Thursday, 14 December 2017

Central Bank

Knowledge Problem in Central Banking – Part II

August 3, 2017
in Blog

The previous post presented Hayek’s knowledge problem in the context of the economic calculation debate under socialism. We discussed the distinction (sometimes overlooked) between information and knowledge . To sum up, information is objective data such as quantities and prices. As a qualitative concept, information can be complete or incomplete. Knowledge is subjective data interpretation. As a qualitative concept, […]

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The Central-Bank Trap: the Real Price of Cheap Money

Posted by Daniel Lacalle
June 8, 2017
in Blog

This piece originally appeared in World Economic Forum At the time of writing, the pace of expansion of the main central banks in the world exceeds $200 billion per month. In fact, in the first four months of 2017, central-bank asset purchases have surpassed the $1 trillion mark, according to Bank of America Merrill Lynch. […]

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Escape from the Central Bank Trap

Posted by Daniel Lacalle
May 10, 2017
in Blog

Cheap money becomes very expensive in the long run. In my new book, “Escape from the Central Bank Trap” (Business Expert Press), I explain that central banks are using the same inflationary policies that led us to the financial crisis. However, this time, these policies put us at an even greater risk. The monster bubble […]

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What will stop the Fed?

Posted by Alex Chafuen
July 10, 2013
in Blog

by Alex Chafuen Central Banks have been tools to destroy rule of law in many countries. “The most secretive organization in America operates without any accountability to the American people. Hiding in the shadows, pretending to be part of the United States government, its power is beyond measure.”  A new thriller by Brad Thor uses […]

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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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Turkey’s Gold Policy

Posted by Gonzalo Schwarz
January 29, 2013
in Blog

by Adrian Ash AMID the brouhaha over Germany’s gold reserves at the Bundesbank, there’s another central bank using gold actively to bolster its currency and financial stability. The strategy looks the same – sitting on big stockpiles of the stuff. But the aim differs, because gold is much closer to the everyday financial system. The […]

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2012 Currency Rankings In Terms of Gold

Posted by Devin Roundtree
January 2, 2013
in Blog

by Devin Roundtree Now that 2012 has come and gone, here are the 15 most traded currencies ranked by their performance against the yellow metal. Among the top performers, the New Zealand dollar and Swedish Krona should not come as a big surprise; the central banks of both countries have gained a reputation for relatively […]

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Is a Gold Standard Necessarily Vulnerable to Speculative Attacks?

Posted by Gonzalo Schwarz
December 18, 2012
in Blog

   by Lawrence H. White My frequent co-author George Selgin (2012) finds it “more doubtful [today] than ever before that any government-sponsored and administered gold standard will be sufficiently credible to either be spared from or to withstand redemption runs.” He quotes James D. Hamilton (2005) to similar effect:  given that central banks the Treasuries […]

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Leszek Balcerowicz: The Anti-Bernanke

Posted by Gonzalo Schwarz
December 16, 2012
in Blog

By MATTHEW KAMINSKI As an economic crisis manager, Leszek Balcerowicz has few peers. When communism fell in Europe, he pioneered “shock therapy” to slay hyperinflation and build a free market. In the late 1990s, he jammed a debt ceiling into his country’s constitution, handcuffing future free spenders. When he was central-bank governor from 2001 to 2007, […]

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Central Banks’ Gold Likely Gone

Posted by Gonzalo Schwarz
November 30, 2012
in Blog

Pay no attention to the men behind the curtain… By: Gregg Hunter Money manager Eric Sprott says, “The central banks’ gold is likely gone with no realistic chance of getting it back.” Don’t expect this revelation to get any coverage by the mainstream media. In an interview last week, Sprott’s analysis was met with words […]

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Pity the Central Banker

Posted by Gonzalo Schwarz
November 2, 2012
in Blog

By Ingolf Eide If central banking were a stock, you’d go short. Blue-chip mystique still clings to it but you can feel the reputational parabola slowly gathering momentum on the downside. Its projects are too large and diffuse, the resources to achieve them too crude and there are mounting signs of unhappiness and confusion at […]

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Central Banks: Reform or Abolish?

