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2023.05.29 16:02 PurpleSolitudes Best Internet Monitoring Software
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2023.05.29 14:01 spunchy M&B 2023 Lecture 4: The Money View, Micro and Macro
![]() | For our schedule and links to other discussions, see the Money and Banking 2023 master post. submitted by spunchy to moneyview [link] [comments] This is the discussion thread for Economics of Money and Banking Lecture 4: The Money View, Micro and Macro. The settlement (survival) constraint says you have to meet your cash commitments as they come due. This lecture explores the settlement constraint from multiple perspectives. We can disaggregate assets into time patterns of future cash inflows, and liabilities into time patterns of future cash outflows (commitments). If your cash inflows are insufficient to cover your cash commitments at any given moment, then the settlement constraint binds, and you're dead. The settlement constraint can be relaxed from above but not below. The payment system is a credit system. By relaxing our settlement constraint, economic units (agents) above us in the hierarchy can allow us to expand credit to make otherwise-impossible payments. Mehrling introduces the "sources and uses" notation, an analytical tool that helps us match up cash flows with different liquidity categories: monetary, funding, and market. This Lecture connects with Hyman Minsky's cashflow-oriented view of the economy, which we will discuss on Wednesday. Note: The link to the Fed release in the lecture notes doesn't work anymore. Here's the latest version (Fourth Quarter 2022). The sources and uses matrices are on pages 1 and 2 (color-coded red). Part 1: FT: Dealer of Last Resort
When I heard the news of another round of quantitative easing in the US last week, my first thought was that Mario Draghi should have done the same. Instead, the president of the European Central Bank opted for a conditional bond purchasing programme with an uncertain start date. In the meantime, the eurozone’s faltering economy needs a much more determined monetary stimulus, and it needs it right now.—QE would be right for Europe, tooThe idea with dealer of last resort is that the central bank offers to buy an unlimited quantity of an asset at a particular price. This installs a floor below which the price cannot go—and hence a ceiling on the yield/interest rate. In the fall of 2012, the ECB is announcing its Outright Monetary Transactions (OMT) program, which offers to buy the sovereign debt of European member countries that need help—possibly Italy and Spain. This is the "monetizing government debt" operation we've seen before. https://preview.redd.it/prt8l004ws2b1.png?width=714&format=png&auto=webp&s=d2ddcd4b04bd5a679f2fd22b3a7c88564e770dc6 The problem with the OMT program is that it only backstops sovereign debt if the countries ask for it and if they agree to certain conditions. But it can be problematic to ask for help. So the question is whether the OMT will have its desired effect if it never gets used/activated. Nearly nine years later, I think the answer is: partly. Although the announcement of the program did help drive down interest rates, as far as I can tell the ECB has still never actually done any OMT purchases. Here's a Bloomberg article from 2020. As of last year, Mario Draghi is now Prime Minister of Italy. Part 2: Reading: Hyman MinskyAs we'll see in the reading next week, Minsky thought about the economy in terms of cashflows. His financial instability hypothesis was based on the idea that the financial sector becomes more brittle as it becomes more difficult for everyone to line up their cash inflows with their commitments—the "survival constraint" binds more tightly.This can all happen without anyone becoming insolvent at any time. Part 3: Payments: Money and CreditIn a "pure money" system, nobody ever borrows from each other. People make payments only by passing back and forth money assets. Whether that money is represented as physical coins/tokens/notes or merely as entries on a balance sheet, it's something that the people spending the money can't create more of.https://preview.redd.it/2c18yui6ws2b1.png?width=655&format=png&auto=webp&s=2e586f87ce8ed375c21615ffaecd38e3eb5321fb Such a system is, of course, impossible. People will always find ways to borrow from each other to introduce elasticity. On the other end of the spectrum is a "pure credit" system: https://preview.redd.it/fatx72q8ws2b1.png?width=716&format=png&auto=webp&s=91f4d751a4716b82b1b339d49c72bcc112b067d0 The above balance sheet shows payment by issuance. This creates a new IOU from the buyer to the seller of the goods. This expands credit in the economy. There's also payment by set-off where the buyer crosses off a debt owed to him by the seller. This contracts credit. https://preview.redd.it/biuna09bws2b1.png?width=739&format=png&auto=webp&s=e014786b164f28cba54cd5c3e70f5932a261f77a And, for completeness, we can imagine the buyer taking on a liability that was previously owed by the seller. Credit