Archive for April 19th, 2016

Are banks intermediaries of loans or originators of loans?

April 19, 2016

This is a hard hitting piece by Prof Steve Keen which questions the basic ideas on banking.  It is hard hitting as he takes on Prof. Joseph Stiglitz of all people. I am ignoring the hard hitting bit and getting directly to the banking bit.

Traditionally, we are taught that banks intermediate between depositors (surplus units) and loan seekers (deficit units). So they take deposits from someone and pass them on to others as loans. It charges higher interest rates on loans than interest it pays on deposits. This spread in turn should ideally help recover operational costs and also result in profits.

Lately. this model is being questioned as too simplistic. Bank of England econs make a great case of this.

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Can crises be curbed? Hayek vs Keynes…

April 19, 2016

Today is a day of this versus this on ME blog. After Schumpeter vs Kirzner, here is another take on the more famous Hayek vs Keynes.

This one is by Norges Bank  Deputy Governor Jon Nicolaisen. As he is a central banker, what more to expect than whether one should intervene ot let markets work during a crisis:

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Why Entrepreneurship Matters? Schumpeter vs. Kirzner

April 19, 2016

Interesting post by Prof Steven Horowitz.

He says we usually think entrepreneurs to do big heroic things which is what Schumpeter also said. However, entrepreneurship could be incremental as well a la Kirzner:

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A roller coaster simulation of inflation-adjusted crude oil prices, 1946-201

April 19, 2016

Superb video on Chris Blattman blog. Brilliant ride and its does feel like as if one is sitting on roller coaster. Highly recommended to take the ride.

The global economy is actually like this theme-park as of now with multiple rides. Some promise a lot of thrill but are a disappointment. Then there are those less hyped ones which give much better bang for the buck.


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