Malinvestment and Endogenous Money

So much has been written about the endogeneity of money that I thought it was now widely accepted. But recent exchanges have shown me that people STILL aren’t getting it. Most recently, there have been two themes doing the rounds that bother me:

QE myths and the Expectations Fairy

by Frances Coppola, CoppolaComment.Blogspot.Co.UK There are perhaps more myths about QE than almost any other monetary policy instrument. Here are five of the most pernicious QE myths: ••••••••••••••••••••••••••••••••••••• Myth 1: QE raises inflation. Despite the considerable evidence that it does nothing of the kind, people still persistently believe that it does – that “eventually” inflation …

There’s A Problem with the Transmission

by Frances Coppola, CoppolaComment.Blogspot.Co.UK In my last post, I pointed out that QE does not work when the transmission mechanism for monetary policy is impaired because of a damaged and risk-averse financial sector. This caused some confusion among those who think that throwing money at banks automatically makes them lend, so I attempted to explain …