16 ms·

What to read to understand central banking

306 points by helsinkiandrew 4y ago

helsinkiandrew 4y ago
https://archive.ph/N3sLg https://archive.ph/N3sLg
noinsight 4y ago
Central Banking 101 by Joseph Wang is the obvious choice and it's not even mentioned here...
- amit9gupta 4y ago
  This book explains Central Banking down to the balance sheet level and makes things crystal clear.
- thoughtstheseus 4y ago
  This book is the best on central banking. It avoids most of the theoretical and math nonsense to plainly explain what financial markets (+Fed) are doing.
walterbell 4y ago
http://aei.pitt.edu/2812/1/079.pdf http://aei.pitt.edu/2812/1/079.pdf > The agreements finally reached at the [1944] Bretton Woods conference ... invented the International Monetary Fund and, as a subsidiary institution, the International Bank for Reconstruction and Development (or World Bank). Finally, to eliminate rival forums that might be hostile to these objectives, they advocated the destruction of the Bank for International Settlements. But almost every element of this mosaic was subsequently undermined. https://www.researchgate.net/publication/323947229_IMF_BIS_and_World_Bank_On_the_Intra-institutional_Articulation_of_the_International_Financial_System https://www.researchgate.net/publication/323947229_IMF_BIS_a... > After the end of World War II.. during the Bretton Woods Conference it was decided to abolish the BIS “at the earliest possible moment,” because it was considered that the BIS would have no useful role to play once the newly created World Bank and International Monetary Fund were operational. European central bankers held a different opinion, and successfully lobbied for maintaining the BIS.
- JumpCrisscross 4y ago
  If you’re trying to understand modern central banking, Bretton Woods is a bad start. As you note, it was largely dismantled. You’ll get hung up on complexities and conspiracies that went nowhere in the end. It’s like studying a non-reserve central bank to understand the Fed, gold-era banking to figure the BoE or a horse to grok an engine.
  - wolpoli 4y ago
    Also, there are university economic courses and textbooks on central banking. There will be less misinformation in these official sources.
    - JumpCrisscross 4y ago
      > there are university economic courses and textbooks on central banking There are more people who would benefit from knowledge of the system than those for whom it makes sense to pursue those courses. The books suggested by the article are a good start. Anything focussing on Bretton-Woods is not.
- andrepd 4y ago
  It's also interesting to read about John Maynard Keynes' original Bretton Woods proposal, which was overruled by the US.
anonyme-honteux 4y ago
qxfys 4y ago
I would add Lex Fridman's conversation with Saifedean Ammous. It would at least partially serve this purpose if you don't have that much time. Be aware that Saifedean's view is strong (well, this is obvious considering his book). So, take it with a pinch of salt.
- smt88 4y ago
  I encourage readers to skip that interview. It's like you're saying we should learn about how the immune system works from an interview with an anti-vaxxer. Ammous is (to put it mildly) an ultra-contrarian on a variety of subjects -- central banking, money, and even climate change -- that he has no actual scientific training in. He claims Bitcoin should replace central banking and that Bitcoin is a hedge against inflation. He doesn't bother to counter the argument that these are opposing goals: a useful currency can't be deflationary. He was also proven wrong about the whole "Bitcoin is a hedge against inflation" thing when it crashed along with every other speculative asset in the last few months.
  - c0brac0bra 4y ago
    As Tom Woods would say: "Only the views listed on this 3x5 index card of respectability are allowed."
    - mhh__ 4y ago
      Allowed and worth spending time listening to are not same thing.
      - timtas 4y ago
        When people take time to wave you off, it means they’re worried it might persuade you.
    - smt88 4y ago
      No one is allowing or disallowing anything. Commenting on discourse is part of discourse. If you're so thin-skinned that you think all criticism is an attempt at censorship, then perhaps the internet is not a safe space for you.
StanislavPetrov 4y ago
I think another good book to add to this list would be one that, coincidentally, Matt Taibi wrote an article about today. "The Lords of Easy Money" by (NYT best seller) Christopher Leonard gives some added perspective to this book list recommended by The Economist. It is certainly illuminating to read Ben Bernanke in his own words, but it is far from optimal to base your understanding of the FED on his own self-serving tome. https://www.goodreads.com/en/book/show/58485511-the-lords-of-easy-money https://www.goodreads.com/en/book/show/58485511-the-lords-of...
- ambientenv 4y ago
  Matt's interview with the author, Christopher Leonard [1] [1] https://taibbi.substack.com/p/interview-christopher-leonard-author https://taibbi.substack.com/p/interview-christopher-leonard-...
heurisko 4y ago
Positive Money has published books on how the banking system works in real life, not how it is portrayed in textbooks. https://positivemoney.org/publications/ https://positivemoney.org/publications/
- notahacker 4y ago
  With the significant caveat that Positive Money is actively campaigning for a completely different system [of dubious merit].
  - andrepd 4y ago
    I see nothing dubious about putting the money printing machine to work on New Deal-type infrastructure and public works projects, green energy, etc., rather than using it to pump up asset prices and effectively direct transfer money to the very richer.
    - notahacker 4y ago
      You don't see anything dubious about campaigners selling a wide range of policy options based on reheated monetarism as economic panacea with a progressive slant because banks bad? You can have New Deal type infrastructure and public works projects in the existing system, or the government pumping asset prices by far more directly transferring money to the rich in a full-reserve banking "Positive Money" system. The only thing guaranteed by "positive money" is that it makes the supply of money a centralised political decision rather than a decentralised supply and demand based one, and makes retail banking even less friendly to the average person.
      - heurisko 4y ago
        A rebuttal that it is monetarism is here: https://positivemoney.org/2014/08/sovereign-money-system-monetarism/ https://positivemoney.org/2014/08/sovereign-money-system-mon...
hd4 4y ago
No mention of the Eurodollar system, probably best to ignore this. Look up Jeff Snider/Eurodollar University, he's probably the most well-researched guy on the subject. https://twitter.com/jeffsnider_aip https://twitter.com/jeffsnider_aip
rhyswallace 4y ago
Surprised not to see Secrets of the Temple listed here — a very intimate account of a few years of Volcker's time as chair. Highly recommend. https://www.amazon.com/Secrets-Temple-Federal-Reserve-Country/dp/0671675567/ref=sr_1_1?crid=2COJ03G0HVP8U&keywords=secrets+of+the+temple&qid=1662623807&sprefix=secrets+of+the+templ%2Caps%2C154&sr=8-1 https://www.amazon.com/Secrets-Temple-Federal-Reserve-Countr...
dhsysusbsjsi 4y ago
This explains it the best: https://brrr.money/ https://brrr.money/
- anjanb 4y ago
  I didn't understand. How do you navigate this site ?
szeptik 4y ago
Perry Mehrling's course Economics of Money and Banking https://www.coursera.org/learn/money-banking https://www.coursera.org/learn/money-banking
- ipnon 4y ago
  I found this to be the best introduction because it shows how every function of the money markets is a direct patch for a previous catastrophe. It balances the Wall Street view with the Ivy League view, and shows what happens when they butt heads. His book “The New Lombard Street” is more or less this course as a book, but covers more of the historical developments.
  - DalekBaldwin 4y ago
    I find it to be the best introduction because it draws on material from economists of different major schools of thought without requiring the student to subscribe to any school in particular. He can do that because he focuses on the structure of the modern financial system, which is neglected or abstracted away in most mainstream and even heterodox economics literature. It makes it easy to recommend this course to anybody, because they can't say "I'm sorry, this is from the toilet-water school of economics, and I only listen to the bilge-water school."
beefield 4y ago
I've found that the best starting point understanding money and banking is understanding that all money is very literally, nothing more, nothing less than debt. Your "money at bank account"? Very fundamentally, nothing but a credible statement from the bank that they owe you the amount of money. Obviously, you do not need to have any assets in the first place to make the statement. To make it credible is a bit more difficult trick.
- funklute 4y ago
  > all money is very literally, nothing more, nothing less than debt This doesn't seem to work for a dollar bill in my hand though?
  - z3c0 4y ago
