For our schedule and links to other discussions, see the Money and Banking 2023 master post.
This is the discussion thread for Economics of Money and Banking Lecture 4: The Money View, Micro and Macro.

• Lecture Videos
• Lecture Notes

The settlement (survival) constraint says you have to meet your cash commitments as they come due. This lecture explores the settlement constraint from multiple perspectives.
We can disaggregate assets into time patterns of future cash inflows, and liabilities into time patterns of future cash outflows (commitments). If your cash inflows are insufficient to cover your cash commitments at any given moment, then the settlement constraint binds, and you're dead.
The settlement constraint can be relaxed from above but not below. The payment system is a credit system. By relaxing our settlement constraint, economic units (agents) above us in the hierarchy can allow us to expand credit to make otherwise-impossible payments.
Mehrling introduces the "sources and uses" notation, an analytical tool that helps us match up cash flows with different liquidity categories: monetary, funding, and market.
This Lecture connects with Hyman Minsky's cashflow-oriented view of the economy, which we will discuss on Wednesday.
Note: The link to the Fed release in the lecture notes doesn't work anymore. Here's the latest version (Fourth Quarter 2022). The sources and uses matrices are on pages 1 and 2 (color-coded red).

Part 1: FT: Dealer of Last Resort

• FT Article: QE would be right for Europe, too

When I heard the news of another round of quantitative easing in the US last week, my first thought was that Mario Draghi should have done the same. Instead, the president of the European Central Bank opted for a conditional bond purchasing programme with an uncertain start date. In the meantime, the eurozone’s faltering economy needs a much more determined monetary stimulus, and it needs it right now.—QE would be right for Europe, too

The idea with dealer of last resort is that the central bank offers to buy an unlimited quantity of an asset at a particular price. This installs a floor below which the price cannot go—and hence a ceiling on the yield/interest rate. In the fall of 2012, the ECB is announcing its Outright Monetary Transactions (OMT) program, which offers to buy the sovereign debt of European member countries that need help—possibly Italy and Spain.
This is the "monetizing government debt" operation we've seen before.
https://preview.redd.it/prt8l004ws2b1.png?width=714&format=png&auto=webp&s=d2ddcd4b04bd5a679f2fd22b3a7c88564e770dc6
The problem with the OMT program is that it only backstops sovereign debt if the countries ask for it and if they agree to certain conditions. But it can be problematic to ask for help. So the question is whether the OMT will have its desired effect if it never gets used/activated. Nearly nine years later, I think the answer is: partly.
Although the announcement of the program did help drive down interest rates, as far as I can tell the ECB has still never actually done any OMT purchases. Here's a Bloomberg article from 2020.

• ECB’s Pandemic Program Means Most Powerful Tool Stays in Reserve

As of last year, Mario Draghi is now Prime Minister of Italy.

Part 2: Reading: Hyman Minsky

As we'll see in the reading next week, Minsky thought about the economy in terms of cashflows. His financial instability hypothesis was based on the idea that the financial sector becomes more brittle as it becomes more difficult for everyone to line up their cash inflows with their commitments—the "survival constraint" binds more tightly.
This can all happen without anyone becoming insolvent at any time.

Part 3: Payments: Money and Credit

In a "pure money" system, nobody ever borrows from each other. People make payments only by passing back and forth money assets. Whether that money is represented as physical coins/tokens/notes or merely as entries on a balance sheet, it's something that the people spending the money can't create more of.
https://preview.redd.it/2c18yui6ws2b1.png?width=655&format=png&auto=webp&s=2e586f87ce8ed375c21615ffaecd38e3eb5321fb
Such a system is, of course, impossible. People will always find ways to borrow from each other to introduce elasticity.
On the other end of the spectrum is a "pure credit" system:
https://preview.redd.it/fatx72q8ws2b1.png?width=716&format=png&auto=webp&s=91f4d751a4716b82b1b339d49c72bcc112b067d0
The above balance sheet shows payment by issuance. This creates a new IOU from the buyer to the seller of the goods. This expands credit in the economy.
There's also payment by set-off where the buyer crosses off a debt owed to him by the seller. This contracts credit.
https://preview.redd.it/biuna09bws2b1.png?width=739&format=png&auto=webp&s=e014786b164f28cba54cd5c3e70f5932a261f77a
And, for completeness, we can imagine the buyer taking on a liability that was previously owed by the seller. Credit neither expands nor contracts. This is payment by novation.
https://preview.redd.it/b0gjwztdws2b1.png?width=708&format=png&auto=webp&s=00586607d20d988ebe14024c1a2b8645b833bbc4
In the credit payment system, the quantity of outstanding credit increases and decreases as payments are made. That means the quantity of assets—and liabilities—expands and contracts. In the real world, there's both money and credit. Holding a buffer of money reserves allows us to make payments without lining them up perfectly against cash inflows.
Money is credit that's issued above you in the money-credit hierarchy. Banks, who sit above you in the hierarchy, create elasticity by swapping their liabilities for your liabilities. What's money to you (bank deposits) is a form of credit from the perspective of the banking system.
https://preview.redd.it/gxppa00hws2b1.png?width=811&format=png&auto=webp&s=8aaebbad8b15e10a0c6553c7cf357c647acd0c14
Notice that by using a bank as an intermediary, the overall payment system still behaves as a credit system. You pay using something that looks like money to you, but the bank created that money as credit.
On his BU site, Perry links to two helpful YouTube videos by the Bank of England:

• Money in the modern economy: an introduction
• Money creation in the modern economy

The first video explains that money is a special form of generally acceptable IOU. In today's world, instead of being directly redeemable for something like gold, the central bank does other things to ensure the integrity of the monetary standard and to manage the stability (or instability) of the credit superstructure that rests on top of it.
The second video discusses "endogenous" money creation, narrow money versus broad money (hierarchy), and the effects of quantitative easing. Even for the "narrow money" issued by the central bank, they don't get to choose how much of it they issue. It has to endogenously adjust based on what's necessary for stable monetary conditions.