Posted by Gonzalo Schwarz
October 16, 2012
in Blog

by Gerald P. O’Driscoll Jr. Advocates of central bank reform must examine why central banks emerged and what forces sustain them. They did not arise in an institutional vacuum, and will not be reformed in an institutional vacuum. The historical origins of central banks explain how they came into existence. The forces sustaining and feeding […]

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Not Gold, Restrictions on Bank Freedom

Posted by Gonzalo Schwarz
October 9, 2012
in Blog

Why are people (who should know better) surprised that there were problems when banks were forced to wear strait jackets? by Kurt Schuler Two sharp economists whose blogs I enjoy reading were off-base last month on a common theme, which merits correction.Stephen Williamson said of Alan Greenspan’s 1966 essay “Gold and Economic Freedom” that Greenspan “thinks that the ‘golden’ age […]

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Does QE3 Mark the Beginning of the End of the Bond Bubble?

October 2, 2012
in Blog

  With savings rates at historic lows and budget deficits at historic highs, it makes little sense that interest rates should remain this low for this long. While the Federal Reserve has received much praise for keeping rates low with its Quantitative Easing program, the congratulations rightfully belong to the European debt crisis. It is […]

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Sound Money: Turkey’s Cure for Oil Dependence

September 25, 2012
in Blog

By Devin Roundtree With so much havoc among European nations, Turkey has attracted headlines recently as Europe’s fastest growing economy and the remaining shining star of investment grade on the continent. Though, as CNBC reported, rising oil prices threaten the country’s economic outlook. When it comes to oil dependence, Turkey upstages even the U.S. by […]

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What Would it mean to End the Fed?

Posted by Gonzalo Schwarz
September 18, 2012
in Blog

What would it mean to “end the Fed”? Professor Larry White says that in order to know the effects of such a measure, we must first understand the role of “the Fed”. The Federal Reserve is the central bank of the United States and the institution at the center of the nation’s monetary and banking […]

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The Perverse Effects of Easy Money

Posted by Gonzalo Schwarz
September 14, 2012
in Blog

by M.C.K. With a few noteworthy exceptions, mainstream academic economists failed to anticipate that the global financial crisis and ensuing collapse of output was even possible. There are several legitimate explanations for this failure, including bad incentives among economists and the absence of a realistic financial system in standard macro models. The most unconvincing excuse, however, […]

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Central Banks Race to BUY Gold At Record Pace

August 21, 2012
in Blog

This must be more evidence of Bernanke’s “tradition.” The Olympics may be over, but central banks around the world have begun a race to buy gold and are doing so at the highest level in decades. The World Gold Council recently announced that central banks officially bought 157.5 tonnes of gold, equivalent to just over […]

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Imposed versus Adopted Monetary Rules

Posted by Gonzalo Schwarz
August 2, 2012
in Blog

Steven Horwitz There’s been some recent controversy over the difference between rules and discretion in monetary policy, started, innocently enough, by a Don Boudreaux blog post and a Daniel Keuhn comment, then a full post by Daniel.  Bob Murphy weighed in as well.  I think part of the problem here is a dual meaning of the word “rule” in the […]

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Does the Fed Really Monetize Government Debt?

Posted by Gonzalo Schwarz
July 31, 2012
in Blog

by George F. Smith If monetizing debt is understood to mean printing money to pay for government deficits, then the Fed is guilty. The basics are quite simple. The federal government issues and the Fed buys interest-bearing debt certificates. The Fed pays for these securities by creating digits on a computer that represent dollars. In […]

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Priceless: How The Federal Reserve Bought The Economics Profession

Posted by Gonzalo Schwarz
July 31, 2012
in Blog

An oldie, but a goodie. From the huffingtonpost.com: The Federal Reserve, through its extensive network of consultants, visiting scholars, alumni and staff economists, so thoroughly dominates the field of economics that real criticism of the central bank has become a career liability for members of the profession, an investigation by the Huffington Post has found. This […]

