Wednesday, 13 December 2017

Monthly Archives March 2011

Where Did the Free Banking Debate Go?

March 31, 2011
in Blog

The discussion in monetary institutions is becoming increasingly relevant in economics. How to deal and avoid financial crisis is an important issue. The recent financial crisis showed that economics might not be as suited to foresee and deal with these problems as the theory seems to suggest. This analysis requires a benchmark in the same […]

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“France Begins Pressure for Sound World Money” – 1933

Posted by Tom Duncan
March 31, 2011
in Blog

“‘World leaders must understand that re-establishment of international confidence is more important for recovery in every country than the artificial measures from which people sometimes expect salvation,’ Daladier said. He hoped the world would not suffer an international monetary war to come on top of the long war of tariffs… the French side of the […]

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“China Warns of ‘Dollar Trap'” – Fortune

Posted by Tom Duncan
March 31, 2011
in Blog

“A top Chinese economist warned that the world has fallen into a “dollar trap,” as U.S. trading partners lack an alternative to the greenback and can’t prevent the Federal Reserve from printing more money. The arrangement means big holders of dollars – such as China, which holds some $3 trillion of foreign exchange reserves, mostly […]

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“The GOP’s New Gold Rush” – Tim Murphy

Posted by Tom Duncan
March 30, 2011
in Blog

“After three decades of railing against America’s monetary policies, Congress’ most famous gold bug and anti-Fed crusader, Rep. Ron Paul (R-Texas), doesn’t have much to show for his efforts on the national level. But Paul’s message finally seems to be gaining traction outside Washington. Since the beginning of 2009, lawmakers in more than a dozen […]

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“ECB Cannot Tailor Monetary Policy to Individual Countries” – FT

Posted by Tom Duncan
March 30, 2011
in Blog

“The benefit of maintaining price stability in the eurozone as a whole, and thereby keeping the inflation risk low, becomes even greater in times of crisis. At the height of the financial crisis, the ECB lowered interest rates aggressively in the face of downside risks to price stability. To the extent that these risks tilt […]

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“Our House Is Not in Order” – FDR

Posted by Tom Duncan
March 30, 2011
in Blog

“For the fiscal year 1934, based on the appropriation bills passed by the last Congress and the estimated revenues, the deficit will probably exceed $1,000,000,000 unless immediate action is taken. Thus we shall have piled up an accumulated deficit of $5,000,000,00. With the utmost seriousness I point out to the Congress the profound effect of […]

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Inflation, Unemployment, and Monetary Policy – Solow and Taylor

Posted by Tom Duncan
March 30, 2011
in Blog

“We have learned much about the unemployment-inflation trade-off and about monetary policy during the last 25 years. Both economic research – especially the research surrounding the rational expectations revolution of the 1970s – and historical experiences – in particular, the inflation and disinflation of the 1970s and 1980s – have contributed to this improved understanding. […]

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The Shell Game, Part I

Posted by Gonzalo Schwarz
March 29, 2011
in Blog

PART I: Imagine an island where the local currency is a type of beautiful shell. Everyone on the island has some, either collected over time or traded for through an exchange of goods or services for shells. The shells can either be worn for adornment or held to trade at a later date. The shells […]

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“Does the U.S. Economy Need Inflation?” – William Anderson

Posted by Tom Duncan
March 29, 2011
in Blog

“One would hope that the supposed “great minds” at the Fed and in academic economics would better understand inflation and its destructiveness, but that is not to be. First and most important, the lack of inflation is not the enemy of the economy. The economy does not remain in recession because government is not debasing […]

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“The Rise and Fall and Rise Again of Supply-Side Economics” – Forbes

Posted by Tom Duncan
March 29, 2011
in Blog

“A long time ago, in a galaxy far, far away, the American dream was going to hell in a handbasket. I speak, of course, of 1980, a time that seems as remote to the elite imagination as those of the days of America’s founding. The news then was dominated by “the misery index” measuring high […]

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The Only Financial Regulation You’ll Ever Need

