Explanations by Great Economists
Edited by G. Page West III and Robert M. Whaples
Chapter 2: Insights from Walter Bagehot
My first book, The Money Interest and the Public Interest: American Monetary Thought, 1920–1970 (1997) is a history of monetary economics. My second book, Fischer Black and the Revolutionary Idea of Finance (2005) is a history of financial economics. Those two topics come together in my talk today on insights from history for today’s trying economic times – and in my third book, The New Lombard Street: How the Fed Became the Dealer of Last Resort (2011). The connection between the two topics is what the recent crisis has been all about – the interaction of the capital markets and the money markets, how they got intertwined, and how that came unglued in the crisis. And we are still gluing it back together. I have been teaching money and banking at Barnard College at Columbia University for 15 years and a lot of my students actually work in the money markets, or down at Goldman Sachs, or somewhere like that. When I first started teaching it, I found that there was a big disconnect between the lives the students were experiencing and what was in the textbooks. So eventually I got rid of the textbooks. I started teaching The Money Market by Marcia Stigum (1989), which is a desk reference for people who trade in the repo market and other money markets.
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