Economic commentary on margin monitoring, macro theory, and omnibus funds

even in 2008 and the flash crash of 2013. Short legs have been protected without fail, and long legs have got what they bargained for. The reason is that margin sufficiency is monitored from tick to tick. Checking every few seconds doesn’t rule out every doomsday scenario, but gives about as much confidence as we're going to find in this uncertain world. Saltwater and freshwater schools debate the wisdom of fiscal and monetary policy. But both sides frame their arguments in Keynesian language. | find it wanting. The idea that intended consumption is either invested or not, and realized in equal capital growth if it is, misses the essential mechanics. It measures employment of plant and people in hours rather than in production. This is a good reason why macro should start again from scratch. Another is to recast its basis equations in terms of market-valued capital as well as flows. Another is to accommodate human capital, for example by substituting the pay and Y rules for the doctrines that pay measures work and that output is investment plus consumption. None of those good reasons refers to the possibility of omnibus funds. They are only a gleam in my eye. If they come to pass, and succeed as | imagine, macro will have still more novelty to digest. If they lead to devolution into separate deposit and lending banks, with the deposit banks operating as omnibus funds, good riddance to the 10:1 leverage that has brought down economies every generation or so since Marco Polo’s time. The lagged flow method of assessing efficacy of ex ante investment is outdated by the simultaneous rates one outlined in Chapter 4. It should go to honorable retirement whenever market-valued capital is available. It superimposes the inevitable unintended lag of accounts themselves, even under best practices, onto the intended one needed for the new tree planted to bear fruit. Both lags blur causality. Chapter 8 Banks, Money and Macroeconomics 2/8/16 26 HOUSE_OVERSIGHT_011115