Part 4: Payments: Discipline and Elasticity

In our first example, the discipline came from the limited quantity of money—when either side ran out of money, they could no longer buy and trade stopped. In the second example, the discipline comes from the bilateral credit limit. In the third example the discipline comes from the credit limit and terms imposed by the bank on each borrower, and the elasticity comes from the willingness of the bank to swap its own IOU (which is money) for IOUs farther down the hierarchy (which are credit).—Lecture Notes

Banks can impose discipline from above by refusing to expand their credit, which is your money.
We can imagine credit limits as representing balance sheets' capacity to expand. And that capacity can bounce around depending on how much people trust each other, how much they trust financial conditions, and the capacity/willingness of lenders to expand credit.

Part 5: The Survival Constraint

To analyze the flow of money, we can think of all "economic units" (people, firms, governments, etc.) as banks. Everybody is a "money-flow" operation. Everybody faces a survival (liquidity/reserve/settlement) constraint.

To analyze how financial commitments affect the economy it is necessary to look at economic units in terms of their cash flows. The cash-flow approach looks at all units—be they households, corporations, state and municipal governments, or even national governments—as if they were banks.(Minsky 1986, p. 198)

For an economic agent to remain functional, it must be able to meet its cash commitments as they come due. If you can't make a promised payment, you're in trouble. In terms of day-to-day operations, you don't necessarily have to be solvent (assets > liabilities). You just have to be liquid enough to make your promised payments. You can continue doing business for a long time, even if you're insolvent. But not if you're illiquid.

"Liquidity kills you quick."—Perry Mehrling

Part 6: Sources and Uses Accounts

A key feature of the sources and uses framework is that it allows us to categorize cash flows. Different categories of sources and uses have different properties and represent different constraints. Mehrling breaks sources and uses into four categories: Goods, Financial Assets, Financial Debts, and Money.
Each category's source corresponds to a type of liquidity.

• Goods: Expenditure/Receipt — Market Liquidity
• Assets: Accumulate/Liquidate — Market Liquidity
• Debts: Repay/Borrow — Funding Liquidity
• Money: Hoard/Dishoard — Monetary Liquidity

Consistent with Mehrling's recent usage, I have replaced "decumulate" with "liquidate." For conciseness, I've shortened "Financial Assets" to "Assets" and "Financial Debts" to "Debts." Goods and money are also assets on the balance sheet, of course.
Dishoarding is the only source that requires no counterparty. Separating out assets and liabilities emphasizes that agents manage their gross liabilities, not just their net debts. Each and every cash commitment needs to be fulfilled.
The sources and uses accounts represent payment flows, whereas the balance sheets we're used to represent stocks. Sources and uses can be translated into balance sheet changes.

• Rule 1: For each agent, every use has a corresponding source, and vice versa.
• Rule 2: Every agent's use is some other agent's source, and vice versa.

The first rule is just about keeping track of where the money goes when you receive it (or where it comes from when you spend it). The second rule ties every agent in the economy together.
We put the goods and services "above the line." The other three categories of sources and uses are below-the-line financial accounts. What's possible above the line (goods and services) is determined by what happens below the line (financial). This MOOC focuses mostly on what's below the line.
We don't revisit sources and uses much in later lectures, but have a look at this blog post by Daniel Neilson for more intuition on sources and uses.

• Sources and uses on Soon Parted

Part 7: Payment Example: Money and Credit

In this part, we use sources and uses to compare a cash payment to a credit card payment. I've also translated the examples into balance sheets, so we can see how the two notations map onto each other. We can use the Clavero color-coding convention for both.
Here's the simpler cash payment:
https://preview.redd.it/v9d72ofkws2b1.png?width=596&format=png&auto=webp&s=fc398ecf09ca2ca37a39f64b4fcbb36d22b2e7dd
And here's the balance-sheet version:
https://preview.redd.it/yrb15w3mws2b1.png?width=538&format=png&auto=webp&s=1b7593822a91aefe82054e58bb040f7b4d258ddb
It's just an asset swap. Each party ends up with what the other party started with.
Here's the balance-sheet version of the credit card payment:
https://preview.redd.it/2y2auy6ows2b1.png?width=1013&format=png&auto=webp&s=b44b6d1cd3e51c1a6098b4c726bff585699712b3
And the sources-and-uses version:
https://preview.redd.it/k7do44vtws2b1.png?width=870&format=png&auto=webp&s=c37765f6a4d55b9dfdfcd3d7cf67a4b592797162
The two main parties (Perry and Vareli) ended up with what the other person started with. But more complicated stuff happened along the way.
I've also partitioned the balance into time periods starting from top to bottom. The sources and uses, on the other hand, are partitioned by their categories.
Notice that each issuance is paired up with its eventual set-off. This is possible because the credit expansion that facilitated the payment eventually contracted back down.
Several different credit-related transactions happen "below the line." These transactions don't directly buy goods and services, but they ultimately facilitate payments for goods and services that take place "above the line." Paying attention to what happens below the line can help us understand what happens above the line.
Mehrling's lecture notes further break down the Vareli credit card payment example into separate sources and uses diagrams for the three steps. We can do that here using our payment-type color coding.
First, Perry makes the credit payment to get the dinner.
https://preview.redd.it/x41b5dewws2b1.png?width=873&format=png&auto=webp&s=caa11606efa4564bbebea276650efd3c92a63ea6
The Goods line represents a "payment by assignment" of the dinner. The asset and debt lines together represent an "IOU swap."
Vareli settles with Mastercard at the end of the day—and the end of every day.
https://preview.redd.it/4t98iuzyws2b1.png?width=874&format=png&auto=webp&s=2926e8ddd974896a27ba6fb2d5e730d96f7bf70c
Perry settles with Mastercard at the end of the month—and the end of every month.
https://preview.redd.it/1nqu7r01xs2b1.png?width=873&format=png&auto=webp&s=7b139f125bfd9b65e1a23b9b5efaab1d46ea0ed4
Balance-sheet liabilities (financial debts) only ever represent a specific type of use: repayment. Liabilities represent time patterns of future cash commitments. You have promised to repay at various times in the future. You could also novate the asset to repay it sooner.
If you fail to match your previously committed use with a corresponding source, you've failed to meet your cash commitment with a cash flow. You've defaulted.
Financial assets represent a specific type of source: liquidation. The asset's time pattern of cash flows is a time pattern of liquidation. You could also sell the asset to liquidate it sooner.
Since we haven't seen novation on a sources and uses table, let's do that now. When a payment is made in the banking system, a portfolio transfer happens between banks. Here it is in sources and uses:
https://preview.redd.it/yv5vkod4xs2b1.png?width=845&format=png&auto=webp&s=977d1a7472ed7972fbbee91a5d1f0613d0e1a0ee
For Bank A, the dishoarding of reserves is the source of funds used to repay the deposits. Notice that there's no set-off happening here. The debt still exists. It's just been transferred to Bank B.
For Bank B, the borrowing of deposits is the source of funds, which are hoarded as reserves. Again, the borrowing doesn't happen through the issuance of new debt. It happens through acquiring deposit liabilities that Bank A previously held (novation).
We have yet to see hierarchy/alchemy in a sources and uses table, so let's do that now. Below is an example from Mehrling that's not in the lectures.
https://preview.redd.it/y74317jhxs2b1.png?width=593&format=png&auto=webp&s=29b5773f8d191159637a55f5234c249454ad8164
Notice that the bank is borrowing as its source of funds. The corresponding use of funds for the borrower is hoarding. Hierarchy is the only case when hoarding and dishoarding are not paired in rule #2. In this case, the bank is above the borrower.

