A new NBER working paper uses bank-level financial and county-level agricultural data to show how risky lending might amplify the boom and bust.
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Advisory Board: Steve H. Hanke, Jerry L. Jordan, Gerald P. O’Driscoll, Jr., Lawrence H. White
Director: William J. Luther
Senior Fellows: Gerald P. Dwyer, Joshua R. Hendrickson
Fellows: Scott A. Burns, James L. Caton, Nicolás Cachanosky, Judge Glock, Alexander W. Salter
Contributors: Brian C. Albrecht, J.P. Koning
We must recognize that a whole may exhibit properties that are not present in its parts. But problems come in when the method of study for the economy as a whole looks radically different from that used for its parts.
The Federal Reserve has created so much base money that it has found itself between the devil and the deep sea: choosing whether to let the money circulate in the economy, thereby pushing up prices, or to remove this money quickly, thereby potentially creating a deflationary spiral.
For both social contract theory and monetary theory, theorists are considering something that never happened in the past and that they have no reason to believe will happen in the future. No such considerations are useful.