neither expands nor contracts. This is payment by novation. https://preview.redd.it/b0gjwztdws2b1.png?width=708&format=png&auto=webp&s=00586607d20d988ebe14024c1a2b8645b833bbc4 In the credit payment system, the quantity of outstanding credit increases and decreases as payments are made. That means the quantity of assets—and liabilities—expands and contracts. In the real world, there's both money and credit. Holding a buffer of money reserves allows us to make payments without lining them up perfectly against cash inflows. Money is credit that's issued above you in the money-credit hierarchy. Banks, who sit above you in the hierarchy, create elasticity by swapping their liabilities for your liabilities. What's money to you (bank deposits) is a form of credit from the perspective of the banking system. https://preview.redd.it/gxppa00hws2b1.png?width=811&format=png&auto=webp&s=8aaebbad8b15e10a0c6553c7cf357c647acd0c14 Notice that by using a bank as an intermediary, the overall payment system still behaves as a credit system. You pay using something that looks like money to you, but the bank created that money as credit. On his BU site, Perry links to two helpful YouTube videos by the Bank of England: The first video explains that money is a special form of generally acceptable IOU. In today's world, instead of being directly redeemable for something like gold, the central bank does other things to ensure the integrity of the monetary standard and to manage the stability (or instability) of the credit superstructure that rests on top of it. The second video discusses "endogenous" money creation, narrow money versus broad money (hierarchy), and the effects of quantitative easing. Even for the "narrow money" issued by the central bank, they don't get to choose how much of it they issue. It has to endogenously adjust based on what's necessary for stable monetary conditions. Part 4: Payments: Discipline and ElasticityIn our first example, the discipline came from the limited quantity of money—when either side ran out of money, they could no longer buy and trade stopped. In the second example, the discipline comes from the bilateral credit limit. In the third example the discipline comes from the credit limit and terms imposed by the bank on each borrower, and the elasticity comes from the willingness of the bank to swap its own IOU (which is money) for IOUs farther down the hierarchy (which are credit).—Lecture NotesBanks can impose discipline from above by refusing to expand their credit, which is your money. We can imagine credit limits as representing balance sheets' capacity to expand. And that capacity can bounce around depending on how much people trust each other, how much they trust financial conditions, and the capacity/willingness of lenders to expand credit. Part 5: The Survival ConstraintTo analyze the flow of money, we can think of all "economic units" (people, firms, governments, etc.) as banks. Everybody is a "money-flow" operation. Everybody faces a survival (liquidity/reserve/settlement) constraint.To analyze how financial commitments affect the economy it is necessary to look at economic units in terms of their cash flows. The cash-flow approach looks at all units—be they households, corporations, state and municipal governments, or even national governments—as if they were banks.(Minsky 1986, p. 198)For an economic agent to remain functional, it must be able to meet its cash commitments as they come due. If you can't make a promised payment, you're in trouble. In terms of day-to-day operations, you don't necessarily have to be solvent (assets > liabilities). You just have to be liquid enough to make your promised payments. You can continue doing business for a long time, even if you're insolvent. But not if you're illiquid. "Liquidity kills you quick."—Perry Mehrling Part 6: Sources and Uses AccountsA key feature of the sources and uses framework is that it allows us to categorize cash flows. Different categories of sources and uses have different properties and represent different constraints. Mehrling breaks sources and uses into four categories: Goods, Financial Assets, Financial Debts, and Money.Each category's source corresponds to a type of liquidity.
Dishoarding is the only source that requires no counterparty. Separating out assets and liabilities emphasizes that agents manage their gross liabilities, not just their net debts. Each and every cash commitment needs to be fulfilled. The sources and uses accounts represent payment flows, whereas the balance sheets we're used to represent stocks. Sources and uses can be translated into balance sheet changes.
We put the goods and services "above the line." The other three categories of sources and uses are below-the-line financial accounts. What's possible above the line (goods and services) is determined by what happens below the line (financial). This MOOC focuses mostly on what's below the line. We don't revisit sources and uses much in later lectures, but have a look at this blog post by Daniel Neilson for more intuition on sources and uses.
