's concentration of corporate power feel like the end of capitalism when prior such concentrations, the Dutch East India Company for example, were resolved through regulation? Yanis started by addressing the East India Company example. He said capitalism succeeded because it went beyond what the East Indian Company did, with protection, not just exploitation, appropriation, and trade. He then shifted to the Standard Oil question. He said Standard Oil was extremely powerful and Theodore Roosevelt did amazingly well to break it up through legislation which is to be applauded. So, can we do the same today with Amazon, Facebook, etc? No, he doesn't think so. Things are different now. The difference in his mind is that standard oil was a monopoly within a market. When he contrasts that with Amazon he sees something different.... --- ### Saving capitalism by making it more inclusive, part 7 - Published: 2021-12-27 - Modified: 2021-12-27 - URL: https://moneymatters42.com/economics/saving-capitalism-by-making-it-more-inclusive-part-7/ - Categories: Economics - Series: Saving Capitalism This post is part of a series about a discussion (framed as a debate) between Gillian Tett and Yanis Yaroufakis on the subject of saving capitalism. If you found this post via an Internet search, it probably makes sense to start with the first post in the series, the link to which can be found above, and here. Saving capitalism: Q&A session This post is about the questions asked during the post-debate Q&A. Does capitalism require governments? and Do we need less asymmetry of information to make capitalism work? Yanis starts. As regards the first question he states there is a "great illusion" that capitalism is a system where wealth is produced individually, then socialized by the state, when in reality the state has always been an integral part of the wealth creation within a capitalist system. As regards the second question, he states with "Yes, information is power", and inequalities of power are often associated with asymmetries of information. However, power is derived from other sources, such as the threat of violence and the holding of resources. Asymmetry of information is layered on top of these other factors and provides greater power and privilege. Gillian addresses the asymmetry of information question and comments that we have more information available to use today than ever before. She uses the release of the Panama Papers and the use of social media to spread information as examples. As regards the question of governments, Gillian somewhat translates that question into "Has capitalism been tried... --- ### Saving capitalism by making it more inclusive, part 6 - Published: 2021-12-26 - Modified: 2021-12-27 - URL: https://moneymatters42.com/economics/saving-capitalism-by-making-it-more-inclusive-part-6/ - Categories: Economics - Series: Saving Capitalism This post is part of a series about a discussion (framed as a debate) between Gillian Tett and Yanis Yaroufakis on the subject of saving capitalism. If you found this post via an Internet search, it probably makes sense to start with the first post in the series, the link to which can be found above, and here. Saving capitalism, greenwashing, and actually "going green" Gillian responds to Yanis's story (at the end of the prior post) about Monsanto Bayer wanting to "harvest profits" from the Greek fires by claiming that a setup that would be very profitable to Monsanto Bayer, and ecologically devastating to Greece, is in fact green. She states she understands that corporations do "greenwash" things in pursuit of profits, and she states that as she believes we can't trust governments alone to turn us green, and we need the checks and balances that come with a competitive market. Gillian stated that back in the 1970s when Milton Friedman developed his vision of shareholder capitalism (which she does not agree with) there were two things that were very different from today: People thought they could outsource the difficult decisions, the social stuff, to governments, so companies just worried about their balance sheets. There was no radical transparency, and most people did not know what was happening inside companies. Today, people do not trust the government to get stuff done, and almost everyone (at least in the industrial world) has access to enormous amounts of data, such that many... --- ### Saving capitalism by making it more inclusive, part 5 - Published: 2021-12-26 - Modified: 2021-12-27 - URL: https://moneymatters42.com/economics/saving-capitalism-by-making-it-more-inclusive-part-5/ - Categories: Economics - Series: Saving Capitalism This post is part of a series about a discussion (framed as a debate) between Gillian Tett and Yanis Yaroufakis on the subject of saving capitalism. If you found this post via an Internet search, it probably makes sense to start with the first post in the series, the link to which can be found above, and here. Saving capitalism via property rights over data? Yanis agrees with Gillian that we need to change property rights over the data the technology platforms collect about us. Yanis again mentions his book “Another Now: Dispatches from an Alternative Present”, in which he covered this topic and proposes an idea of tiny micropayments which provide people with ownership rights to their data. He then points out that data portability doesn't solve the concentration of power at a company like Facebook because their value comes from the fact that people join Facebook because everyone else is on Facebook, and if that were not the case, it would be less valuable to them. And, because this "network effect" is an inherent part of the value to users, there is nothing we can do about that by requiring data portability. Gillian points out that teenagers have abandoned Facebook as their tastes have changed. Yanis replies this applies to all platforms (which in my opinion helps support Gillian's idea). He then talks about how with Amazon, there is an entire non-competitive market ecosystem entirely built on the corporate power of one company, and how there is nothing that... --- ### Saving capitalism by making it more inclusive, part 4 - Published: 2021-12-25 - Modified: 2021-12-27 - URL: https://moneymatters42.com/economics/saving-capitalism-by-making-it-more-inclusive-part-4/ - Categories: Economics - Series: Saving Capitalism This post is part of a series about a discussion (framed as a debate) between Gillian Tett and Yanis Yaroufakis on the subject of saving capitalism. If you found this post via an Internet search, it probably makes sense to start with the first post in the series, the link to which can be found above, and here. Does saving capitalism need us to move away from share markets? To pick up where the prior post left off, Yanis makes the statement that financial markets are so disconnected from the real economy that the idea of going back to a capitalism that works is now impossible. That the concentration of power is so gigantic these days that the "umpires", the regulators, will always be "captured" by the powerful corporations. That if we really want competition, and freedom, and liberalism, to have a chance, we need to move away from share markets and go to a system where the capital to expand existing businesses and fund new businesses comes from savings. Yanis claims Adam Smith supports this idea, and that Adam Smith was totally against public limited companies because he understood that "liquid ownership" or what we call securitized ownership, where the ownership of firms are sliced up and traded anonymously as shares, destroys what he (Smith) saw as prerequisites for well functioning competitive markets. Gillian asks why we wouldn't go to a system of asset management funds representing people (automatic enrollment in pension funds for example) providing the "fuel" for investing... --- ### Saving capitalism by making it more inclusive, part 3 - Published: 2021-12-25 - Modified: 2021-12-27 - URL: https://moneymatters42.com/economics/saving-capitalism-by-making-it-more-inclusive-part-3/ - Categories: Economics - Series: Saving Capitalism This post is part of a series about a discussion (framed as a debate) between Yanis Yaroufakis and Gillian Tett on the subject of saving capitalism. If you found this post via an Internet search, it probably makes sense to start with the first post in the series, the link to which can be found above, and here. Saving capitalism: A discussion of "what is socialism" Their conversation then veered into a discussion of what is socialism. Gillian said that if Yanis believes that competition is valuable, that prices matter, that diversification of different roles and specialist functions matter, then he doesn't sound very socialist. Yanis responded by talking about the economist Oscar Lange, and how he considered himself to be a socialist who thought central planning was a terrible idea. Yanis described how Oscar Lange promoted an idea where workers join companies, get one share, and that share gives them one vote on major decisions. Yanis further promoted markets, in which companies compete, and those companies are owned by the workers who work in the companies. We would call these workers cooperatives, and they exist in many capitalist countries in the world, including the USA and Canada. For these firms, "profits" and "wages" become the same, as everyone participates in profit sharing. When such a company has profits, the employees vote on what to do with them and broadly speaking, there are two options: they're invested, or they're handed out to shareholders, who are employees. Every year or two, various... --- ### Saving capitalism by making it more inclusive, part 2 > Since the death throes of capitalism have been predicted before, why do we need to take the idea of saving capitalism seriously this time? - Published: 2021-12-24 - Modified: 2021-12-27 - URL: https://moneymatters42.com/economics/saving-capitalism-by-making-it-more-inclusive-part-2/ - Categories: Economics - Series: Saving Capitalism This post is part of a series about a discussion (framed as a debate) between Yanis Yaroufakis and Gillian Tett on the subject of saving capitalism. If you found this post via an Internet search, it probably makes sense to start with the first post in the series, the link to which can be found above, and here. Question for Yanis: The death throes of capitalism have been announced before, why is "saving capitalism" to be taken serious this time? Yanis First, in August of 2020, as a result of the UK economy shrinking due to Covid lockdowns, analysts expected the UK GDP to fall 12% or so. When it was announced that UK GDP actually fell 20%, the stock market went up. This disconnect between the GDP shrinking, and the stock market rising had never before been seen. Why did it happen? Because the institutional investors EXPECTED a cash infusion from the Bank of England. This illustrates how financial markets have decoupled from real capitalism. In 2008 our generation experienced a global financial crash similar to 1929, but whereas in 1929 banks were permitted to fail, in 2008 the Federal Reserve injected massive amounts of money to keep them afloat, an effort that was succeeded in its goal. This was copied by the European Central Bank in 2012, and capitalism is now hooked on central bank money. Why did Jeff Bezos become so much richer during the pandemic? Not because of the profits of Amazon, but because the central... --- ### Saving capitalism by making it more inclusive, part 1 > Saving capitalism: A weird out of touch concept? Or something we need to think about and plan for? Can capitalism adapt? Or will it be replaced? - Published: 2021-12-24 - Modified: 2023-01-28 - URL: https://moneymatters42.com/economics/saving-capitalism-by-making-it-more-inclusive/ - Categories: Economics - Series: Saving Capitalism There is no denying capitalism has brought the world incredible material wealth and prosperity, especially since the end of world war 2. Having said that, many of the criticisms leveled against capitalism, most notably by Karl Marx, seem to have been unfolding as predicted, at least since the mid-1970s. The rich are getting richer, the middle class is shrinking, industries are consolidating and are increasingly dominated by oligopolies, wealth inequality is growing wider, and the "peasants" while richer than peasants in any prior stage of human history, are getting angry. Do we need to collectively put saving capitalism on our to-do list? Can we retool capitalism to make it more inclusive before the pitchforks, metaphorically or literally, come out? A debate on this topic was held as part of the "intelligence2" series where Anne McElvoy of The Economist magazine mediated a discussion between economist Yanis Varoufakis, who is apparently now a member of the Greek parliament, and Gillian Tett, an anthropologist and Financial Times contributor who has written a book on how anthropology can help us understand business. The word "debate" doesn't feel right here, because, in my opinion, the two debaters were in fairly broad agreement, using different words to describe the same things. This blog post is a SUMMARY of this discussion about saving capitalism, not a word-for-word transcript. It is for the TLDR, or in this case Didn't Watch crowd, who prefer reading a shorter summary. Having said that, the link to the full discussion is below.... --- ### Marxist economic theory criticisms of capitalism - Published: 2021-12-23 - Modified: 2023-08-25 - URL: https://moneymatters42.com/economics/marxist-economic-theory-criticisms-of-capitalism/ - Categories: Economics Let me open by saying that it is very recently that I've learned anything about Marxist economic theory, but what little I've learned so far has surprised me. I've always learned that Marxist economic theory and ideas were harmful, evil, and not something to waste time on. I did learn at a very young age that Karl Marx proposed that the value of something was determined by the amount of labour put into its creation and that idea intuitively seemed wrong when compared to the Adam Smith idea that value is whatever price the market would bear. However, I recently learned that this idea, which is known as The Labour Theory of Value, does not come from Karl Marx, but rather comes from Adam Smith, and that I was confusing the ideas of "value" and "price" which they both distinguished as being different. My first exposure to Marxist economic theory came in the book Contending Perspectives in Economics, by the economics professor John T Harvey. That entire (and fairly short) book opened my eyes to various ideas in economic thought, as well as to the idea that every economic school of thought consists of two very different parts: the descriptions, and the prescriptions. The descriptions are how the various schools of economic thought considered that economies work, and the prescriptions (now that we know how they work), consist of the set of policy ideas that the proponents think make sense. The chapter on Marxism in the above book caused me... --- ### Modern Monetary Theory explained by Stephanie Kelton > This is a summary of a short talk in which economist Stephanie Kelton explains