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So with a suitably provocative title I think we can declare 2012 open.

So with a suitably provocative title I think we can declare 2012 open.

A correspondent sends us to a column of Paul Krugman’s that asserts that “nobody understands debt”. Fair enough.

When I started this blog, almost exactly one year ago today, my thought was to provide commentary on the financial events of the day, using the Financial Times as my primary source of information about those events.

As we prepare to digest the implications of this week’s ECB move, it seems worthwhile to take a look at the monetary economics of fixed exchange rates.

[The following guest post is by John Whittaker, from whom we have learned much of what we know about how the European payments system works. See his terrific papers here and here, both of which reward close study. He has been looking over the last couple Money View posts, and the comments to those posts, and has this to say.]

Why is the IMF getting involved in the Eurocrisis, and why is its involvement taking the form of lending to individual member states of the Eurozone?

The ECB has always been the protagonist of the eurozone crisis story.

The fact of the matter is that European bank funding markets are collapsing onto the ECB balance sheet.

My friend read somewhere that the experience of death makes people think in philosophical terms. He might have thought of religion rather than philosophy, I replied. We agreed, and wandered off talking about our crypto-religious experiences in good old secular Europe.

Bloomberg’s reporters continue their diligent work looking back on the Fed’s lending in the subprime crisis.

Europe is embarked on a grand experiment, managing modern financial crisis without a dealer of last resort, so refusing to follow the lead of the 2008 Fed.

On November 2nd, I was sitting in the Hayden Library Special Collection reading room at MIT, browsing archives on the undergraduate and graduate students’ discontent during the early 70s and the response of the economics department faculty.

Amid mass unemployment and economic turmoil, instructors who lecture on the superiority of free markets without acknowledging the dysfunction in the wider economy are at risk of appearing out of touch and exacerbating antipathy towards economics.

INET published a paper, written by John Kay, that deals with the relationship between economics and the world we live in. The Map Is Not the Territory: An Essay on the State of Economics spells out methodological critiques of economic theory in general, and of DSGE models and rational expectations in particular.