Part 7: Payment Example: Money and CreditIn this part, we use sources and uses to compare a cash payment to a credit card payment. I've also translated the examples into balance sheets, so we can see how the two notations map onto each other. We can use the Clavero color-coding convention for both.Here's the simpler cash payment: https://preview.redd.it/v9d72ofkws2b1.png?width=596&format=png&auto=webp&s=fc398ecf09ca2ca37a39f64b4fcbb36d22b2e7dd And here's the balance-sheet version: https://preview.redd.it/yrb15w3mws2b1.png?width=538&format=png&auto=webp&s=1b7593822a91aefe82054e58bb040f7b4d258ddb It's just an asset swap. Each party ends up with what the other party started with. Here's the balance-sheet version of the credit card payment: https://preview.redd.it/2y2auy6ows2b1.png?width=1013&format=png&auto=webp&s=b44b6d1cd3e51c1a6098b4c726bff585699712b3 And the sources-and-uses version: https://preview.redd.it/k7do44vtws2b1.png?width=870&format=png&auto=webp&s=c37765f6a4d55b9dfdfcd3d7cf67a4b592797162 The two main parties (Perry and Vareli) ended up with what the other person started with. But more complicated stuff happened along the way. I've also partitioned the balance into time periods starting from top to bottom. The sources and uses, on the other hand, are partitioned by their categories. Notice that each issuance is paired up with its eventual set-off. This is possible because the credit expansion that facilitated the payment eventually contracted back down. Several different credit-related transactions happen "below the line." These transactions don't directly buy goods and services, but they ultimately facilitate payments for goods and services that take place "above the line." Paying attention to what happens below the line can help us understand what happens above the line. Mehrling's lecture notes further break down the Vareli credit card payment example into separate sources and uses diagrams for the three steps. We can do that here using our payment-type color coding. First, Perry makes the credit payment to get the dinner. https://preview.redd.it/x41b5dewws2b1.png?width=873&format=png&auto=webp&s=caa11606efa4564bbebea276650efd3c92a63ea6 The Goods line represents a "payment by assignment" of the dinner. The asset and debt lines together represent an "IOU swap." Vareli settles with Mastercard at the end of the day—and the end of every day. https://preview.redd.it/4t98iuzyws2b1.png?width=874&format=png&auto=webp&s=2926e8ddd974896a27ba6fb2d5e730d96f7bf70c Perry settles with Mastercard at the end of the month—and the end of every month. https://preview.redd.it/1nqu7r01xs2b1.png?width=873&format=png&auto=webp&s=7b139f125bfd9b65e1a23b9b5efaab1d46ea0ed4 Balance-sheet liabilities (financial debts) only ever represent a specific type of use: repayment. Liabilities represent time patterns of future cash commitments. You have promised to repay at various times in the future. You could also novate the asset to repay it sooner. If you fail to match your previously committed use with a corresponding source, you've failed to meet your cash commitment with a cash flow. You've defaulted. Financial assets represent a specific type of source: liquidation. The asset's time pattern of cash flows is a time pattern of liquidation. You could also sell the asset to liquidate it sooner. Since we haven't seen novation on a sources and uses table, let's do that now. When a payment is made in the banking system, a portfolio transfer happens between banks. Here it is in sources and uses: https://preview.redd.it/yv5vkod4xs2b1.png?width=845&format=png&auto=webp&s=977d1a7472ed7972fbbee91a5d1f0613d0e1a0ee For Bank A, the dishoarding of reserves is the source of funds used to repay the deposits. Notice that there's no set-off happening here. The debt still exists. It's just been transferred to Bank B. For Bank B, the borrowing of deposits is the source of funds, which are hoarded as reserves. Again, the borrowing doesn't happen through the issuance of new debt. It happens through acquiring deposit liabilities that Bank A previously held (novation). We have yet to see hierarchy/alchemy in a sources and uses table, so let's do that now. Below is an example from Mehrling that's not in the lectures. https://preview.redd.it/y74317jhxs2b1.png?width=593&format=png&auto=webp&s=29b5773f8d191159637a55f5234c249454ad8164 Notice that the bank is borrowing as its source of funds. The corresponding use of funds for the borrower is hoarding. Hierarchy is the only case when hoarding and dishoarding are not paired in rule #2. In this case, the bank is above the borrower. Part 8: Flow of Funds AccountsIn NIPA accounts, the emphasis is on value added and employment, so we focus on final production. But used goods are also exchanged, and also financial assets. These exchanges are shunted off to one side by NIPA but are at the same level of analysis in FoF. Indeed, in FoF the sale of goods and the sale of assets are equivalent ways of achieving a source of funds.—Lecture NotesIf we pretend that the payment system is a "pure money" system, then an expansion of credit just looks like an increase in the velocity of the fixed amount of money. The Flow of Funds accounts exhibit statistical discrepancies partly because it's impossible to record all financial promises, agreements, and expectations on balance sheets. And they were designed before financial innovations such as derivatives. We can still conceptualize any of these things as being on an implicit balance sheet. But to the extent that we regulate what's on firms' explicit balance sheets, it can push financial arrangements off the explicit balance sheet.