    A dollar in your hand is "redeemable debt". It's future value that you've been promised, presumably for having prior given up something of value, like your time or some tangible good.
    - omnicognate 4y ago
      So a train ticket is money?
      - scrollaway 4y ago
        Keyword is redeemable. A train ticket is not exchangeable. But yes, products can sometimes become accidental foreign currencies when they satisfy all the key properties, even if they’re not printed by a national bank. Casino chips for example. Disney dollars. Etc.
  - scatters 4y ago
    A dollar bill is just a piece of paper. You can light a fire with it, or wipe your ...uh, nose with it. What gives it value is that society has agreed that it represents a redeemable obligation to receive one dollar's worth of goods or services. That obligation is debt.
mandmandam 4y ago
Witness: 16 comments with 16 different opinions. Note that this is within the very small subsection of the population that even has any interest in how central banking works. Can we all agree at least that for something so fundamental as our central money supply, we do a pretty horrific job on making it clear and understandable - much less interesting? Side note: Why the fuck would full employment be a goal of a central bank. Talk about paperclip optimization.
- mellavora 4y ago
  > Why the fuck would full employment be a goal of a central bank. Talk about paperclip optimization. Agree it does not seem (at first glance) to be a reasonable policy goal for a bank, and further this mandate does not hold for all central banks. <edit> For example, the ECB does not have this mandate </edit> However, some economists believe there is a relationship between % of population "employed" and inflation. Employed in quotes because, well, see the other HN post today https://news.ycombinator.com/item?id=32738538 https://news.ycombinator.com/item?id=32738538 about the costs of caring for parents as an example of actions which create direct,large, partially measurable social benefit but don't count as 'employment'.
- neilwilson 4y ago
  Full employment should be the goal of the central bank, because that is really what they are discounting when they create money - the available labour hours of the population, manifested in the government's capacity to tax. That is, ultimately, the main asset on the balance sheet of the nation and arguably the underlying denomination. Humans trade by exchanging labour hours with each other.
  - mandmandam 4y ago
    > ...because that is really what they are discounting when they create money - the available labour hours Can you explain how demanding full employment follows from that? I'm not seeing it. It seems that by this logic, advances in fusion energy and AI which obliviate the need for 99.9% of humans to work at all would be seen as bad. I'd call that perverse.
danuker 4y ago
The lessons from Khan Academy are some of clearest, most distilled courses I've seen. https://www.khanacademy.org/economics-finance-domain/macroeconomics/monetary-system-topic https://www.khanacademy.org/economics-finance-domain/macroec... Salman Khan, its founder, used to be a hedge fund analyst. I won't read hundreds of pages of dry economics any time soon. But maybe the books recommended in the article would be useful as a reference.
- andrepd 4y ago
  Especially since the textbook theories are often misleading or wrong x)
BoardsOfCanada 4y ago
The first paper mentioned, Money Creation in the Modern Economy, is available here: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
- 7373737373 4y ago
  One thing I'd love to read more about is how banks, larger and smaller ones, handle liquidity outflows. Do banks have to cooperate to ensure that transfers caused by loans - e.g. customers paying for equipment with a transfer to another bank - mostly net out between them and the "real money" mostly stays within the system?
  - retube 4y ago
    Having worked in a GSIB Treasury I can answer this: In short banks do not co-operate, they are completely independent of each other. To manage liquidity they project all their expected outflows and inflows over a variety of time horizons under both normal and stressed conditions (capturing everything - cc purchases, drawdowns on overdrafts or other credit facilities, deposit movements and transfers, mortgages and other loans, refinancing of funding, debt issuance, staff and building costs etc etc etc, there's a huge amount of modelling behind this). Under US or UK regs Banks have to hold large liquidity buffers, in the UK this is enough to finance 2 months stressed outgoings assuming no incoming. It's pretty punitive, and runs into the 100s of billions for big banks.
    - 7373737373 4y ago
      Thank you :) Sounds like a hell of an optimization problem, since there are not only many variables to model, but also many ((risk) allocation) decisions to make! When a bank considers giving a loan, can it model where the money would/might be eventually transferred to - whether it would stay on the bank's books and thus require less liquidity to cover net outflows? I have the impression that central banks try to model national economies via "flows between large groups of actors", do commercial banks analyze/simulate this too on a (smaller) scale, to find out how not only money flows between them and other banks, but within itself too? Since accurate models would result in more profitability, is it safe to assume that banks have the best economic "world model"? When I buy groceries, I have no idea where the money ends up even in the next "step", maybe banks attempt full "network simulations"? Regarding the cooperation/net flows, wouldn't a more "symmetric" banking system be able to create more credit? https://github.com/void4/notes/issues/73 https://github.com/void4/notes/issues/73
oxff 4y ago
I wouldn't start with Economist nor theorycel material in general. The fastest I got to understand Fed was to read about their operations, observe market reactions to them and read their own research. Easy strike against starting with ad-hoc theory material is that they tend to misinterpret 2008 QE.
neilwilson 4y ago
This bit isn't correct. "The bank must settle the transaction with the vendor’s bank using reserves held at the central bank. If the borrower never repays the loan, then the bank’s reserves will not be replenished, reducing its ability to lend further." If a borrower never repays a loan, then the bank's capital is reduced (on the other side of the balance sheet from reserves) and the bank has to obtain more capital (by persuading those holding created deposits to swap them for bank bonds or shares) to maintain their risk capital ratios. Reserves have absolutely nothing to do with settling transactions. They are an optimisation of the actual process - some other entity in the banking system must take the place of the depositor in the source bank if a cross bank payment is to be made. International transactions via correspondent banking don't use reserves. They use direct bank to bank mirror transactions. It would be far better if we forgot about reserves altogether [0]. They weren't even a thing in the UK until 2005. [0]: http://www.bondeconomics.com/2022/09/bank-reserves-demystified.html http://www.bondeconomics.com/2022/09/bank-reserves-demystifi...
- danuker 4y ago
  > It would be far better if we forgot about reserves altogether Is this different from setting the maximum risk to capital ratio to infinity? If not, won't we have worse cycles of mania and panic? And what would stop banks from eating the world, through unfettered debt creation?
  - MagnumOpus 4y ago
    It is different. Capital requirements (usually something like "a minimum of 10% of the bank's balance sheet has to be funded by equity or deferrable bonds") are far more important to a bank than reserve requirements: - if bank capital is too high, return-on-equity is lower for a given amount of profit. Hence shareholders don't want too-high capital - if bank capital is too low (from too many non-performing loans) then the bank will need recapitalisation which is expensive and bad for shareholders, and if it can't get that, it will be wiped out (either lose its licence or get bought out/nationalised/gutted) So banks are incentivised to not create debt that is too-risky -- i.e. where the ratio of potential non-performing loans is too high for the interest rate they lend at, or the interest rate of raising expensive additional capital would get too high... Reserve requirements are about liquidity (bank runs) rather than about solvency - but if bank capital can be ensured to be positive and the bank remains solvent, bank runs are much less likely in the first place, and liquidity provision and bailouts to avoid bank runs won't incur losses for the rescuing entities.
iamnotsure 4y ago
https://web.archive.org/web/20140825140626/http://library.mises.org/books/Jesus%20Huerta%20de%20Soto/Money,%20Bank%20Credit,%20and%20Economic%20Cycles_Vol_4.pdf https://web.archive.org/web/20140825140626/http://library.mi...
Proven 4y ago
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eraad 4y ago
This is the clearest explanation from an engineering point of view: https://bitcoin.org/bitcoin.pdf https://bitcoin.org/bitcoin.pdf
- ibz 4y ago
