Central Bank History (2/5) 1814-1914 Hundred Years Peace

In previous post on the founding of the Bank of England, we have explained that Central Banks were created to provide financing for wars. In fulfilling this role, they had several advantages over the state, enabling them to get credit, and get it at low interest rates. For a number of reasons, this was not… Read More Central Bank History (2/5) 1814-1914 Hundred Years Peace

Fisher’s Debt Deflation Theory of Financial Crises

This post is the third part of lecture 8 of Advanced Macro L08C: Fisher’s Debt-Deflation Theory of the Great Depression. In previous segments of this lecture L08A: Micro-Foundations for Keynesian Economics, and L08B: Keynesian Explanation for Great Depression: Seriously Incomplete, we examined the Keynesian explanation for the Great Depression, and found serious deficiencies in it. L08A… Read More Fisher’s Debt Deflation Theory of Financial Crises

Monetary Paradoxes of Baby-Sitting Cooperatives

The Global Financial Crisis of 2007 has led to a renewed interest in Keynesian theories. In particular, Krugman in “The Return of Depression Economics” argued that Keynesian ideas remain relevant to understanding contemporary recessions. To motivate this, he has used a real world example of the Capitol Hill Baby-Sitting Cooperative (BSC). According to an analysis by… Read More Monetary Paradoxes of Baby-Sitting Cooperatives