Modern Monetary Theory, what it is, how it work, what it shows us. - Published: 2021-12-20 - Modified: 2021-12-23 - URL: https://moneymatters42.com/economics/modern-monetary-theory-explained-by-stephanie-kelton/ - Categories: Economics Dr. Stephanie Kelton is a professor of economics and public policy at Stony Brook University. She is the author of the bestseller The Deficit Myth in which she explains the Modern Monetary Theory macroeconomic lens for analyzing what money is and how it works. This blog post is a summary (not a word-for-word transcript) of an interview she gave at the University of Adelaide in Australia while she was there in January of 2020 to deliver the 2020 Geoff Harcourt Visiting Professor lecture. She was interviewed (mostly about Modern Monetary Theory) by economics student Coco Hoskin-Murray. https://youtu. be/6VfU3OrkAq8 Advise for girls thinking of studying economics? This was the first question. Professor Kelton answered that females who wish to study economics should do it, should not be intimated, that in the courses she teaches her top students tend to be female, and that there are employers wanting to hire smart economists, without regard to gender. What is Modern Monetary Theory? The interviewer said she was lucky to be able to study economics in high school, but she was taught only neoclassical economics, which Modern Monetary Theory is not. So she asked Professory Kelton to explain what MMT is. Professor Kelton emphasized the importance of a diversity of ideas in the classroom and in the field of economics. She stated that while it's not uncommon for high school economics to use one textbook, have one teacher, and teach one way, that when you get to University you hopefully have exposure to different... --- ### Money and finance: A talk by Dr. Steve Hail > This is a summary of a talk on money and finance given by Dr. Steven Hail (University of Adelaide) about money, central banks, and federal debt. - Published: 2021-12-19 - Modified: 2024-07-04 - URL: https://moneymatters42.com/economics/money-and-finance-a-talk-by-dr-steve-hail/ - Categories: Economics Dr. Steven Hail is an economics lecturer at the University of Adelaide in Australia. This blog post is a summary of two videos (a part 1 and a part 2) of a talk he gave to a group named Modern Money Australia, on the 23rd of June 2019 on the topic of money and finance. Specifically how the central bank and federal debt shapes the economy. As he lives, teaches, and gave this talk in Australia, he uses the Reserve Bank of Australia and the Australian federal debt as his examples when talking about money and finance, but the principles apply to any nation with a sovereign currency. This post is a summary, not a word-for-word transcript, for people who want to understand the core of what he said, without watching the entire two videos which together run for an hour and twenty minutes. However, for those who do wish to watch the videos (as they contain more than my fairly terse summary), they're below. https://youtu. be/70oxUtzdrec https://youtu. be/scIlDd6lTOI Modern Monetary Theory is built on the work of prior economists Most important among them were Abba Lerner, Wynne Godley, and Hyman Minsky. Hyman Minsky's ideas "came to fruition" so to say, after his death in 1996, and he's much more famous among economists now than he was when he lived. A failure of progressive politics is to have NEVER understood how the monetary system works He states this as his opinion, not a fact, although it's a reasonable and credible... --- ### Can democratic capitalism (workers coops) benefit investors? > Can workers cooperations and the democratic capitalism they provide save capitalism? Can investors benefit from workers cooperations? - Published: 2021-12-18 - Modified: 2023-03-21 - URL: https://moneymatters42.com/economics/can-democratic-capitalism-workers-coops-benefit-investors/ - Categories: Economics In the traditional capitalist idea of the absentee investor who receives financial benefits as a right of ownership without doing any work, the answer is no. But, the very model of democratic capitalism through workers' coops redefines who are and are not investors. When the investors are also employees, the answer is yes. First, some definitions Capitalism Capitalism is an economic system that recognizes that owners, investors, and employees are different roles within an enterprise, and generally considers those roles to be fulfilled by different people, which is not a requirement but is common. Some of the underlying concepts of capitalism are the idea of private property and the ability of people to own parts of a company. Workers cooperative In a business structure where the above roles exist, workers own the firm, are sometimes investors, and participate in the making of significant decisions through a democratic process where one worker has one vote. In worker's cooperatives, workers vote for the board of directors as well as hire, evaluate, and if needed, fire managers. Workers also vote on major decisions that in other firms are only voted on by board members, such as what to make, how to make it, where to make it, etc. This is why they're called democratic capitalism. The interesting thing to me about worker's cooperatives is that while they are based on the ownership of private property, they simply distribute ownership of the firm to workers, rather than absentee owners and investors. The interesting irony... --- ### Nomi Prins on banking fraud and bank bailouts - Published: 2021-12-17 - Modified: 2025-02-17 - URL: https://moneymatters42.com/economics/nomi-prins-on-banking-fraud-and-bank-bailouts/ - Categories: Economics Nomi Prins was a Wall St banker, who after 9/11 reassessed her life choices and became somewhat of a traitor to her tribe and an author who is very critical of Wall St banks and the banking industry. She has written a number of books about how bankers dictate terms to governments and make money via business practices that in other realms would likely be called fraud, and would be crimes. This post is a summary (not a transcript) of the video below, where she gave a talk about banking, and its abuses, at the Lannan Foundation on the 24th of January 2018. As the full talk is more entertaining than my terse summary, I do recommend you watch it, but if what you want is a terse summary, here it is. https://youtu. be/m6oF8osYv_U Who is Nomi Prins? I have what I consider to be a bit of a weird admiration for people who, for seemingly moral reasons, turn on their tribe, and in the case of Nomi Prins, her tribe was Wall St investment bankers. As stated above, after 9/11 (she was in lower Manhatten that day, at work, at Goldman Sachs), she reassessed her life choices, decided that helping morally challenged bankers use banking laws to make money without regard to the harm they caused was not an ethical way to earn a living, and became an author who has written a number of books that are very critical of the banking industry. While still in college, she... --- ### Richard Wolff: Democratic capitalism through workers cooperatives? > This blog post summarizes a talk by Economic Professor Richard Wolff on a book he wrote about how workers cooperatives can cure capitalism. - Published: 2021-12-16 - Modified: 2021-12-14 - URL: https://moneymatters42.com/economics/richard-wolff-democratic-capitalism-through-workers-cooperatives/ - Categories: Economics While my next sentence might seem petty, I do feel it's appropriate for me to reveal that for some reason I can't quite identify, I find Richard Wolff's style of presentation to be annoying. Having said this, I find his ideas on how workers cooperatives can democratize and potentially "cure" capitalism to be interesting, even compelling. Can workers cooperatives cure capitalism? The video below is from the series "Talks at Google". In it, Professor Wolff discusses this idea, from his book "Democracy at work: A Cure for Capitalism". He starts with some well-known criticisms of capitalism, and it's hard to argue that those criticisms are misguided. He ends with a discussion of workers cooperatives. This post is a summary of the video, not a word-for-word transcript. https://youtu. be/ynbgMKclWWc People trying to analyze economies disagreed, in big ways, since forever The differences characterizing how different people analyze and explain economic systems are big. And ideas come in and out of favour when we experience some economic event that indicates the current economic ideas "are broken". For example, the laissez-faire capitalism of the late 19th and early 20th centuries was considered broken when the extended high unemployment (20% to 25%) of the great depression occurred. So it was replaced. And the state-interventionist post-Keynesian capitalism (which was dominant from 1945 to around 1975) was considered broken when the stagflation (simultaneous high unemployment and high inflation) of the 1970s occurred. So it was replaced. And the neoliberal capitalism that replaced it, which contained many... --- ### What is money and where does it get its value? > This post summarzies a talk by L Randall Wray who describes "what is money" and where money gets its value, which hasn't changed in millenium. - Published: 2021-12-15 - Modified: 2021-12-13 - URL: https://moneymatters42.com/economics/what-is-money-and-where-does-it-get-its-value/ - Categories: Economics This post is a summary of a YouTube video where L Randall Wray is discussing (explaining may be more accurate) that from the perspective of treasury and central bank monetary operations, "what is money? " and where it gets its value. Below is a link to the video, which I do suggest you watch, but for the TLDR (or in this case "didn't watch") crowd, the summary is found below. https://youtu. be/boHE_dR159k This is a summary, not a word for word transcript What is money? - The core function of money The core function of money is a "social unit of account", which I admit, is a weird phrasing. The money unit of account is almost always issued by a state (in the United States and Canada, the money unit is the dollar). It is a record of debits and credits. It is a unit of measurement, in the same way, that "inches", "centimetres", "pounds", and "kilograms" are. The idea of "what is money" is confused somewhat by the fact that the name of the measurement unit is also the name of a physical object which represents the unit. US dollars, for example. The dollar is both the name of the unit of measure and the name of the greenback note representing the unit of measure. There is a hierarchy of money "things" or tokens As economist Hyman Minsky used to say, anyone can issue money, the challenge is getting someone else to accept it. The money tokens issued by... --- ### How the federal reserve system clears payments with repos > While understanding the federal reserve system can seem hard, its because the slightly abstract concepts are precise more than complex. - Published: 2021-12-14 - Modified: 2024-07-21 - URL: https://moneymatters42.com/economics/how-the-federal-reserve-system-clears-payments-with-repos/ - Categories: Economics This blog post is a summary (of sorts) of a podcast episode: Macro and Cheese Episode 42 - Repo Mania: Has The Fed Bailed Out Wall Street Again? With Nathan Tankus. The keyword in the above sentence is SUMMARY. I encourage you to listen to the full episode. You can listen to the full podcast via the link above, or via the audio widget below. But first, before we get into the details, a few definitions will help greatly. But before that, here is the featured image credit. Definitions needed to understand the federal reserve system Repos and Reverse Repos: Repurchase and Reverse Repurcahse Agreement Repos (repurchase agreements) are very short-term loans the Federal Reserve makes to primary dealers. Reverse Repos (reverse repurchase agreements) is the opposite, where the primary dealers make the short-term loans to the Fed. A repo is where a primary dealer sells Treasury bonds to the Fed and buys them back the next day. In exchange for the bonds, the primary dealers receive settlement balances. The repurchase typically occurs the next day, but the repurchase can stretch out as long as 65 days. Another way to describe repos is the Fed loans money to a primary dealer who provides Treasury bonds as collateral. A reverse repo is the opposite. A primary dealer buys Treasury bonds from the Fed and sells them back the next day. In exchange for the bonds, the Fed receives settlement balances. As with repos, the repurchase typically occurs the next day. Another... --- ### Angrynomics – The summary: Part 15 (and THE END) - Published: 2021-12-13 - Modified: 2021-12-11 - URL: https://moneymatters42.com/economics/angrynomics-the-summary-part-15-and-the-end/ - Categories: Economics - Series: Angrynomics - The Summary This post is part of a series of posts that summarizes the book Angrynomics by Eric Lonergan and Mark Blyth. If you found this post via search, it probably makes sense to start with the link to the full series, which is both here, and above. This is especially true of this post, as this is the last post in the series. What do the Angrynomics authors conclude? Politics leads - Economic policy follows As stated previously, if you can't reduce your economic policy ideas to something voters can easily understand and digest, they will NEVER be voted for. What is different between Bernie Sanders's "Democratic Socialism" and Andrew Yang's "Human-Centred Capitalism"? Mostly messaging. Bernie Sanders sucks at marketing. Andrew Yang doesn't. Additionally, one reason the rich and powerful get their way is that they ARE rich and powerful. While "tax the rich" may provide real economic benefits (as long as the policies require spending into the economy to avoid tax bills) the rich have shown they have ways of convincing both lawmakers and VOTERS not to go there. So whatever policies are considered to make sense MUST fit into the political climate of the nation in question. Is the US ever going to implement universal healthcare? Maybe, but not now. The US needs solutions that fit the language of "free-market capitalism" even though the politics and economics of the US are today fueled by campaign finance funded oligopoly and not by free-market capitalism. The policy recommendations made by the authors,... --- ### Angrynomics – The summary: Part 14 - Published: 2021-12-12 - Modified: 2021-12-10 - URL: https://moneymatters42.com/economics/angrynomics-the-summary-part-14/ - Categories: Economics - Series: Angrynomics - The Summary This post is part of a series of posts that summarizes the book Angrynomics by Eric Lonergan and Mark Blyth. If you found this post via search, it probably makes sense to start with the link to the full series, which is both here, and above. Can nationalism be a force for good? And help tone down angrynomics? The featured image will make sense in a few minutes. This too, to me, is a very interesting idea. While we generally perceive nationalism to be a force for bad, as the word "nationalism" conjures up images of authoritarian governments and societies, the authors ask if nationalism can be harnessed as a force for good. They seem to