Money View - India's leading fintech startup with variety of online services
The Money View is a comprehensive framework for understanding the modem financial system by focusing on the flow of money, credit, and liquidity. It was popularized by economist Perry Mehrling and is used to explain how financial systems work in practice, beyond traditional economic models. This framework emphasizes the central role of liquidity, interconnected markets, and financial institutions in the broader economy, offering a more dynamic and real-world perspective on finance compared to traditional theories. The Core Principles of the Money View 1. The Hierarchy of Money. At the core of the Money View is the concept of a hierarchy of monetary instruments, ranging from the most liquid forms of money (central bank reserves, cash) to less liquid financial assets (corporate bonds, derivatives). Central banks occupy the top tier of this hierarchy, as they issue the ultimate settlement asset-legal tender or reserves. Below them are banks, which create deposits through loans...