Odd Lots Perry Mehrling Explains Why "The Money View" Is Key To Understanding Financial Markets
Jan 27, 2020
Perry Mehrling, a Professor of International Political Economy at Boston University, advocates for 'The Money View,' positioning money as central to understanding financial markets. He discusses how this framework clarifies the repo market's complexities and the inherent weaknesses in conventional economic theories, particularly during the 2007-2009 financial crisis. Mehrling critiques the shadow banking system's impact on stability and emphasizes the critical role of central banks in managing dollar dynamics amidst global tensions.
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Money View Defined
- The Money View emphasizes money as a means of settlement, unlike traditional economics.
- It focuses on the interlocking balance sheets and promises to pay within the economy.
Beyond Barter
- Mainstream economics often views money simply as lubricating a barter system.
- The Money View argues that our lives revolve around meeting financial obligations, not exchanging goods.
Dealer Function
- Traditional economics overlooks the crucial role of dealers in asset pricing.
- The Money View highlights the dealer function, along with the settlement constraint, as central to understanding markets.