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The Golden Rule

Posted by Gonzalo Schwarz
July 27, 2012
in Blog

Written by Jonathan Barnes James Grant, founder of Grant’s Interest Rate Observer, is a longtime advocate of the gold standard and critic of Central Bank monetary policy. In this interview with CFA Magazine, Grant speaks about the failures of the current monetary system, the practical steps toward a new gold standard, and his assessment of Federal […]

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The Soviet Banking System – and Ours

Posted by Gonzalo Schwarz
July 25, 2012
in Blog

By JUDY SHELTON Many in America today fear that our nation is going the way of Europe—becoming more socialist and redistributionist as government grows ever larger. But the most disturbing trend may not be the fiscal enlargement of government through excessive spending, but rather the elevated role of monetary policy. Our central bank, the Federal Reserve, […]

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Central Bank Policy Leaves Tidal Wave of Money on Horizon

Posted by Gonzalo Schwarz
July 25, 2012
in Blog

David Ignatius at WaPo has written an opinion piece which warns that the American and European Central banks have been “forced” by complacent and cowardly politicians into pumping money into the economy – to keep the economy afloat – because politicians have been unwilling to commit to the austerity and deficit reduction necessary to tackle […]

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The Return of the Gold Standard

Posted by Gonzalo Schwarz
July 12, 2012
in Blog

by Peter Schiff In my latest book, The Real Crash: America’s Coming Bankruptcy – How to Save Yourself and Your Country, I devote a full chapter to the merits of the historical gold standard and reasons to reinstate it. What I did not mention and few investors notice is that central banks are already returning to […]

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Fractional Reserves and Economic Instability

Posted by Gonzalo Schwarz
July 12, 2012
in Blog

[Testimony before the Subcommittee on Domestic Monetary Policy and Technology of the Committee on Financial Services, US House of Representatives “Fractional Reserve Banking and Central Banking as Sources of Economic Instability: The Sound Money Alternative,” June 28, 2012] by Dr. John Cochran Fractional-reserve banking has historically been viewed by some economists and most monetary cranks […]

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Our Money is Dying

Posted by Gonzalo Schwarz
July 10, 2012
in Blog

by Chris Martenson of Peak Prosperity: A question on the minds of many people today (increasingly those who manage or invest money professionally) is this: How do I preserve wealth during a period of intense official intervention in and manipulation of money supply, price, and asset markets? As every effort to re-inflate and perpetuate the credit bubble is […]

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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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Something is Rotten in the State of Denmark

Posted by Gonzalo Schwarz
July 5, 2012
in Blog

Central Banks Helpless As Denmark Goes NIRP, Cuts Deposit Rate To NEGATIVE 0.2% From ZeroHedge.com: A few days ago we noted that the ECB may well be contemplating the monetary neutron bomb, which would see it lower rates to below zero, ushering in a Negative Interest Rate Policy. Today, Mario Draghi cut such speculation short promising the […]

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The Fiasco of Fiat Money

Posted by Gonzalo Schwarz
June 25, 2012
in Blog

by Thorsten Polleit I. Today’s worldwide paper-, or “fiat-,” money regime is an economically and socially destructive scheme — with far-reaching and seriously harmful economic and societal consequences, effects that extend beyond what most people would imagine. Fiat money is inflationary; it benefits a few at the expense of many others; it causes boom-and-bust cycles; it […]

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A Call to Arms for Central Banks

Posted by Gonzalo Schwarz
June 19, 2012
in Blog

by Alasdair Macleod  The rate at which the majority of the eurozone is descending into insolvency is accelerating. The rescue package for Spanish banks, which appears to have been provisionally set at a figure designed to impress the markets, hardly even produce a dead-cat bounce. All it has achieved is to draw attention yet again to the helplessness of the authorities in dealing with multiple debt-traps. So what is the answer? It depends on the purpose behind the question. If it is to seek a genuine solution, then the answer is to cut public spending rigorously in all countries that depend on markets to fund budget deficits or to roll over existing debts. Only a convincing budget surplus is going to lead to falling borrowing costs. The objection to this solution is partly political and partly on the grounds of neoclassical economic prejudice. The former persists in placing social objectives above economic objectives, while the latter has been convincingly proved to be wrong. Otherwise, please talk us through how a government actually knows best to kick-start an economy into recovery, without ignoring the accumulation […]

