Mehrling Interviewed on Global Currency System
Perry Mehrling, Professor of International Political Economy at the Frederick S. Pardee School of Global Studies at Boston University, was recently interviewed on the basics of the money view and its relationship with economics and finance as well as the global currency system and challenges facing central banks.
Mehrling was interviewed for a two-part article by the blog Economania published on December 12, 2018. You can read part one of the interview with Mehrling here and the second part of the interview here.
From the text of the article:
At its most basic the money view emphasises two concepts. First, the so-called survival or settlement constraint, namely that in a payment system participants need to acquire cash for a point in time to honour their obligation to pay, and they may do this using credit – hence both the payment and the credit systems are of crucial importance. Second, the budget constraints of the intermediary – or dealer – determines the market price of credit, in both money and capital markets. In other words, the levels of inventory at dealers have a direct bearing on market prices. Dealers – and how they make money – play a central role in the model.
Also, the money view tends to view the world in balance sheet terms: each entity, be it bank or individual for example, is thought of as a balance sheet – assets and corresponding liabilities.
Market practitioners from banks and central banks (rather than theoretical macroeconomists) have long appreciated these points; nevertheless I see my contribution over the past two decades or so as largely twofold. I connected the dots and I systematised the points – with the latter essential for pedagogical purposes. It is therefore now possible for students to appreciate how the financial world works in practice without having to spend 5-10 years as a market practitioner. A further confirmation of the practical nature of the money view is that it – unlike typical macroeconomic models – does not make many assumptions.
Perry Mehrling is a Professor of International Political Economy at the Pardee School of Global Studies, Boston University, where he teaches courses on the economics of money and banking, the history of money and finance, and international money, the first of these is available online. Perry is the author of The New Lombard Street: How the Fed became the dealer of last resort (Princeton 2011), Fischer Black and the Revolutionary Idea of Finance (Wiley 2005), and The Money Interest and the Public Interest (Harvard 1997). Recent papers and video are available on his website, “one stop shopping for all things ‘money view’”.