Perry Mehrling has written an excellent blog-entry entitled “Why is money difficult?” He points out 4 essential obstacles to understanding monetary economies he has encountered again and again in teaching his money and banking course over the years: (1) the alchemy of banking, (2) the essential hybridity of the monetary system, (3) the inherent hierarchy of credit and money, and (4) the inherent instability of credit.
In his comment, Wolfgang suggests adding a point (5) to the list: the paradox of thrift, which essentially is based upon accounting identities (my obligation is your claim and vice versa) and the mechanics of balances (W. Stützel) resulting from them. Continue reading “Why is Money difficult? Comment on Perry Mehrling’s blog (by Wolfgang)”
Perry Mehrling has published a comment on UNCTAD’s 2015 Trade and Development Report, “Making the international financial architecture work for development“.
We agree with Mehrling that “the deep suspicion of financial development that is evident throughout the report might rather be considered part of the problem than part of the solution” and, as Mehrling is clearly aware of, monetary economies have to be closely monitored and managed by informed and wise fiscal and monetary policy. We add, however, that to create a monetary and financial infrastructure in developing countries, a reliable and strong state and legal infrastructure has to be created. It cannot be taken for granted, and to develop it is no small task. Continue reading “Financialization and Development: our comments on Perry Mehrling’s blog (by Nicolas and Wolfgang)”
The EU and the Eurozone are in deep crisis. So are orthodox and heterodox economics. While orthodox neoclassical economics have “no room for money” and nothing to say about financial crises and deflationary depressions, heterodox Post Keynesians do better in that regard but lack a shared paradigm. They also lack a systematic and precise legal foundation, without which the numerous institutional flaws of the Eurozone and the EU cannot be detected. Some Post Keynesians, notably Modern Monetary Theorists, notice the lack of sovereign taxing power at the Eurozone level. The lack of private (property and contract) law and a weak, patrimonial state infrastructure in general in parts of the southern periphery, Post Keynesians typically overlook. Only some neoclassical institutional economists perceive this, but they in turn typically overlook the lack of federal taxing power at the Eurozone level.
Some people admonish that a “political union” would have had to precede the monetary union, but what specifically a “political union” would entail – a federal european state holding the legitimate monopoly of force on european territory – is left in the dark. A precise comparative look at how such loose confederations of states historically arrived at federal unions is missing entirely, since both neoclassical and post keynesian economists work with abstract universalist models and show deliberate disinterest in history and the historical specificity of capitalism. Continue reading “Legal Institutionalism: The Public/Private Law dialectic, Accounting and Post Keynesian Monetary Macroeconomics”