Part 9: The Survival Constraint, ReduxThe central concern from a banking perspective is not solvency but liquidity, i.e., the survival constraint. Are current cash inflows sufficient to cover current cash outflow commitments? If yes, then we satisfy the survival constraint.—Lecture NotesCredit allows us to delay the settlement/survival/reserve constraint. Of the sources of funds, only dishoarding is dependable during a crisis. If you have the money you can always dishoard it to make a payment. To sell an asset (or a good), or to borrow, you need a buyer or a lender. Market liquidity and funding liquidity require counterparties. Part 10: Liquidity, Long and ShortThe key to Minsky is the alignment of cashflows and commitments in time. The economy consists of a web of interconnected agents with patterns of cash inflow and patterns of cash commitments going out into the future. Liquidity constraints anticipated in the future have consequences for today.Because banks borrow short and lend long, they're always potentially vulnerable to cashflow mismatches (i.e. liquidity problems). In Minsky's terminology, banks are never "hedge units." They can't be. They always have to worry about rolling over their funding. Agents that are under liquidity stress (i.e. up against the survival constraint) have to borrow. In this case, borrowing has nothing to do with time preferences or information about the market. It's not a choice. Part 11: Financial Fragility, Flows and Stockshttps://preview.redd.it/dmji06xkxs2b1.png?width=321&format=png&auto=webp&s=b703af6db92931be87e0d64223d21ef22a063f0aWe're used to balance sheets representing stocks of assets and liabilities. Flows represent changes in those assets and liabilities. Expected future flows tell us how the balance sheets are expected to change in the future. Stocks represent residuals of past cashflows and promises of future cashflows. The balance between the pattern of cashflows and cash commitments is important for individuals, but also important for the economy as a whole. Crisis shows up in the money-market rate of interest as agents under liquidity stress become desperate and bid up the price of liquidity. Solvency problems can become liquidity problems and liquidity problems can become solvency problems. For our purposes the question of solvency is interesting mainly as an outer bound on the credit limit facing each agent. Intuitively it makes sense that that credit limit will be somehow related to the net worth. Solvent agents have unused borrowing power on their balance sheets which they can potentially mobilize to make payments. Thus we can see how asset price fluctuations can cause fluctuations in borrowing power, which might have consequences for immediate liquidity. Solvency problems can easily become liquidity problems. —Lecture NotesPlease post any questions and comments below. We will have a one-hour live discussion of Lecture 3 and Lecture 4 on Monday May 29th at 2:00pm EDT. |
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2023.05.29 11:40 anatanohanashi What could be the reason for this screen problem?
2023.05.29 11:17 monicasneakers Monica Sneakers Tell You Adidas Yeezy Boost 350 v2 "Granite" Finally Released
![]() | Monica Sneakers Tell You Adidas Yeezy Boost 350 v2 "Granite" Finally Released submitted by monicasneakers to MonicaSneakers [link] [comments] From the Foam Runner "MX Azure" to the Yeezy 450 "Stone Teal," adidas Yeezy's upcoming slate of releases is filled with products we thought would never see the light of day. It appears that even the Replica Yeezy Boost 350 v2 “Granite” — which was first teased in April 2022 — will release later this year, as official images of the colorway have just loaded. Unlike the aforementioned pair of shoes, the adidas Replica Yeezy Boost 350 v2 "Granite" was not included in the lineup revealed in the sub-brand's official announcement. That means these could appear in future installments, sure to arrive alongside a host of familiar and brand new colorways. https://preview.redd.it/msdl6b294s2b1.jpg?width=1140&format=pjpg&auto=webp&s=2643735c22378ed0265c2711a58ce5ee28dd6cf0 While it’s been a while since we last saw the model, the Yeezy Boost 350 v2 “Granite” design should look familiar even at first glance. The shoe features similar colorblocking to many of its predecessors, using the titular gray for much of its Primeknit upper. Then, the side stripes contrast with the dark black, which rounds out the package with the light blue sole unit. While we await word on a confirmed release date, take a first look at an official look at the adidas Replica Yeezy Boost 350 v2 "Granite." Replica Yeezy 350 Boost V2 "Granite" Release date: 2023 Color: N/A Men: $230 Style code: HQ2059 Click to learn more Replica Yeezy |
2023.05.29 11:12 r3crac BlitzWolf BW-WA3 Pro 120W Bluetooth Speaker [EU] for 85.99 USD with coupon (Best price in history: 79.99 USD) [EUROPE]