Saturday, March 26, 2011

Kindleberger vs MMT

A bit of what I quoted earlier today, from Kindleberger's Manias, Panics, and Crashes:

In the manic phase, people of wealth or credit switch out of money or borrow to buy real or illiquid financial assets. In panic, the reverse movement takes place, from real or financial assets to money...

I just want to point out that Kindleberger seems to distinguish between "financial assets" and "money."

I think this is a useful distinction. As I see it, money is the yardstick, and assets are what people get into or out of in order to end up with more money. To put Warren Mosler's word on it, money is for "scorekeeping."

And a reminder from Joseph Schumpeter:

The distinction is, in a sense, quite unrealistic. But if we do not make it, we shall never be able to say any more than that everything depends upon everything.

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