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This article finishes off a sequence of articles on an ancient debate in economics: what limits bank lending? (Links to Part I, Part II.) My argument is that the usual ways of looking at this question are highly misleading. The mainstream Economics 101 description of banking is hopeless — and then heterodox critics got bogged down in attacking a hopeless description of banking. The key to understanding banking is that they are a financial firm that borrows to invest in assets (a “levered financial entity”) — and they have some similarities to other financial firms, albeit that they have some special privileges....Bond EconomicsBanking Debate Woes: Part IIIBrian Romanchuk
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This article finishes off a sequence of articles on an ancient debate in economics: what limits bank lending? (Links to Part I, Part II.) My argument is that the usual ways of looking at this question are highly misleading. The mainstream Economics 101 description of banking is hopeless — and then heterodox critics got bogged down in attacking a hopeless description of banking. The key to understanding banking is that they are a financial firm that borrows to invest in assets (a “levered financial entity”) — and they have some similarities to other financial firms, albeit that they have some special privileges....Bond EconomicsBanking Debate Woes: Part IIIBrian Romanchuk
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Mike Norman considers the following as important:
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This article finishes off a sequence of articles on an ancient debate in economics: what limits bank lending? (Links to Part I, Part II.) My argument is that the usual ways of looking at this question are highly misleading. The mainstream Economics 101 description of banking is hopeless — and then heterodox critics got bogged down in attacking a hopeless description of banking. The key to understanding banking is that they are a financial firm that borrows to invest in assets (a “levered financial entity”) — and they have some similarities to other financial firms, albeit that they have some special privileges....
Bond Economics
Banking Debate Woes: Part IIIBrian Romanchuk