  Indeed, once you understand that you also understand the opposite - central banking and CBDCs. It's two opposite worldviews which lead to two very different definitions of money.
  - once_inc 4y ago
    Both Central Banking and CBDCs lead to the same outcome though; reduced personal liberties (privacy and economic freedom), and increased interference of the state with its constituents and the macro economy (skewing incentives through centralizing forces).
amit9gupta 4y ago
For understanding the origins of Central Banking, highly recommend: The Creature from Jekyll Island: A Second Look at the Federal Reserve by G. Edward Griffin
- christophilus 4y ago
  Excellent recommendations. There’s a good podcast that analyzes the Fed (and other things) in a somewhat critical light without getting sidetracked by conspiracy theories the way many such things do: Eurodollar University My description doesn’t do it justice. It really is a thorough and informative podcast.
  - janandonly 4y ago
    Excellent tip indeed :-) I remember hearing Jeffrey Snider explain all this stuff, and I had to listen more than once just to grok it all. Very educational. Free to listen here: https://www.macrovoices.com/edu https://www.macrovoices.com/edu
    - hd4 4y ago
      Glad I'm not the only one mentioning Snider/Eurodollar University and that people are noticing his work. Everyone "noticing" the Eurodollar market may bring about the biggest shift in modern economics.
- throw0101c 4y ago
  > The Creature from Jekyll Island Please, no. The author has a very loose attachment to reality: > In his book World Without Cancer, he argued in favor of a pseudo-scientific theory that asserted cancer to be a nutritional deficiency curable by consuming amygdalin.[1][2][3] He is the author of The Creature from Jekyll Island (1994),[1] which advances debunked conspiracy theories[4] about the Federal Reserve System. He is an HIV/AIDS denialist, supports the 9/11 Truth movement, and supports the specific John F. Kennedy assassination conspiracy theory that Oswald was not the assassin.[1] He also believes that the Biblical Noah's Ark is located at the Durupınar site in Turkey.[5] * https://en.wikipedia.org/wiki/G._Edward_Griffin https://en.wikipedia.org/wiki/G._Edward_Griffin
f0e4c2f7 4y ago
None of these books seem like they would explain central banking. Some of them were even written before our modern system of central banking. I enjoyed this textbook on the topic for a ground up explanation to a lay person. https://www.amazon.com/Central-Banking-Sustaining-Financial-Stability/dp/1118832469 https://www.amazon.com/Central-Banking-Sustaining-Financial-...
roenxi 4y ago
The frame here is unrealistic - the central bankers aren't like a court or parliament with long public traditions and well-defined, difficult to change procedures. They don't deal in issues that the public understands. Their activity is relatively opaque (maybe they even have secret activities, we wouldn't necessarily know). There is no guarantee of procedural stability year-to-year. Every crisis the way central banking works changes. Before & after 2008 central banks became different beasts, for example. They keep changing their methods. A published book can't keep up with that central banking 'is'.
ghastmaster 4y ago
The speaker in the video below gives an very insightful presentation of the federal reserve bank. He explains why it exists and how it works at a basic level; all in a non partisan way. "A Look Back at the History of the Federal Reserve (2013)" https://m.youtube.com/watch?v=5IHzAcKIRHw https://m.youtube.com/watch?v=5IHzAcKIRHw Richmond Fed President Jeffrey M. Lacker discussed Federal Reserve history at Christopher Newport University on Aug. 29 in Newport News, Va.
- janandonly 4y ago
  Thanks a lot for sharing this usefull resource ;-)
0x08 4y ago
How is no one mentioning the Fed's book Modern Money Mechanics? https://upload.wikimedia.org/wikipedia/commons/4/4a/Modern_Money_Mechanics.pdf https://upload.wikimedia.org/wikipedia/commons/4/4a/Modern_M... Then there is the accounting system the Federal Reserve uses: FAM: https://www.federalreserve.gov/aboutthefed/financial-accounting-manual.htm https://www.federalreserve.gov/aboutthefed/financial-account...
- janandonly 4y ago
  Thanks a lot for sharing these resources ;-)
janandonly 4y ago
I'm currently writing a book about modern forms of money, and it so happend that I just read the first paper that is mentioned in this article: > Money Creation in the Modern Economy. By Michael McLeay, Amar Radia and Ryland Thomas of the Bank’s Monetary Analysis Directorate. Bank of England Quarterly Bulletin. Q1, 2014. It's a very accessibly written paper, not much "dry theory" at all. The previous paper of the same team is also a must-read in my opinion. > https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-in-the-modern-economy-an-introduction
- spiralx 4y ago
  Also their paper on money creation specifically: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
- fiat_fandango 4y ago
  Any way to track your progress of your book / pre-order to support your work? Even with a maths and engineering background it's hard to keep up / know where I need to read to understand what's going on at a macro level with the US FED / monetary policy in general. I've found that reading more usually leads to more productive conversations with my financial advisor. (before folks come out of the wood-work to tell me I'm getting fleeced, the advisor is a family friend - I hold all of my investments with an online broker not the advisor)
snshn 4y ago
1984 by George Orwell
snshn 4y ago
The Communist Manifesto Book by Friedrich Engels and Karl Marx
- hsavit1 4y ago
  or even Capital volume 1 by Marx. You can't understand the economy without understanding the labor theory of value and primitive accumulation of capital
- tharne 4y ago
  Agreed. Understanding what "not to do" is often times more important than understanding how to do something well. Avoiding communism and poverty, and the human misery, poverty and 6 and 7-figure death tolls that so often come with it is far more productive than getting a certain economic or policy lever "just right". This is similar to health where avoiding things like smoking are more important than finding the perfect diet.
  - snshn 4y ago
    It's way worse than you think. Central banking is a Marxist invention, he was all for it. It's not coincidence that many globalists today worship his ideas and have Lenin's busts in their offices (e.g. Klaus Schwab does). Listen to Audiobooks and podcasts of/with Robert Kiyosaki, he talks about it in great detail. The goal of communism is one-world govt, you have to have central banking system for that to be in place.
    - hsavit1 4y ago
      lmao, anyone who recommends listening to a Robert Kiyosaki podcast is a total clown. He TWICE co-"authored" books with Donald Trump on how to get rich quick - all you need to know on how little credibility he has.
      - snshn 4y ago
        I'm not a clown. And it's a bit odd to dismiss somebody completely by citing just one thing, very childish. Robert understands how money works today, knows a ton about the banking system. Both him and Donald Trump are wealthy and successful, and besides getting rich quick has worked many times for many people (including many who use this site: the dotcom boom, crypto, NFTs, etc) — if you have no ability to figure out how to play certain games, that's another discussion.
sudden_dystopia 4y ago
Ron Paul
rvba 4y ago
How do central banks clear things with each other? Say "Bank of USA" emits physical and electronic dollars, then those dollars flow to Japan for some goods. Can the central bank look at every way those dollars went to Japan (some small part in physical way, much bigger part by moving through multiple clearing houses). How does the central bank then trust the other central bank? "We received 1 billion in paper dollars and 100 billion in electronic transactions". Also, how can "Bank A" from say Germany, trust "Bank B" from say some less reputable country that those underlying "electronic" dollars even exist? The settlement company supposedly checks this somehow, but how? If "Bank B" moves 100 million to "Bank A", then were is that 100 million in a physical way, if all of that is just electronic money created via lending. How can you know that the "Bank B" didnt just print 200M and use it to pay for something in Bank A. Among the same country, there is some central institution that looks on that (e.g. all banks in EU are audited by EU). But what about cross border transactions. How can you know that those 100M dollars paid to you are actual 100M dollars and not just some fake line? Does your bank have "anything" apart from a line in a database that said that you received 100M from the other bank? And also what is the incentive for the other bank to not "create" a bit money "on the side" to import stuff to your country. Every time I try to search about any clearing houses I just land up on the "Clearstream scandal" wikipedia page. Same for the recent "naked short" theory, where you basically land on the articles about DTCC, but without any information "how the sausage is made".
tarunmuvvala 4y ago
