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Thin Air Economics

Summary:
George Selgin joins Real-Time with Steve Keen & Friends this week. George is a senior fellow and director emeritus of the of the Center for Monetary and Financial Alternatives at the Cato Institute and professor emeritus of economics at the University of Georgia. His research covers a broad range of topics within the field of monetary economics, including monetary history, macroeconomic theory, and the history of monetary thought.

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George Selgin joins Real-Time with Steve Keen & Friends this week.



George is a senior fellow and director emeritus of the of the Center for Monetary and Financial Alternatives at the Cato Institute and professor emeritus of economics at the University of Georgia. His research covers a broad range of topics within the field of monetary economics, including monetary history, macroeconomic theory, and the history of monetary thought.
Steve Keen
Steve Keen (born 28 March 1953) is an Australian-born, British-based economist and author. He considers himself a post-Keynesian, criticising neoclassical economics as inconsistent, unscientific and empirically unsupported. The major influences on Keen's thinking about economics include John Maynard Keynes, Karl Marx, Hyman Minsky, Piero Sraffa, Augusto Graziani, Joseph Alois Schumpeter, Thorstein Veblen, and François Quesnay.

29 comments

  1. @georgewaters6424

    Top notch content. Great debate guys.

  2. @ProfSteveKeen

    Big thank to George for venturing into the non-linear lions den. Great stuff!

    • @GhostOnTheHalfShell

      All in all, I don’t think he got treated too harshly. Not too much blood on the walls.

    • I love your intros… I have it on good authority that you are the shit by Prof. Hudson… I hope to see catch the ideas soon…

  3. @TheDynamicmarket

    intermediaries can be both producers and middlemen (retailers). electrolux, lindt chocolate, most car manufacturers (= dealers).

  4. @GhostOnTheHalfShell

    I'm quite relieved that George is a nicer person than the impression his Cato paper left. The stream was more interesting than I had thought it might be.

    His paper felt like 20 pages of ad hominem, then some statements which I have a large amount of ink questions about to actually probe his definitions on.

    The most consistent observation I have of economist disagreement is the sloppy as s h 1 t e nomenclature. Bank IOUs, liabilities and deposits.. how many different terms for the same thing? ridiculous. Intermediary, but there are multiple notions of what is intermediated. Is it brought up? nope.

    Money, are we talking specie, legal tender (bank notes), demand deposits? What does it even mean to mention demand for digital ledger entries when our wallets are those exact digital ledgers and exchanges never leave the ledger system? By avoiding it, economists leave out the actual nature of that exchange (endogenous to banks, especially the whales). Banks themselves only care if the borrower will make good, or not, when they can fob the loan away (see GFC) and if their balance sheets can handle any transfer. Oh people might invest in stocks. And? where does the money go from a bank account to another one.

    Are the bank's assets "money".. (rolls eyes)

    • @GhostOnTheHalfShell

      I'll note in the tech field, a vet is distinguished from a junior engineer in their ability to recognize when people operate without common meanings or understanding of the differences.

    • Hams are cool, just saying

    • @ProfSteveKeen

      Spot on! This is a sign of a pre-science. Neoclassical economists aren’t aware of this because they share the definitions of their paradigm, but any outside observer, it’s obvious.

    • @GhostOnTheHalfShell

      @@ProfSteveKeen In a way yes, for mathematics nailing down definitions is the first order of business. No useful work can occur until they are nailed down.

      As noted, differing assumptions is a common issue in (engineering) meetings and one person knowing the ropes can be quite transformative. Polling people and having them state their assumptions, what they know, really does work (most of the time). The discipline does have a tremendous problem because it’s also been conflated with moral sentiments over freedom and prosperity (all that political false equivalence and dichotomy stuff). That’s a different kind of hurdle to surmount.

    • @GhostOnTheHalfShell

      @@ProfSteveKeen Plank's lament aside, there's also the side effect of the Cold War, where neoclassicals and Austrians made themselves equivalent to capitalism (freedom and prosperity). M Friedman was the chief proselytizer for that logical fallacy Critique of those schools is reflexively felt as a repudiation of capitalism (or more properly market economies), because anything else is "USSR" style tyranny and that's what several of my videos attempt to a) argue and b) dismantle. Neoliberalism has been devastating to the conditions needed for a market (like competitors competing in a marketplace) and as, any academic well knows, to their academic freedom and prosperity. Ironically it's the left actually trying to restore those components, such as agency, choice and actual competition.

