Introduction to a "money view" of economic activity f modern times, building on the intellectual traditions of British central banking and American institutionalism. Part One exples the economics of payment systems and money markets. Part Two exples connections with feign exchange and capital markets.
About the Course
The last three four decades have seen a remarkable evolution in the institutions that comprise the modern monetary system. The financial crisis of 2007-2009 is a wakeup call that we need a similar evolution in the analytical apparatus and theies that we use to understand that system. Produced and sponsed by the Institute f New Economic Thinking, this course is an attempt to begin the process of new economic thinking by reviving and updating some fgotten traditions in monetary thought that have become newly relevant.
Three features of the new system are central.
Most imptant, the intertwining of previously separate capital markets and money markets has produced a system with new dynamics as well as new vulnerabilities. The financial crisis revealed those vulnerabilities f all to see. The result was two years of desperate innovation by central banking authities as they tried first this, and then that, in an efft to stem the collapse.
Second, the global character of the crisis has revealed the global character of the system, which is something new in postwar histy but not at all new from a longer time perspective. Central bank cooperation was key to stemming the collapse, and the details of that cooperation hint at the outlines of an emerging new international monetary der.
Third, absolutely central to the crisis was the operation of key derivative contracts, most imptantly credit default swaps and feign exchange swaps. Modern money cannot be understood separately from modern finance, n can modern monetary they be constructed separately from modern financial they. That's the reason this course places dealers, in both capital markets and money markets, at the very center of the picture, as profit-seeking suppliers of market liquidity to the new system of market-based credit.
1: The Four Prices of Money
2: The Natural Hierarchy of Money
3: Money and the State: Domestic
4: The Money View, Macro and Micro
Banking as a Clearing System
5: The Central Bank as a Clearinghouse
6: Federal Funds, Final Settlement
7: Repos, Postponing Settlement
8: Eurodollars, Parallel Settlement
Banking as Market Making
9: The Wld that Bagehot Knew
10: Dealers and Liquid Security Markets
11: Banks and the Market f Liquidity
12: Lender/Dealer of Last Rest
The Barnard version of this course requires Intermediate Microeconomics and Intermediate Macroeconomics as prerequisites f economics majs, but non-economics majs (such as engineers and histians) without those prerequisites have taken the course and done fine. The imptant thing is some familiarity with economic reasoning and concepts and perhaps some familiarity with the subject matter (such as through job experience an internship).
The lectures are meant to be complete in themselves, and there is no assigned textbook f the course. Weekly readings by a variety of different auths will be posted to introduce students to the range of discourse on money. Students may wish to purchase my book The New Lombard Street, How the Fed Became the Dealer of Last Rest (Princeton 2011), which is also meant to be complete in itself, as a backstop f the videos.
The class will consist of lecture videos, shot live in the classroom but then edited down into digestible segments, with integrated quiz questions and animated slide videos added. There will also be weekly quizzes and a final exam.
What is the coolest thing I'll learn if I take this class? You will learn to read, understand, and evaluate professional discourse about the current operation of money markets at the level of the Financial Times.
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