alternative to reserve system

Discussion in 'Economics' started by morganist, Apr 9, 2010.

  1. I thought this was a good article. It is by thomas palley. Who I think is one of, if not the best economist in america. He has a really good idea here, it is a bit complex but can help a lot. I think I even need to read it again to fully understand it, but I think from what I have read so far is that the concept is based on altering the ratio of assets to cash to increase or decrease the level of aggregate demand.

    The overall value is the same but in a more liquid form or less liquid form depending on that ratio. For example rather than the central bank holding cash, it would hold cash and assets, depending on the ratio of cash to assets there would be more or less liquid cash increaing or decreasing demand, as cash is the more liquid asset and will therefore increase the velocity of transaction. This is something I have looked at and referred to it as fluidity, it is a little different though (you might hear more about that in the future). Perhaps I have misunderstood that. I read it very quickly late at night I will look at it again tomorrow, hopefully with your views.
  2. Ed Breen

    Ed Breen

    Why wouldn't you just manipulate the leverage ratio through the existing powers of the Central Bank over the banking system a la Gaenkoplos Leverage Cycle Theory.
  3. Thank you for your post. It is not my work to start with but I could tell Thomas Palley of the alternative. I have never heard of the Geanakoplos Leverage Cycle Theory until this post. I will look into it. Thank you for the information.
  4. Ed Breen

    Ed Breen

    He is an Economics professor at Yale.