https://www.youtube.com/c/FREENVESTING https://www.youtube.com/c/FREENVESTING This channel just points to doomsday of the central banking fund. I am curious on the counter point people can put against the prediction they are giving out.
Temporary_31337 4y ago
Just understand that CBs only influence the demand side of the economy- ie how easy/ cheap it is to get money. If the crisis is supply side, all they can do is constrain money supply so people can’t afford the scarce resources anymore.
- zhte415 4y ago
  The interest rate is the return on capital as much as it is the cost. They are two sides of the same coin. Which is why persistent low interest rates are bad: money may be 'cheap' but the return on capital is low.
sylware 4y ago
The currency system is said to be a "less worse" system to organize civilization, accounting for many facets of human nature (the lazy, the hard working, the essential and non-essential, etc). The way I see that is, it is a dangerous utopia (same grade than the soviet utopia) to think that currencies will flow well enough to give all households a decent living, and that only based on the "supply and demand" rule. Actually, that would be madness. What people tend to forget about currency systems: it is a set of rules made by human beings, enforced by human beings, certainly not a force of mother nature. It seems those human beings are very discret and very few, but their networks seem complex (a good start is the blackrock and vanguard funds which drive much tech industry via "their" directors). In "tech", those currency systems are extremely toxic, and they push this toxicity upon nearly the entire world: planned obsolescence and Rube Goldberg Machines (network protocols and software mostly). Why? Because, huge parts of the tech industry cannot justify __fairly__ a sustained activity. Then, rotten people do setup those previously cited "tech" scams. This is accute toxicity for the entire world. That is expected to be strongely regulated... which will bring its own set of issues, but on the overall I believe we'll get much less toxicity... because the current state is just... omg.
deleted 4y ago
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jimcavel888 4y ago
uticus 4y ago
Understanding central banking, like so many other things, also means understanding philosophies, worldviews, perceptions, and outlooks. And goals. Especially goals. So yes, read. But my advice: read widely, not naively, because economic theory looks like math from the shoreline but it tastes and feels like philosophy when you dive in. Fun starting point: learning about the different "schools" of economic thought: https://en.wikipedia.org/wiki/Schools_of_economic_thought https://en.wikipedia.org/wiki/Schools_of_economic_thought
- stevievee 4y ago
  I love how you worded your advice here and I agree this is the best approach because macroeconomics is a "social science". Everything you hear and understand about central banking as it exists today is just part of the prevailing school of economic thought. It is not the only way forward and many would argue it is not even the best way forward (but we are always led to believe it is)
- connectsnk 4y ago
  You worded it very well. Any suggestions on understanding the “goals” part of modern central banking?
  - orangepurple 4y ago
    Debt: The First 5000 Years ASIN ‏ : ‎ 1612194192 Publisher ‏ : ‎ Melville House; Updated, Expanded edition (October 28, 2014) Language ‏ : ‎ English Paperback ‏ : ‎ 560 pages ISBN-10 ‏ : ‎ 9781612194196 ISBN-13 ‏ : ‎ 978-1612194196
- davidw 4y ago
  Something else to be mindful of when reading about economics is that the more centrist, middle of the road, technocrat type of stuff that underpins modern economies tends to not be all that loud on the internet, whereas you get people endorsing more fringe, absolutist theories who make a lot of noise.
  - 4y ago
hsavit1 4y ago
Why would anyone look towards the bourgeoisie Economist for advice on the how the economy works? The economist is a journal that speaks for the millionaire class
RunSet 4y ago
I recommend The Ferengi Rules of Acquisition.
jonluca 4y ago
Central Banking 101[0] is a great primer on this as well [0]: https://www.amazon.com/Central-Banking-101-Joseph-Wang/dp/0999136747/ https://www.amazon.com/Central-Banking-101-Joseph-Wang/dp/09...
orsenthil 4y ago
For those who don't have economist subscription, what were the four books mentioned in that article?
- jeffreyrogers 4y ago
  Money Creation in the Modern Economy. By Michael McLeay, Amar Radia and Ryland Thomas of the Bank’s Monetary Analysis Directorate. Bank of England Quarterly Bulletin. Q1, 2014. The Man Who Knew: The Life & Times of Alan Greenspan. By Sebastian Mallaby. The Courage to Act: A Memoir of a Crisis and its Aftermath. By Ben Bernanke. Lombard Street: A Description of the Money Market. By Walter Bagehot. The Future of Money. By Eswar Prasad. (The following two are mentioned at the end of the article) “A Monetary History of the United States, 1867-1960” by Milton Friedman and Anna Schwartz. “The Fed and Lehman Brothers: Setting the Record Straight on a Financial Disaster” by Lawrence Ball.
Sin2x 4y ago
If you wish to see a more modern approach compared to the classical monetarist one, I suggest reading those: https://www.goodreads.com/book/show/33657496-macroeconomics https://www.goodreads.com/book/show/33657496-macroeconomics https://www.goodreads.com/book/show/15794201-modern-money-theory https://www.goodreads.com/book/show/15794201-modern-money-th... https://en.wikipedia.org/wiki/Modern_Monetary_Theory https://en.wikipedia.org/wiki/Modern_Monetary_Theory
RemovedAccount 4y ago
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wonder_er 4y ago
Central Banking is a bit of a legal fiction to "legalize" otherwise fraudulent misappropriation of customers' money. Using deposits as loans is fraud, and has been recognized as fraud for a long time, until governments (and banks!) realized that if they worked together they could hide the fraud until it wasn't a problem for the people doing the fraud anymore. Fractional reserve banking is actually "fraudulent misappropriation of deposits", and in roman times, if someone's bank failed, the only way it could fail would be if illegal stuff was going on, so the banker had 1 year to make their customers whole, and if they didn't, they were beheaded in front of their banking table. (most of them would generally skip town rather than be beheaded, but it's a nice public signal about how the world feels about fraudulent banking practices) In the modern world, when someone's bank fails, they gaslight the rest of us by publishing _another_ book about how they didn't see it coming... https://mises.org/library/money-bank-credit-and-economic-cycles https://mises.org/library/money-bank-credit-and-economic-cyc...
- hammock 4y ago
  Fractional reserve banking isn’t how money is created, and loans are not made on deposits. That’s an outdated theory. Money is created simply by banks making a ledger entry (an asset and a balancing liability). Nothing more needed. Wish I had a great paper for you on this, I have seen some but blanking at the moment. Maybe a likeminded HN colleague can help out Edit: here is a decent start https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
  - wonder_er 4y ago
    I perceive that you don't agree with my frame, but it's not 'an outdated theory'. I linked to a book that explains it in great depth, not that I would expect anyone to read it. _real_ money is backed by _real_ things. What banks create when they make a ledger entry that creates new money isn't "real" money. It's fake money, but because of the fungible nature of money, their fake money gets mixed in with real money, growing the purchasing power of those who get it at the expense of reduced purchasing power of everyone else who has dollars. THAT ALL SAID! I appreciate the engagement, and my god if you wanna hash this out more I'd love a zoom call to see where we'd find "a failure to disagree". I suspect we'd agree on most things. BTW, love your username. I rode a moped from Denver to BC to Vancouver to Seattle and back, a few weeks ago, and of the 20+ days I was gone, spent 12 of them hammock camping. I love hammocks. They're perfect, in many situations.
herodoturtle 4y ago
> What to read to understand central banking To the list of books to read I'll humbly add: "The Only Game in Town" by Mohamed El-Erian. https://www.amazon.com/Only-Game-Town-Instability-Avoiding/dp/0812987306 https://www.amazon.com/Only-Game-Town-Instability-Avoiding/d...
grungy 4y ago
What happens when the root of evil is centralized?
lfaoro 4y ago
These are all the wrong books, very little truth in them. You should start by reading: The Creature from Jekyll Island by Edward Griffin.
trizuz 4y ago
frozencell 4y ago
So are the French, German and EU governments adept of Laissez-Faire?
mbrodersen 4y ago
If you talk to an “economist” and the person claims that there is only one true objective way to think about economic issues then you know you are talking to somebody who has zero clue about economics. They may sound like somebody who knows what they are talking about but the reality is that they don’t. All they are doing is to promote a specific ideology.