Posted by Tyler Watts
March 28, 2011
in Blog

Financial industry regulation has been a hot topic in the wake of the Panic of 2008 and ensuing recession. Many pundits blamed the crisis on a vaguely-defined concept of “deregulation.” Over the years, they argue, governmental oversight of financial institutions was reduced, allowing banks—especially large ones—to build up too much risk. This allows bankers’ greed […]

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“Crises Nudge Debt Loads to Brink” – WSJ

Posted by Tom Duncan
March 28, 2011
in Blog

“The financial strains created by crises in Japan and Europe highlight a growing problem: The rich world is getting close to the point where it won’t be able to bear the costs of another disaster. Japan and Europe face very different crises—one brought on by nature, the other man-made. But from a financial perspective, they’re […]

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“Taming Leviathan” – The Economist

Posted by Tom Duncan
March 25, 2011
in Blog

“Costly though it has been, the financial crisis has merely brought forward a fiscal reckoning. In most of the rich world ageing populations have been driving up the cost of public health care and state pensions. Emerging countries that are becoming richer, such as China and India, are now wondering what sort of state they […]

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Is the Supply of Money a Natural Monopoly?

March 24, 2011
in Blog

In conventional microeconomics the monopoly is associated with inefficiency. Under perfect competition there are no deadweight losses. This means that resources are efficiently allocated. The monopoly, on the other hand, provokes inefficient production by choosing a low level of production. This inefficiency could be reduced by the involvement of the government; that is, by regulation. […]

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“Monetary Calculation and the Extension of Social Cooperation into Anonymity” – Horwitz

Posted by Tom Duncan
March 24, 2011
in Blog

“The question of how humans come to trust anonymous others has been addressed by both economists and evolutionary psychologists recently. However, the idea of monetary calculation, as articulated by Ludwig von Mises and other Austrian school economists, is missing from their accounts. Game theory and evolutionary psychology might tell us why we trade at all […]

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Prosperity and Depression – Harberler

Posted by Tom Duncan
March 24, 2011
in Blog

“Are you serious about business cycle theory? In 1937, back when economists thought big and coherent thoughts about the boom-bust cycle, long before mainstream economists began to doubt the existence of theoretical universals, Professor Gottfried Haberler, an exponent of the Austrian theory, wrote a full and wonderful treatise on the topic. He sought to answer […]

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“Easy Money: Prelude to Recession” – Freeman

Posted by Tom Duncan
March 23, 2011
in Blog

“Why is the American economy plagued by recessions? The simplest way to answer this question is to focus our attention on individuals. Once we know why individual businessmen experience economic setbacks, we will have the key to understanding why the entire economy intermittently goes through periods of recession. A businessman suffers heavy losses when he […]

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“How Much Purchasing Power Has the Dollar Lost? Take a Look”

Posted by Tom Duncan
March 23, 2011
in Blog

“When the Federal Reserve began telegraphing late last summer that it would launch a new round of monetary stimulus to help the U.S. economy, Wall Street assumed that the dollar would be the sacrificial lamb. More money in the financial system, after all, would be expected to depress the greenback’s value against other currencies. But […]

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“Federal Reserve Official: ‘We’ve Done a Bit Too Much’ QE”

Posted by Tom Duncan
March 23, 2011
in Blog

“Richard Fisher, who heads the Dallas branch of the Fed, said that the world’s biggest economy is no longer in need of further stimulus and the real question is when to begin tightening monetary policy. To embark on a third round of quantitative easing (QE) would “only prolong the injustice inflicted” on savers through inflation, […]

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“Stimulus Spending and Jigsaw Puzzles” – Coordination Problem

Posted by Tom Duncan
March 23, 2011
in Blog

“In a series of newspaper columns last year, Don Boudreaux compared the economy to a giant jigsaw puzzle with billions of pieces that can fit together in numerous combinations only a small number of which produce a meaningful pattern or picture. We learn which combos work because they “beep” every time we get one “right” […]

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“The Japanese Currency Intervention” – Mises Daily

Posted by Tom Duncan
March 23, 2011
in Blog

“The ostensible reason for the currency interventions was to promote stability. According to David Mann, head of research for the Americas at Standard Chartered Bank. “This is about limiting volatility and reducing uncertainty.” However, if stability is the goal, then fighting speculators is the exact wrong approach. Speculators actually reduce volatility, insofar as they are […]

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Like fish in a barrel.