Part 8: Flow of Funds Accounts

In NIPA accounts, the emphasis is on value added and employment, so we focus on final production. But used goods are also exchanged, and also financial assets. These exchanges are shunted off to one side by NIPA but are at the same level of analysis in FoF. Indeed, in FoF the sale of goods and the sale of assets are equivalent ways of achieving a source of funds.—Lecture Notes
In a way the Keynesian framework grows from the quantity theory, with C+I+G+X-M serving as a kind of disaggregation of MV, and Y serving as a specification of a subset of PT. Copeland wanted to go even farther but he did not win out. Actual macroeconomic debate was between Keynesians and monetarists, and FoF remained a specialty interest for those who wanted to track developments in the financial world (below the line).—Lecture Notes

If we pretend that the payment system is a "pure money" system, then an expansion of credit just looks like an increase in the velocity of the fixed amount of money.
The Flow of Funds accounts exhibit statistical discrepancies partly because it's impossible to record all financial promises, agreements, and expectations on balance sheets. And they were designed before financial innovations such as derivatives.
We can still conceptualize any of these things as being on an implicit balance sheet. But to the extent that we regulate what's on firms' explicit balance sheets, it can push financial arrangements off the explicit balance sheet.

• Here's A Study of Moneyflows in the United States by Morris Copeland and a link to the Office of Financial Research.
• Stigum Chapter 2 is also a good resource for understanding flow of funds.

Part 9: The Survival Constraint, Redux

The central concern from a banking perspective is not solvency but liquidity, i.e., the survival constraint. Are current cash inflows sufficient to cover current cash outflow commitments? If yes, then we satisfy the survival constraint.—Lecture Notes

Credit allows us to delay the settlement/survival/reserve constraint.
Of the sources of funds, only dishoarding is dependable during a crisis. If you have the money you can always dishoard it to make a payment. To sell an asset (or a good), or to borrow, you need a buyer or a lender. Market liquidity and funding liquidity require counterparties.

Part 10: Liquidity, Long and Short

The key to Minsky is the alignment of cashflows and commitments in time. The economy consists of a web of interconnected agents with patterns of cash inflow and patterns of cash commitments going out into the future. Liquidity constraints anticipated in the future have consequences for today.
Because banks borrow short and lend long, they're always potentially vulnerable to cashflow mismatches (i.e. liquidity problems). In Minsky's terminology, banks are never "hedge units." They can't be. They always have to worry about rolling over their funding.
Agents that are under liquidity stress (i.e. up against the survival constraint) have to borrow. In this case, borrowing has nothing to do with time preferences or information about the market. It's not a choice.

Part 11: Financial Fragility, Flows and Stocks

https://preview.redd.it/dmji06xkxs2b1.png?width=321&format=png&auto=webp&s=b703af6db92931be87e0d64223d21ef22a063f0a
We're used to balance sheets representing stocks of assets and liabilities. Flows represent changes in those assets and liabilities. Expected future flows tell us how the balance sheets are expected to change in the future.
Stocks represent residuals of past cashflows and promises of future cashflows. The balance between the pattern of cashflows and cash commitments is important for individuals, but also important for the economy as a whole.
Crisis shows up in the money-market rate of interest as agents under liquidity stress become desperate and bid up the price of liquidity.
Solvency problems can become liquidity problems and liquidity problems can become solvency problems.

For our purposes the question of solvency is interesting mainly as an outer bound on the credit limit facing each agent. Intuitively it makes sense that that credit limit will be somehow related to the net worth. Solvent agents have unused borrowing power on their balance sheets which they can potentially mobilize to make payments. Thus we can see how asset price fluctuations can cause fluctuations in borrowing power, which might have consequences for immediate liquidity. Solvency problems can easily become liquidity problems. —Lecture Notes

Please post any questions and comments below. We will have a one-hour live discussion of Lecture 3 and Lecture 4 on Monday May 29th at 2:00pm EDT.