ask this in the context of Europe, where 27 countries are now members of the European Union trading block, and 19 of them use the common currency of the euro. Conceptually what they're talking about is similar to American and Canadian federalism, where one federal government interacts (with varying degrees of cooperation - from issue to issue and from time to time) with a large number of state, provincial, and territorial governments. The problem they identify is that often a "one size fits all" policy doesn't work, for various reasons. Different regions of a country simply have different dynamics, different needs, and different ideas on how to do things. So should different regions be encouraged to attempt to solve problems in different ways, then later compare notes? Exchange ideas on what worked best? It... --- ### Angrynomics – The summary: Part 13 - Published: 2021-12-12 - Modified: 2025-03-17 - URL: https://moneymatters42.com/economics/angrynomics-the-summary-part-13/ - Categories: Economics - Series: Angrynomics - The Summary This post is part of a series of posts that summarizes the book Angrynomics by Eric Lonergan and Mark Blyth. If you found this post via search, it probably makes sense to start with the link to the full series, which is both here, and above. Can Independent Fiscal Councils help alleviate Angrynomics? To me, this next idea is brilliant in its simplicity. I don't think anyone still exits who will argue that central bank fiscal stimulus during recessions does not help stimulate economies and does not help keep recessions from becoming even worse. At least no one anyone else would take seriously. The important questions no longer have to do with "will we do we do something"? But rather have to do with "WHAT will we do"? So the idea is to figure out what fiscal stimulus will be used as part of the response to the next recession and to do so in advance of that recession happening. The authors credit this idea to the American economist Claudia Sahm, who is a senior fellow at the Jain Family Institute, which describes itself as "a nonpartisan applied research organization in the social sciences". Having said that I googled for various combinations of "Claudia Sahm" and "Fiscal Councils" and while I found various writings of hers about fiscal stimulus, I found nothing on Independent Fiscal Councils. Don't they already exist? It seems the answer is "sort of", in as much as the International Monetary Fund identified 51 such councils as of... --- ### Angrynomics – The summary: Part 12 - Published: 2021-12-11 - Modified: 2021-12-10 - URL: https://moneymatters42.com/economics/angrynomics-the-summary-part-12/ - Categories: Economics - Series: Angrynomics - The Summary This post is part of a series of posts that summarizes the book Angrynomics by Eric Lonergan and Mark Blyth. If you found this post via search, it probably makes sense to start with the link to the full series, which is both here, and above. Can dual interest rates be part of the solution to angrynomics? I confess, it is taking me a while to wrap my head around the idea of dual interest rates, and I'm not sure I fully get it yet, so this post may change later as I learn more. From the book: Dual interest rates would allow central banks to separately target the rate of interest savers receive on their deposits and the rate borrowers pay on their loans. Lonergan, E. , & Blyth, M. (2020). Angrynomics. Agenda Publishing. Page 149. But don't we do that already? Aren't depositors paid one interest rate (a lower one) and borrowers charged another (a higher one)? The answer to the above question, as best I can ascertain, is that commercial banks already have a dual interest rate policy, but most central banks do not. And furthermore, what the authors are recommending is to flip the commercial bank model on its head, where the central bank pay a small interest rate on deposits (say 0. 25% or 0. 5%), which I should add most central banks pay zero percent today, and charges a LOWER interest rate on loans. But... . how does a central bank charge a lower interest... --- ### Angrynomics – The summary: Part 11 - Published: 2021-12-11 - Modified: 2021-12-09 - URL: https://moneymatters42.com/economics/angrynomics-the-summary-part-11/ - Categories: Economics - Series: Angrynomics - The Summary This post is part of a series of posts that summarizes the book Angrynomics by Eric Lonergan and Mark Blyth. If you found this post via search, it probably makes sense to start with the link to the full series, which is both here, and above. Can data dividends be part of the solution to angrynomics? But first: Featured Image Credit. The next policy idea, which I think is fascinating, is the idea of the “data dividend”. Companies are collecting enormous amounts of data on us. Absolutely staggeringly enormous amounts of data. And they are profiting incredibly well on their uses of "our" data. And right now, we, the people on whom the data is being collected, analyzed, sold, and used to target ads, have very little say in what data is collected or how it’s used. The basic idea here is to pass laws where WE have ownership rights of the data about us, and if the companies in question want to use it within their business practices, they: 1) Get our permission to do so, and 2) Pay us for the use of our data. Now, I don’t expect this would ever be a truly significant amount of money for any one individual, but imagine what an additional $500 a month per person would mean to rural midwest communities that have been devastated by globalization. It would partially make up for the economic devastation that globalization left in its wake. Then imagine what it would do for larger... --- ### Angrynomics – The summary: Part 10 - Published: 2021-12-10 - Modified: 2021-12-09 - URL: https://moneymatters42.com/economics/angrynomics-the-summary-part-10/ - Categories: Economics - Series: Angrynomics - The Summary This post is part of a series of posts that summarizes the book Angrynomics by Eric Lonergan and Mark Blyth. If you found this post via search, it probably makes sense to start with the link to the full series, which is both here, and above. Suggested prescriptions for Angrynomics But first:Featured Image credit. So, does the void left after the crash of capitalism 3. 0 leave us hopeless? Do we just give up? Accept the negative aspects of globalization? Accept 30 plus years of stagnating wages? Accept widening wealth and income inequality? Or are there things we can do to fix capitalism? Or has the time come to burn it to the ground? As Karl Marx predicted? The book contains a number of VERY interesting policy ideas for capitalism 4. 0. National Wealth Funds These are also called Sovereign Wealth Funds and essentially they are investment funds, owned by governments, for specific purposes. They are also not all national funds. Such funds can be owned by lower levels of government, such as states, provinces, and territories. The basic idea is sovereign wealth funds can provide "ownership" of assets to people who typically don't. If you're a state employee (or retiree) of the state of California, you have a vested interest in CalPERS, the California Public Employees Retirement System, which is nothing more than an investment fund that pays retirement benefits. The idea is sometime similar to this should be done for residents of nations. The Sovereign Wealth Fund best... --- ### Angrynomics – The summary: Part 9 - Published: 2021-12-10 - Modified: 2021-12-09 - URL: https://moneymatters42.com/economics/angrynomics-the-summary-part-9/ - Categories: Economics - Series: Angrynomics - The Summary This post is part of a series of posts that summarizes the book Angrynomics by Eric Lonergan and Mark Blyth. If you found this post via search, it probably makes sense to start with the link to the full series, which is both here, and above. Angrynomics and politicians fueling the sense of “us” vs “them” And then politicians not only start to speak rhetorically about who is “us” and who is “them”, but they also start to implement policies that look suspiciously like robbing Peter to pay Paul. And if you feel you’re in the group being robbed, that is definitely not a good look. UK: University tuition exists now due to privatization In the UK, universities are increasingly privatized, which means students now pay tuition, which they didn’t use to. To the UK government, which previously funded this spending, this represents savings. Where are those savings being spent? In the NHS (National Health Service). Who goes to university? Mostly young people. Who uses the bulk of NHS resources? Mostly old people. This looks like a generational transfer of wealth, from young people to old people. Why does this make sense? Well, old people do vote at twice the rate of young people. Germany: No resources to help struggling Germans After 2008, German residents, like residents all over Europe, are increasingly financially stressed. Big banks and big businesses get bailed out quickly, while German households don’t. In fact, the German government prescribed austerity, which took money away from programs to... --- ### Angrynomics – The summary: Part 8 - Published: 2021-12-09 - Modified: 2021-12-16 - URL: https://moneymatters42.com/economics/angrynomics-the-summary-part-8/ - Categories: Economics - Series: Angrynomics - The Summary This post is part of a series of posts that summarizes the book Angrynomics by Eric Lonergan and Mark Blyth. If you found this post via search, it probably makes sense to start with the link to the full series, which is both here, and above. Angrynomics and the inequality that exists within capital too! But weirdly, the inequality created by capitalism 3. 0 exists WITHIN capital as well. Capitalism 3. 0 increased competition within capital: fewer winners Even within the competition for profits between capitalists (as contrasted with workers working within a capitalist economy), there are fewer winners than there used to be. Razor-thin margins A big part of this is more and more forms are running on thinner and thinner margins. If they don’t, they’re undercut by a competitor. Then you get instances of the big players in a sector intentionally selling stuff BELOW cost specifically in order to drive competitors out of business. Living on the edge This pushes more and more companies to the edge of financial solvency. External shocks push them over And just as some external shock can push households over the financial edge, external shocks can push companies over the financial edge. The 2008 great financial crisis and the 2020 Covid pandemic were two such events. And in the rush to bail out big businesses, smaller enterprises and Main St businesses were left to sink or swim mostly on their own. Some had no choice but to close, others were “lucky” to be able... --- ### Angrynomics – The summary: Part 7 - Published: 2021-12-09 - Modified: 2021-12-16 - URL: https://moneymatters42.com/economics/angrynomics-the-summary-part-7/ - Categories: Economics - Series: Angrynomics - The Summary This post is part of a series of posts that summarizes the book Angrynomics by Eric Lonergan and Mark Blyth. If you found this post via search, it probably makes sense to start with the link to the full series, which is both here, and above. Angrynomics: How macro crashes released public anger Which considering how our political and economic elites responded to the macro crashes, is completely understandable. When they tell us “everything is good” when our own lived experiences show that to be not the case, what we see is they clearly don’t know what they’re talking about. We are creatures of habit Part of the “human experience” are the habits we form and the expectations we form about them. We learn “basic norms” from the people around us. From them, we learn aspects of how we set expectations for the future based on things that happened in the past. Which could be our individual direct past experiences or the stories we hear from our parents and grandparents. When circumstances change and we are forced to change our habits, it can be unsettling, to say the least. And when the circumstances change in a very big way for a large segment of the population, such as drastically declining standards of living occurring within a single generation, it can create an environment of “constant uncertainty”. Constant uncertainty is stressful And this constant uncertainty is stressful. The poor among us have known this for forever, and as the middle-class shrinks and... --- ### Angrynomics – The summary: Part 6 - Published: 2021-12-08 - Modified: 2021-12-08 - URL: https://moneymatters42.com/economics/angrynomics-the-summary-part-6/ - Categories: Economics - Series: Angrynomics - The Summary This post is part of a series of posts that summarizes the book Angrynomics by Eric Lonergan and Mark Blyth. If you found this post via search, it probably makes sense to start with the link to the full series, which is both here, and above. Angrynomics and tribal energy Tribal energy polarizes the electorate, threatens violence (the 6 Jan 2021 riot at the US capital is an example, the death threats to school board members around the country are another), and wins elections. And it has its origins in our feelings that neoliberal capitalism works for a few and leaves the rest of us behind. What makes capitalism capitalism? Markets, trading, prices, etc have existed for thousands of years, so what makes an economic system capitalism? Labour is a commodity? Of primary interest is the idea that labour is defined as a commodity and an input to production. Having said that, there is one very large difference between labour and other commodities. Labour is THE commodity that has strong opinions about how it’s priced. Other commodities seem indifferent. Economic nationalism is push-back against this idea Since what allows big businesses to treat labour as a commodity is globalization, which as we discussed previously dropped the income levels of entire communities in the industrial and manufacturing heartlands of first world nations, the obvious push back is “not globalism”, which is nationalism. “Made in ” becomes a rallying cry, but the people rallying around the cry tend not to have the... --- ### Angrynomics – The summary: Part 5 - Published: 2021-12-08 - Modified: 2021-12-08 - URL: https://moneymatters42.com/economics/angrynomics-the-summary-part-5/ - Categories: Economics - Series: Angrynomics - The Summary This post is part of a series of posts that summarizes the book Angrynomics by Eric Lonergan and Mark Blyth. If you found this post via search, it probably makes sense to start with the link to the full series, which is both here, and above. Angrynomics and the collapse of the neoliberal system From 1945 to around 1975, the western world was in a period of economic expansion where economic policies targeted full employment, labour unions were strong, and wage growth kept pace with productivity growth. This setup did however have issues and when in the 1970s it produced a combination of high unemployment and inflation, people got worried. In the meantime, a competing economic narrative was making the rounds. Global trade is goodRegulation is bad. Privitatization