Wednesday, 18 October 2017

Author Archives Jerry Jordan

The Inflation Tax

Posted by Jerry Jordan
July 20, 2017
in Blog

Can you name an official at a major central bank who expresses worries that inflation is now, or soon will be, too high?  Can you identify any financial publication–even the Wall Street Journal–that does not report that recent inflation data have been “disappointing?” To paraphrase former President Nixon, are we “all inflationists now?” Twenty years […]

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Here’s Where All That Chinese Money Came From

Posted by Jerry Jordan
April 12, 2017
in Blog

This piece originally appeared in Forbes Have you read about tens of billions of U.S. dollars — sometimes over $100 billion — “flowing out of China” every month? Makes one wonder where, how and when China got the plates, paper and special ink to start printing American currency. Of course, it is all electronic money, […]

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“Strong” and “Weak” Currencies

Posted by Jerry Jordan
January 10, 2017
in Blog

Is a “strong dollar” good or bad?  If the currency of another country is pegged to the US dollar, and the US dollar is “strong,” is that good or bad for the other country? A recent Wall Street Journal article was titled “Heat is on Currencies with Pegs to Dollar” and the subtitle was “The […]

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Tools of Monetary Policy

Posted by Jerry Jordan
December 13, 2016
in Blog

For several decades the money we use in everyday life is “fiat currency.”  That is, it is created by central banks and its value is not anchored to anything of intrinsic worth such as gold.  The workings and decision making of central banks is therefore important, and does not need to be a subject of […]

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Monetary debates

Posted by Jerry Jordan
November 14, 2016
in Blog

In recent decades, the “big debate” among monetary economists and policy makers was “Rules versus Discretion.”  That debate accepted that the various tools/instruments available to monetary policymakers are well known.  Implicit is that the linkages between open market operations of the central bank’s trading desk and the objectives of monetary policies have been defined and […]

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Op-ed: What Brexit means for the euro

Posted by Jerry Jordan
November 7, 2016
in Blog

This article originally appeared in Forbes International political and economic news in recent weeks was filled with stories and analyses of the United Kingdom referendum to leave the European Union (EU). The immediate results of the vote included the resignations of the British Prime Minister and other government leaders, as well as a substantial decline […]

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The contractionary, contradictory nature of negative interest rates

Posted by Jerry Jordan
October 12, 2016
in Blog

A negative interest rate imposed by a central bank on reserve balances of commercial banks is not an interest rate at all.  It is a tax.  As such, like all taxes, it transfers resources from the private sector to the government sector and has a contractionary effect on economic activity.  The European central banks and the […]

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Op-ed: The age-old problem of low interest rates

Posted by Jerry Jordan
June 16, 2016
in Blog

This piece originally appeared in Forbes Earlier this year, Michael Walker of the Fraser Institute in Vancouver, Canada released a paper that deserves the attention of everyone interested in the subjects of central banking, inflation and interest rates. In it, he makes a claim that could fundamentally change our understanding of monetary economics: An aging population (think of […]

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Should Italians be crucified on a cross of euros?

Posted by Jerry Jordan
May 18, 2016
in Blog

There is no doubt that ordinary Greeks feel that they have been financially crushed by the foreign-creditor-mandated austerity policies in recent years. The nation’s real output has been declining for several years and the rate of decline understates the contraction of real after-tax incomes of many Greek households. Nevertheless, even a left-wing Greek government has […]

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Helicopter money: dropping money from the sky?

Posted by Jerry Jordan
April 19, 2016
in Blog

In the past few years, most major central banks have failed to achieve the higher rates of inflation they claim to want. They tried both “quantitative easing” and “zero-interest-rate policies” with no success. Now there are press reports that in Europe and Japan they are considering “helicopter money.” It is not as easy to give […]

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Central banks and foreign exchange markets

Posted by Jerry Jordan
February 1, 2016
in Blog

In addition to turmoil in common stock markets around the world, the early weeks of the new year have been characterized by changes in—and much hand wringing about—exchange rates between currencies. Prospects for changes in currency exchange rates were also much in the financial news a year ago, with considerable confusion about what was happening […]

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The value of our money

Posted by Jerry Jordan
December 22, 2015
in Blog

The purchasing power of money over time depends on its relative abundance or scarcity. People choose to hold money balances for a variety of reasons, all of which economists lump together as “the demand for money.” It is crucially important that this is understood to be a desire to hold on to, rather than spend, […]

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Money, inflation, and central banks

Posted by Jerry Jordan
December 2, 2015
in Blog

Milton Friedman famously declared that inflation is always and everywhere a monetary phenomenon.  While that no doubt remains a universal principle, it is not the same (as some people think) that inflation is a central bank phenomenon.  Certainly, before central banks were created by governments there was inflation when Spanish galleons returned from the new world […]

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Sound as a dollar

Posted by Jerry Jordan
October 29, 2015
in Blog

A few weeks ago I addressed the question, “Who Wants Sound Money?” Because my answer was that apparently everyone does, the next obvious question is: who should be responsible for assuring sound money? In the case of the US dollar, the original answer at the time of the founding of the country was the US […]

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Who wants sound money?

