The Sound Money Project was founded in January 2009 to conduct research and promote awareness about monetary stability and financial privacy. The project is comprised of leading academics and practitioners in money, banking, and macroeconomics. It offers regular commentary and in-depth analysis on monetary policy, alternative monetary systems, financial markets regulation, cryptocurrencies, and the history of monetary and macroeconomic thought. For the latest on sound money issues, subscribe to our working paper series and follow along on Twitter or Facebook.
Advisory Board: Steve H. Hanke, Jerry L. Jordan, Lawrence H. White
Director: William J. Luther
Senior Fellows: Nicolás Cachanosky, Gerald P. Dwyer, Joshua R. Hendrickson, Thomas L. Hogan, Gerald P. O’Driscoll, Jr., Alexander W. Salter
Fellows: James L. Caton, J.P. Koning
Assessing Potential for Higher Inflation
“Monetary policy is intentionally supporting fiscal policy and supporting levels of indebtedness from the Federal government that are unprecedented. The result has been an explosion of M2 that increases the risk of inflation. There is a fair chance that policymakers will succeed. But, for the possibility of success, they risk a monetary-fiscal crisis.” ~ James L. Caton
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The Rise of Bitcoin
“The blockchain technology at bitcoin’s core provides a new and fundamentally different way to process payments. It relies on neither decentralized nor centralized clearing. Instead, it processes transactions over a distributed network. And, by solving the double spending problem without recourse to a trusted third party, it has the potential to offer a degree of financial privacy comparable to decentralized payment mechanisms like cash.” ~ William J. Luther
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Why Do Cryptocurrencies Use So Much Energy?
“Critics are upset about the energy consumption of cryptocurrencies. But it’s not the energy needs of these products that is the problem. Let niche communities enjoy their strange energy-intensive activities. Rather, what is disturbing is that most consumers of cryptocurrencies don’t perceive the true cost of the services they are using. And so these very, very expensive products have, by accident, gone mainstream.” ~ J.P. Koning
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The Promise of Cryptocurrencies
“Cryptocurrencies have the potential to improve upon both commodity and fiat monies. If designed properly, a cryptocurrency would anchor long-run expectations and provide timely supply adjustments at a lower cost than commodity and fiat monies.” ~ William J. Luther
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Gift Cards: When Good Products Do Bad Things
“For now, Apple is free to keep providing gift cards as before. Which means that scammers will probably not face additional hurdles to coopting gift cards for extortion payments. As for the rest of us, that means we get to keep enjoying a hassle-free gift card experience.” ~ J.P. Koning
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Understanding The Rise In Inflation Expectations
“Bond markets are currently pricing in a little more than two percent inflation on average over the next ten years, which suggests inflation will pick up. So far, Fed officials seem willing to permit inflation to run a bit high over the next decade. Whether they will remain so permissive when the inflation numbers start rolling in––or, ratchet up IOR to bring inflation down to two percent––remains to be seen.” ~ Nicolás Cachanosky
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Rising Interest Rates and Inflation
“A 5 to 10 percent jump in inflation expectations could be enough to set off a fiscal crisis for the federal government. And a fiscal crisis could be enough to generate a crisis of confidence in the dollar. There are numerous traps to avoid on the road ahead. Yet, monetary and fiscal policy both continue on expansionary paths with the greatest boldness that we have seen since the chairmanship of Arthur Burns.” ~ James L. Caton
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Signs of Inflation so Far
“The increases in money held by the public are a new experiment to test a widely verified proposition: substantial increases in the quantity of money held by the public are associated with substantial inflation. Inflation is quite likely to be higher in coming years than it has been in the recent past. Whether the increase is muted – an increase of one percentage point per year or so – or noticeably larger remains to be seen.” ~ Gerald P. Dwyer
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Only Ending Lockdowns Can Stimulate the Economy
“Regardless of what one believes about the health costs or benefits of lockdowns, preventing businesses from operating is clearly bad for the economy. Fiscal spending and monetary expansion cannot improve matters while these restrictions remain in place.” ~ Thomas L. Hogan
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In Finance, Slow is Good
“What the central bank RTGS/LSM two-step teaches us is that we need a good balance between fast and slow. Sure, real-time settlement is a nice feature. But let’s also have delayed settlement. If brokerages have a choice to use some combination of two-day and real-time settlement, we may arrive at a socially optimal stock settlement rate.” ~ J.P. Koning
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Texas Electricity Prices Are Lower Due to Deregulation
“Contrary to McGinty and Patterson, a close look at the evidence reveals that deregulation and competition have, in fact, reduced electricity prices in Texas. Prices in competitive markets have fallen, while those of noncompetitive utilities have increased. Competition has brought both residential and commercial prices down below the national averages.” ~ Thomas L. Hogan
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Should We Rethink Macroeconomics?
“Critiques of mainstream macroeconomics are common among Austrian economists. In a new book, titled Macroeconomics as Systems Theory, Richard Wagner goes further. He starts with Erik Lindahl’s distinction between microeconomics as individual action and macroeconomics as interaction. He then offers a new approach to macroeconomics based on theories of complex systems.” ~ William J. Luther
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