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https://preview.redd.it/e9t77msm7s2b1.png?width=767&format=png&auto=webp&s=fa27327385cb8f760522426e0f48012bb9705f78
Do you want to be an effective leader? Menteora gives some advice:
An effective leader can be something other than a leader in the conventional sense. For example, Harry Truman had no charisma, but that did not prevent him from becoming one of the most influential presidents in US history. Many of the great corporate and nonprofit CEOs I have advised (and I have been doing this for over 65 years) did not fit the leader stereotype. They were very different people: they varied in character and mindset, had different perspectives and values, and had their strengths and weaknesses. They were both gregarious and reclusive, liberal and authoritarian, generous and greedy. The secret of their effectiveness was that they all adhered to eight principles.

1. I asked the question, "What needs to be done?".
2. I asked, "What's good for the company?".
3. We developed a plan of action.
4. Took responsibility for their own decisions.
5. Took responsibility for their relationships.
6. Focused on possibilities rather than challenges.
7. Conducted meetings productively.
8. Think and talk using the pronoun 'we' rather than 'I.'

By following these principles, managers were given the information they needed (principles 1 and 2), built an effective strategy around this information (3-6), and delegated responsibility for achieving company objectives to all employees (7 and 8).

Get the information you need

The first thing to ask yourself is what needs to be done. It is "What needs to be done?" not "What do I want to do? To succeed, a leader must ask and answer the right question seriously. The most intelligent leader who needs to ask himself or herself this question is doomed to be ineffective.
When Truman became president of the United States in 1945, he knew exactly what he wanted. He dreamed of seeing through the economic and social reforms outlined in Roosevelt's New Deal, and not completed because of World War II. But as soon as the President asked himself what needed to be done, he realized that foreign policy issues were the most critical at the time.
So he would hear reports from the Secretary of State and the Secretary of Defence on foreign affairs first thing in the morning. President Truman managed to achieve the greatest successes in the field of foreign policy in the history of the United States: he was able to contain the spread of communism in Europe and Asia and, by introducing the Marshall Plan, ensured global economic growth throughout the second half of the twentieth century—another example.
After taking over General Electric, Jack Welch understood that the company could use international expansion, which he strongly desired. His company needed to eliminate lines of business that, regardless of their profitability, could not become either "number one" or "number two" in their industries. In answering the question "What needs to be done?" one is almost always forced to tackle several tasks simultaneously. But effective managers keep their efforts intact: they focus on one direction. Some managers skilled in switching - not too few of them, by the way - can deal with two tasks during one working day. But this is the limit: according to my observations, only one can tackle up to two functions in parallel. So, after asking himself what needs to be done, a manager prioritizes what needs to be done and then considers it in his further work.
For example, the CEO may prioritize revising the company's mission, and the head of a department may prioritize reorganizing the relationship between his department and headquarters. However significant or attractive, other tasks must be put on hold. Once the job has been completed, the second task on the list should never be taken up. At this point, the manager should ask himself, "What needs to be done now?" and reconsider the priority system. Jack Welch, the most famous American business leader, wrote in his autobiography that every five years, he asked himself, "What should I do now?" each time he answered it, he constructed a completely new system of priorities. However, before deciding what would be most important for the next five years, Welch faced a genuine challenge: which of the most important tasks he would do himself and which ones he would entrust to his subordinates. Effective managers try to take on the work that they do best.
They understand that a company's success and top management's effectiveness are two sides of the same coin. The second, equally important principle that influential leaders follow is the ability to ask the question, "What is good for the company?" They are not interested in whether it will benefit owners, employees, or management or how it will affect shareholder value. Naturally, the executive is well aware that shareholders, employees, and managers cannot be ignored: their support, or at least acquiescence, is essential to the company's success. He knows that shareholder value is significant not only to shareholders but also to the company itself. But he also knows that a decision that is not good for the company will ultimately do the shareholders no good. The second principle is particularly relevant for executives of family businesses (family-owned or family-managed businesses are the most common form of business worldwide), and above all, in personnel decisions.
In a successful family company, a relative of the owner is promoted only if he or she is noticeably superior to other employees at his or her level. For example, DuPont started as a family business, and family members held all top positions at the time (except for controller and lawyer). After that, the descendants of DuPont's founders started at the bottom of the hierarchy, and any promotion required the approval of a board in which independent managers (not members of the DuPont family) had a majority.

Make an action plan

Managers are people of action, decision makers. Knowledge is only helpful to them once it is translated into real action. But before they do, a manager must develop a plan: determine what results they want to achieve; consider what constraints may arise; make changes to the program and monitor its implementation; allocate time.
First, the manager defines the desired outcomes, for which he or she asks questions: "What contribution can the company expect from me in the next year and a half or two years? What results will I be striving for? What timeframe do I have to meet? He then considers the factors that limit my freedom of action: "Will this course of action be ethical? Is it acceptable within my organization? Is it legal? Is it consistent with the organization's mission, values, and strategy?" More than positive answers to all these questions is needed to guarantee that the action will be effective. But violating these constraints inevitably leads to wrong and ineffective steps.
An action plan is not a straitjacket but a statement of intent rather than a commitment. It must be revisited occasionally because every success is an opportunity (just as every failure is an opportunity). The plan must also be revised when the business environment, market conditions, and, most importantly, the company's workforce change. The project needs to be flexible so that it can be adjusted. It is also necessary to define a system for checking the execution of the plan. Effective managers usually provide two checkpoints. The first checkpoint is after half of the deadline for executing the program; the second is at the end of the deadline before the next work plan is prepared.
Finally, the action plan should be the basis for the manager's time management. Time is a manager's most scarce and valuable resource, and organizations (public, for-profit, not-for-profit) are essentially time wasters. A plan that does not determine how a manager will spend their time is useless. Napoleon said that no successful battle in history has ever gone according to a schedule. And yet, he planned each of his struggles much more thoroughly than anyone before him.
Without a plan, a leader becomes a hostage to the events. If you don't mark the points in the chain of events for program revision, a manager cannot determine which events are significant and which are just unimportant backgrounds.
Act
Leaders should focus on decision-making, contacts, opportunities (not problems!), and meetings when implementing plans.
You can take responsibility for decisions. A decision cannot be made until the following information is made public:

• the name of the person responsible for implementing the decision;
• deadlines for implementation;
• the names of those affected by the decision (these people need to be informed about the decision, they need to understand it and approve it or at least not be in irreconcilable opposition);
• the names of people who should be informed about the decision, even if it does not affect them directly.

