Thursday, 14 December 2017

Author Archives Tyler Watts

What Happens when Uncle Sam’s Sugar Daddy Runs out of Canes?

Posted by Tyler Watts
February 13, 2013
in Blog

The Wall Street Journal’s Real Time Economics Blog recently reported that, according to new CBO projections, the Federal Reserve will cease its annual “payments” to the US government by 2018. You’re probably wondering two things: 1. Why the heck would the Fed be funding the government—shouldn’t it be the other way ‘round? 2. How the […]

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The Mutual Mower Association

Posted by Tyler Watts
August 6, 2012
in Blog

by Tyler Watts Larry, George, and Steve all live next door to each other in the quiet town of Ayr. As respectable men about town, they all endeavor to keep their houses neat, especially their lawns. Currently only Larry has a mower. One summer day, right after Larry cuts his grass, George comes over and […]

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The Essence of Central Banking

Posted by Tyler Watts
July 6, 2012
in Blog

by Tyler Watts “In theory, there is no difference between theory and practice. In practice, there is.” –Yogi Berra In theory, central banks exist to do things like “promote economic stability” and “uphold the value of the currency.” If you consult any Federal Reserve official (or any mainstream economics textbook), the stated purposes of the […]

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“I am not an Economist…”

Posted by Tyler Watts
June 1, 2012
in Blog

“…nor am I a doctor. But here is a critique of a school of economic thought, along with an appendectomy!”     “Donny, you’re out of your element.” Fans of the cult classic film “The Big Lebowski” will recognize this line used by the neurotic Walter (John Goodman) to put the scatterbrained Donny (Steve Buscemi) […]

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Cracks in the Fiscal Dam

Posted by Tyler Watts
March 22, 2012
in Blog

by Tyler Watts I’ll admit it: we fiscal hawks are increasingly mystified that things haven’t blown up yet for Uncle Sam. The Fed has held interest rates at zero for almost 3 ½ years now, and the inflation rate hasn’t exploded—even though people are noticing price increases all around, Bernanke & company can still claim […]

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The Euro (Double) Standard

Posted by Tyler Watts
February 20, 2012
in Blog

The received wisdom in economic history places much of the blame for the Great Depression squarely on the shoulders of the gold standard. For instance, Berkley economist Barry Eichengreen states, “Far from being synonymous with stability, the gold standard itself was the principal threat to financial stability and economic prosperity between the wars” (Golden Fetters […]

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Golden Paperweights, and Other Investments

Posted by Tyler Watts
February 10, 2012
in Blog

Why gold isn’t money, steak isn’t food, and you’re not really reading this… File this one under “you’ve got to be pulling on my leg:” an unsigned editorial at Nasdaq.com makes the utterly risible claims that “gold has no value except as an investment” and “It is only the backing of governments that gives gold […]

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Man Shot and Killed. Bullet Arrested.

Posted by Tyler Watts
January 31, 2012
in Blog

   Yahoo Finance writer Aaron Task told to carry water for the Fed, but instead writes an obfuscating apologia for inflationist institution. Aaron Task over at Yahoo Finance thinks he pulled a big “gotcha” on all those anti-Fed cranks out there with his article, “No, the Fed Does NOT ‘Print Money’.” What’s that, Mr. Task? […]

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America’s Dirty Laundering

Posted by Tyler Watts
January 26, 2012
in Blog

 No matter how many times they clean it, the fresh ink stains just won’t go away. Forget, for a moment, about all the horrible economic damage the Fed is responsible for, according to its critics. News that just came out about the Fed’s massive payout to the Federal government ought to, by itself, raise the […]

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What the Price of Gold Means

Posted by Tyler Watts
December 19, 2011
in Blog

It’s amazing how so many people don’t get gold. It’s only been 40 years since the dollar was completely severed from it’s once proud golden heritage, yet most finance and econ people are wont to consider gold just another commodity—and a not very “useful” one at that. Thus they speak of “investing” in gold as […]

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Is Deleveraging “Bad for the Economy”?

