Discussion — Lecture 22

This session covers Lecture 22: Touching the Elephant: Three Views

• Lecture 22 Notes

The lecture ties the money view into the "economics view" and "finance view" of money and banking. The economics view says that past investments and commitments result in cash flows today—the past determines the present. The finance says expectations of the future generate cash flows today—the future determines the present. The money view says that the present determines the present. Today's time pattern of cashflows is locked in by past investments and future expectations.

In addition to connecting up to some of the economics and finance models that we're used to, Mehrling describes an intellectual progression building from Fischer Black's pure finance view of the world, bringing money and banking—including central banking—back into the picture. The key insight is that market liquidity is not free. It comes from the dealer system. And the dealer system depends on funding liquidity, which the central bank ultimately supplies.

Money and Banking Summer 2023 Reddit Master Thread