Many organizational decisions are not implemented because these simple conditions still need to be met. Here is an example from 30 years ago. The company I advised ignored these rules and lost its leadership position in the booming Japanese market. My clients then decided to set up a joint venture with a new Japanese partner, but it was never agreed on who should notify the buyers that the partner was counting in meters and kilograms rather than in feet and pounds. No one has ever let those concerned know.
Try Career Guidance Test Menteora!

Let's compare ancient history prices to today's prices. According to encyclopedia.com, 1 shekel of silver was about 1/3 Ozt.
Historical prices would vary greatly it seems. During hard times when the land didn't produce much, the spending power of silver went down because the quantity of available silver:food ratio was too high. In better times where harvests were good, 1 shekel (1/3 OzT) of silver could buy:
- 300 silas (liters) of barley
- 3 silas (liters) of fine oil
- 12 silas of regular oil
- 15 silas of lard
- 40 silas of bitumen
- 360 sheqels of wool
-180 sheqels of copper
-120 sheqels of wrought copper
Let's just look at copper.
If 1/3 OzT (1 shekel) of silver could buy 180 sheqels of copper, 1 OzT could buy 540 shekels (180 OzT) of copper. So back then the silver to copper ratio was 180.
In order to double check the info on this website, I asked chatgpt to make a best estimate of the silver to copper ratio. It came back with:
"Based on historical information and estimates, during biblical times, the silver-to-copper ratio is believed to have been approximately 1:200 to 1:300. This means that it would have taken around 200 to 300 units of copper to have the same value as one unit of silver. However, please note that this is a rough estimate and the actual ratio could have varied in different regions and time periods."
To be conservative, let's stick with the 180 ratio for now. Today silver is $23.30 per OzT. Copper is about 3.67 per pound. Divide that by 12 and we see that copper is currently about $0.306 per OzT. That is a Silver to copper ratio of 76.
If the ratio went back up to the value remembered by history, silver would be $0.306 x 180 =~ $55 per OzT. It should be kept in mind that back in those days there were no electronics and thus no real industrial use for silver. It was mainly used as money, utensils and jewelry (which is a form of wealth). We still use silver in all of those ways today. But we also use it for industrial purposes. As you add uses for something, you add demand. So we are being really conservative by comparing the new, higher demand environment to the pre-Biblical one.
The main reason silver is in the ditch right now is because it is between starring roles. ChatGPT tells us that:
"The largest industrial use of silver since the beginning of history is undoubtedly photography. Digital cameras and image sensors have largely replaced the need for silver-based films and prints. Nonetheless, the historical significance of silver in the development of photography remains profound."
Thus, digital photos killed the largest industrial use for silver. On the monetary front, America is the richest nation on the planet because we tricked everyone into accepting our fake paper currency as if it were real money. The Marks and Patsies in this scam were not limited to overseas people; American citizens bought into the scam hook line and sinker as well. Because people were brainwashed into thinking that fake paper currency was and is and will continue to be money, the people most able to buy silver in huge quantities, Americans, do not buy it. Most Americans wouldn't know silver from shiney steel. Not because they are stupid but simply because the majority were born into a world where the leaders did not acknowledge silver (or gold even) as money.
That said, everything is cyclic. Photography is now being replaced by photovoltaic power generation (solar panels) as the big industrial consumer of silver. Look around your neighborhood. How many people own any solar today in the USA? NOT MANY. If you think differently pull up Google Earth and look at rooftops. Solar is still too expensive for most to either be able to buy or to want to buy. So the residential solar market in the US is in its infancy.
As power bills skyrocket, that will change. Below is my most current model for electricity prices. This says that we are now approaching the peak of a 5 wave move up which will peak at about 18 cents per kWH on average in the USA. Following that we should see a significant pullback for a couple of years to build wave green 2. But after that I expect to see runaway electricity prices according to the model. THAT is when US adoption of PV solar will really begin to spike.
I could be off by 1 wave in this model. If this blows through 18 cents I will concede that the model will have to be recounted such that the current wave is not blue 5 of green 1 but instead the first wave of wave 3. The outcome will be the same, but the difference is that in the current model you have a bit more time with low electricity prices before they just go nuts. And why shouldn't they go nuts? The government is pushing BTUs from gas cars onto the electric grid. Same with natural gas stove and boilers. More BTUs on the same aging grid means higher rates, pure and simple. They are planning this. They want it to happen. Electricity will become a major control mechanism over the rabble in the future.
https://preview.redd.it/75fo1js13s2b1.png?width=633&format=png&auto=webp&s=269611b2902d88b4d694d7200f6b309e0ab128ba
Solar panels are going to be the new photography for silver; the big new industrial consumer. And whereas photos were an optional consumption item for the masses, electricity is not. The higher the power rates go, the more economic sense it makes to install pv solar.
AT THE SAME TIME, our fake money is dying. In response, the fed has driven rates up to the edge where it is now killing the regional banks yet CPIflation remains stubbornly high. Why?? Because while higher interest rates have a dampening effect on the economy, thus reducing demand by killing jobs, the government has to ramp up the printing presses in order to pay the vastly higher debt service that results from higher interest rates.
Thus in order to fight CPIflation it has to create a lot more inflation (expansion of the currency supply) which always leads to more CPIflation. THAT is why CPIflation is not going back down to 2%, ever again. The fed is now in a debt death spiral. There is no cure for this. They either lower rates and let massive CPIflation ravage the people OR raise the interest rates like they think they are Volcker and, oh shit, let massive CPIflation ravage the people. There is no escape from CPIflation folks. That's what it means when the fake money is dying.
PV solar is the means of production of an important, essential consumable. If you can afford it, go buy what you can on sale from Ebay right now because when the herd begins to decide that it has to hold its nose and buy pv solar in order to escape sky high power bills, they are going to take that federal money from the build back better solar equipment kickback and they are going to bid up the price of everything solar. This, also, is what I am telling my subscribers. Good luck to us all.