Posted by Tyler Watts
December 19, 2011
in Blog

A while back there was a story in the Wall Street Journal (“America’s Debt Cutting Hampers Growth,” Oct. 22) about deleveraging in the U.S. economy. American households, burned by the recession, have a new-found frugality and are reducing their overall debt loads for the first time in decades. Looks like a lot of people learned […]

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Choose Austerity, Before It Chooses You

Posted by Tyler Watts
December 15, 2011
in Blog

Strange and amazing things happen when sovereign debt levels get out of hand. In Europe, the strikes, massive street protests, and riots build energy by the day. The US is not quite at that stage of affairs yet, but large deficits and debt still loom large, so large, in fact, that some pundits have the […]

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The Gutenberg Solution

Posted by Tyler Watts
December 5, 2011
in Blog

The European Monetary Union is evolving like a slow-motion train-wreck these days. Just a few weeks ago, the pundits and bloggers began to ponder the possibility of the Euro failing, and now many are claiming that this is all but inevitable (the Economist provides a sobering assessment; an even more sobering assessment in the Financial […]

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The Irrelevant Dramatics of the Super Committee

Posted by Tyler Watts
December 2, 2011
in Blog

“Lord, make me chaste, but not yet.”-St. Augustine I know a guy who’s 130 lbs. overweight, slowly dying from arthrosclerosis and diabetes. He’s been living a slouchy lifestyle for the past 10 years: fast food every night, hasn’t seen the inside of a gym since high school, smokes a pack a day. His doctors have […]

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The “Inflation Moralist” View

Posted by Tyler Watts
November 15, 2011
in Blog

I’m trying to wrap my brain around the recent wave of ‘respectable’ economists coming out in favor of higher inflation. Some of the more prominent names include Ken Rogoff, Christina Romer, and the blogging sensation Scott Sumner. Although it’s often dressed up in fancy sounding jargon like “Nominal GDP targeting,” the inflationists’ arguments are pretty […]

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The US Economy is Fedlocked

Posted by Tyler Watts
November 14, 2011
in Blog

By all accounts in the news, the FOMC basically threw up its hands at its meeting this week, deciding it can’t do anything constructive to improve economic conditions. The official statement included such downers as: “continuing weakness in overall labor market conditions,” “significant downside risks to the economic outlook” and “unemployment will decline only gradually.” […]

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The Fed as Witchdoctor

Posted by Tyler Watts
November 1, 2011
in Blog

Although very few in the mainstream media are paying much attention, there’s growing chatter in sound-money circles about the ongoing phenomenon of negative real interest rates. By pumping in nearly $2 trillion in extra bank reserves and committing to keep the benchmark inter-bank lending rate at basically zero for 2 more years, the Fed has […]

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The Incredible Morphing Fed

Posted by Tyler Watts
October 30, 2011
in Blog

Student blogger Andrew Mack points out that the Fed was a creature of the “progressive” ethos of the early 20th century—i.e. the idea that powerful centralized institutions could “manage” the economy better than free, competitive individuals. But it is nonetheless interesting to note that when the Fed was founded, it was very different, and much […]

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America’s Love/Hate Relationship with Sound Money

Posted by Tyler Watts
October 28, 2011
in Blog

Having been doing research for a paper on credit expansion and inflation in the U.S. in the 1790’s, I’ve been looking at mortgage documents from that era. Almost all of them feature what we might call a “sound money clause” i.e. they are explicitly payable in “gold or silver coin.” One particular mortgage note from […]

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Nuts to Higher Inflation

Posted by Tyler Watts
October 21, 2011
in Blog

The chorus of voices calling for higher inflation is growing. Joining “respectable” mainstream economists like Harvard’s Greg Mankiw and Ken Rogoff is Rex Nutting at Marketwatch. To his credit, Nutting identifies the big problem in the US economy pretty well: US debt levels are too high—367% of GDP as of 2009, compared to just 150% […]

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Government vs. The Economy

Posted by Tyler Watts
October 16, 2011
in Blog

Score Update: Government beating economy 21-3 late in 4th quarter… I hate to use sports metaphors when talking about the economy because, while the two realms share some basic themes (like competition), their outcomes are radically different. For instance, sporting events are inherently win-lose, or “zero-sum games.” When the Colts play the Steelers, only one […]

