Economics 470/570 - Monetary
Theory and Policy
« Syllabus for Fall 2009 | Main | Class Materials for Lecture 2 »
September 28, 2009
http://economistsview.typepad.com/economics470/2009/09/class-materials-for-lecture1.html#more
Class Materials for Lecture 1
Brief Outline of Topics Covered in Lecture 1
Chapter 1 Why Study Money, Banking, and Financial Markets?
Why Study Money and Monetary Policy?
Money and Business Cycles
Money and Inflation
Money and Interest Rates
Conduct of Monetary Policy
Fiscal Policy and Monetary Policy
Why Study Banking and Financial Institutions?
What Defines Banks and Financial Institutions?
What is Financial Intermediation?
Direct versus Indirect Finance
Why is Financial Intermediation Important?
Why Study Financial Markets?
Bond Market
Stock Market
Foreign Exchange Market
Chapter 2 An Overview of the Financial System (pgs 25-27, 39-42)
Functions of Financial Markets
Direct versus Indirect Finance
Structure of Financial Markets
Function of Financial Intermediaries
Example
Chapter 3 What is Money?
Meaning of Money
Functions of Money
Medium of Exchange
Unit of Account
Store of Value
Video:
Materials from class:
The financial crisis—and ensuing recession—has helped
turn economics bloggers like (clockwise from top left)
Greg Mankiw, Paul Krugman, Alex Tabarrok and Mark Thoma
into Internet celebrities (WSJ)
Links:






Predicting Crises, Part II - FRBSF Economic Letter
Lessons from the 1970s for Fed Policy Today - David Papell
The Fed draining reserves? - News N Economics
Is Mankiw being completely above board? - Environmental Economics
Is Krugman being completely above board? - Environmental Economics
In Liquid and Air, Scientists Find Order Among the Chaos - NYTimes.com
Application: This is something the Oregonian asked me to do around a year ago:
Mark Thoma, Guest opinion, Oregonian, Sept. 19, 2008: Many people associate the onset of the Great Depression with the
stock market crash in October 1929. But a more important cause was a series of banking panics in the years prior to the
Great Depression, and the particularly severe banking collapse from 1930-1933.
The response to this crisis and the devastating economic disruption that came along with it was the Banking Acts of 1933
and 1935, also known as the Glass-Steagall Acts. The goal was to stabilize the banking system by enhancing the power of
the Federal Reserve to regulate financial markets and to intervene when problems emerged.
And it worked. The changes resulted in a very long period, over 50 years, where financial markets remained calm.
That calm is now over, and we are experiencing our worst financial crisis since the Great Depression. What happened?
What ended the tranquility? Very simply, financial innovation got ahead of regulation.
The problems we are having did not arise in the traditional banking sector; the problems come from what is called the
shadow banking sector. This is comprised of firms such as hedge funds that do just what banks do -- they take deposits,
they use the funds to purchase financial assets such as housing loans, and they only keep a fraction of those deposits on
hand as cash reserves. But these firms are essentially unregulated and hence subject to the same problems that traditional
banks faced prior to the 1930s.
What is the solution to our problems? First and foremost, We need to clean up the mess we are in and do all we can to stop
things from getting any worse. Recreating the Resolution Trust Co., as we did in the aftermath of the savings and loan
crisis, would be a useful step to take to remove the bad financial paper that is poisoning financial markets.
Over the longer run, it is essential that regulation be modernized. The most important task is to bring the shadow banking
sector out into the sunlight, and to put it under the same regulatory structure and safeguards faced by traditional banks.
The last time we restructured our financial system from the ground up, the result was more than 50 years of stability. With
a determined effort we can repeat that success and modernize our financial system so that it is substantially less likely to
suffer a massive meltdown, but still innovative enough to meet our financial needs.
Posted by Mark Thoma on September 28, 2009 at 08:56 PM in Fall 2009, Lectures | Permalink
Comments
Comment below or sign in with Typepad Facebook Twitter and more...