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The Hoarding Continues

Posted by Gonzalo Schwarz
June 4, 2012
in Blog

Submitted by Tyler Durden A month ago we were delighted to counterpoint Charlie Munger’s prior remarks about the level of “civilization” of a given consumer based on their sentiment vis-a-vis gold, by demonstrating that Chinese purchases of gold from Hong Kong rose to a record. To wit: “Imports from Hong Kong were 135,529 kilograms (135.53 metric tons) […]

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Gold and The Central Banks: The Game Theory

Posted by Gonzalo Schwarz
May 24, 2012
in Blog

“Collectively, the central bankers of the world might agree that they do not want gold to be remonetized. Individually, it is in their interest to defect from this consensus. As the American Century decays, individual motivations tend to become more prominent. You and I are not in a free market – but the central banks […]

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JPMorgan Chase and Central Banking

Posted by Gonzalo Schwarz
May 21, 2012
in Blog

by Frank Shostak On Friday, May 1, 2012, JPMorgan Chase said it suffered a $2 billion trading loss. Some commentators have suggested that the huge loss emanates from so-called proprietary trading or placing risky bets using the bank’s money. The loss raised the credibility of the Volcker rule, which restricts banks from trading their own money. […]

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Krugman’s Misreading of US Banking History

Posted by Gonzalo Schwarz
May 16, 2012
in Blog

by Steve Horwitz  In his NY Times column Sunday, Paul Krugman tries, in vain, to construct a case for bank regulation in light of the problems at JP Morgan. As usual with Krugman, there’s much to disagree with, but I want to focus on his utterly ham-handed version of the history of US banking, which bears shockingly […]

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Our Central Bankers are Intellectually Bankrupt

Posted by Gonzalo Schwarz
May 14, 2012
in Blog

by Ron Paul The financial crisis has fully exposed the intellectual bankruptcy of the world’s central bankers. Why? Central bankers neglect the fact that interest rates are prices. Manipulating those prices through credit expansion or contraction has real and deleterious effects on the economy. Yet while socialism and centralised economic planning have largely been rejected […]

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The Real Debate On Gold And Money

Posted by Gonzalo Schwarz
May 7, 2012
in Blog

engaged observers who otherwise were content with that central bank apathy awake to the possibility that flexibility for the Federal Reserve comes at the price of individual flexibility. More power for Chairman Bernanke necessarily means less power for you and me.

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Is There No Escape from the Euro?

Posted by Gonzalo Schwarz
April 27, 2012
in Blog

by Philipp Bagus As I discussed recently, the costs and risks of maintaining the eurozone system are already immense and rising. So is an exit possible? Intuitively, the exit from the euro should be as easy as the entrance. Joining and leaving the club should be equally simple. Leaving is just undoing what was done before. Indeed, many popular […]

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Sound Money Interview Series: Dr. George Selgin

Posted by Gonzalo Schwarz
April 23, 2012
in Blog

Should a monetary system be centrally planned? Don’t make Dr. Selgin laugh. We sat down with Dr. George Selgin of the University of Georgia and discussed the history of central banking, the performance of the Federal Reserve, and alternatives to a government run money monopoly. First, what it all means in 3 minutes… Then, the […]

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A Prisoner’s Dilemma in Free Banking?

