Discussion — Lecture 4: The Money View, Micro and Macro

This session covers Lecture 4: The Money View, Micro and Macro

This lecture connects up the money view with Hyman Minsky's cashflow-oriented view of the economy. The payments system is a credit system. The expansion of credit makes ordinary payments possible. But sometimes the expansion of credit has to come from above in the hierarchy. Everybody is constrained by a reserve constraint (survival constraint). If your cash inflows are insufficient to cover your cash commitments at any given moment, then you're dead. "Liquidity kills you quick."

We disaggregate assets into time-patterns of future cash inflows, and liabilities into time patterns of future cash outflows. We also cover flow-of-funds accounting with sources and uses of funds. Every use of funds has a corresponding source on its own balance sheet (micro) and on someone else's (macro).

Lecture Notes

Lecture 4 Discussion Thread