helsinkiandrew 4y ago

https://archive.ph/N3sLg https://archive.ph/N3sLg

noinsight 4y ago

Central Banking 101 by Joseph Wang is the obvious choice and it's not even mentioned here...

amit9gupta 4y ago
This book explains Central Banking down to the balance sheet level and makes things crystal clear.
thoughtstheseus 4y ago
This book is the best on central banking. It avoids most of the theoretical and math nonsense to plainly explain what financial markets (+Fed) are doing.

walterbell 4y ago

http://aei.pitt.edu/2812/1/079.pdf http://aei.pitt.edu/2812/1/079.pdf > The agreements finally reached at the [1944] Bretton Woods conference ... invented the International Monetary Fund and, as a subsidiary institution, the International Bank for Reconstruction and Development (or World Bank). Finally, to eliminate rival forums that might be hostile to these objectives, they advocated the destruction of the Bank for International Settlements. But almost every element of this mosaic was subsequently undermined. https://www.researchgate.net/publication/323947229_IMF_BIS_and_World_Bank_On_the_Intra-institutional_Articulation_of_the_International_Financial_System https://www.researchgate.net/publication/323947229_IMF_BIS_a... > After the end of World War II.. during the Bretton Woods Conference it was decided to abolish the BIS “at the earliest possible moment,” because it was considered that the BIS would have no useful role to play once the newly created World Bank and International Monetary Fund were operational. European central bankers held a different opinion, and successfully lobbied for maintaining the BIS.

JumpCrisscross 4y ago
If you’re trying to understand modern central banking, Bretton Woods is a bad start. As you note, it was largely dismantled. You’ll get hung up on complexities and conspiracies that went nowhere in the end. It’s like studying a non-reserve central bank to understand the Fed, gold-era banking to figure the BoE or a horse to grok an engine.
- wolpoli 4y ago
  Also, there are university economic courses and textbooks on central banking. There will be less misinformation in these official sources.
  - JumpCrisscross 4y ago
    > there are university economic courses and textbooks on central banking There are more people who would benefit from knowledge of the system than those for whom it makes sense to pursue those courses. The books suggested by the article are a good start. Anything focussing on Bretton-Woods is not.
andrepd 4y ago
It's also interesting to read about John Maynard Keynes' original Bretton Woods proposal, which was overruled by the US.

anonyme-honteux 4y ago

qxfys 4y ago

I would add Lex Fridman's conversation with Saifedean Ammous. It would at least partially serve this purpose if you don't have that much time. Be aware that Saifedean's view is strong (well, this is obvious considering his book). So, take it with a pinch of salt.

smt88 4y ago
I encourage readers to skip that interview. It's like you're saying we should learn about how the immune system works from an interview with an anti-vaxxer. Ammous is (to put it mildly) an ultra-contrarian on a variety of subjects -- central banking, money, and even climate change -- that he has no actual scientific training in. He claims Bitcoin should replace central banking and that Bitcoin is a hedge against inflation. He doesn't bother to counter the argument that these are opposing goals: a useful currency can't be deflationary. He was also proven wrong about the whole "Bitcoin is a hedge against inflation" thing when it crashed along with every other speculative asset in the last few months.
- c0brac0bra 4y ago
  As Tom Woods would say: "Only the views listed on this 3x5 index card of respectability are allowed."
  - mhh__ 4y ago
    Allowed and worth spending time listening to are not same thing.
    - timtas 4y ago
      When people take time to wave you off, it means they’re worried it might persuade you.
  - smt88 4y ago
    No one is allowing or disallowing anything. Commenting on discourse is part of discourse. If you're so thin-skinned that you think all criticism is an attempt at censorship, then perhaps the internet is not a safe space for you.

StanislavPetrov 4y ago

I think another good book to add to this list would be one that, coincidentally, Matt Taibi wrote an article about today. "The Lords of Easy Money" by (NYT best seller) Christopher Leonard gives some added perspective to this book list recommended by The Economist. It is certainly illuminating to read Ben Bernanke in his own words, but it is far from optimal to base your understanding of the FED on his own self-serving tome. https://www.goodreads.com/en/book/show/58485511-the-lords-of-easy-money https://www.goodreads.com/en/book/show/58485511-the-lords-of...

ambientenv 4y ago
Matt's interview with the author, Christopher Leonard [1] [1] https://taibbi.substack.com/p/interview-christopher-leonard-author https://taibbi.substack.com/p/interview-christopher-leonard-...

heurisko 4y ago

Positive Money has published books on how the banking system works in real life, not how it is portrayed in textbooks. https://positivemoney.org/publications/ https://positivemoney.org/publications/

notahacker 4y ago
With the significant caveat that Positive Money is actively campaigning for a completely different system [of dubious merit].
- andrepd 4y ago
  I see nothing dubious about putting the money printing machine to work on New Deal-type infrastructure and public works projects, green energy, etc., rather than using it to pump up asset prices and effectively direct transfer money to the very richer.
  - notahacker 4y ago
    You don't see anything dubious about campaigners selling a wide range of policy options based on reheated monetarism as economic panacea with a progressive slant because banks bad? You can have New Deal type infrastructure and public works projects in the existing system, or the government pumping asset prices by far more directly transferring money to the rich in a full-reserve banking "Positive Money" system. The only thing guaranteed by "positive money" is that it makes the supply of money a centralised political decision rather than a decentralised supply and demand based one, and makes retail banking even less friendly to the average person.
    - heurisko 4y ago
      A rebuttal that it is monetarism is here: https://positivemoney.org/2014/08/sovereign-money-system-monetarism/ https://positivemoney.org/2014/08/sovereign-money-system-mon...

hd4 4y ago

No mention of the Eurodollar system, probably best to ignore this. Look up Jeff Snider/Eurodollar University, he's probably the most well-researched guy on the subject. https://twitter.com/jeffsnider_aip https://twitter.com/jeffsnider_aip

rhyswallace 4y ago

Surprised not to see Secrets of the Temple listed here — a very intimate account of a few years of Volcker's time as chair. Highly recommend. https://www.amazon.com/Secrets-Temple-Federal-Reserve-Country/dp/0671675567/ref=sr_1_1?crid=2COJ03G0HVP8U&keywords=secrets+of+the+temple&qid=1662623807&sprefix=secrets+of+the+templ%2Caps%2C154&sr=8-1 https://www.amazon.com/Secrets-Temple-Federal-Reserve-Countr...

dhsysusbsjsi 4y ago

This explains it the best: https://brrr.money/ https://brrr.money/

anjanb 4y ago
I didn't understand. How do you navigate this site ?

szeptik 4y ago

Perry Mehrling's course Economics of Money and Banking https://www.coursera.org/learn/money-banking https://www.coursera.org/learn/money-banking

ipnon 4y ago
I found this to be the best introduction because it shows how every function of the money markets is a direct patch for a previous catastrophe. It balances the Wall Street view with the Ivy League view, and shows what happens when they butt heads. His book “The New Lombard Street” is more or less this course as a book, but covers more of the historical developments.
- DalekBaldwin 4y ago
  I find it to be the best introduction because it draws on material from economists of different major schools of thought without requiring the student to subscribe to any school in particular. He can do that because he focuses on the structure of the modern financial system, which is neglected or abstracted away in most mainstream and even heterodox economics literature. It makes it easy to recommend this course to anybody, because they can't say "I'm sorry, this is from the toilet-water school of economics, and I only listen to the bilge-water school."

beefield 4y ago

I've found that the best starting point understanding money and banking is understanding that all money is very literally, nothing more, nothing less than debt. Your "money at bank account"? Very fundamentally, nothing but a credible statement from the bank that they owe you the amount of money. Obviously, you do not need to have any assets in the first place to make the statement. To make it credible is a bit more difficult trick.