April 20, 2012
in Blog

Everything looks monopolistic if you leave out competition. There are several criticisms to the system of free banking. One of them relies on the conclusion that such system will converge to the presence of a central bank. This is, for instance, the position of Charles Goodhart and Huerta de Soto. From the Austrian school point […]

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Contra Bernanke

Posted by Gonzalo Schwarz
April 16, 2012
in Blog

Another takedown of the Fed Chairman’s “lesson” at GWU. by Frank Shostak In his lecture at George Washington University on March 20, 2012, Federal Reserve chairman Ben Bernanke said that under a gold standard the authorities’ ability to address economic conditions is significantly curtailed. The Fed chairman holds that the gold standard prevents the central […]

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Problems Facing Every Monetary System

Posted by Gonzalo Schwarz
April 4, 2012
in Blog

by Kurt Schuler Readers of George Selgin’s post just below should be aware that there is a an extensive comment section about it, including a few of his own remarks, over at Marginal Revolution. Now, on to what I promised to discuss in my last post, some time ago. Every monetary system faces a number […]

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Addition by Subtraction

Posted by admin
April 3, 2012
in Blog

It is getting harder and harder justify not getting rid of the Fed. by Julie Borowski This week marks the conclusion of Federal Reserve Chairman Ben Bernanke’s four-part lecture series on how the central bank “saved the economy” to undergraduate students at the George Washington University School of Business. At this point, you almost have […]

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Why Was the Federal Reserve System Created?

Posted by Gonzalo Schwarz
April 2, 2012
in Blog

Rep. Ron Paul sponsored this Congressional lecture on “Why Was the Federal Reserve Created?”, the introductory lecture in a three part series on the Federal Reserve System for Congressional staff. As a continuing educational tool this lecture was filmed and is provided to the public. The lecture was delivered by Dr. George Selgin, Professor of […]

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Digging Up and Digging Down Gold

March 30, 2012
in Blog

The Gold Standard is the worst standard, except for all the others. In a recent post at Nada es Gratis (Nothing is Free), Jesús Fernández-Villaverde discusses a visit to the vault where gold is stored at the New York Fed. The post and subsequent comments evolve into some criticisms of the gold standard. I won’t […]

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Like Bugs Looking For Windshields

Posted by admin
January 30, 2012
in Blog

Largest Central Banks Now Hold Over 15 Trillion in Fictitious Capital By Russ Winter01/27/2012 I could not help noticing that China’s imports from Japan fell 16.2pc in December. Imports from Taiwan fell 6.2pc. The strong yen strikes again: Honda decides to build a high-performance hybrid Acura in Ohio – instead of its home nation of […]

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Water Is Wet, and Other Breaking News

Posted by admin
January 30, 2012
in Blog

Central bank policy is obscuring market values, Warsh tells Stanford audience. By: Chris Powell, Secretary/Treasurer, GATA Dear Friend of GATA and Gold: Central banks are now so heavily influencing asset prices that investors are unable to ascertain market values, former Federal Reserve Board of Governors member Kevin M. Warsh told the Stanford University Institute for […]

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Medicine, or Poison? Real Inflation to Cure the Specter of Deflation

Posted by Gonzalo Schwarz
January 30, 2012
in Blog

by Thorsten Polleit I. The ongoing financial and economic crisis has not only stoked fears that it will end ininflation — as central banks will print up ever-greater amounts of money — but it has also given rise to a diametrically opposed concern: namely, that of deflation. For instance, in December 2011 Christine Lagarde, head of the International […]

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Explaining Central Bank’s Gold Purchases

Posted by Gonzalo Schwarz
December 13, 2011
in Blog

The last two years marked a significant shift in central banks’ attitudes toward gold. Since 1988, central banks have been net sellers of the precious metal. Lacking convertibility of their paper currencies into the commodity, this occurrence makes perfect sense. Why hold a physical asset with costly storage fees when there is no risk that […]

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Gold bugs and Paper bugs

December 9, 2011
in Blog

At Free Banking blog, Kurt Schuller points to Ralph Benko’s reply to Roubini’s statements that “this idea of a gold standard is pushed every other day by these gold bugs [and] is not even a theory it’s a theology,” and that the return to the Gold Standard after WWI was a major cause of the […]

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