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(Poison) Ivy League Economists Dis the Gold Standard

Posted by Tyler Watts
October 16, 2011
in Blog

As the Wall Street Journal reports, 6 Yale economists convened last week in New Haven to discuss “The State of the U.S. Economy: How Do We Create More Jobs?” Not surprisingly, their answers were straight out of the Keynesian playbook: more stimulus, infrastructure spending, and higher taxes on the wealthy. Also not surprising was the […]

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You’re Pre-Approved! (Tim Geithner’s junk mail)

Posted by Tyler Watts
June 20, 2011
in Blog

It goes without saying that finances are tight for many Americans these days. The problem is not only affecting American families at all income levels, but the mighty US government. For a sampling of our government’s fiscal woes, check out this (hypothetical) junk mailer recently found in the inbox at the US Treasury. What is […]

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Inflation: Fact or Fear?

Posted by Tyler Watts
June 6, 2011
in Blog

Chicago Tribune columnist Steve Chapman claims that fears of coming inflation are “unfounded.” His main arguments: Gold has been rising since 2000, while CPI inflation averaged under 3% per year since then—suggesting gold has been a poor predictor of inflation. Price increases for other commodities are driven largely by surging demand from developing countries (this […]

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The Central Planning Elephant in the Room

Posted by Tyler Watts
May 23, 2011
in Blog

Roberts and Papola have done it again: a rap video that explains the divergent views of two of the most prominent economists of the 20th century. It’s  better than most textbooks, and entertaining to boot. It’s “Fight of the Century.” The video is a follow-up to their 2009 Youtube hit, “Fear the Boom and Bust.” […]

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Coming Soon to a Bank Near You…the “Hoarders”

Posted by Tyler Watts
May 10, 2011
in Blog

We sound money types lament the disappearance of “good” money like gold and silver coins from day-to-day business. There is something special about these ancient and honorable monies. No, it’s not some Goldmember-style fetish, some psychological affliction known only to “gold bugs.” It’s knowing that the value of your money cannot be inflated away by […]

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When Low Inflation is Too High

Posted by Tyler Watts
May 2, 2011
in Blog

Milton Friedman famously stated, “Inflation is always and everywhere a monetary phenomenon.” In other words, whenever you see persistent, high inflation, you know the cause was too much money. When too much money is chasing the same amount of goods, as they say, prices tend to rise; the faster the money supply is increased, the […]

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Deficit Spending on the Backs of the Poor

Posted by Tyler Watts
April 25, 2011
in Blog

Rejecting any serious cuts to government spending, President Obama stated recently, “Nothing is easier than solving a problem on the backs of people who are poor, for people who are powerless and don’t have lobbyists or don’t have clout.” Exactly. In the context of Obama’s much-discussed budget speech of a few days ago, one would […]

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Signs of Inflation

Posted by Tyler Watts
April 18, 2011
in Blog

Driving to the big city the other day, I noticed 2 billboards along the interstate highway that struck me as unique signs of the times. No, they weren’t ads for upcoming Justin Beiber concerts. They were ads for scrap metal buyers. One advertises “top prices paid” for metal by a company that deals in industrial […]

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Sound Money and Financial Crisis

Posted by Tyler Watts
April 12, 2011
in Blog

One of the main virtues of sound money is stability. We sound-money types like to point out that financial systems built on core sound money principles—namely, free competition at all stages of money production and credit markets—are not nearly as prone to monetary crises and money-induced recessions. Sounds too good to be true, I know. […]

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What Good Are Banks, Anyway?

Posted by Tyler Watts
April 4, 2011
in Blog

There’s plenty of frustration, irritation, and anger at banks during times of financial crisis and recession. Complaints run the gamut: bank over-exuberance (“predatory lending”) fueled the boom, and their under-exuberance (tight credit) contributes to the bust. They’re charging outrageous overdraft fees and being too harsh on loan defaulters. And oh yes, the taxpayer-funded bailouts! Why […]

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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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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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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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