Pics and builds are available online, but I just wanted to give my 2 cents on her.
First off, I love Tiasha. Her armor was a bit lacking, but the sword and shield combo really made her stand out. This time, they gave her a bazooka and backpack, and they look great, especially with that helmet piece. Colors are excellent. At first, I wanted to do a "who wore it better?" pic with Gourai for her treads (spoiler warning, it's Gourai), but they look better as a backpack, in my opinion.
I did a little research into the Alto her parts are harvested from, and there is a specific runner that, if it was included, would have really made the kit a lot better (I think it was B). Smaller C joint connectors, double knee joints to attach the armor, and a few adapters to expand play. How they incorporated Alto's "hip guards" is groan-worthy.
If you're just going to use the 'skates', those new boots are excellent, and those alone add many possibilities to the line, but the weird shoe-like swing-out parts are so odd and impractical, it's hard for me to set on any definitive pose for her. Arca=Carti was a bit similar, but I think that was a feature, not a bug. I won't be able to do it for awhile, but I'm probably gonna customize her a bit by using the 30MM optional leg attachments included with Tiasha (or Rishetta). I sorta wanted to do DarkMan 1 with her (from MegaMan 5), but there's just no way without a full lower body modification, and that's a shame because she comes with many unused extras.
Conclusion, is she worth it? Well I love Tiasha, so yeah. The helmet and boots are the highlight. Colors are great. With skin parts included, her value goes up. I'd say around 5k¥ is fair for her. If you already have Tiasha and Far=Farina, she's a tougher sell. Granted, I have no desire to see an army of Luluches, Lirinels, or Neverlias with various colors and spare runners from miscellaneous 30MM, but every once and a while, they'll get a pass.
(Powerari is using her "peace" hand in the pic. She doesn't come with "pointing" fingers)

For our schedule and links to other discussions, see the Money and Banking 2023 master post.
This is the discussion thread for Economics of Money and Banking Lecture 3: Money and the State: Domestic.

• Lecture Videos
• Lecture Notes

The lecture discusses the history of the US monetary system from the Civil War, through the national banking system, to the formation of the Fed. The currency principle (scarcity of ultimate money) dominated during the national banking era, whereas the banking principle (elasticity of credit) was the guiding principle of the Federal Reserve System. We dig deeper into some the ideas from last week's Allyn Young reading, with more opportunity to practice thinking in terms of balance sheets. We also contrast the central bank's role as a banker's bank with its role as a government bank.

I will largely leave aside for today the whole issue of the money standard—gold, silver, or fiat—but we will come back to it after the midterm.—Lecture Notes

Part 1: FT: Quantitative Easing and the Fed

• FT Article: Fed's expected QE move weighs on dollar

Here is Mehrling's chart of the Fed's balance sheet changes in 2008.
https://preview.redd.it/e9q8l8662s2b1.png?width=460&format=png&auto=webp&s=3cb05566eed2f9807b20a31d2cf5d2d767348b95
I've created some simplified/stylized balance sheets below to illustrate Mehrling's explanation of QE.
After Bear Stearns, the Fed did not immediately expand its balance sheet. Instead, it replaced some of its holdings of Treasuries with loans to banks and dealers.
https://preview.redd.it/8gx5agv72s2b1.png?width=852&format=png&auto=webp&s=3f2a04f9b43025614b8ac518d6dbc7d29875fa10
The operation is an asset disintermediation combined with a mutual obligation. The private sector ends up holding Treasuries directly instead of currency. Meanwhile, the Fed issues new currency as it lends to banks and dealers.
The first round of quantitative easing was arguably the simplest thing they did. It was largely a classic "swap of IOUs" balance sheet expansion in which the Fed made more loans by issuing reserves.
https://preview.redd.it/xvfa1zr92s2b1.png?width=574&format=png&auto=webp&s=a516d0a2312fed455428d41e38a01fe985e8512b
QE2 was a bit more complicated. As the QE1 loans were repaid, the Fed prevented its balance sheet from shrinking by buying up mortgage-backed securities.
https://preview.redd.it/4171kg0d2s2b1.png?width=576&format=png&auto=webp&s=47465ea81ecb9159523d1fd04bcb2c2320e97922
The term "quantitive easing" refers to the liability side of the Fed's balance sheet—the expansion of reserves in the banking system. But at the time this was all happening, the chairman of the Fed, Ben Bernanke, wanted to call it "credit easing" to emphasize the asset side of the Fed's balance sheet. What mattered to him was which assets the Fed was buying and which markets they were backstopping.
There were even efforts to neutralize the effects of excess reserves. The orange area on the liabilities side of the Fed balance sheet comes from the Treasury's "Supplementary Financing Program." The Treasury issued debt and sat on the money. They did this for the purpose of sucking reserves out of the banking system.

Part 2: Allyn Young: Money and Economic Orthodoxy

We get some insight into Allyn Young's perspective. Some of his positions are more controversial than they appear.
He's challenging Economists on three points.
Barter—

The notion that money is just there—we just use money because of the inconvenience of barter. This is a very old trope in economics. —Lecture

It's not clear to me that this "trope" is wrong. The following things can be simultaneously true:

1. Money exists because of the inconvenience of barter.
2. Organized markets have never traded goods for goods.

If barter is so inconvenient, the absence of barter-based economies is exactly what we should expect.
Growth—
The absence of a well-developed financial system impedes economic growth.
Currency Principle—
Young sees the Fed as providing an elastic money supply to escape the problematic monetary scarcity during the national banking era. He also wants the Fed to keep speculation in check through financial system management. Left alone, speculative bubbles can destabilize the system.
Young emphasizes the importance of the central bank as a public institution, but he opposes the notion that the value of money ultimately comes from the state. This is, perhaps, part of why he pushes so hard for the gold standard. But even if money isn't fundamentally "a creature of the state," it is still possible for government to manage the economy's monetary standard.