Posted by Gonzalo Schwarz
March 22, 2011
in Blog

The most important matter to anyone concerned with expanding freedom by limiting government is the matter of sound money. In fact the definition of sound money boils down to freedom of choice in money. Alternatively, control of the money is the source of a government’s unlimited growth. Any paper constraint can be washed away with […]

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“Fed and Inflation” – Ron Paul

Posted by Tom Duncan
March 22, 2011
in Blog

“Last week, the subcommittee which I chair held a hearing on monetary policy and rising prices. Whether we consider food, gasoline, or clothing, the cost of living is increasing significantly. True inflation is defined as an increase in the money supply. All other things being equal, an increase in the money supply leads to a […]

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“Basic, But Not Simple” – FEE

Posted by Tom Duncan
March 22, 2011
in Blog

“Economic theory has an amazing ability to explain the world around us. It explains human behavior of all sorts, from the mundane to the deadly serious, from the trivial day-to-day of our lives to the most important policy issues. Yes, the discipline of economics has become more complex in theory, often shrouded in mathematical formulations. […]

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The Ideal Money, Part II

Posted by Tyler Watts
March 21, 2011
in Blog

Last week, I wrote something here that might seem a little strange for a “sound money” blog. I stated that fiat paper money could be the optimal form of money in an ideal world. Sure, we “sound money” economists see much virtue in a commodity money like gold, because it erects a tall barrier against […]

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“Time to Take Inflation Seriously” – Seeking Alpha

Posted by Tom Duncan
March 21, 2011
in Blog

“While the world has focused on fuel rods in Japan and fighter jets in Libya, issues that are ultimately much more significant for investors have gone largely ignored. For example, the Producer Price Index for February registered a 5.6% Year-Over-Year increase. That was the figure in the headlines, at least. The reality is much worse. […]

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“AIG, Fed, in Sub-Prime Bond Standoff” – WSJ

Posted by Tom Duncan
March 21, 2011
in Blog

“American International Group Inc. is trying to force the hand of the Federal Reserve on a large portfolio of subprime-mortgage bonds it wants to repurchase, putting the central bank in the position of weighing taxpayers’ interests against those of the government-controlled insurer. Earlier this month, AIG disclosed an offer to pay $15.7 billion, or roughly […]

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“Should America Adopt the Gold Standard?” Ebeling vs Barsky – March 29

Posted by Tom Duncan
March 20, 2011
in Blog

On Tuesday, March 29, Northwood University will be hosting “Should America Adopt the Gold Standard?” , a debate between Dr. Richard Ebeling of Northwood and Dr. Robert Barsky of the University of Michigan. Should the United States return to a gold standard? Hear the debate and decide for yourself! The debate will be held at […]

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Larry White on Free Banking and Gold

Posted by Tom Duncan
March 18, 2011
in Blog

Larry White gives a lecture on the benefits of Free Banking and the Gold Standard at the Cato Monetary Conference in November, 2010. Watch it here. Larry White on Free Banking and Gold  Sheldon Richman Anything Peaceful, March 8, 2011.  Via the Foundation for Economic Education. Image by Salvatore Vuono / FreeDigitalPhotos.net.

