[OPE-L:2053] temporary leave?

riccardo bellofiore (bellofio@cisi.unito.it)
Wed, 1 May 1996 03:18:12 -0700

[ show plain text ]

I am not able to pursue the debate with Duncan beyond the point it has
reached, because of non-virtual work - and that is why I didn't reply to
his lat answer to my points.

I'm not very happy with criticisms based on arguments like "well,
that's an *old* train of thought". Well, but that id due to personal

Anyhow, I think that the exchange for me was extremely helpful, and
has reached some results. There are, from my point of view, two different
views on the working of the monetary system, and more fundamentally even of
what is a monetary system, *both* coherent and well argued, *unless* for
one important point: is it Tobin's model of the bank a good starting point
or not. I think no, because it is confused on the issue that I labelled
"loans make deposits"; as I understood him, Duncan has a more positive
judgement. Here I would say that the view I'm opposed to is not so

I almost soon contradict myself! Let me add four (!) things, to
clear possible confusions on my position.

1. Of course, banks do not in fact create credit from nothing: they
'monetize' means of payment produced within the non-bank private sector,
but this has nothing to do with banks having to collect money deposits to
create loans.

2. Of course, the non-bank credit sector may react increasing the
endogenous production of this non-bank 'liquidity': the problem, then, is
"will this non-bank liquidity be eventually monetized by the banking

3. Of course, the public can 'escape' from the credit money produced by
banks - as in hyperinflations (see Heyman-Leijohnufvud books from the OUP):
that is, going towards a collapse of the monetary system. The monetary
system was not always there, and even today it is not so general (see this
same post when I reply to Costas).

4. Banks as a whole do not face limits in their lending supply (though
individual banks do), but this make the standard of account function of
money fragile, and that is why in my view the central banking function is
originated in the system. Put otherwise, the monetary system has no problem
of leakages (unless they are imposed from the outside, through
'convertibiity'), but it is inherently unstable.

I'll look closely at how this debate as a whole will progress, even if I do
not participate in it with the same frequence.

That does not mean that I've finished with you, Duncan, if you will be so
kind to tolerate me some posts more and help me again. I have some
questions for you more linked to something I'm just writing - some
'bizarre' and I hope not too sloppy questions on your way to interpret the
transformation problem. But that is for private conversations, at the
moment, since it is strictly for clarification. I'll send a post in the
following days.


Riccardo Bellofiore e-mail: bellofio@cisi.unito.it
Department of Economics Tel: (39) -35- 277505 (direct)
University of Bergamo (39) -35- 277501 (dept.)
Piazza Rosate, 2 (39) -11- 5819619 (home)
I-24129 Bergamo Fax: (39) -35- 249975