funklute 4y ago
> all money is very literally, nothing more, nothing less than debt This doesn't seem to work for a dollar bill in my hand though?
- z3c0 4y ago
  A dollar in your hand is "redeemable debt". It's future value that you've been promised, presumably for having prior given up something of value, like your time or some tangible good.
  - omnicognate 4y ago
    So a train ticket is money?
    - scrollaway 4y ago
      Keyword is redeemable. A train ticket is not exchangeable. But yes, products can sometimes become accidental foreign currencies when they satisfy all the key properties, even if they’re not printed by a national bank. Casino chips for example. Disney dollars. Etc.
- scatters 4y ago
  A dollar bill is just a piece of paper. You can light a fire with it, or wipe your ...uh, nose with it. What gives it value is that society has agreed that it represents a redeemable obligation to receive one dollar's worth of goods or services. That obligation is debt.

mandmandam 4y ago

Witness: 16 comments with 16 different opinions. Note that this is within the very small subsection of the population that even has any interest in how central banking works. Can we all agree at least that for something so fundamental as our central money supply, we do a pretty horrific job on making it clear and understandable - much less interesting? Side note: Why the fuck would full employment be a goal of a central bank. Talk about paperclip optimization.

mellavora 4y ago
> Why the fuck would full employment be a goal of a central bank. Talk about paperclip optimization. Agree it does not seem (at first glance) to be a reasonable policy goal for a bank, and further this mandate does not hold for all central banks. <edit> For example, the ECB does not have this mandate </edit> However, some economists believe there is a relationship between % of population "employed" and inflation. Employed in quotes because, well, see the other HN post today https://news.ycombinator.com/item?id=32738538 https://news.ycombinator.com/item?id=32738538 about the costs of caring for parents as an example of actions which create direct,large, partially measurable social benefit but don't count as 'employment'.
neilwilson 4y ago
Full employment should be the goal of the central bank, because that is really what they are discounting when they create money - the available labour hours of the population, manifested in the government's capacity to tax. That is, ultimately, the main asset on the balance sheet of the nation and arguably the underlying denomination. Humans trade by exchanging labour hours with each other.
- mandmandam 4y ago
  > ...because that is really what they are discounting when they create money - the available labour hours Can you explain how demanding full employment follows from that? I'm not seeing it. It seems that by this logic, advances in fusion energy and AI which obliviate the need for 99.9% of humans to work at all would be seen as bad. I'd call that perverse.

danuker 4y ago

The lessons from Khan Academy are some of clearest, most distilled courses I've seen. https://www.khanacademy.org/economics-finance-domain/macroeconomics/monetary-system-topic https://www.khanacademy.org/economics-finance-domain/macroec... Salman Khan, its founder, used to be a hedge fund analyst. I won't read hundreds of pages of dry economics any time soon. But maybe the books recommended in the article would be useful as a reference.

andrepd 4y ago
Especially since the textbook theories are often misleading or wrong x)

BoardsOfCanada 4y ago

The first paper mentioned, Money Creation in the Modern Economy, is available here: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...

7373737373 4y ago
One thing I'd love to read more about is how banks, larger and smaller ones, handle liquidity outflows. Do banks have to cooperate to ensure that transfers caused by loans - e.g. customers paying for equipment with a transfer to another bank - mostly net out between them and the "real money" mostly stays within the system?
- retube 4y ago
  Having worked in a GSIB Treasury I can answer this: In short banks do not co-operate, they are completely independent of each other. To manage liquidity they project all their expected outflows and inflows over a variety of time horizons under both normal and stressed conditions (capturing everything - cc purchases, drawdowns on overdrafts or other credit facilities, deposit movements and transfers, mortgages and other loans, refinancing of funding, debt issuance, staff and building costs etc etc etc, there's a huge amount of modelling behind this). Under US or UK regs Banks have to hold large liquidity buffers, in the UK this is enough to finance 2 months stressed outgoings assuming no incoming. It's pretty punitive, and runs into the 100s of billions for big banks.
  - 7373737373 4y ago
    Thank you :) Sounds like a hell of an optimization problem, since there are not only many variables to model, but also many ((risk) allocation) decisions to make! When a bank considers giving a loan, can it model where the money would/might be eventually transferred to - whether it would stay on the bank's books and thus require less liquidity to cover net outflows? I have the impression that central banks try to model national economies via "flows between large groups of actors", do commercial banks analyze/simulate this too on a (smaller) scale, to find out how not only money flows between them and other banks, but within itself too? Since accurate models would result in more profitability, is it safe to assume that banks have the best economic "world model"? When I buy groceries, I have no idea where the money ends up even in the next "step", maybe banks attempt full "network simulations"? Regarding the cooperation/net flows, wouldn't a more "symmetric" banking system be able to create more credit? https://github.com/void4/notes/issues/73 https://github.com/void4/notes/issues/73

oxff 4y ago

I wouldn't start with Economist nor theorycel material in general. The fastest I got to understand Fed was to read about their operations, observe market reactions to them and read their own research. Easy strike against starting with ad-hoc theory material is that they tend to misinterpret 2008 QE.

neilwilson 4y ago

This bit isn't correct. "The bank must settle the transaction with the vendor’s bank using reserves held at the central bank. If the borrower never repays the loan, then the bank’s reserves will not be replenished, reducing its ability to lend further." If a borrower never repays a loan, then the bank's capital is reduced (on the other side of the balance sheet from reserves) and the bank has to obtain more capital (by persuading those holding created deposits to swap them for bank bonds or shares) to maintain their risk capital ratios. Reserves have absolutely nothing to do with settling transactions. They are an optimisation of the actual process - some other entity in the banking system must take the place of the depositor in the source bank if a cross bank payment is to be made. International transactions via correspondent banking don't use reserves. They use direct bank to bank mirror transactions. It would be far better if we forgot about reserves altogether [0]. They weren't even a thing in the UK until 2005. [0]: http://www.bondeconomics.com/2022/09/bank-reserves-demystified.html http://www.bondeconomics.com/2022/09/bank-reserves-demystifi...

danuker 4y ago
> It would be far better if we forgot about reserves altogether Is this different from setting the maximum risk to capital ratio to infinity? If not, won't we have worse cycles of mania and panic? And what would stop banks from eating the world, through unfettered debt creation?
- MagnumOpus 4y ago
  It is different. Capital requirements (usually something like "a minimum of 10% of the bank's balance sheet has to be funded by equity or deferrable bonds") are far more important to a bank than reserve requirements: - if bank capital is too high, return-on-equity is lower for a given amount of profit. Hence shareholders don't want too-high capital - if bank capital is too low (from too many non-performing loans) then the bank will need recapitalisation which is expensive and bad for shareholders, and if it can't get that, it will be wiped out (either lose its licence or get bought out/nationalised/gutted) So banks are incentivised to not create debt that is too-risky -- i.e. where the ratio of potential non-performing loans is too high for the interest rate they lend at, or the interest rate of raising expensive additional capital would get too high... Reserve requirements are about liquidity (bank runs) rather than about solvency - but if bank capital can be ensured to be positive and the bank remains solvent, bank runs are much less likely in the first place, and liquidity provision and bailouts to avoid bank runs won't incur losses for the rescuing entities.

iamnotsure 4y ago

https://web.archive.org/web/20140825140626/http://library.mises.org/books/Jesus%20Huerta%20de%20Soto/Money,%20Bank%20Credit,%20and%20Economic%20Cycles_Vol_4.pdf https://web.archive.org/web/20140825140626/http://library.mi...