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Recovery versus Growth: The Broken Window Fallacy and the GDP Fixation

March 17, 2011
in Blog

Extreme events sometimes cause big shifts in the economic point of view of the market process. The recent financial crisis brought back into scene Keynesian economics as a way to cope with the depression and make the economy recover. The recent tragic events in Japan seems to have brought to surface once more the “Broken […]

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“Government Borrowing Won’t Create Savings” – Freeman

Posted by Tom Duncan
March 17, 2011
in Blog

“I long have believed there are two schools of thought on our current economic crisis and its effect on the federal government’s budget. The first is that the government must stop destroying the dollar, cut back all spending, and give up trying to “stimulate” the economy back to health. On the other hand, some don’t […]

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“Three Flawed Fed Exit Options” – Mises Daily

Posted by Tom Duncan
March 17, 2011
in Blog

“Whether giving public lectures or teaching at the Mises Academy, I’m often asked whether Bernanke will be able to “pull this off.” Specifically, can the Fed gracefully exit from the huge hole it has dug for itself? Unfortunately my answer is no. In the present article I’ll go over three possible exit options, and explain […]

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“Blanchard on the Future of Macroeconomic Policy” – EconLog

Posted by Tom Duncan
March 17, 2011
in Blog

“Summarizing an IMF conference, Olivier Blanchard lists nine points. I will make extended comments below the fold. Here is a crucial sentence: ‘Monetary policy has to go beyond inflation stability, adding output and financial stability to the list of targets, and adding macro-prudential measures to the list of instruments.’ Thus does over thirty years of […]

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“Detached From Reality” – FreedomWorks

Posted by Tom Duncan
March 16, 2011
in Blog

“By 2020, public debt in the United States is set to reach 90 percent of GDP, a line that many economists demarcate as when accumulated debt pushes an economy to the precipice of fiscal demise. Entitlement spending remains on autopilot and some federal agencies, with “stimulus” money included, have received 180 percent increases in spending. […]

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“Why Financial Regulation is Doomed to Fail” – Econlog

Posted by Tom Duncan
March 16, 2011
in Blog

“Financial regulation may be the cleanest test of regulation in general, in the sense that if regulation works anywhere, it should work in the financial sector. Here, regulatory transparency is high: Banks report vast quantities of data to regulators, and regulators are easily able to check and audit the numbers. Regulatory compliance is even higher; […]

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“Rising Wholesale Prices Ring Inflation Alarm Bells” – CNNMoney

Posted by Tom Duncan
March 16, 2011
in Blog

“The sharp rise in oil prices is a major concern for economists. In a recent survey by CNNMoney, economists identified the oil spike as the biggest headwind facing the nation’s economic recovery. And some fear that unlike previous scares, higher prices could hit consumers. “The big difference today relative to the 2008 commodity rise is […]

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“Does Economic Growth Cause Inflation?” – Mises Daily

Posted by Tom Duncan
March 16, 2011
in Blog

“According to mainstream thinking, the stronger the monetary pumping is, the stronger the pace of spending — and consequently the stronger the monetary income and the so-called real economy is going to be. In short, in this framework more money means more spending and this leads to stronger economic growth. Contrary to this way of […]

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The Ideal Money

Posted by Tyler Watts
March 16, 2011
in Blog

The emergence (note I don’t say “invention”) of money stands out as one of the great boons to human economic development. Life before money was frustrating. For a mutually beneficial trade to take place, there must be a “double coincidence of wants”: Ug has to have exactly what Zog wants and want exactly what Zog […]

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“Inflation and Hyperinflation” – John Mauldin

Posted by Tom Duncan
March 15, 2011
in Blog

“In the previous chapter, we discussed why the current crisis presents the real risk of deflation if monetary velocity falls and does not rise. However, there are many reasons to believe that we will not see deflation. The major mistake that deflationists now make is their focus on spare capacity. Central bankers and most economists […]

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“How Long Can the Fed Continue to Downplay Inflation?” – Daily Finance

Posted by Tom Duncan
March 15, 2011
in Blog

“When the Federal Reserve’s interest-rate-setting committee meets on Tuesday to consider whether to change its monetary policy, it will likely be forced to alter the way it views the economy. It will probably rewrite its dismissal assessment of unemployment, which has fallen, and acknowledge that the economy seems to be picking up. But will it […]