  5. @TheDynamicmarket

    if i start a bank today, and i somehow get 1 million dollars (any assets including cash), then i can lend 10 million dollars?? is this correct or not?

    • @Economics21st

      I believe reserve ratios are currently zero. That means you can lend as much as you want . After all, you're only writing IOUs (in exchange for borrowers' IOUs).

      But you might get a liquidity crisis if lots of them either withdraw cash or make payments to accounts at other banks. And you might get a solvency crisis if defaults on the loans exceed the interest payments you receive. (This is the fundamental limit on lending).

    • @GhostOnTheHalfShell

      Define “get”. Do those assets come with liability, as with a deposit, or a dividend you must pay. Or is it your inheritance? Non cash assets could be peddled off. Most banks sell their home loans to insurers, hedge funds and pensions. Your market share of total deposits also effects how much you can loan. A monopoly bank only has to worry if the borrower will pay in order to profit from lending. Otherwise all money is just moving around endogenously. Also remember though that banks extract rent from every transaction. They always get their drop of blood.

    • @TheDynamicmarket

      @@GhostOnTheHalfShellit is about keen's comment that fractional reserve banking does not multiply money supply. i comment the video.

    • @TheDynamicmarket

      @@Economics21stit is about keen's comment that fractional reserve banking does not multiply money supply. i comment the video.

    • @GhostOnTheHalfShell

      @@TheDynamicmarket In other contexts, he’s established why fractional banking does not describe the banking system. Loans would have to paid in actual cash (dollar bills). Even so, if you follow accounting rules of such loan mechanics, it does not add up.

  6. I’ve recently discovered that you can use ChatGPT to create very good graphs comparing any sets of economic variables you want. Just out of curiosity, I asked it to produce one for the % change in bank credit with unemployment levels in the UK. Not only did it produce the graph, but it also gave me some analysis and possible reasons for the strong inverted relationship, but it also cited all its sources. The output seemed also to be tailored to giving this answer based on all previous questions I had been asking it. A subscription to ChatGPT 4.0 costs US$20 per month. It could prove to be an invaluable tool to any economist who wants quick answers to their questions in a matter of seconds.

  7. @brianhoade1411

    congratulations Dr Radzicki on earning your Ham radio credentials 🎉🎉

    • @GhostOnTheHalfShell

      He’s slowly morphing into McGyver. Parachute into the wilderness and build a fortress from a stick of gum kind of guy.

  8. @marcuschamp9881

    With thanks to all, especially George for being a good sport and engaging in genuine debate.

  9. @pictureworksdenver

    Didn't Richard Werner settle this years ago?

    • I think people who pay attention largely agree on how money is created. The question is what, if anything, constrains it. Selgin talks about demand for money. I think it's simpler than this: money creation decreases the net worth of the bank. Usually the bank gets an asset in return (e.g. borrower's IOU), but if the bank keeps making losses on these transactions (e.g. borrowers default), it eventually becomes insolvent. And the more loans it makes, the more likely it is to make losses, especially as it's more likely to have to sell its illiquid assets at a low price to meet cash-flow commitments.

    • @@Economics21st This falls in line with my thinking on the topic.

  10. @derekmcdaniel6029

    banks create "money" from collateral. and then deal in shares and debt claims to operate payments.

    So the money is not created from "nothing", nor is it created from previous savings handed to banks, it's created from the collateral offered by borrowers, either existing assets they can leverage, or even the assets developed by the act of financing the loan.

  11. Great show as always, the production is getting better – nice touch with the ringside announcement. Fair play to George for coming on the show and presenting his ideas in calm manner. Strange to hear about Michael Kumhof not speaking to Steve because he wears a mask, I still wear a mask in confined spaces, hope he comes to his senses.

  12. George is correct that the debates concerning what constitutes accurate and useful models in macroeconomics will continue, but that doesn't mean that endogenous money models haven't gained interest among central bankers and many politicians. They aren't ready to give full endorsement to MMT, but they are actively experimenting with some of its aspects. Steve decries the neoclassicals still holding sway in government, but they aren't as much in control as they have been in the past, in spite of the large numbers who still hold to their models. Attitudes are changing, and people are learning, it hasn't all been in vain.

  13. @JimRoberts-tx5ey

    Really great show guys thank you!

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