Part 3: National Banking System Before the Fed

The previous lecture focused on the general hierarchical nature of money and credit. Here, we look at the hierarchical structure within the commercial banking system. Not all bank deposits are equal. Before the Fed, deposits at the big New York banks acted as reserves for everyone else.
The Fed came about partly because we wanted a reserve system not privately controlled by rich New York bankers.

Part 4: Civil War Finance, Bonds, Loans

Initially, the government sold bonds to the private sector. No new deposits are created. The deposits simply move from the private sector to the government. The government expands its balance sheet, but nobody else does.
https://preview.redd.it/h2qan2nk2s2b1.png?width=848&format=png&auto=webp&s=17e72ff5d31a6c379d608c226282a2d4b0da975b
On the banking sector's balance sheet, I've shaded the transfer of deposits in blue to denote payment by novation. The government deposit account takes on liabilities previously held in the private sector's deposit account.
Once the government can't sell bonds to the private sector anymore, they sell directly to the banks. This is just a classic mutual-obligation swap of IOUs:
https://preview.redd.it/w6g51f2n2s2b1.png?width=850&format=png&auto=webp&s=308d9500511218b0eae191dae0ce010c937c4c43

In this case the banking sector is directly funding the government, not just transferring funds it is holding for the private sector. And it is funding the government by expanding the supply of money. How so? When the banking system swaps IOUs with the government, it expands both sides of its balance sheet, so total deposit liabilities increase.—Lecture Notes

Finally, we get Salmon P. Chase sucking up all the gold. It starts with a swap of IOUs, but then the government demands payment of those IOUs:
https://preview.redd.it/stahc1vo2s2b1.png?width=877&format=png&auto=webp&s=a99fa98ea395e924cf7d9e7a4b99bdf12e3e78b0

Note that when the government withdraws the deposit, the banking system loses its accumulated gold. Once the banking system has no more gold, its promises to pay gold (its deposits) lose their credibility, and banks accordingly “suspend convertibility”. Deposits are no longer promises to pay gold, so what are they?—Lecture Notes

Part 5: Civil War Finance, Legal Tenders

The legal tenders insert themselves into the hierarchy between gold and deposits. They replace gold at the top of the hierarchy.
https://preview.redd.it/t2se9ils2s2b1.png?width=850&format=png&auto=webp&s=31e2f4f7d34a5daaee2d08bae937d0f027670842
The legal tenders fell to fifty cents on the dollar. But they were all eventually redeemable at par by 1879. This is expensive for the government because they essentially paid back a dollar for every fifty cents they borrowed.

Part 6: National Banking System, Origins

In the national banking system, 2% government bonds are the collateral that backs the issue of private bank notes. This is a way of using the private banking system to monetize government debt in the absence of a central bank.
https://preview.redd.it/tbhrhmpu2s2b1.png?width=1048&format=png&auto=webp&s=d3057c787de0864c6267d289123247bffa55884a
I've shaded the entire transaction between the government and the private sector yellow to denote an asset swap. They're both money liabilities of the issuing bank. Implicit in the above balance sheets is a refinancing of deposits into bank notes.
The below set of balance sheets adds an explicit refinancing step in which the private sector exchanges its deposits for bank notes.
https://preview.redd.it/uprnqqew2s2b1.png?width=1088&format=png&auto=webp&s=7f3e72042ef7ba693a104b8fd277730e83475158
After the war, the government wasn't issuing any further greenbacks or 2% bonds. This constrained any expansion of the money supply.

Part 7: National Banking System, Instability

Money demand fluctuated seasonally in the US, but money supply was constrained. Every harvest, the farmers drained cash from the banking system. This caused seasonal financial instability under the national banking system.

Part 8: Federal Reserve System, Plan

Mehrling talks about the essential public-private hybridity of money and the monetary system. Reserves are managed publicly, but bank deposits are created in the private sector. The Fed is hybrid too. It is both a bank for financing the government and a bank that keeps the reserves for the retail banking system. It's called the Federal Reserve System because it was conceived as a constellation of central banks, each one holding the banking reserve for its region.
Here is the set of balance sheets that Mehrling draws on the blackboard:
https://preview.redd.it/ylnufezy2s2b1.png?width=1114&format=png&auto=webp&s=a59eeb1c251203d58c6445f34e539a0e0f59f537
According to my reading of Young, this is not correct.

1. There is no "Federal Reserve System" that is issuing notes. The notes are liabilities of the individual reserve banks.
2. In the original design, the Fed bought commercial paper from its member banks at a discount. It did not advance money (lend) against collateral.
3. "Rediscount" referred to the member bank discounting with its reserve bank. The "original" discount was when the member bank discounted the commercial paper from Main Street.

Allyn Young only describes two layers of hierarchy: the member bank and its reserve bank.
The reserve bank is supplying elasticity by discounting commercial paper (e.g. bills of exchange) from its member banks, as in the following set of balance sheets.
https://preview.redd.it/ui6g3vt13s2b1.png?width=852&format=png&auto=webp&s=99dbdfae677786b05ddb12e8fc4ffd4de7daf35c
By 1918 (I think), the reserve banks were also allowed to make advances, as below:
https://preview.redd.it/09cbhpd43s2b1.png?width=825&format=png&auto=webp&s=a9f806d11ce21b1ac0c3a59b9f085e32dfe7ef08
This lending also went through the "discount window."
Today, the Fed still lends through the discount window. It doesn't do any actual discounting anymore. When member banks go to the Fed's discount window, they borrow against collateral.

Part 9: Federal Reserve System, Actual

Thanks to World War I, the Fed ended up lending money to the Treasury. The Fed and all the other banks became "stuffed" with Treasury bills. Since banks could always sell Treasury bills to meet their liquidity needs, they didn't need to discount commercial paper with (or borrow from) their reserve banks.
Today, open-market operations using Treasury bills are considered a normal instrument of the Fed's monetary policy. The discount window exists (for advances) but isn't used much, partly due to stigma.
Please post any questions and comments below. We will have a one-hour live discussion of Lecture 3 and Lecture 4 on Monday May 29th at 2:00pm EDT.