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“To Avert Criticism, Fed Avoids Saying ‘Core'” – WSJ

Posted by Tom Duncan
March 14, 2011
in Blog

“Fed officials have for years cited “core inflation,” a measure that excludes food and energy prices. That is because core inflation tends to be a useful predictor of inflation over a couple of years, which they call the medium term, a period that is key to monetary-policy decisions. But this focus has drawn criticism that […]

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“Inflation and You” – Ludwig von Mises

Posted by Tom Duncan
March 11, 2011
in Blog

“The first fact that needs to be noted in answering such questions is that inflation is detrimental to all creditors. The higher prices rise, the lower will fall the purchasing power of the principal and interest payments due. The dollar which was loaned out had a higher purchasing ability, could provide more goods, than the […]

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“Economists React: Inflation Higher Than Expected” – WSJ

Posted by Tom Duncan
March 11, 2011
in Blog

“Despite government efforts to rein in inflation, China’s consumer price index in February rose 4.9% from a year earlier for the second straight month–well above the government’s target of 4%–the National Bureau of Statistics said Friday. China’s producer price index, a measure of inflation pressures in the pipeline, rose 7.2% from a year earlier, up […]

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When Money Dies – Fergusson

Posted by Tom Duncan
March 11, 2011
in Blog

“Just before the First World War in 1913, the German mark, the British Shilling, the French franc, and the Italian lira were all worth about the same, and four or five of any were worth about a dollar. At the end of 1923, it would have been possible to exchange a shilling, a franc or […]

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Was there a free banking experience in the United States?

March 10, 2011
in Blog

An important aspect of the study of sound money is to correctly identify historical cases of free markets in money and banking versus regulated markets in money and banking. If we cannot correctly separate one from another then our conclusions will inevitably be biased. The period known in the U.S. as the “free banking era” […]

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The Legacy of Milton Friedman – Ben Bernanke

Posted by Tom Duncan
March 10, 2011
in Blog

“Friedman’s emphasis on avoiding monetary disruptions arose, like many of his other ideas, from his study of U.S. monetary history. He had observed that, in many episodes, the actions of the monetary authorities, despite possibly good intentions, actively destabilized the economy. The leading case, of course, was the Great Depression, or as Friedman and Schwartz […]

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“Higher Oil, Higher Inflation? The Fed Can’t Decide” – Fortune

Posted by Tom Duncan
March 10, 2011
in Blog

“Up until recently, there was pretty overwhelming support by central bankers to keep U.S. interest rates low by buying up bonds in a second round of quantitative easing with the goal of boosting our slow-growing economy. But the debate over the right policy prescription is about to get more complex (if it isn’t already), as […]

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Mary O’Grady on The Fed vs the ‘Lindsay Lohan’ Congress

Posted by Alex Chafuen
March 9, 2011
in Blog

In “The ‘Lindsay Lohan’ Congress vs. the Fed” Mary O’Grady describes the thinking in these two interventionist camps: “Is the Federal Reserve still an independent monetary authority with the power to curtail the inflationary impulses of politicians? Dallas Federal Reserve Bank President Richard Fisher seemed to suggest otherwise in a speech this week to the […]

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“Two Years of Epic Stimulus Failures” – Steve Stanek

Posted by Tom Duncan
March 9, 2011
in Blog

“We’ve just passed the second anniversary of “economic stimulus” under President Barack Obama. Aside from spending on the stimulus itself—the actual price tag soon climbed from $787 billion to $862 billion—not much else has been stimulated. Well over half-a-trillion dollars have been poured into the U.S. economy courtesy of the American Recovery and Reinvestment Act […]

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Our Fed Chairmen and Our Money

Posted by Andrew Mack
March 9, 2011
in Blog

Last Friday morning on CNBC’s Squawk Box the honorable former Fed Chairman Alan Greenspan was interviewed. He was asked about the role that gold is playing in financial markets. He stated that what we have are “two faulty fiat currencies”, referring to the Dollar and the Euro. Greenspan did not elaborate on why they are […]

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