Tuesday, 12 December 2017

Central Banking

Knowledge Problem in Central Banking – Part I

August 2, 2017
in Blog

In my previous posts, Andreas Hoffmann and I discussed the problem of unintended consequences in monetary policy, particularly as applied to the U.S. Federal Reserve and the European Central Bank in the context of the 2008 crisis. This post tackles a related issue: the so called “knowledge problem.” This term was coined after Hayek’s engagement […]

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More Credit, More Money: Poland and the Euro-zone

Posted by Gonzalo Schwarz
November 11, 2013
in Blog

By Steve H. Hanke Money matters — it’s a maxim of Prof. Milton Friedman that I repeat often in my columns, and to my students in class. Since the Northern Rock bank run of 2007 — the “opening shot” of the recent financial crisis — the money supply, broadly measured, in Poland and the rest […]

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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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Money in Bad Faith

Posted by Gonzalo Schwarz
January 21, 2013
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The depredations of the Fed. by Judy Shelton The Federal Reserve is not your friend. Whether you reside on Wall Street or Main Street, whether you are a borrower or a saver, whether you lean toward the Tea Party or the Occupy Wall Street movement​—​or whether you simply believe in free markets and free people​—​loose […]

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The Case For 100% Reserve Banking

Posted by Devin Roundtree
December 14, 2012
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by Devin Roundtree Even among the most vocal advocates of returning to a gold standard, a banking system that requires banks to reserve 100% of all deposits redeemable on demand is considered impractical and a hindrance to economic growth. However, not only is 100% reserve banking practical, it is lawful and will not create credit […]

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Myth 7: The Gold Standard was Responsible for the Deflation that Ushered in the Great Depression

Posted by Gonzalo Schwarz
December 13, 2012
in Blog

by Lawrence H. White The most prominent set of criticisms of the gold standard among academic economists in recent years blame the gold standard for the creating the Great Depression in the United States and for then spreading it internationally.  Douglas Irwin (2011, p. 1) summarizes the case and identifies its most cited source: Modern […]

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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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Paper Money or The True Gold Standard

Posted by Gonzalo Schwarz
November 1, 2012
in Blog

How does the United States once again establish, by statute, a dollar convertible to a defined weight of gold?  “If you have ever wondered how the world can get from here to there— from the chaos of depreciating paper to a convertible currency worthy of our children and our grandchildren—wonder no more. The answer, brilliantly […]

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Iran’s Death Spiral – II

Posted by Gonzalo Schwarz
October 25, 2012
in Blog

Is the Rial cooked? by Steve H. Hanke My October 2009 Globe Asia column was titled “Iran’s Death Spiral.” In light of the recent events that have transpired in Iran, I think I might have been onto something back in 2009. Since early September, there has been an accelerated slide in the value of the […]

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Book Review: John Allison’s The Financial Crisis and the Free Market Cure

Posted by Gonzalo Schwarz
October 23, 2012
in Blog

by John Tamny BB&T Bank has long been revered by those who think government has grown too close to the financial services industry. Led from 1989 until 2009 by the publicly libertarian John Allison, he took over as CEO when it was a small ($4 billion in assets) player in banking, and built it into a $152 […]

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Central Banks: Reform or Abolish?

Posted by Gonzalo Schwarz
October 16, 2012
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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
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  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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Twin Demons

Posted by Gonzalo Schwarz
October 1, 2012
in Blog

by Llewellyn H. Rockwell Jr. [This talk was delivered at the Mises Circle in New York City on September 14, 2012.] The 20th century was the century of total war. Limitations on the scope of war, built up over many centuries, had already begun to break down in the 19th century, but they were altogether obliterated in the […]

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Death Knells for the USDollar

Posted by Gonzalo Schwarz
September 28, 2012
in Blog

by Jim Willie CB The recent decision by the US Federal Reserve to contaminate the financial body until it responds favorably was the last straw in my book. Witness a declaration of permanent QE and hyper monetary inflation of the most virulent strain, unsterilized. The USFed is essentially admitting failure. The signal serves as the loudest death knell for the USDollar among […]

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How Crony Capitalism Corrupts the Free Market | David Stockman

Posted by Gonzalo Schwarz
September 27, 2012
in Blog

Archived from the live Mises.tv broadcast, this lecture by David Stockman was presented at the Mises Circle in Manhattan: “Central Banking, Deposit Insurance, and Economic Decline.” Includes a welcome and introduction by Llewellyn H. Rockwell, Jr. Music by Kevin MacLeod. Watch more at youtube.com/misesmedia… image: flickr.com/newamerica

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Sound Money: Turkey’s Cure for Oil Dependence

September 25, 2012
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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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The Fed Has Forgotten Sound Money, And Now Just Manipulates Interest Rates

Posted by Gonzalo Schwarz
August 22, 2012
in Blog

by James Dorn While some members of Congress and Republican presidential hopeful Mitt Romney want to label China a “currency manipulator,” little is said about the Federal Reserve’s role as an interest-rate manipulator.  Interest rates are relative prices that should be freely determined in private capital markets, not manipulated by the central bank.  The Fed is […]

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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
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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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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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Fractional Reserves and Economic Instability

Posted by Gonzalo Schwarz
July 12, 2012
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[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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The Essence of Central Banking

Posted by Tyler Watts
July 6, 2012
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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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It Ain’t So, Joe