I have a real interest in the Athens Tetradrachm, and I've looked at the CNG auctions, eBay, and Vcoins.
The best price that I can find for something like this pictured coin (XF 5/5 - 4/5) is about $760.
But when I research online, places like Reddit, I read that there is a plentiful supply of this coin. People seem to value this coin around $500.
How can I find the real value of this coin, and where is the least overpriced place to look?

Few things could aspire to the weirdness of Elon Sperm, a coin started in mid-2021 and currently trading somewhere under a thousandth of a cent.
The official description goes something like this: Elon sperm is a deflationary DeFi token raising awareness and donating to testicular cancer research. It has a 10% tax on every transaction, 5% is redistributed to holders and 5% is locked into liquidity pair on Pancake Swap. Team plans to launch SPERM NFT marketplace with a limited series of collectibles that will be purchasable using SPERM token and part of the gains will go to testicular cancer research.
Wonderful.
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How could anyone resist advertising like this?

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Best CBSE Schools in Hyderabad 2023-2024
edustoke is India’s most comprehensive school search platform. Playschools, PreSchools, Day Schools and Boarding Schools.
​
Best CBSE schools in Hyderabad

• Hyderabad, earnestly known as the ‘City of Nizams’ is the common capital city for the states of Telangana and Andhra Pradesh. Hyderabad is particularly famous for technical education and civil coaching centres.
• The city also has CBSE schools in Hyderabad pacing with the fast-changing curriculum.
• The CBSE schools in Hyderabad provide quality education emulating the prominent combination of academics, sports and other extracurricular activities.
• Several popular CBSE schools in Hyderabad are Bharatiya Vidya Bhavans Public School, Chirec International School, Bhavans Sri Ramakrishna Vidyalaya, Jubilee Hills Public School, Meridian School, Air Force School, Army Public School.

Hyderabad, the joint capital of Telangana and Andhra Pradesh, is widely popular as the ‘City of Pearls’. One of the top four metropolitan cities in the country, Hyderabad is growing to be an IT epicenter in the country. The city is growing to be one of the best education hubs in the country with eminent universities and colleges and the coaching culture for national competitive entrance examinations. Alongside, there are several CBSE Schools in Hyderabad which impart value-based quality education which is at par with national educational requirements.
Some of the options you can consider from the best CBSE Schools in Hyderabad are as follows:
1. Bharatiya Vidya Bhavans Public School
An initiative of Swami Ranganathanandaji Bhaatiya Vidya Bhavans Public School is one of the best CBSE Schools in Hyderabad. With a huge playground and training facilities for cricket, volleyball, football, table tennis, basketball, state-of-art laboratories and library to support the educational journey of the students.
School Type: Day School
Board: CBSE
Type of School: Co-Ed School
Grade Upto: Class 12
Establishment Year: 1979
2. DDMS P.Obul Reddy Public School
Durgabai Deshmukh Mahila Sabha (earlier known as Andhra Mahila Sabha) -P Obul Reddy Public School has classes from Nursery to Class XII. The school is one of the top CBSE Schools in Hyderabad with the solid infrastructure and the digital learning facilities.
School Type: Day School
Board: CBSE
Type of School: Co-Ed School
Grade Upto: Class 12
Establishment Year: 1989
3. D.A.V. Public School
Established in 1983, D.A.V Public School has the objective to provide effective learning and teaching environment which helps builds critical thinking, strong interpersonal communication skills, problem solving ability and ethical practices. It is one of the best CBSE Schools in Hyderabad for value oriented education.
School Type: Day School
Board: CBSE
Type of School: Co-Ed School
Grade Upto: Class 12
Establishment Year: 1983
4. Chirec International School
Chirec International School encompasses a very protected and nurturing environment with distinct sections and facilities for primary, secondary and senior secondary students. With education following the IB, IGCSE and NCERT framework, it is one of the best CBSE Schools in Hyderabad.
School Type: Day School
Board: CBSE, IB, IGCSE
Type of School: Co-Ed School
Grade Upto: Class 12
Establishment Year: 1989
5. Army Public School
Established in 2002, Army Public School Bolarum is the second such school located amid the twin cities Hyderabad and Secunderabad with its vision to provide holistic education to the students. Affiliated to CBSE Board, the school gives a very conducive and positive atmosphere for learning and igniting the young minds.
School Type: Day School
Board: CBSE
Type of School: Co-Ed
Grade Upto: Class 12
Establishment Year: 2002
6. Maharishi Vidya Mandir
Maharishi Vidya Mandir is one of the best CBSE Schools in Hyderabad with its contemporary learning strategies and a blend of values and spirituality instilled among the students. The school has the state-of-the-art facilities, library and digital smart classrooms and focus on holistic development of the students.
School Type: Day School
Board: CBSE
Type of School: Co-Ed School
Grade Upto: Class 12
Establishment Year: NA

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When Coulson gives the couple Deke’s rhodium coin I realized that he might not be such a great idea. He can’t just give it to people in poverty. Think about it, with the value of rhodium, plus it being much more scarce, what with the destruction of the world, it is at least 10x more valuable if not more. (Quarter=5.67 grams. Rhodium = $225.06/gram[today] 225.06x 5= 1,125.3 + 112.53[1/2 gram]=1,237.83x10= 12,378.3+ ??[for .17 gram]) means that the coin is roughly $12,378.30 that Coulson just gave to the couple. This is like giving a homeless person a bag of gold bars and telling them to cash it in. The likelihood that somebody thinks it was stolen or is fake is so high. It is one of the most questionable things ever. If the couple in poverty tries to cash in a $12,400 coin, they will most likely either be denied, taken by Kreepers and beaten and or sent to the surface to die, or killed on the spot. It is a nice gesture, but also so questionable