is goodUnions are causing more harm than good. State influence in the economy is bad. This setup is called neoliberalism, and it became the setup to move towards as the prior setup was seen to be failing. Why? Probably because the neoliberal narrative was “ready to go” having been discussed at length over the preceding several years. Then, in 2008 when neoliberalism failed, what narrative took its place? The reason none of us know what it is, is that there wasn’t one. The failure of neoliberalism left a void, and that void was quickly filled with anger. People are being punished because “their” elites screwed up In essence, the political and economic elites of the western world messed up. The neoliberal narrative... --- ### Angrynomics – The summary: Part 4 - Published: 2021-12-07 - Modified: 2021-12-08 - URL: https://moneymatters42.com/economics/angrynomics-the-summary-part-4/ - Categories: Economics - Series: Angrynomics - The Summary This post is part of a series of posts that summarizes the book Angrynomics by Eric Lonergan and Mark Blyth. If you found this post via search, it probably makes sense to start with the link to the full series, which is both here, and above. Is the angrynomics genie out of the bottle? Can we pull back from this global display of political anger? Probably not. Why? Because history tends not to run backwards. People around the world are pissed off that the people who make the rules of how our economies are structured seem not to care a bit about the plight of the common person. And that is why the anger is unlikely to be going away any time soon. Eventually yes, but not soon. Angry people regulate the behaviour of the tribe A very interesting idea I learned from the book is the idea that the angry people within a community modulate the behaviour of the community. They used the example of the angry sports fan who tells the other fans when to cheer, when to boo, etc, and how other fans follow their lead. I’m been at sporting events where that happened. I did in fact follow their lead. I’m sure you have to. The authors also draw an interesting distinction between “public anger” which we openly display, such as is seen at sporting events, and “tribal anger” which is generally “held in” until it bursts out. Tribal anger is more dangerous, as it tends... --- ### Angrynomics - The summary: Part 3 > Angrynomics describes the anger people around the world are feeling now that they know their political elites are lying to them. Can we do anything? - Published: 2021-12-07 - Modified: 2021-12-08 - URL: https://moneymatters42.com/economics/angrynomics-the-summary-part-3/ - Categories: Economics - Series: Angrynomics - The Summary This post is part of a series of posts that summarizes the book Angrynomics by Eric Lonergan and Mark Blyth. If you found this post via search, it probably makes sense to start with the link to the full series, which is both here, and above. Angrynomics is fueld by how politicians broker in fear This is not limited to any specific country, but I suspect is worse in some than in others. As to myself, while I am a dual Canadian-American citizen, I have lived most of my life in the States and spent the last almost seven years in Texas and Arkansas. As I follow the politicians who purport to represent me, I follow Senators Ted Cruz and Tom Cotton. Both of whose social media strategies seem to be “get them as angry as you can”. Per the increasing tribal partisan politics in the USA, both Cruz and Cotton promote that Democrats hate America, are doing everything they can to destroy it, and the only fix is to vote more Republicans into office. To me, this presents an interesting chicken and egg question I don’t know how to answer. Is the increase in anger being seen around the world the result of politicians intentionally working to inflame their supporters, or are the politicians merely trying to ride a wave of anger that is occurring without their effort, or is it an interplay between the two? The list of politicians accused of stoking anger encompasses many nations around the... --- ### Angrynomics - The summary: Part 2 - Published: 2021-12-06 - Modified: 2021-12-08 - URL: https://moneymatters42.com/economics/angrynomics-the-summary-part-2/ - Categories: Economics - Series: Angrynomics - The Summary This post is part of a series of posts that summarizes the book Angrynomics by Eric Lonergan and Mark Blyth. If you found this post via search, it probably makes sense to start with the link to the full series, which is both here, and above. Angrynomics: There seems to be a pattern here This pattern is being seen all over the world, independent of how a government claims their politics and economics are organized. This pattern is being seen in the USA, Europe, Chile, Brazil, Philippines, China, etc. Governments bail out big banks and big businesses through their central banks. Even after economic calamity, elites gather and shelter wealth. Governments do little to nothing to help Main St businesses and people. Some governments impose austerity that hurts poor and middle-class people. And people are getting angry All over the world, people are starting to express anger about how their leaders seem to be clearly favouring big business over people. 2009: The Tea Party in the USA After Wall St investment banks, GM, and other big businesses got bailed out, the Tea Party formed and started protesting. They opposed excessive taxation and government intervention in the private sector while supporting stronger immigration controls. They seemed to operate under the belief that their tax dollars were used to bail out the big businesses, and while taxes do not fund the US federal government, that is incidental to the big picture here. The Tea Party movement was generally seen as right-wing anger... --- ### Angrynomics - The summary: Part 1 - Published: 2021-12-06 - Modified: 2021-12-08 - URL: https://moneymatters42.com/economics/angrynomics-the-summary-part-1/ - Categories: Economics - Series: Angrynomics - The Summary This series of blog posts is a summary of what I consider to be the excellent book Angrynomics, by Eric Lonergan and Mark Blyth. I know of it because I follow Mark Blyth, a professor of International and Public Affairs at Brown University. Mark Blyth has demonstrated a talent for explaining complex ideas in fairly simple ways. Additionally, he promotes a perspective that no matter how good a set of economic policy ideas might be, if economic ideas can’t be reduced to something that can be sold within the marketplace of political ideas, they’re never going to become policy. Because politics is about stories, not truth. Eric Lonergan is a macro hedge fund manager (whatever that means), economist, and writer. Another book he wrote that I’ve added to be “to be read” pile is Money, which per a review written by Mark Blyth... If you like your economic shibboleths stabbed through the heart, roasted and served medium rare with a side of cold hard logic, you should read Eric Lonergan’s Money. You will see not only money, but the whole economic process, in a new light. For anyone who has ever wondered what money actually is and how it works this book is quite simply the place to both start and finish. In spite of the fact that I am summarizing this excellent book, this series of posts IS a summary. I strongly recommend you read the book for yourself. My summary of it will likely be much more poorly... --- ### Was libertarianism really created by corporate special interests? - Published: 2021-12-05 - Modified: 2023-08-23 - URL: https://moneymatters42.com/economics/was-libertarianism-really-created-by-corporate-special-interests/ - Categories: Economics I keep bumping into this idea online. Here are four articles making this claim Why corporate special interests created modern libertarianism The Long Con of Libertarianism This bastardised libertarianism makes 'freedom' an instrument of oppression The True History of Libertarianism in America: A Phony Ideology to Promote a Corporate Agenda What specific claims do they make? We know what we know because of a congressional committee The information was uncovered by a congressional committee named The House Select Committee on Lobbying Activities, also known as The Buchanan Committee, whose mandate was to investigate the extent to which lobbying influenced legislation. This committee operated from 8/12/1949 to 1/3/1951. Some of the findings of the committee were summarized in a book titled "The Lobbyists: The Art and Business of Influencing Lawmakers" by Karl Schriftgiesser. A corporate think tank created libertarianism Specifically, The Foundation for Economic Education was created in 1946 to promote the interests of big business. They still exist and are known as the FEE. The FEE was founded by a longtime US Chamber of Commerce executive named Leonard Read and was initially funded by the largest corporations existing at that time: General Motors, Chrysler, Consolidated Edison, Du Point, Gulf Oil, US Steel, Montgomery Ward, Armour, and BF Goodrich. The stated purpose of the FEE was: "the preparation of pamphlets, booklets, and articles presenting one side of public issues". Something that in other contexts is sometimes called propaganda. The FEE hired Milton Friedman to promote the real estate industry They actually... --- ### How did gigantic ships break our global supply chains? > To learn how the arrival of giant mega-ships (arrival, get it?) broke our global supply chains, read this interview with Marc Levinson. - Published: 2021-12-03 - Modified: 2021-11-22 - URL: https://moneymatters42.com/supply-chains/how-did-gigantic-ships-break-our-global-supply-chains/ - Categories: Supply Chains How did the arrival of gigantic mega-ships break our global supply chains? This topic is covered in depth in the Odd Lots podcast episode: How Gigantic Ships Are Creating Global Supply Chain Havoc. This blog post is a summary of that podcast episode. Odd Lots, in my mind, is an EXCELLENT podcast dealing with logistics and supply chain issues. While there are a lot of podcasts about logistics and supply chain issues, it's my experience many are thinly veiled long-form ads for the products and services being discussed. Odd Lots is a series of discussions with people in the industry who don't seem to be promoting a specific perspective or agenda per se, but rather have deep expertise and engage in substantive discussions about what's happening, with thoughtful analysis of why it's happening. The guest, Marc Levinson, knows about global shipping Marc Levinson, the podcast guest, is an economist, historian, and author. He literally wrote the book on modern global shipping: The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger. The podcast episode below is from the 31st of Mar 2021 (29 weeks ago). You can listen to it below, but, if you want to get the gist of what is discussed in less time, you can read this summary. Odd Lots podcast 31 Mar 2021: How Gigantic Ships Are Creating Global Supply Chain Havoc This is a summary, not a word for word transcript The episode starts with a discussion of the Ever... --- ### Why the rising cost of shipping isn't a surprise, part 5 - Published: 2021-12-02 - Modified: 2021-11-22 - URL: https://moneymatters42.com/supply-chains/why-the-rising-cost-of-shipping-isnt-a-surprise-part-5/ - Categories: Supply Chains - Series: Cost of Shipping If you found this post via search, it probably makes sense to start with the first post in this series on the cost of shipping. The link to the full series is above, and here. Is the bigness of modern ships because of anticipation of a never ending shipping boom as we saw prior to the great financial crisis? The slump in the growth of trade wasn't the only factor here. Ship lines, like companies in many other industries, have relentlessly pursued economies of scale. Bigger was better. And that WAS true when you could build a ship that could carry three thousand containers instead of two thousand containers. The cost per container dropped a lot. When they built ships that could carry ten thousand containers vs five thousand containers, the cost per container became lower still. So ship lines were aggressively pursuing economies of scale. What they didn't count on was that at some point the vessels would get so big that diseconomies of scale would set in. And that's what's happening in shipping now. As ships got beyond perhaps seventeen or eighteen thousand TEUs, they just got too big. And that's when you started to have this confusion in the ports, when you started to have these delays in shipping, and when the entire industry become less reliable. And the diminished reliability in the shipping industry is leading manufacturers and retailers to change their sourcing patterns. To make their products in different places and to have different value... --- ### Why the rising cost of shipping isn't a surprise, part 4 > How do mega cargo ships, and mega martitime transport alliances affec the cost of shipping? What problems does this introduce? How do we fix it? - Published: 2021-12-01 - Modified: 2024-06-17 - URL: https://moneymatters42.com/supply-chains/why-the-rising-cost-of-shipping-isnt-a-surprise-part-4/ - Categories: Supply Chains - Series: Cost of Shipping If you found this post via search, it probably makes sense to start with the first post in this series on the cost of shipping. The link to the full series is above, and here. What's the downside of the overcapacity of megaships? Why is that bad for the overall global economy? I wouldn't say necessarily it's bad for the overall global economy, but it's really bad for A) ship lines, for sure, but B) these mega-ships have generally fouled up the transportation system. You actually have fewer ships calling at most ports today than you used to have. But they're much bigger. So think of what does to the operation of the port. You don't have a smooth flow of cargo going through the port. Now, you've got nothing happening at the port. It's dead today. Then tomorrow, a ship shows up and it wants to unload 3,000 containers, in your port. What do you do with this? How do you get this unloaded? Where do you put the containers? One thing that's happened is that ships spend more time in port, which is very wasteful because it takes more time to get so many containers on and off. The trucks are lined up at the gate because there are so many containers to bring in and send out on these ships. There are so many containers to deliver. The railroads can't handle this sudden flood of containers, so you have the cargo sitting around longer before it gets... --- ### Why the rising cost of shipping isn't a surprise, part 3 > How is the cost of shipping determined? When you look up a price on an exchange, how is that price calculated? - Published: 2021-11-29 - Modified: 2021-12-05 - URL: https://moneymatters42.com/supply-chains/why-the-rising-cost-of-shipping-isnt-a-surprise-part-3/ - Categories: Supply Chains - Series: Cost of Shipping If you found this post via search, it probably makes sense to start with the first post in this series on the cost of shipping. The link to the full series is both above, and here. If actual shipping costs are not public information, how can I