Posted by Gonzalo Schwarz
June 26, 2012
in Blog

by Kurt Schuler Commenting on the appearance of the 100th issue of the Journal of Economic Perspectives, its founding editor, Joseph Stiglitz,remarks (page 22) that a diversity of perspectives is “especially important in a field known for having certain orthodoxies—orthodoxies that dominate for a while and then fade, making the profession sometimes look less like a science than it would […]

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Ron Paul Hearing on Fractional Reserve Banking

Posted by Gonzalo Schwarz
June 26, 2012
in Blog

  House Subcommittee to Examine Fractional Reserve Banking and High-Powered Money WASHINGTON, June 25 Congressman Ron Paul, Chairman of the Domestic Monetary Policy and Technology Subcommittee, announced today that the subcommittee will hold a hearing this week to examine fractional reserve banking. “Fractional reserve banking underpins the entire banking system, yet its effects on society […]

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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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Which is it? Both–or neither

Posted by Gonzalo Schwarz
June 14, 2012
in Blog

From FreeBanking.org: Scott Sumner writes, “I don’t object to people noting that Bretton Woods had some characteristics of the gold standard; I’ve made that argument myself. But I wish the gold bugs would get the story straight.  Half of them seem to think the US monetary system of the 1920s wasn’t really a gold standard, and half seem to think […]

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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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Returning to a Gold Standard System: Why and How?

Posted by Gonzalo Schwarz
May 16, 2012
in Blog

by Nathan Lewis The answer to Why? is: because gold-linked stable money is superior to manipulated funny money. The answer to How? has two subsections. The first is: How to maintain a gold standard system? The second is: How to transition to a gold standard system?The answer to “how to maintain a gold standard system” is to understand the process of […]

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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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Jim Grant: “The Fed Owns The Stock Market”

Posted by Gonzalo Schwarz
May 9, 2012
in Blog

From ZeroHedge: The dulcet tones of Jim Grant provided much food for thought on Tom Keene’s Bloomberg Radio show this morning. While the interest rate observer did not change his tack on the extreme experimentation of world’s central banks, he did have some new perspective on the incredible moral hazard (or unintended consequence) that is […]

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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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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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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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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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FREE BANKING: Theory, history, and a Laissez-Faire Model

Posted by Gonzalo Schwarz
November 7, 2011
in Blog

Free Banking: Theory, History and a Laissez-Faire Model by Larry Sechrest is a magnificent work, now rescued from undeserved obscurity with this new edition. Published in 1993, it is a formalization and extension of literature in the free banking area, with important correctives and clarifications. He argues that the debate over central banking and free […]

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Private Clearing House Associations versus Central Banks

June 2, 2011
in Blog

A relevant figure in a free banking scenario is that of the private clearing house association (CHA). The CHA facilitates clearing services among its members, supplies some regulation to the market and eventually it may become a lender of last resort. Isn’t the case, then, that the invisible hand that operates under free banking will […]

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“A Note on the Machiavellian Origins of Central Banking in America” – QJAE

Posted by Tom Duncan
May 31, 2011
in Blog

“In The Mystery of Banking, Murray Rothbard explained how the origins of central banking in the U.S. were rooted in a lobbying effort by Robert Morris and other “nationalists” to create a bank modeled after the Bank of England that would subsidize their businesses with cheap credit and other forms of corporate welfare. This paper […]

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Are Bank Runs a Problem for laissez-faire Banking?

April 21, 2011
in Blog

The problem of bank runs is probably the most serious concern in monetary economics. It is clear that if all clients claim back their depositors together the bank will fail. This situation, it is argued, puts the banks in an unstable position where their clients may try to run each other to get their deposits […]

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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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Is Money a Public Good?

February 17, 2011
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It is a common position in welfare economics that government should let the market work except in those situations where it fails to deliver efficient results. One of those situations is the case of public goods, which are non-excludable in its provision and non-rival in its consumption. Clean air and national security are two common […]

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“M&S Warns of Rising Inflation” – WSJ

Posted by Tom Duncan
January 12, 2011
in Blog

“Marks & Spencer Group PLC is facing the specter of rising inflation as it fights for market share in the fiercely competitive U.K. grocery and clothing market, just as the government’s austerity cuts start to bite. The U.K. high street bellwether has enjoyed a strong third quarter, including the key Christmas period, when same-store sales […]

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“Could the U.S. Central Bank Go Broke?”

Posted by Tom Duncan
January 12, 2011
in Blog

“While that day seems distant now, some economists and market analysts have even begun pondering the unthinkable: could the vaunted Fed, the world’s most powerful central bank, become insolvent? Almost by definition, the answer is no. As the monetary authority, the central bank is the master of the printing press. It can literally conjure up […]

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Second Annual Sound Money Essay Contest

Posted by Alex Chafuen
December 30, 2010
in Blog

Is the world economy in crisis because it lacks the fundamentals of sound money?  If you believe that sound money is the key to our recovery, tell us why.    Join Atlas’s 2nd Annual Sound Money Essay Contest and win cash prizes.  This  year’s theme is “Money in Crisis.”  Deadline is January 15th, 2011.

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Why Do We Have a Central Bank?

December 6, 2010
in Blog

by Gerald P. O’Driscoll, Jr. Why do nations have central banks? Countries have developed without one, and sophisticated financial systems have evolved in their absence. Some countries with a central bank have suffered for having one. Zimbabwe comes to mind. The Federal Reserve System was created by an act of Congress only in 1913. It […]

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