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Edited by Hassan Bougrine and Louis-Philippe Rochon

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Jan Toporowski

Marc Lavoie and Mario Seccareccia have, together with John Smithin, been leading voices in recent discussions on monetary theory. Among Post-Keynesians they have stood out for their willingness to engage with the rapid evolution of policy, in the wake of the financial crisis of 2008, and for their creative approach to the doctrines of Post-Keynesian analysis. This chapter is therefore dedicated to them formally as well as in the sense that it presents a view of financial crisis that, in many respects, complements their original insights. There are few monetary economists today who doubt the idea that the supply of money is endogenous. That the number of such doubters is so reduced is, in good measure, due to the compelling case for endogeneity that has been put forward by the Canadian Post-Keynesians. The banking and financial crisis, however, stands out as something of an anomaly in this approach to monetary theory: if money, or credit, is generated by processes inherent in the functioning of the credit system according to need, then, by definition, a financial crisis cannot arise because of a shortage of credit. Such crises must be because banks refuse to lend as much as is necessary, or because of some disturbances in the price mechanism (a fall in asset prices, or a fall in the rate of profit in relation to the rate of interest).

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Louis-Philippe Rochon and Hassan Bougrine

The names of Marc Lavoie and Mario Seccareccia have been associated with one another for well over four decades, during which time they made important contributions to post-Keynesian economics in general, but have also been associated with an array of more specific topics, including the theory of the monetary circuit, economic growth, fiscal policy, monetary policy/theory and endogenous money, growth theory, and microeconomics, among others. Individually or together, they contributed a vast arsenal of both critical and constructive papers and books: close to 300 journal and book articles, as well as a number of books, authored and edited, including the Canadian version of the American micro–macro textbook by Baumol and Blinder (see Baumol et al., 2009a; 2009b). Throughout their long and distinguished careers, their contributions have pushed post-Keynesian and heterodox economics in many interesting and fruitful directions, and they have influenced a number of scholars as well as students around the world. Steadfast in their criticism of neoclassical – or orthodox or mainstream – economic theory, as well as their rejection of mainstream policies, in particular fiscal austerity and fine-tuning monetary policy, Lavoie and Seccareccia have shared a vision of a more real-world view of economics, where institutions mattered.

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Edited by Louis-Philippe Rochon and Hassan Bougrine

In this volume, Louis-Philippe Rochon and Hassan Bougrine bring together key post-Keynesian voices in an effort to push the boundaries of our understanding of banks, central banking, monetary policy and endogenous money. Issues such as interest rates, income distribution, stagnation and crises – both theoretical and empirical – are woven together and analysed by the many contributors to shed new light on them. The result is an alternative analysis of contemporary monetary economies, and the policies that are so needed to address the problems of today.
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Edited by Hassan Bougrine and Louis-Philippe Rochon

Hassan Bougrine, Louis-Philippe Rochon and the expert contributors to this book explore issues of economic growth and full employment; presenting a clear explanation to stagnation, recessions and crises, including the latest Global Financial Crisis of 2007-8. With a central focus on the role played by government spending, deficits and debt as well as the setting of interest rates, the chapters propose alternative policies that can be used by central banks and fiscal authorities to deal with problems of income inequality, unemployment and slow productivity.
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Edwin Le Heron

Money is an institution that can only function when it perfectly manages the relationship between sovereignty and confidence. The foundation of this monetary relationship can focus on two directions: either a top-down process based on sovereignty so as to justify public confidence in the money; or a bottom-up process starting from building confidence through coordination and learning among individuals to explain the organization of a sovereign monetary authority. Starting from the three hierarchical levels of confidence (methodical, hierarchical and ethical) highlighted by Michel Aglietta and André Orléan (2002), the first process emphasizes the importance of a sovereign political power as the foundation of confidence and multiplies the rules and norms necessary for methodical confidence, while being a guarantor of the social values in the monetary compromise issuing from ethical confidence. The monetary order is based on the exercise of hierarchical political power from top to bottom. Money thus becomes a ‘total social fact’ (Simmel quoted in Aglietta, 2008, p. 4).

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Edited by Louis-Philippe Rochon and Hassan Bougrine

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Edited by Hassan Bougrine and Louis-Philippe Rochon

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Thomas Ferguson, Paul D. Jorgensen and Jie Chen

For months the suspense built up. By the late Spring of 1987, the initial trickle of anxious conjectures had swollen into a raging torrent of speculation and suspicion. On 2 June 1987, the worldwide guessing game came at last to an end: the White House announced that President Reagan would nominate Alan Greenspan to replace Paul Volcker as Chair of the Federal Reserve Board. Markets reacted with shock: ‘the news stunned the financial markets, which had come to regard a third term for Mr. Volcker as highly probable. Bonds finished with one of the biggest losses on record, and the dollar tumbled’ (Hershey 1987). At the time, the official story was that Volcker had indicated in a lette that ‘he did not wish to be reappointed after eight years in the job’. Even then many doubted that was the whole truth: ‘It appeared that White House efforts to persuade Mr. Volcker to remain were minimal. It is understood that Mr. Volcker would have accepted a reappointment to the post if the President himself had urged him to do so. But no such effort was made’.

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Claude Gnos and Sergio Rossi

The nature and role of money are a subject that inflames academics, not only within the economics profession but also in the social and political sciences, as well as in theology and philosophy. A number of scientists have been attracted by the study of money, and of its essence in particular, as Ingham (2004) shows with painstaking detail with respect to sociology. Yet, as Schumpeter (1954/1994, p. 289) noted long ago, ‘views on money are as difficult to describe as are shifting clouds’. In spite of two centuries of monetary economics, it is indeed no exaggeration to claim that ‘the definition of money can still be regarded as an almost unresolved issue’ (Bofinger, 2001, p. 3). As a matter of fact, although money has been fully dematerialized and its linkage to any physical yardstick has been abandoned everywhere, several economists and the general public still think of it as a thing that is somehow comparable to real goods and financial assets. This conception derives from the idea that today’s bank money is a refinement of commodity money, which most economists consider indeed as a commodity. This view is the result of a time-honoured representation (see, notably, Menger, 1892; Brunner and Meltzer, 1971), according to which money is a medium of exchange – particularly in the form of a commodity – subdividing trade into two separate transactions, with real goods and/or (productive) services being exchanged for money and subsequently money for goods, as depicted by Clower (1967). In this story, even paper and bank monies are considered as (immaterial) goods or financial assets, whose quantity is exogenously determined by monetary authorities. This view also affected the Bretton Woods conference in 1944 and then all the political discussions on reforming the international monetary regime after the US dollar standard collapsed in the early 1970s. It has survived to, and is still well alive in, the present days of financial globalization and capital account liberalization. As such, it continues to affect the current policy debate on how to design an international monetary regime in order to limit, if not to avert, the occurrence of other financial crises in the future. In fact, it should be noted that central bankers have recently come round to the endogenous view on money, without, though, giving up the conventional view as regards the nature of money (see Rochon and Rossi, 2013; McLeay et al., 2014). This is so much so that both national and international monies are considered as media of exchange and, hence, as objects of trade, for which there exists a supply and a demand on the market place – be it the money or the foreign exchange market.