lookup shipping costs online? When you look up cargo shipping costs, what you see is the market forecast of a spot rate. Some of the contracts are pegged to that index, some are not. And there is a question as to what information an index like this has. You may have some players in the industry who want this information to get out, about what they actually are paying for freight, you have some players in the industry who don't want it to get out. As is the case with many other traded commodities, many of the transactions occur in private, and what is known in the public sphere is not the full story. We don't really know what the actual prices are or were. How difficult is it now to get ships that are "out of position" in the global supply chain, back to where they need to be? There are a couple of things that make these large container ships not very flexible. One is that these big ships don't necessarily fit at all ports. On some routes, there's simply not enough demand to handle a ship that can carry 10,000 containers. Or perhaps the harbour in some places isn't deep... --- ### Why the rising cost of shipping isn't a surprise, part 2 > To understand how the cost of shipping is determined, click here. Marc Levinson, who wrote THE book on global shipping, explains. - Published: 2021-11-27 - Modified: 2021-12-05 - URL: https://moneymatters42.com/supply-chains/why-the-rising-cost-of-shipping-isnt-a-surprise-part-2/ - Categories: Supply Chains - Series: Cost of Shipping If you found this post via search, it probably makes sense to start with the first post in this series on the cost of shipping. The link to the full series is both above, and here. What's causing our current shipping disruptions and how much of a problem is it? Starting in the early 2000s, container ship lines started building bigger and bigger ships. The first ships that carried standardized intermodal containers carried 68 containers. Now, the biggest carry more than 12,000 containers, or what they call 24,000 20 foot units. And it was really in the early 2000s that these big ships started to come online, and they got bigger and bigger over time. These were built on the assumption that international trade would continue to grow very quickly, as it had for decades. What happened then was, in the financial crisis , trade crashed. After that, the growth of trade never recovered. International trade as a share of global GDP peaked back in 2008. So there was a lot of excess capacity in shipping. And every time a new ship came online with the capacity to carry thousands of containers, the excess capacity got worse. To the point where you could send a container across the Pacific for less than $1,000 at one point. When this happened, many ship lines went bust, or else found merger partners. And so, what had been a very competitive industry, was transformed into what is basically an oligopoly today. . There are... --- ### Why the rising cost of shipping isn't a surprise > For a quick to read summary of why the rising cost of shipping isn't a surprise, read this summary of this Odd Lots podcast episode. - Published: 2021-11-25 - Modified: 2022-10-08 - URL: https://moneymatters42.com/supply-chains/why-the-rising-cost-of-shipping-isnt-a-surprise/ - Categories: Supply Chains - Series: Cost of Shipping This blog post is a quick-to-read summary of the Odd Lots podcast episode: Why the Cost of Shipping Goods From China Is Suddenly Soaring. Bear in mind that by "suddenly" they mean about a year ago, in late 2020, as this podcast episode was published on 18 Jan 2021. Odd Lots, in my mind, is an EXCELLENT podcast dealing with logistics and supply chain issues. While there are a lot of podcasts about logistics and supply chain issues, it's my experience many are thinly veiled long-form ads for the products and services being discussed. Odd Lots is a series of discussions with people in the industry who don't seem to be promoting a specific perspective or agenda per se, but rather have deep expertise and engage in substantive discussions about what's happening, with thoughtful analysis of why it's happening. The guest, Marc Levinson, knows about the cost of shipping Marc Levinson, the guest, is an economist, historian, and author. He literally wrote the book on this topic: The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger. The podcast episode below is from the 18th of Jan 2021 (44 weeks ago). You can listen to it below, but, if you want to get the gist of what is discussed in less time, you can read this summary. Odd Lots podcast 18 Jan 2021: Why the Cost of Shipping Goods From China is Suddenly Soaring This is a summary, not a word for word transcript The... --- ### How do US treasury auctions work and why does it matter? - Published: 2021-11-23 - Modified: 2021-11-19 - URL: https://moneymatters42.com/economics/how-do-us-treasury-auctions-work-and-why-does-it-matter/ - Categories: Economics A little background information on this US treasury auctions explainer video This is a goofy little video published to YouTube six years ago that does a very good job of explaining how US treasury auctions work. It's in a question and answer format, where the grandson is asking questions of his grandmother who is an economist who used to work at the US treasury. The transcript below is not word for word in that I omitted the parts that were not part of the Q&A, such as when the characters are being introduced or doing a little grandma grandson banter. https://youtu. be/Wgcv_wJOLcA This is a summary, not a word-for-word transcript. The grandson's questions are in bold, the grandmother's answers are below them. Did you know the federal government is going to run a 506 bazillion dollar deficit this year? Bazillion isn't a real number. I think you mean 506 billion dollars. That's the Congressional Budget Offices projection for this year. How can the federal government can just force-feed US treasuries onto private American citizens to finance their pork belly spending habits? That isn't quite the case. US treasuries are interest-bearing, virtually no-risk financial assets for private citizens. They are quite a good investment. They fulfill quite an important role in our econonmy. The US government doesn't force-feed US treasuries to anyone. Since they are such a good asset, a lot of people want to purchase them. Really? Who wants to buy treasuries? Well, for example, pensions and mutual funds own... --- ### Are there state and provincial sovereign wealth funds? - Published: 2021-11-22 - Modified: 2021-11-18 - URL: https://moneymatters42.com/economics/are-there-state-and-provincial-sovereign-wealth-funds/ - Categories: Economics - Series: Sovereign Wealth Funds Canadian sovereign wealth funds As a country, Canada does not have any sovereign wealth funds. Alberta But the province of Alberta does. The Alberta Heritage Savings Trust Fund has a current value of $18. 3 billion and in the 2021-22 fiscal year earned a rate of return of 5. 5% or $668 million. Per the "Latest update" page on the Alberta government's website, the fund has been paying out since 1976 and has contributed more than $46. 2 billion for health care and education. Criticisms of the Alberta Wealth Fund While anything tinged by politics has critics, some of the criticisms of the Alberta wealth fund seem reasonable. There are people who consider the Alberta fund a squandered opportunity. People compare the Alberta fund to the Norway fund as they're both funded through oil revenues, but the two funds have had drastically different rules. Per University of Calgary economics Trevor Tombe, if the Alberta fund had followed the rules that Norway used, contributing all its resource revenue to the fund and limiting withdrawals to four percent per year, this nest egg would now be worth $575 billion. American sovereign wealth funds As with Canada, as a country, the United States does not have a sovereign wealth fund. However, there are 21 such funds in the United States, a few of which are detailed in the first post in this series. Alaska The largest US wealth fund, and surely the best known, is the one in Alaska that pays annual dividends... --- ### What are examples of national sovereign wealth funds? > National sovereign wealth funds are been created by a variety of nations for a variety of purposes. This post talks about the largest national funds. - Published: 2021-11-22 - Modified: 2022-10-01 - URL: https://moneymatters42.com/economics/what-are-examples-of-national-sovereign-wealth-funds/ - Categories: Economics - Series: Sovereign Wealth Funds We'll start with the biggest ones. The Government Pension Fund of Norway Total assets and year founded The Government Pension Fund of Norway is actually two separate sovereign wealth funds owned by the government of Norway. The Government Pension Fund Global has total assets of USD $1. 3 trillion and was founded in 1996. It is the largest sovereign wealth fund on earth. The Government Pension Fund Norway was founded in 1967 and is not one of the world's largest, so it gets only a passing mention here. How the fund describes itself The first part of how they describe the fund is: Norway’s oil fund, or the Government Pension Fund Global which is its official name, was created after we discovered oil in the North Sea. The fund was set up to shield the economy from ups and downs in oil revenue. It also serves as a financial reserve and as a long-term savings plan so that both current and future generations get to benefit from our oil wealth. What are the proceeds used for? Norway initially treated its fund like a rainy day fund. Norway made its first withdrawal from the fund in Jan of 2016, twenty years after the fund was first established. The money was transferred to the Norweigan Treasury. I did not find any stated specific uses. The Norweigan fund has averaged a 6. 6 percent return from Jan of 1998 to Jun of 2021, and Norweigan law allows withdrawals of no more than 4%... --- ### What are Sovereign wealth funds and why do they work? - Published: 2021-11-21 - Modified: 2022-10-01 - URL: https://moneymatters42.com/economics/what-are-sovereign-wealth-funds-and-why-do-they-work/ - Categories: Economics - Series: Sovereign Wealth Funds We've all heard the best way to build long-term wealth is to buy and hold stocks. Can governments do this for the benefit of their residents? Yes, and some do. They're called Sovereign Wealth Funds. More of them exist than we realize. What exactly is a sovereign wealth fund? A sovereign wealth fund is nothing more than an investment fund that is owned by a sovereign government. That's it. These sovereign wealth funds invest in assets such as stocks, bonds, real estate, private equity funds, and/or hedge funds. In this regard, they are no different from other investment funds. The only difference is who owns the fund, and why. Why are they created? Sovereign wealth funds are generally created with a specific objective in mind, as you'll see in some of the examples that follow. Sometimes, people who are thinking into the future realize they can take advantage of the fact that, over the long term, the value of stocks and real estate tends to rise, and that they can use that to provide funding for specific purposes in the future. Some funds cover specific aspects of government funding. Alaska has a fund that pays an annual dividend to Alaska residents. Texas has two funds, one of which helps pay for K12 education, the other of which help pay for the University of Texas and Texas A&M University systems. The Norweigan fund now covers about 20% of annual Norwegian government spending. Having said all that, many sovereign wealth funds in... --- ### Is there a pattern to how poor nations create economic value? - Published: 2021-11-21 - Modified: 2021-11-16 - URL: https://moneymatters42.com/economics/is-there-a-pattern-to-how-poor-nations-create-economic-value/ - Categories: Economics - Series: Creating Economic Value In this series of posts, we've taken a look at seven nations whose growth in economic value is considered to be somewhat miraculous. The seven nations are the four Asian Tigers (Singapore, Taiwan, South Korea, and Hong Kong), the Celtic Tiger (Ireland) and the post WW2 rebuilding of Germany and Japan. This is my "wrap up" post where I look for patterns. The big question for me now is... . Is there a common thread that runs through all seven? What I looked at I looked at the following for the seven nations: Government structuresPoliticsGovernment corruptionThe legal systemThe banking systemNatural resourcesDirect government support and interventionDirect foreign investmentImportant domestic partnershipsWealth and income inequality The government This identifies governments on a spectrum of autocratic to democratic. This was not an easy call for every country, as some countries (Singapore in particular) democratically elected autocratic governments. It is also true that some countries were very autocratic when the economic revitalization got underway and are very democratic now. When this happened, I identified how they were when the economic revitalization got underway. SingaporeAutocraticTaiwanAutocraticSouth KoreaVERY autocraticHong KongDemocraticIrelandDemocraticGermanyAutocratic (post WW2)JapanAutocratic (post WW2) It would appear the difference that makes the difference is not in how autocratic or democratic the government is. Politics What matters here? How many parties are registered? How many parties have seats in the legislature? How combative or angry the parties seem to be with each other? I'm honestly not sure, so I'm going to summarize all of the above and see what... --- ### How did Japan rebuild economic vitality after WW2? > Germany went from total ruins after WW2 to the 3rd largest economy on earth by 1990. How did such economic vitality happen? - Published: 2021-11-20 - Modified: 2025-04-10 - URL: https://moneymatters42.com/economics/how-did-japan-rebuild-economic-vitality-after-ww2/ - Categories: Economics - Series: Creating Economic Value If you found this post via search, it probably makes sense to start with the first post in this series. The link to the full series is above. In this series of posts, I examine seven nations whose economic vitality transformed them from poor countries into rich countries. The focus of this post is the rebuilding of Japan after WW2. A ruined state Everyone knows Japan was badly damaged by WW2. Here are some specifics. About 2 million dead (about 4% of the population) About 680,000 injured or missing One quarter of national material wealth destroyed 90% drop in industrial capacity Commodity shortages leading to hyperinflation Yet by 1990, in a period of only 45 years, Japan transformed into the world's second-largest economy. Immediate post war government A few days before the surrender of Japan in September of 1945, Douglass MacArthur was appointed to be the Supreme Command for the Allied Powers, he was in effect Japan's American viceroy. He had the final decision in all matters relating to the governing of Japan. Unlike Germany, after WW2, Japan had a functioning government, and MacArthur and his people ruled Japan through them. This phase lasted until the new Japanese constitution went into effect in May of 1947. The US occupation of Japan ended in 1951. Immediate post war policies As the war ended, a few Japanese men organized a study group to think through the post-war recovery. The first meeting was in Aug of 1945, and while it started as an... --- ### How did Germany rebuild economic vitality after WW2? > Germany went from total ruins after WW2 to the 3rd largest economy on earth by 1990. How did such economic vitality happen? - Published: 2021-11-19 - Modified: 2025-04-10 - URL: https://moneymatters42.com/economics/how-did-germany-rebuild-economic-vitality-after-ww2/ - Categories: Economics - Series: Creating Economic Value If you found this post via search, it probably makes sense to start with the first post in this series. The link to the full series is above. In this series of posts I examine seven nations whose economic vitality transformed them from poor countries into rich countries. The focus of this post is the rebuilding of Germany after WW2. A ruined state Everyone knows Germany, and many countries in Europe were badly damaged by WW2. For Germany: Industrial output down by one third 20% of housing was destroyed Half of food production stopped Many men aged 18 to 35, the "heavy lifters" of the work force, were dead or permanently maimed Before Germany fell, the German government rationed Germans to 2,000 calories a day. After the allies took over and did the math, they saw food was going to run short, so they reduced the daily ration to 1,000 to 1,500 calories a day. Immediate post war government When Germany surrendered in April of 1945, ending the war in Europe, the government of Germany simply vanished. One day Germany had a government, the next, it didn't. When the allies who occupied Germany issued an order, there was no government entity in existence to carry it out. So the four allied nations in Germany at that time (the United States, the UK, France, and Russia) divided Germany into four administrative zones. Millions of people were homeless, there were chronic food shortages, the allied forces had 1. 