Posted by Jerry Jordan
October 12, 2015
in Blog

Well, apparently everyone does. An often misunderstood postulate in economics is known as “Gresham’s Law.” The popular version is that “bad money drives out good money.” Historically, what this has meant is that the bad money is what circulates in the market place, while the good money does not circulate. The reason is obvious; people […]

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A different kind of monetary control

Posted by Jerry Jordan
September 9, 2015
in Blog

This piece was written in response to a recent Financial Times editorial. Have you ever doubted the real reasons governments throughout history and all over the world want to control what ‘we the people’ choose to use “as money?” The reasons people want to use something for the purposes we ascribe to money are well known. […]

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About the Greek losses

Posted by Jerry Jordan
August 26, 2015
in Blog

Economists and accountants don’t think about financial losses the same way. When a person buys an asset, such as shares of a company on the stock market, and then sees the price of the shares fall below the purchase price, an accountant will say the loss is not “realized” unless and until the shares are […]

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David Stockman’s The Great Deformation: The Corruption of Capitalism in America

Posted by Jerry Jordan
August 25, 2015
in Blog

This book review originally appeared in the Cayman Financial Review For six years I’ve told audiences (and even more than a few social acquaintances who would listen) that the 2008-09 Global Financial Crisis was not “The Big One.” In time, people will look back on that episode as relatively minor and fairly short-lived compared to the […]

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More on money and interest rates

Posted by Jerry Jordan
June 15, 2015
in Blog

A confusion arising from the popular usage of the word “money” is that bankers claim to lend money and bank customers claim to borrow money. But, people do not increase their indebtedness in order to hold greater idle cash balances! The extension of credit by financial intermediaries does not alter the amount of money in […]

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Gold-backed money must be private money

Posted by Jerry Jordan
May 11, 2015
in Blog

Dr. Jordan’s article appeared in the Spring/Summer 2015 edition of the Cato Journal. “I am convinced we shall never have good money again so long as we leave it in the hands of government. Government has always destroyed the monetary systems.” Friedrich A. Hayek (1978) In the next issue of Cato Journal, I discuss the tax […]

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Managed money ≠ sound money

Posted by Jerry Jordan
March 30, 2015
in Blog

When asked (especially during Congressional oversight hearings) a central banker will resolutely declare a belief in “price stability.” Then, with a straight face, express concerns that the rate of increase of consumer prices is below target! The belief that the average of the prices of things households purchase on a regular basis should always increase […]

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The multiple moral hazards of central banking

Posted by Jerry Jordan
March 12, 2015
in Blog

In an introductory economics course, students are taught that there is “moral hazard” in the incentives of commercial banks because of access to the “safety net” offered by central banks and the government’s guarantee/insurance of bank deposits. There are a couple dimensions to this. One is that bank managers have less concern about the liquidity […]

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Money and exchange rates

Posted by Jerry Jordan
February 18, 2015
in Blog

The new year started with much media attention to exchange rates between currencies of some countries versus their trading partners. The Swiss got things started by announcing an end to the artificial peg of their currency—francs—and euros. The consequent dramatic rise in the exchange rate between francs and euros caused sudden and often very large […]

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Is the euro paper gold?

Posted by Jerry Jordan
January 8, 2015
in Blog

Unlike paper money–fiat currencies created and issued by governments–the historic superiority of hard money–specie-backed, whether issued privately or by governments–is manifested in the imposed fiscal discipline. James Madison and other founding fathers of the US did not put the new country on a gold and silver standard because they were certain that specie-backed money was […]

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Money and productivity

Posted by Jerry Jordan
December 15, 2014
in Blog

Traditionally, economists talk about things being produced using some combinations of land, labor, and capital, where capital is taken to mean tools, machines, buildings, and so on. Productivity— productive efficiency—improves when the same output can be obtained with less of at least one of these inputs. Some economists include “money” in the production function as […]

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Government money…

Posted by Jerry Jordan
November 19, 2014
in Blog

… is not Sound Money “I am convinced we shall never have good money again so long as we leave it in the hands of government. Government has always destroyed the monetary systems.” *  Sound money is private money—government-issued monopoly currency has never been a stable standard of value. For centuries rulers have decreed what […]

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More money? Or more income?

Posted by Jerry Jordan
October 27, 2014
in Blog

Sorry to say, money and income are not the same thing! Most people think, “I wish I had some more money.” Economists respond, “No, you don’t. If you really wanted more money, you would simply spend less and add to the balances in your bank accounts and in your wallet. What you really mean to […]

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Standards of value

Posted by Jerry Jordan
September 19, 2014
in Blog

Probably no pollster has conducted a survey to find out from the public how frequently they think the purchasing power of the currency should be cut in half. Probably no survey is necessary because we already know the public’s reaction: ‘that is a really silly question.’ Imagine asking the average person on the street, “Do […]

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Hayek on sensible monetary policy

Posted by Jerry Jordan
August 15, 2014
in Blog

Hayek on Sensible Monetary Policy This year marks the seventieth anniversary of the publication of “Road to Serfdom”by Frederick Hayek, as well as the fortieth anniversary of the award of the Nobel Prize in Economics to Hayek. Hayek’s enduring contributions to our understanding of the “Uses of Knowledge in Society”and characterization of markets as “mutualization […]

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We are Taxed Enough Already

Posted by Jerry Jordan
July 18, 2014
in Blog

Today’s T.E.A. party adherents have it right. We are Taxed Enough Already! So why is raising the inflation tax gaining popularity with policymakers around the world? The central idea of post WWII monetary arrangements was that the US dollar would be firmly pegged to gold at a fixed rate and the rest of the world […]

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Are We Still All Inflationists Now?

Posted by Jerry Jordan
July 14, 2014
in Blog

A recent WSJ news story made the startling claim that the Federal Reserve was “making progress” because the various measures of inflation have been rising recently.  Other   reports have similarly commented favorably on success of the Bank of Japan and European Central Bank in raising inflation rates.  What is going on? Five years ago, the […]

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