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Some observations on Mehrling’s latest, which uses monetary flux and reflux or, in Graziani’s terms, “initial” and “final” finance, to consider some recent and historical monetary debates. 1/ https://www.ineteconomics.org/uploads/papers/WP_113-Mehrling-Payment-vs-Funding.pdf
@PMehrling notes that by abstracting from initial finance and focusing only on final balance sheet positions, Tobin excluded the elasticity of payments from analysis. Tobin’s target was Friedman, but there was Keynesian collateral damage. 2/
The initial/final finance distinction (framed as finance/funding) is also used by @SawyerMalcolm in his critique of MMT 3/. http://www.paecon.net/PAEReview/issue89/Sawyer89.pdf
While @PMehrling notes that the flux/reflux principle applies to government fiat money, @SawyerMalcolm argues that MMT focuses on initial finance while paying insufficient attention to the issue of funding (not least in an open economy setting). 4/
I use the initial/final financing distinction in my critique of @DanielaGabor “shadow money” approach: in symmetry w/ MMT, this focuses on funding (final balance sheet positions) but, like Tobin, elides flux and reflux and thus abstracts from financing /5 https://www.researchgate.net/publication/308746216_Do_Shadow_Banks_Create_Money_'Financialisation'_and_the_Monetary_Circuit
Some critics, eg @JulienNoizet , object to the terminology of “funding” because it doesn’t match the usage when discussing individual balance sheets.
@PMehrling’s balance sheet examples illustrate that the endogenous money view is correct, as is the “funding” terminology. 6/
@PMehrling’s balance sheet examples illustrate that the endogenous money view is correct, as is the “funding” terminology. 6/
When you are accept a bank deposit in payment, you are “financing” that bank — and the banking system as a whole. As long as someone is willing to continue holding that deposit, they are also effectively “funding” the banking system. Banks — collectively — are “self-funding”. 7/
This is why the critique by @_LukasFreund_ misses the mark — it is not critiquing the analysis described by @PMehrling. 8/ https://voxeu.org/article/banks-do-not-create-money-out-thin-air
