Macroeconomics

Greenwich University
Lecturer:Dr Jeff Powell
BSc Econ
Macroeconomics 1; Money, banking and finance
13/2/2023


ADMIN ANNOUNCEMENTS
 You should have received an optional module selection email stating that the period
for you to select modules for next year is open till 17th March, using student record
systems
 He completed an online session last week where he explained which modules to
select and this is on the progamme Moodle page on your dashboard
 See Moodle page also for details of the programme, handbooks for the module
options and in some cases introductory videos from staff
 Make sure you have all the info you need- look at the info he has provided and talk
to second year students re the modules they preferred + speak to the module
leaders too
 He wants to make sure people are in the modules they want to be in to avoid
confusion later. He prefers that people stay in the modules they have chosen.
 Strikes- Tues Wed and Thursdays this week.
 Next week was to have been set aside for guided learning essay work but instead he
he’ll deliver a lecture on monetary policy instead
 Inez- is offering extra essay support to individuals or in small groups- this Friday and
next Monday. If not received an email, please contact her asap.
 Time is running short on essays>you need to be finishing your draft as soon as
possible for exchanging with others in your group
 Essay is to be submitted on the 24th February
LECTURE -MACROECONOMICS 1 :MONEY BANKING AND FINANCE
 News article; an example of how monetary policies are underappreciated. Last year
inflation starting to rise/increase in interest rate
 Andrew Bailey Governor Bank of England stated that workers needed to accept that
their wages can’t keep up with inflation. Question from public- why should workers’
wages not keep up with inflation?
 Article – reminds us that prices are made up of various components- input
costs(partially labour costs),labour cost wages in production of goods and profit
margin. Article states that workers have to pay for inflation and capitalists ( owners
don’t and argument is still continuing
 Empirical work last year indicates that workers are paying the cost of inflation –
wages flatlined though profits are being maintained
 Article raises the distributional question around inflation and notes that energy
price rises are driving inflation
 Bailey- lets slip the assumption of standard monetary policy that interest rate rises
leads to unemployment so workers will moderate their wage requests

, Greenwich University
Lecturer:Dr Jeff Powell
BSc Econ
Macroeconomics 1; Money, banking and finance
13/2/2023


Outline of lecture
 What is money?
 Covers banking systema and credit creation
 Growth of the financial system
Hyperinflation- chapter of your required reading
Chapter for reading discusses hyperinflation and relates this to the printing press i.e. an -
assumption that too much money is being printed.
Among serious economists this is not an acceptable explanation of hyperinflation
See Germany 1920’s- effect on purchasing power> inflation as leading to support for
Hitler. Monetary policy as having global implications.
BUT see German balance of payment theorists and Joan Robinson who argue that
inflation was the consequence of exchange rate devaluations used by payment of war
reparations to western powers by Germany. Stress of this caused Germany to devalue>
then create more money to create domestic demand.
Problem leading to hyperinflation was more of a post war policy> Keynes was opposed to
forcing Germany to pay as would leave to rise in nationalism( was correct)
Sharp depreciation of mark in 1921> triggered demands for rising wages> granted as there
was low unemployment>led to rise in wage costs> worsened trade balance> more
exchange rate devaluation= hyperinflation
What is money?
What are its functions? Can be accused of functionalism- mistaking description of function
for more analytical discussion of its context
Money =
 Medium of exchange- instead of barter
 Store of value – e.g., can be saved for future purchasing power
 Unit of account / standardized measure of value across services and countries
Is crypto money? No, limited acceptance-writer of an article went to central American
country where it was supposed to be a parallel currency but he could not use it. Very few
areas accepted it
Limited capacity . As part of Bitcoin debate, issues with processing and volatility
Crypto – not adequate unit account or store of value- in his view it’s an asset rather than
money system.US and NZ are treating it that way.