Proven 4y ago

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eraad 4y ago

This is the clearest explanation from an engineering point of view: https://bitcoin.org/bitcoin.pdf https://bitcoin.org/bitcoin.pdf

ibz 4y ago
Indeed, once you understand that you also understand the opposite - central banking and CBDCs. It's two opposite worldviews which lead to two very different definitions of money.
- once_inc 4y ago
  Both Central Banking and CBDCs lead to the same outcome though; reduced personal liberties (privacy and economic freedom), and increased interference of the state with its constituents and the macro economy (skewing incentives through centralizing forces).

amit9gupta 4y ago

For understanding the origins of Central Banking, highly recommend: The Creature from Jekyll Island: A Second Look at the Federal Reserve by G. Edward Griffin

christophilus 4y ago
Excellent recommendations. There’s a good podcast that analyzes the Fed (and other things) in a somewhat critical light without getting sidetracked by conspiracy theories the way many such things do: Eurodollar University My description doesn’t do it justice. It really is a thorough and informative podcast.
- janandonly 4y ago
  Excellent tip indeed :-) I remember hearing Jeffrey Snider explain all this stuff, and I had to listen more than once just to grok it all. Very educational. Free to listen here: https://www.macrovoices.com/edu https://www.macrovoices.com/edu
  - hd4 4y ago
    Glad I'm not the only one mentioning Snider/Eurodollar University and that people are noticing his work. Everyone "noticing" the Eurodollar market may bring about the biggest shift in modern economics.
throw0101c 4y ago
> The Creature from Jekyll Island Please, no. The author has a very loose attachment to reality: > In his book World Without Cancer, he argued in favor of a pseudo-scientific theory that asserted cancer to be a nutritional deficiency curable by consuming amygdalin.[1][2][3] He is the author of The Creature from Jekyll Island (1994),[1] which advances debunked conspiracy theories[4] about the Federal Reserve System. He is an HIV/AIDS denialist, supports the 9/11 Truth movement, and supports the specific John F. Kennedy assassination conspiracy theory that Oswald was not the assassin.[1] He also believes that the Biblical Noah's Ark is located at the Durupınar site in Turkey.[5] * https://en.wikipedia.org/wiki/G._Edward_Griffin https://en.wikipedia.org/wiki/G._Edward_Griffin

f0e4c2f7 4y ago

None of these books seem like they would explain central banking. Some of them were even written before our modern system of central banking. I enjoyed this textbook on the topic for a ground up explanation to a lay person. https://www.amazon.com/Central-Banking-Sustaining-Financial-Stability/dp/1118832469 https://www.amazon.com/Central-Banking-Sustaining-Financial-...

roenxi 4y ago

The frame here is unrealistic - the central bankers aren't like a court or parliament with long public traditions and well-defined, difficult to change procedures. They don't deal in issues that the public understands. Their activity is relatively opaque (maybe they even have secret activities, we wouldn't necessarily know). There is no guarantee of procedural stability year-to-year. Every crisis the way central banking works changes. Before & after 2008 central banks became different beasts, for example. They keep changing their methods. A published book can't keep up with that central banking 'is'.

ghastmaster 4y ago

The speaker in the video below gives an very insightful presentation of the federal reserve bank. He explains why it exists and how it works at a basic level; all in a non partisan way. "A Look Back at the History of the Federal Reserve (2013)" https://m.youtube.com/watch?v=5IHzAcKIRHw https://m.youtube.com/watch?v=5IHzAcKIRHw Richmond Fed President Jeffrey M. Lacker discussed Federal Reserve history at Christopher Newport University on Aug. 29 in Newport News, Va.

janandonly 4y ago
Thanks a lot for sharing this usefull resource ;-)

0x08 4y ago

How is no one mentioning the Fed's book Modern Money Mechanics? https://upload.wikimedia.org/wikipedia/commons/4/4a/Modern_Money_Mechanics.pdf https://upload.wikimedia.org/wikipedia/commons/4/4a/Modern_M... Then there is the accounting system the Federal Reserve uses: FAM: https://www.federalreserve.gov/aboutthefed/financial-accounting-manual.htm https://www.federalreserve.gov/aboutthefed/financial-account...

janandonly 4y ago
Thanks a lot for sharing these resources ;-)

janandonly 4y ago

I'm currently writing a book about modern forms of money, and it so happend that I just read the first paper that is mentioned in this article: > Money Creation in the Modern Economy. By Michael McLeay, Amar Radia and Ryland Thomas of the Bank’s Monetary Analysis Directorate. Bank of England Quarterly Bulletin. Q1, 2014. It's a very accessibly written paper, not much "dry theory" at all. The previous paper of the same team is also a must-read in my opinion. > https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-in-the-modern-economy-an-introduction

spiralx 4y ago
Also their paper on money creation specifically: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
fiat_fandango 4y ago
Any way to track your progress of your book / pre-order to support your work? Even with a maths and engineering background it's hard to keep up / know where I need to read to understand what's going on at a macro level with the US FED / monetary policy in general. I've found that reading more usually leads to more productive conversations with my financial advisor. (before folks come out of the wood-work to tell me I'm getting fleeced, the advisor is a family friend - I hold all of my investments with an online broker not the advisor)

snshn 4y ago

1984 by George Orwell

snshn 4y ago

The Communist Manifesto Book by Friedrich Engels and Karl Marx

hsavit1 4y ago
or even Capital volume 1 by Marx. You can't understand the economy without understanding the labor theory of value and primitive accumulation of capital
tharne 4y ago
Agreed. Understanding what "not to do" is often times more important than understanding how to do something well. Avoiding communism and poverty, and the human misery, poverty and 6 and 7-figure death tolls that so often come with it is far more productive than getting a certain economic or policy lever "just right". This is similar to health where avoiding things like smoking are more important than finding the perfect diet.
- snshn 4y ago
  It's way worse than you think. Central banking is a Marxist invention, he was all for it. It's not coincidence that many globalists today worship his ideas and have Lenin's busts in their offices (e.g. Klaus Schwab does). Listen to Audiobooks and podcasts of/with Robert Kiyosaki, he talks about it in great detail. The goal of communism is one-world govt, you have to have central banking system for that to be in place.
  - hsavit1 4y ago
    lmao, anyone who recommends listening to a Robert Kiyosaki podcast is a total clown. He TWICE co-"authored" books with Donald Trump on how to get rich quick - all you need to know on how little credibility he has.
    - snshn 4y ago
      I'm not a clown. And it's a bit odd to dismiss somebody completely by citing just one thing, very childish. Robert understands how money works today, knows a ton about the banking system. Both him and Donald Trump are wealthy and successful, and besides getting rich quick has worked many times for many people (including many who use this site: the dotcom boom, crypto, NFTs, etc) — if you have no ability to figure out how to play certain games, that's another discussion.

sudden_dystopia 4y ago

Ron Paul

rvba 4y ago

How do central banks clear things with each other? Say "Bank of USA" emits physical and electronic dollars, then those dollars flow to Japan for some goods. Can the central bank look at every way those dollars went to Japan (some small part in physical way, much bigger part by moving through multiple clearing houses). How does the central bank then trust the other central bank? "We received 1 billion in paper dollars and 100 billion in electronic transactions". Also, how can "Bank A" from say Germany, trust "Bank B" from say some less reputable country that those underlying "electronic" dollars even exist? The settlement company supposedly checks this somehow, but how? If "Bank B" moves 100 million to "Bank A", then were is that 100 million in a physical way, if all of that is just electronic money created via lending. How can you know that the "Bank B" didnt just print 200M and use it to pay for something in Bank A. Among the same country, there is some central institution that looks on that (e.g. all banks in EU are audited by EU). But what about cross border transactions. How can you know that those 100M dollars paid to you are actual 100M dollars and not just some fake line? Does your bank have "anything" apart from a line in a database that said that you received 100M from the other bank? And also what is the incentive for the other bank to not "create" a bit money "on the side" to import stuff to your country. Every time I try to search about any clearing houses I just land up on the "Clearstream scandal" wikipedia page. Same for the recent "naked short" theory, where you basically land on the articles about DTCC, but without any information "how the sausage is made".

tarunmuvvala 4y ago

https://www.youtube.com/c/FREENVESTING https://www.youtube.com/c/FREENVESTING This channel just points to doomsday of the central banking fund. I am curious on the counter point people can put against the prediction they are giving out.