5M German POWs they... --- ### How did Ireland create high economic value and growth? > How did Ireland get so rich so fast? The rising economic value of the country is one of capitalism's great success stories. How did it happen? - Published: 2021-11-18 - Modified: 2023-12-30 - URL: https://moneymatters42.com/economics/how-did-ireland-create-high-economic-value-and-growth/ - Categories: Economics - Series: Creating Economic Value If you found this post via search, it probably makes sense to start with the first post in this series. The link to the full series is above. In this series of posts, I examine seven specific nations that created economic value which transformed them from fairly poor countries to fairly rich countries. The focus of this post is Ireland sometimes referred to as the Celtic tiger. Regarding the image at the top of the post There may be nothing more Irish than the "two-part pour" of a pint of Guinness. If you've never been and seen it yourself, I'm sure you can find videos on YouTube, but the basic idea is: You hold the glass at an angle and fill the glass almost all the way. You sit the glass on the bar for maybe two minutes, while the bubbles settle. You top it off. What I never knew is this two-part pour is controversial. Apparently, someone on BuzzFeed published an article claiming it's the greatest marketing myth in history, which didn't sit well with some long-time pint pullers. Personally, I think it's cool to watch the bubbles settle, so I like the two-part pour method, whether it's necessary or not. If it is a marketing ploy, they got me Background information While the island of Ireland has been continuously occupied for 10,000 years or so, the history of modern Ireland effectively starts with English annexation and occupation. In 1541 Henry VIII declared himself to be King of Ireland,... --- ### How did Hong Kong create high economic value and growth? > How did Hong Kong get so rich so fast? The rising economic value of the region is one of capitalism's great success stories. How did it happen? - Published: 2021-11-17 - Modified: 2023-09-10 - URL: https://moneymatters42.com/economics/how-did-hong-kong-create-high-economic-value-and-growth/ - Categories: Economics - Series: Creating Economic Value If you found this post via search, it probably makes sense to start with the first post in this series. The link to the full series is above. In this series of posts, I examine seven specific nations that created economic value which transformed them from fairly poor countries to fairly rich countries. This post focuses on Hong Kong. Background information Hong Kong has never been an independent nation. It became part of China about 2200 years ago and was ceded to the British in 1842 after Britain won the first opium war. Side note: The Opium Wars were started by Britain after China banned opium. Some British people had been making good money selling opium to people in China, and they wanted that to continue. Per the Second Convention of Peking, a treaty signed in 1898, Britain leased Hong Kong for 99 years, which I'm sure at the time seemed like "forever", but scheduled a turnover back to China in 1997. Like much of southeast Asia, Hong Kong was under Japanese occupation during WW2. When WW2 ended, control of Hong Kong was returned to the British. As 1997 was approaching, the British government, wishing Hong Kong to continue to be a political and economic bridge to the west, enacted a series of reforms hoping to achieve that purpose. In 1997, Hong Kong reverted to China as a Special Administrative Region, which puts specific protections in place for 50 years, or until 2047. China has started to publically erode some... --- ### How did South Korea create high economic value and growth? > How did South Korea get so rich so fast? The rising economic value of the country is one of capitalism's great success stories. How did it happen? - Published: 2021-11-16 - Modified: 2021-11-12 - URL: https://moneymatters42.com/economics/how-did-south-korea-create-high-economic-value-and-growth/ - Categories: Economics - Series: Creating Economic Value If you found this post via search, it probably makes sense to start with the first post in this series. The link to the full series is above. In this series of posts, I examine seven specific nations that created economic value which transformed them from fairly poor countries to fairly rich countries. This post focuses on the Republic of Korea, commonly known as South Korea. Background information Contrary to most narratives about the importance of "free markets", the economic transformation of the Republic of Korea started with a military coup in 1961. Medieval Korea had such poor experiences with other nations that in the early 1600s they chose to limit their contact with the outside world, and this period lasted for about 250 years, ending in the late 1800s. European nations then started arriving seeking trade opportunities, with little success. Japan took a more heavy-handed approach and after Japan beat China and Russia in a war over control of the Korean peninsula, they formally annexed it in 1910. After WW2, the United States and the Soviet Union divided the Korean peninsula into two halves, the southern one of which became the Republic of Korea in 1948. The Korean war was devastating in every way possible, costing the lives of 2 million Koreans before ending in 1953. Then in 1961, the military took over the government of the Republic of Korea, which weirdly, is what started the extreme economic growth that came to be known as the miracle on the... --- ### How did Taiwan create high economic value and growth? > How did Taiwan get so rich so fast? The rising economic value of the island is one of capitalism's great success stories. How did it happen? - Published: 2021-11-15 - Modified: 2025-03-25 - URL: https://moneymatters42.com/economics/how-did-taiwan-create-high-economic-value-and-growth/ - Categories: Economics - Series: Creating Economic Value If you found this post via search, it probably makes sense to start with the first post in this series. The link to the full series is above. In this series of posts, I am examining seven specific nations that created economic value which transformed them from fairly poor countries to fairly rich countries. This post focuses on Taiwan, also known as Formosa. Background information Taiwan is kind of an independent country, and kind of not. And while that sounds weird, it's because The People's Republic of China claims Taiwan as a part of China, and China will not establish diplomatic relations with and will sever diplomatic relations with, any country that establishes diplomatic relations with Taiwan. As a result, only 15 small nations recognize Taiwan as an independent nation. An excellent perspective on the absurdity of Taiwan's nationhood status is this episode of Last Week Tonight, with John Oliver. https://youtu. be/9Y18-07g39g After WW2, Taiwan was (again) part of China, and the split between the People's Republic of China (Mainland China) and the Republic of China (Taiwan) occurred in 1949 when the communist rebels won the Chinese civil war, 1. 2 million people fled mainland China for the island of Formosa, and then established themselves as a separate nation, sort of. The government Some consider the government of Taiwan to be democratic in form, but not so much in operation. Taiwan enacted a constitution in 1947, but Taiwan existed under martial law from 1949 until 1987, during which time the... --- ### How did Singapore create high economic value and growth? > How did Singapore get so rich so fast? The rising economic value of the small nation is one of capitalism's great success stories. How did it happen? - Published: 2021-11-14 - Modified: 2025-03-13 - URL: https://moneymatters42.com/economics/how-did-singapore-create-high-economic-value-and-growth/ - Categories: Economics - Series: Creating Economic Value If you found this post via search, it probably makes sense to start with the first post in this series. The link to the full series is above. In this series of posts, I am examining seven specific nations that created economic value which transformed them from fairly poor countries to fairly rich countries. This post focuses on Singapore. Background information Geographically, Singapore is well situated at both the southern tip of Malaysia and the southern end of the Malaca Straight, a shipping channel between Malaysia and the Indonesian island of Sumatra. This shipping channel was used for shipping between the Pacific ocean and the Indian ocean. As such, the small island of Singapore looked like a strategic location for the British to set up a port, which they did in 1822. The British expanded their presence in the area with the annex of Malaya in 1867. During WW2, Singapore was attacked by Japanese forces and formally occupied by Japan starting in Feb of 1942. When Japan surrendered in 1945, Singapore was handed over to the British Military Administration. In 1946 Singapore became a British Crown Colony. In 1963, the modern nation of Malaysia was formed, consisting of Malaya, Singapore, Sarawak, and North Borneo. In August of 1965, Singapore separated from Malaysia to become an independent sovereign nation. The government There seems to be a general consensus that Singapore has had autocratic governments, but that for Singapore, that has worked out well. Singapore’s Lee Kuan Yew showed how autocratic government... --- ### How do poor nations create high economic value? > We have several success stories of poor nations becoming rich fairly quickly: Singapore, Taiwan, Korea, Hong Kong, Ireland, etc. What happened? - Published: 2021-11-13 - Modified: 2024-07-04 - URL: https://moneymatters42.com/economics/how-do-poor-nations-create-high-economic-value/ - Categories: Economics - Series: Creating Economic Value A simple question, with answers from across the spectrum While there are many articles and studies on this topic, there seems to be quite a bit of disagreement as to how poor nations create economic value and become rich. Many articles and papers I found seem to align with the perspectives of the organizations publishing them. Some answers that do not seem surprising The World Bank writes about the role of trade in ending poverty. The International Monetary Fund writes about global trade liberalization and the developing countries. The World Trade Organization writes about how the WTO can help countries develop, through trade. And some answers that do Interestingly, the Department for International Development, which is part of the UK government, offers the refreshingly honest opinion of: There is no one right answer. A mistake often made in the early 1990s was to translate general policy principles into a unique set of policy actions. Growth: Building Jobs and Prosperity in Developing Countries They then proceed to quote a World Bank report which they feel is too simplistic in its "one size fits all" prescription. And the National Bureau of Economic Research, a non-government American economic think tank, offers this: The evidence strongly suggests that export growth and incoming foreign investment have reduced poverty everywhere from Mexico to India to Poland. Yet at the same time currency crises can cripple the poor. Globalization and Poverty Perhaps analyzing success stories makes sense There are seven stories of creating economic value that jumps... --- ### Why what the World Trade Organization does matters > What is the World Trade Organization and why do they matter? How do they affect the everyday lives of people around the world? - Published: 2021-11-12 - Modified: 2021-12-11 - URL: https://moneymatters42.com/economics/why-what-the-world-trade-organization-does-matters/ - Categories: Economics - Series: The Neoliberal World Trade System What is the World Trade Organization? I often find useful definitions on the website Investopedia. Created in 1995, the World Trade Organization (WTO) is an international institution that oversees the global trade rules among nations. It superseded the 1947 General Agreement on Tariffs and Trade (GATT) created in the wake of World War II. What does the World Trade Organization do? They oversee global trade between nations, and there are currently 164 member countries. Is the World Trade Organization a government? No. The rules of trade are determined by international treaties. The WTO helps government negotiate these treaties, and once the rules are established, the WTO helps governments resolve trade disputes. They seem to be more of an international mediation service than a government. The WTO however, is a driving force behind globalism Which has been both good and bad. Developing economics have benefited by setting up factories while simultaneously manufacturing areas of developed nations have suffered for precisely the same reason. Stuff is made in cheaper parts of the world resulting in stuff being cheaper, but due to the job losses in developed countries due to having moved factories around the world, people in the developed countries have less money with which to buy that cheaper stuff. Where is their HQ? What is their structure? The WTO is