Money Matters: There is No Such Thing as a Money 'Supply'
Monetary literature remains plagued by references to money “supply” at a time when the endogeneity of money is becoming generally accepted. Money endogeneity is not a hypothesis; it is a fact, and one that has existed since a goldsmith-banker wrote out the first receipt (bank note) and handed it to a borrower (as opposed to a depositor of gold coins). The creation of money has always been endogenous, even under the Friedman-Schwartzian Monetarist fixed-money-rule model. Once this is accepted, then it is logical to refer to the quantity or stock of money, and to the supply of bank credit. The household, corporate and government sectors borrow from banks to consume (C) or invest (I), which are the major components of nominal GDP [C + I + net exports (= aggregate demand, AD)]. Domestic credit extension (DCE) thus represents the link between the monetary and real economies. Money creation is the outcome of the change in DCE; the latter, not the change in M, approximates the change in AD (there are other influences). The essence of monetary policy is that the central bank controls the (reference) prime lending rate (PR) of banks via its policy interest rate (PIR), and thereby the demand for bank credit. It controls PR in normal (ie non-QE) times by manipulating the liquidity of banks to a borrowed reserves condition (actual, close to, or threat of), in order to make the PIR effective. The causation path is clear.
Money Creation: The Sources
The endogenous-exogenous money debate is a futile one. Exogenous money creation, based on the money multiplier, is not a money creation process. Rather, it is a monetary policy model, but in it money is still created endogenously: bank loans (and foreign asset accumulation by banks) concurrently create new bank deposits (money). This simple fact is obscured by the powerful thesis of Friedmanian Monetarism, and the sharp antithesis of the Post-Keynesian School, as, therefore, is the simple balance sheet analysis of money creation (which disappeared from the literature). This article argues the above, and resurrects the straightforward balance sheet monetary analysis, as the only way to present the sources of money creation. It elucidates the balance sheet sources, as well as the underlying actual sources: the demand for loans (and their satisfaction), and bank decisions regarding foreign asset accumulation. It also covers money destruction.
Testosterone levels, handedness and sex ratio at birth.
Geschwind has hypothesized that levels of androgens in utero affect postnatal laterality preferences, high levels being associated with left-handedness of offspring. I have hypothesized that high parental androgen levels at the time of conception are associated with subsequent male births. However, left-handed parents seem to produce an excess of female, not male, offspring. This finding could be reconciled with the two hypotheses if individuals who were exposed to high levels of androgens in utero had low circulating levels in adulthood. Some evidence for this loophole is reviewed here. Lyster & Lloyd (1987, J. theor. Biol. 126, 125) have reported that (consistent with the hypotheses) index left-handed men have an excess of brothers; but, contrary to the hypotheses, index left-handed women have an excess of sisters. Accordingly these authors proposed that left-handedness in females is associated not with high levels of androgen in utero, but with a "sensitivity" to it. If such sensitivity were associated with low androgen levels, it might explain an excess of sisters among the sibs of left-handed women. It is shown here that evidence in agreement with this hypothesis (though not discriminating between it and Geschwind's) suggests that the sex ratios of offspring of LH male x RH female and of RH male x LH female matings, are both low.