Temporary_31337 4y ago

Just understand that CBs only influence the demand side of the economy- ie how easy/ cheap it is to get money. If the crisis is supply side, all they can do is constrain money supply so people can’t afford the scarce resources anymore.

zhte415 4y ago
The interest rate is the return on capital as much as it is the cost. They are two sides of the same coin. Which is why persistent low interest rates are bad: money may be 'cheap' but the return on capital is low.

sylware 4y ago

The currency system is said to be a "less worse" system to organize civilization, accounting for many facets of human nature (the lazy, the hard working, the essential and non-essential, etc). The way I see that is, it is a dangerous utopia (same grade than the soviet utopia) to think that currencies will flow well enough to give all households a decent living, and that only based on the "supply and demand" rule. Actually, that would be madness. What people tend to forget about currency systems: it is a set of rules made by human beings, enforced by human beings, certainly not a force of mother nature. It seems those human beings are very discret and very few, but their networks seem complex (a good start is the blackrock and vanguard funds which drive much tech industry via "their" directors). In "tech", those currency systems are extremely toxic, and they push this toxicity upon nearly the entire world: planned obsolescence and Rube Goldberg Machines (network protocols and software mostly). Why? Because, huge parts of the tech industry cannot justify __fairly__ a sustained activity. Then, rotten people do setup those previously cited "tech" scams. This is accute toxicity for the entire world. That is expected to be strongely regulated... which will bring its own set of issues, but on the overall I believe we'll get much less toxicity... because the current state is just... omg.

deleted 4y ago

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jimcavel888 4y ago

uticus 4y ago

Understanding central banking, like so many other things, also means understanding philosophies, worldviews, perceptions, and outlooks. And goals. Especially goals. So yes, read. But my advice: read widely, not naively, because economic theory looks like math from the shoreline but it tastes and feels like philosophy when you dive in. Fun starting point: learning about the different "schools" of economic thought: https://en.wikipedia.org/wiki/Schools_of_economic_thought https://en.wikipedia.org/wiki/Schools_of_economic_thought

stevievee 4y ago
I love how you worded your advice here and I agree this is the best approach because macroeconomics is a "social science". Everything you hear and understand about central banking as it exists today is just part of the prevailing school of economic thought. It is not the only way forward and many would argue it is not even the best way forward (but we are always led to believe it is)
connectsnk 4y ago
You worded it very well. Any suggestions on understanding the “goals” part of modern central banking?
- orangepurple 4y ago
  Debt: The First 5000 Years ASIN ‏ : ‎ 1612194192 Publisher ‏ : ‎ Melville House; Updated, Expanded edition (October 28, 2014) Language ‏ : ‎ English Paperback ‏ : ‎ 560 pages ISBN-10 ‏ : ‎ 9781612194196 ISBN-13 ‏ : ‎ 978-1612194196
davidw 4y ago
Something else to be mindful of when reading about economics is that the more centrist, middle of the road, technocrat type of stuff that underpins modern economies tends to not be all that loud on the internet, whereas you get people endorsing more fringe, absolutist theories who make a lot of noise.
- 4y ago

hsavit1 4y ago

Why would anyone look towards the bourgeoisie Economist for advice on the how the economy works? The economist is a journal that speaks for the millionaire class

RunSet 4y ago

I recommend The Ferengi Rules of Acquisition.

jonluca 4y ago

Central Banking 101[0] is a great primer on this as well [0]: https://www.amazon.com/Central-Banking-101-Joseph-Wang/dp/0999136747/ https://www.amazon.com/Central-Banking-101-Joseph-Wang/dp/09...

orsenthil 4y ago

For those who don't have economist subscription, what were the four books mentioned in that article?

jeffreyrogers 4y ago
Money Creation in the Modern Economy. By Michael McLeay, Amar Radia and Ryland Thomas of the Bank’s Monetary Analysis Directorate. Bank of England Quarterly Bulletin. Q1, 2014. The Man Who Knew: The Life & Times of Alan Greenspan. By Sebastian Mallaby. The Courage to Act: A Memoir of a Crisis and its Aftermath. By Ben Bernanke. Lombard Street: A Description of the Money Market. By Walter Bagehot. The Future of Money. By Eswar Prasad. (The following two are mentioned at the end of the article) “A Monetary History of the United States, 1867-1960” by Milton Friedman and Anna Schwartz. “The Fed and Lehman Brothers: Setting the Record Straight on a Financial Disaster” by Lawrence Ball.

Sin2x 4y ago

If you wish to see a more modern approach compared to the classical monetarist one, I suggest reading those: https://www.goodreads.com/book/show/33657496-macroeconomics https://www.goodreads.com/book/show/33657496-macroeconomics https://www.goodreads.com/book/show/15794201-modern-money-theory https://www.goodreads.com/book/show/15794201-modern-money-th... https://en.wikipedia.org/wiki/Modern_Monetary_Theory https://en.wikipedia.org/wiki/Modern_Monetary_Theory

RemovedAccount 4y ago

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deleted 4y ago

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wonder_er 4y ago

Central Banking is a bit of a legal fiction to "legalize" otherwise fraudulent misappropriation of customers' money. Using deposits as loans is fraud, and has been recognized as fraud for a long time, until governments (and banks!) realized that if they worked together they could hide the fraud until it wasn't a problem for the people doing the fraud anymore. Fractional reserve banking is actually "fraudulent misappropriation of deposits", and in roman times, if someone's bank failed, the only way it could fail would be if illegal stuff was going on, so the banker had 1 year to make their customers whole, and if they didn't, they were beheaded in front of their banking table. (most of them would generally skip town rather than be beheaded, but it's a nice public signal about how the world feels about fraudulent banking practices) In the modern world, when someone's bank fails, they gaslight the rest of us by publishing _another_ book about how they didn't see it coming... https://mises.org/library/money-bank-credit-and-economic-cycles https://mises.org/library/money-bank-credit-and-economic-cyc...

hammock 4y ago
Fractional reserve banking isn’t how money is created, and loans are not made on deposits. That’s an outdated theory. Money is created simply by banks making a ledger entry (an asset and a balancing liability). Nothing more needed. Wish I had a great paper for you on this, I have seen some but blanking at the moment. Maybe a likeminded HN colleague can help out Edit: here is a decent start https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
- wonder_er 4y ago
  I perceive that you don't agree with my frame, but it's not 'an outdated theory'. I linked to a book that explains it in great depth, not that I would expect anyone to read it. _real_ money is backed by _real_ things. What banks create when they make a ledger entry that creates new money isn't "real" money. It's fake money, but because of the fungible nature of money, their fake money gets mixed in with real money, growing the purchasing power of those who get it at the expense of reduced purchasing power of everyone else who has dollars. THAT ALL SAID! I appreciate the engagement, and my god if you wanna hash this out more I'd love a zoom call to see where we'd find "a failure to disagree". I suspect we'd agree on most things. BTW, love your username. I rode a moped from Denver to BC to Vancouver to Seattle and back, a few weeks ago, and of the 20+ days I was gone, spent 12 of them hammock camping. I love hammocks. They're perfect, in many situations.

herodoturtle 4y ago

> What to read to understand central banking To the list of books to read I'll humbly add: "The Only Game in Town" by Mohamed El-Erian. https://www.amazon.com/Only-Game-Town-Instability-Avoiding/dp/0812987306 https://www.amazon.com/Only-Game-Town-Instability-Avoiding/d...

grungy 4y ago

What happens when the root of evil is centralized?

lfaoro 4y ago

These are all the wrong books, very little truth in them. You should start by reading: The Creature from Jekyll Island by Edward Griffin.

trizuz 4y ago

frozencell 4y ago

So are the French, German and EU governments adept of Laissez-Faire?

mbrodersen 4y ago

If you talk to an “economist” and the person claims that there is only one true objective way to think about economic issues then you know you are talking to somebody who has zero clue about economics. They may sound like somebody who knows what they are talking about but the reality is that they don’t. All they are doing is to promote a specific ideology.