headquartered in Geneva Switzerland. The WTO has about 600 staff members working in about 80 countries. While the WTO is not a legislative body, it has an org chart that looks like one. There are multiple... --- ### Are we now in a world of competition between supply chains? > Our manufacturing supply chains are now so intertwined that it's fair to say that we now live in a world of competition between supply chains. - Published: 2021-11-12 - Modified: 2024-12-24 - URL: https://moneymatters42.com/supply-chains/are-we-now-in-a-world-of-competition-between-supply-chains/ - Categories: Supply Chains Since any chain is only as strong as its weakest link, and modern manufacturing supply chains are incredibly intertwined, it seems safe to say we now live in a world of competition between supply chains. We all get the idea that a company is a group of people working in competition against other groups of people in other companies. We also all get that a supply chain is a group of companies who all have some part, perform some function, add some value, to the creation of products and services. Take for example the current inability to manufacture new cars due to shortages of computer chips. The picture below is from a post in the Detroit Free Press in which the claim is made these Ford F150s are waiting for semiconductors before they can be finished, checked again, and shipped to dealers. The picture was taken on April 15, 2021. Products competing with other products means... The iPhone vs the Motorola Moto G Power vs the LG Stylo 6. These are products in competition with each other (although some iPhone users have told me there really isn't any competition if only I would open my eyes), which means, in a very real sense the supply chains that produce these products are in competition with each other. The companies building them compete The manufacturing processes that bring these products to us involve so many parts from so many companies that to think of the product as being "made by" the company... --- ### How the evolution of supply chains increased our wealth - Published: 2021-11-11 - Modified: 2021-11-11 - URL: https://moneymatters42.com/supply-chains/how-the-evolution-of-supply-chains-increased-our-wealth/ - Categories: Supply Chains To give you an idea of the complexity of modern supply chains, and the evolution of supply chains over time, the image at the top of the post is a conceptual model of the supply chain for "just" the meat industry in South Africa1. Image credit: A systems analysis and conceptual system dynamics model of the livestock-derived food system in South Africa: A tool for policy guidance. . One industry, in one country. When you extrapolate that to all the products we consume, and how manufacturing of components, subassemblies, and finished goods occurs all over the world, as well as the activities needed to coordinate this, you start to get a sense of the complexity of modern supply chains. Background/Perspective This blog post is a summary, and perspective, of the first chapter of a paper published by the World Trade Organization (WTO) titled Supply Chain Perspectives. This paper is "branded" as a WTO document to the point that the author or authors are not even identified. I say "perspective" as while the paper I'm summarizing also talks about national income disparities in global supply chains, this post focuses only on the evolution of supply chains over time, and ignores national income disparities. Having said that, you can read the full paper via the link above. To me, this paper is clearly "pushing" the WTO perspective. Per the WTO website, the WTO is... In brief, the World Trade Organization (WTO) is the only international organization dealing with the global rules of... --- ### Why do the economics of supply chain management matter? - Published: 2021-11-11 - Modified: 2023-03-10 - URL: https://moneymatters42.com/supply-chains/why-do-the-economics-of-supply-chain-management-matter/ - Categories: Supply Chains Warning, this blog post is a bit of a rant. Consider yourself warned. And why is the economics of supply chain management generally ignored by economic models? First, some definitions What is economics? Investopedia has a good definition, which starts with: Economics is a social science concerned with the production, distribution, and consumption of goods and services. It studies how individuals, businesses, governments, and nations make choices about how to allocate resources. What is supply chain management? Again, Investopedia has a good definition, which starts with: Supply chain management is the management of the flow of goods and services and includes all processes that transform raw materials into final products.   Per these definitions Economics encompasses supply chain management. Yet... Yet when I read about economics, while they may make reference to "production" and "distribution", when I see well-defined economic models and/or descriptions of such models, they all talk almost exclusively about money, and very very very little about stuff. It's as if an underlying assumption is that money matters more than goods and services. I get that money matters. In fact, financial services enable the ability to activate resources within an economy. But... people commonly talk about economics as if the currency issuer within an economy has a scarce supply of money ("how will they pay for it? "), yet if they can find enough money, it seems there is no end to what can be bought. In reality, exactly the opposite is true. In any given economy (or more... --- ### Why is the rational expectations theory of inflation worth paying attention to? - Published: 2021-11-10 - Modified: 2021-11-06 - URL: https://moneymatters42.com/economics/why-is-the-rational-expectations-theory-of-inflation-worth-paying-attention-to/ - Categories: Economics - Series: What causes inflation The rational expectations theory of inflation is part of the neoclassical focus of modern economics (the word "rational" probably gave it away), which was first described in a paper by John F. Muth published in 1961. I think there is evidence to suggest that it is both very influential, and used to justify poor economics, which ironically is why we need to pay attention to it. It became popular in the 1970s as our switch to neoliberal capitalism occurred. Neoliberal capitalism has been built upon neoclassical economic ideas. If you found this blog post via search, it probably makes sense to start at the first post in this series (the link is above), as it contains information and ideas that are relevant here. What is the rational expectations theory? The basic ideas of the rational expectations theory are similar to the basic ideas of neoclassical economics in general. That people make economic decisions based on three primary things: RationalityWhat they know or believe to be truePast experiences And never mind that the Nobel Prize in Economic Science was awarded to Richard Thaler in 2017 precisely for demonstrating that most economic decisions are NOT made rationally. For purposes of using theory as the basis for public policy, that needs to be put aside. Essentially, the idea, as I understand it, is that past outcomes influence current decisions, which of course influence future outcomes. This is as true of future price levels as it is of other aspects of economics. There is... --- ### Does the structural theory of inflation show up in reality? - Published: 2021-11-10 - Modified: 2025-04-18 - URL: https://moneymatters42.com/economics/does-the-structural-theory-of-inflation-show-up-in-reality/ - Categories: Economics - Series: What causes inflation First, I wish to state that the structural theory of inflation is the one that I personally understand the least. Likely as a result of having had the privilege of living my entire life in countries with well-developed economies (Canada and the United States) and as such, not personally seeing evidence of this in my day to day life The structural theory of inflation states that while market power is a source of inflation, a larger cause of inflation, in some economies, are societal and cultural issues affecting a countries politics or economics which affect how the economy can be structured. If you found this blog post via search, it probably makes sense to start at the first post in this series (the link is above), as it contains information and ideas that are mentioned here. Factors influencing structural inflation Markup theory Markup theory states that the effects of demand-pull and cost-push can not be separated. They always travel together. Intuitively this makes sense. For example: Demands for higher wages increase the cost of a widespread production input (that being wages) which creates cost-push inflation. If the demand for oil goes up, OPEC sometimes reduces production in order to raise profits per barrel, as that improves their overall profitability, which creates cost-push inflation as oil is part of producing everything we consume. I'm not sure this works the other way around. I'm not now able to think of an example where the cost increase of a production input would then... --- ### What are the Demand-Pull and Cost-Push Inflation Theories? > The demand-pull and cost-push theories of inflation take the idea of "supply and demand" in a literal sense, and apply them across the economy. - Published: 2021-11-09 - Modified: 2025-03-03 - URL: https://moneymatters42.com/economics/what-are-demand-pull-and-cost-push-inflation-theories/ - Categories: Economics - Series: What causes inflation While demand-pull and cost-push inflation theories are different, they seem, to me, to be two different sides of the same coin. They are both based on the basic concept that prices are a function of supply and demand. I can't state these ideas fully explain inflation, but they're so obviously true, even in limited applications, that any general theory of inflation has to take them into account somehow. If you found this blog post via search, it probably makes sense to start at the first post in this series (the link is above), as it contains information and ideas that are mentioned here. Demand-pull inflation Demand-pull inflation is when demand outgrows supply, which is not able to keep up, and does so on stuff whose prices have a wide effect across the economy. Examples would be oil, corn and soy (which in the US are primarily food for meat animals), silicon, etc. A good case study in demand-pull inflation is the price increases being experienced now, during the pandemic. Used cars As people were advised to isolate, demand for used cars went up, stocks of used cars went down (as people bought them) and prices of used cars rose. Lumber Demand for lumber rose, and prices of lumber rose. Having said that, lumber prices have since come back down. Computer chips There is a global computer chip shortage which is leading to shortages of manufactured items. New cars Such as new cars, each of which needs computer chips. Rental cars... --- ### Does the market power theory of inflation explain reality? > What does the market power theory of inflation say? What evidence supports it being true? How compelling is that evidence? - Published: 2021-11-09 - Modified: 2024-05-11 - URL: https://moneymatters42.com/economics/does-the-market-power-theory-of-inflation-explain-reality/ - Categories: Economics - Series: What causes inflation What is the market power theory of inflation? The market power theory of inflation simply states that if a firm, or a collection of firms working together, have enough dominance within a market, they set prices for the market. These firms are often referred to as "price makers" for what should be obvious reasons, and market power is sometimes referred to as pricing power. If you found this blog post via search, it probably makes sense to start at the first post in this series (the link is above), as it contains information and ideas that are mentioned here. How are "price fixing" and inflation related? Inflation vs "price fixing" Inflation is when prices rise in such a way as to affect the general cost of living for a society. When the purchasing power of people within that society diminishes over time. That being the case, which prices are being fixed matters. When a few firms corner the market on avocados, that does not result in widespread price increases across the economy. When a few firms corner the market on oil, it does. Which sectors of our economy affect many others? This applies to what we call commodities, which are widely consumed and often widely used in the production of other goods. We drink A LOT of coffee. We raise most of our meat animals on corn. Without silicon, there are no computer chips. But the most obvious one is oil. When the cost of oil goes up, the cost... --- ### Why is the quantity theory of money inflation known to be wrong? - Published: 2021-11-08 - Modified: 2024-10-25 - URL: https://moneymatters42.com/economics/why-is-the-quantity-theory-of-money-inflation-known-to-be-wrong/ - Categories: Economics - Series: What causes inflation I admit the title of this post is hyperbolic, as the quantity theory of money is not flat out wrong, but it is, at best, very incomplete. The quantity theory of money inflation is the idea that inflation is a simple phenomenon that is caused by adding money to an economy. It is represented by that fairly famous equation shown in the image at the top of this post. I'll explain what that equation says, how it is used to derive the belief that inflation is a function of adding more money to an economy, and how we know that, at best, it's a very incomplete story. If you found this blog post via search, it probably makes sense to start at the first post in this series, as it contains information and ideas that are mentioned here. First, two things that are equal to the same thing As Daniel Day Lewis so eloquently said, in that movie in which he played Abraham Lincoln... Euclid's first common notion is this... . Things which are equal to the same thing are equal to each other. https://youtu. be/JPGxVShkKdA This post contains some math And I apologize in advance for that, but this math is necessary to explain this idea. It's pretty simple. Two different ways to express GDP M represents the total amount of money in an economy. V represents the "velocity" of money, which is how many times each dollar changes hands in a year. GDP = All the money in... --- ### How we can better understand what causes inflation? - Published: 2021-11-08 - Modified: 2025-04-18 - URL: https://moneymatters42.com/economics/how-we-can-better-understand-what-causes-inflation/ - Categories: Economics - Series: What causes inflation To examine what causes inflation, we must first define what inflation is, and believe it or not, there is some disagreement here. Definitions of inflation The common idea between various definitions can be boiled down to... An increase in the cost of living over time as the prices of goods and services rise. Some definitions talk about "the decline of purchasing power". Others talk about "any increase in the general price level". Others still... . "collective increases in the supply of money, in money incomes, or in prices". How we measure inflation The way we commonly measure inflation is to create an arbitrary "basket of goods and services", track the prices changes of the various things in the basket over time, and create an average price increase relative to everything in the basket. So, what's in the basket? In the United States, the measure used is the Consumer Price Index (CPI) and is created by the Bureau of Labour Statistics (BLS) and is intended to contain things used by urban consumers, representing 93% of the US population. They've defined a basket of 80,000 items. Which includes gasoline, apples, doctor's visits, telephone and cable services, etc. Not everything in the basket is considered to be of equal importance, so each item has an assigned "weight" meant to reflect how important each item is. How important means how many people buy it. I can guarantee you without even bothering to look it up, that due to technological innovations and effective marketing, over... --- ### Why our economic vocabulary is in the way of progress: 5 > Our economic vocabulary causes us to focus heavily on things that matter very little, and not focus at all on things that matter a lot. - Published: 2021-11-07 - Modified: 2023-09-08 - URL: https://moneymatters42.com/economics/why-our-economic-vocabulary-is-in-the-way-of-progress-5/ - Categories: Economics - Series: Economic Vocabulary If you found this post via search, it probably makes sense to start with the first post in this series. The prior posts in this series focused on what does matter relative to our economic vocabulary. This post talks about what we focus on that matters, but either not very much, or not in the way we commonly think. What economic ideas do we give too much importance to? The national debtGDPThe stock market The national debt What the national debt is The vast majority of people who talk about "the economy" do not understand the distinction between "the currency issuer" and "currency users". Within any "currency zone" (what we typically refer to as "economies") there is ONE currency issuer. It is generally the federal government. I think Europe is the only weird situation because there is the European Union which (currently) consists of 27 countries, 19 of which use the euro and 8 of which don't. Within the Eurozone, the currency issuer is the European Central Bank, which is a European Union institution, it just doesn't provide anything to 8 of the member nations. Currency issuers issue currency That's probably not a very profound statement, but HOW do they do this? Currency issuers spend money into existence Generally through excessively complex operations, which I personally suspect were made complex on purpose to obscure the underlying simplicity of it, but currency issuers spend money into existence. Literally. And they tax money out of existence. Literally. THEN they sell bonds They... --- ### Why our economic vocabulary is in the way of progress: 4 > Our economic vocabulary causes us to focus heavily on things that matter very little, and not focus at all on things that matter a lot. - Published: 2021-11-07 - Modified: 2025-01-29 - URL: https://moneymatters42.com/economics/why-our-economic-vocabulary-is-in-the-way-of-progress-4/ - Categories: Economics - Series: Economic Vocabulary If you found this post via search, it probably makes sense to start with the first post in this series. The prior posts in this series contain ideas that will help you understand more about how our economic vocabulary causes us to focus on things that matter very little while not paying any attention to things that matter a lot. What causes inflation? To me, this is one of the most interesting parts of how our economic vocabulary steers us wrong. Would you believe that we don't really know what causes inflation? That is to say that while people have competing ideas about what causes inflation, there are situations to dispute them all, and there is no General Theory of Inflation as you may have thought. Some of the competing theories are listed below, and I may have left some out I haven't yet stumbled across. Monetarist Theory of Inflation Market-Power Theory Demand-Pull Theory Cost-Push Theory Structural Theory Rational Expectations Theory Monetarist Theory of Inflation This is probably the most well-known, and it simply states that adding money to the economy causes inflation. It is based on a very famous equation, that has two parts. I apologize in advance but this part of the post includes a little math. One way to describe GDP is it's all the money in the economy times the number of times each dollar changes hands. GDP = MV, where M = money in the economy, and V = velocity of money, or how often... --- ### Why our economic vocabulary is in the way of progress: 3 > Our economic vocabulary causes us to focus heavily on things that matter very little, and not focus at all on things that matter a lot. - Published: 2021-11-06 - Modified: 2021-11-02 - URL: https://moneymatters42.com/economics/why-our-economic-vocabulary-is-in-the-way-of-progress-3/ - Categories: Economics - Series: Economic Vocabulary If you found this post via search, it probably makes sense to start with the first post in this series. The prior posts in this series contain ideas that will help you understand more about how our economic vocabulary causes us to focus on things that matter very little while not paying any attention to things that matter a lot. Supply chains matter more than money flows As I mentioned in the first post in this series, in conversations you hear about the economy or see online, people talk as if money is scarce, but if you have money there is no end of stuff you can buy with it. That is exactly backward. Currency issuing governments, central banks, and commercial banks could, if they wanted to (and fortunately they don't want to), create an infinite amount of money. But there isn't an infinite amount of stuff to buy. The pandemic shortages should be a teachable moment on this very idea. But I don't see any well-known pundits talking about this. To paraphrase a slogan from the 1992 Presidential campaign of Bill Clinton, "It's the supply chain stupid". The wealth of a society is its productive output plus imports While we measure wealth in dollars (or other currency units of choice) it really IS the total amount of goods and services available to the society. The productive output seems obvious. But why do I say "plus imports"? Consider this: If nation A and B go to war, and nation A... --- ### Why our economic vocabulary is in the way of progress: 2 > Our economic vocabulary causes us to focus heavily on things that matter very little, and not focus at all on things that matter a lot. - Published: 2021-11-06 - Modified: 2021-11-02 - URL: https://moneymatters42.com/economics/why-our-economic-vocabulary-is-in-the-way-of-progress-2/ - Categories: Economics - Series: Economic Vocabulary If you found this post via search, it probably makes sense to start with the first post in this series. It contains ideas that will help you understand more about how our economic vocabulary causes us to focus on things that matter very little while not paying any attention to things that matter a lot. "Public sector" and "currency issuer" We commonly use the phrases "public sector" and "private sector" when talking about the economy. The public sector is the government and the private sector is not the government. This is the wrong focus. Currency issuer and currency user What matters much more is "currency issuer" and "currency user". The currency issuer spends money into an economy which makes it available for currency users to use. Why does THIS matter and not public sector vs private sector? As issuers of a currency, currency issuers do not have to obtain currency in order to spend some. Why? Because they are THE issuer of that currency. Currency issuers are not like households and can NOT be like households. Currency issuers do literally operate under a different set of rules. They're almost the opposite of currency user rules. Currency users on the other hand can't just conjure up currency from thin air (at least not legally) and for a currency user to spend some, they must first obtain some. Public sector currency issuers Includes Canada and the United States. Public sector currency users In Canada, this includes Ontario, Essex County, and the City... --- ### Why our economic vocabulary is in the way of progress: 1 - Published: 2021-11-05 - Modified: 2021-11-02 - URL: https://moneymatters42.com/economics/why-our-economic-vocabulary-is-in-the-way-of-progress/ - Categories: Economics - Series: Economic Vocabulary When we talk about economics, we talk about the wrong stuff. Our economic vocabulary causes us to focus heavily on things that matter very little, and not focus at all on things that matter a lot. Where does our economic vocabulary do us wrong? The main areas are: Where money comes fromThe reasons banks make loans"Public sector" and "currency issuer"What the currency issuer spends on mattersSupply chains matter more than money flowsUnpaid and low paid care work that make "market work" possibleCauses of inflation Where does money come from? Banks create money. Seriously. In the way we commonly talk about economies, it's easy to come to the belief that within an economy money is scarce, but if you have money there is an infinite amount of stuff you can buy with it. The reality is exactly the opposite. Banks can create an infinite amount of money, and what constrains an economy is the amount of stuff available to be bought. Central banks Every banking system in the world has a central bank which is the highest level payment clearinghouse for that banking system. Examples are the Federal Reserve, the Bank of Canada, the Bank of England, the Bank of Japan, the Central Bank of Thailand, the Central Bank of Kenya, The Peoples Bank of China, The Central Bank of the Russian Federation, etc. There is even the Central Bank of the Democratic People's Republic of Korea (North Korea) and the Banco Central de Cuba. Each central bank can be thought... --- ### Why reverse logistics is WAY better than recycling - Published: 2021-11-05 - Modified: 2021-11-01 - URL: https://moneymatters42.com/supply-chains/why-reverse-logistics-is-way-better-than-recycling/ - Categories: Supply Chains Reverse logistics is a phrase a first stumbled across about a week ago. When I googled for what it means, I was left with the distinct impression that it means "recycling". Except, maybe it IS "just" recycling But, convinced that it can't be just a new buzz phrase for an old idea, I read several articles I found via a Google search, and 9 out of 10 talks about "end of life" and "waste" and "circular economy". That sounds like recycling. The other ones talk about e-commerce returns. When we buy stuff from Amazon or Zappos or whatever eCommerce platform we use, we send some of it back. Why is reverse logistics hard? The recycling articles all identified the same set of challenges: The materials needing recycling are geographically spread out. As a result, economies of scale are elusive. Sifting and sorting is labour intensive. Anyway, this got me thinking about recycling, how it's not new, and how we're really not very good at it, and I started wondering if ANY companies that make stuff are any good at it. Do any manufacturing firms do a good job? Turns out, the answer is only a few, but some. So, yes. Now, to be fair, these companies have defined "recycling" or "reverse logistics" more narrowly than we generally think of, but what they're doing has value. They're striving to reduce waste from their manufacturing processes, which all by itself is challenging. And some companies have actually achieved zero waste going to... --- ### Why is it dangerous to NOT enforce existing antitrust laws? - Published: 2021-11-04 - Modified: 2024-07-21 - URL: https://moneymatters42.com/antitrust/why-is-it-dangerous-to-not-enforce-existing-antitrust-laws/ - Categories: Antitrust Republican Congressman Ken Buck (now retired) believed in enforcing antitrust laws, to the point of creating new ones when the existing ones do not address nuances of modern high-tech monopolies. Who is Ex-Representative Ken Buck? Ken Buck represented Colorado's 4th congressional district in the House of Representatives and served on the House Judiciary Committee and the House Foreign Affairs Committee. He was the ranking member on the House Judiciary Subcommittee on Antitrust, Commercial and Administrative Law. This blog post is a summary of an interview about antitrust laws The interview of Representative Buck was conducted by Kara Swisher, who hosts the New York Times podcast Sway. You can listen to the full episode here: Why Republican Ken Buck Believes in Antitrust and Doesn't Believe in the 'Big Lie'. If you want to listen to just the antitrust portion of the episode, it's below. The target is big tech, not corporate consolidation per se For what it's worth, the bills they introduced, which were co-sponsored by Democrat Representative David Cicilline are targeting big tech companies, and are not targeting the general extreme corporate consolation that exists today in the American economy. It's about four monopolies As you can guess, he's concerned about Amazon, Apple, Facebook, and Google. It started with hearings, where startup founders aired grievances The testimony of the startup founders described what sounded to him like white-collar crime. The startups were selling products on Amazon and via Google, and the platforms used their dominance to steer consumers away from... --- ### Why do federal reserve Repos matter? Why do they exist? - Published: 2021-11-04 - Modified: 2021-10-31 - URL: https://moneymatters42.com/banking/why-do-federal-reserve-repos-matter-why-do-they-exist/ - Categories: Banking If this concept is new to you, the first question is what is a federal reserve repo? Federal reserve repo means Fed "repurchase agreement" A Federal Reserve repo is a repurchase agreement which is a short-term loan whose collateral is some form of a security (bond) generally a US treasury security. An institution (bank, hedge fund, etc) that has some securities and needs cash, borrows the money from the Fed uses some securities as collateral. While the term can be as long as 65 days, generally they are paid back the next day. Because the loan term is so short, there is only one payment to make, and that payment includes the principal plus the interest, which is known as the repo rate. There is also such a thing as a reverse repo, which is when the institution loans money to the Fed, and the Fed provides some securities as collateral. Why do repos exist? While there are a bunch of things repos are used for, per the New York Fed: The Fed uses these two types of transactions to offset temporary swings in bank reserves; a repo temporarily adds reserve balances to the banking system, while reverse repos temporarily drains balances from the system. It's about keeping the commercial banking system working. What are banking reserves? Why do they matter? There is a limit to how much a bank can lend, based on the reserves they have on deposit at the Federal Reserve. Let's say the mandated reserve requirement... --- ---