Topic: Central Banking

In Finance, Slow is Good

– March 3, 2021

“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

Central Banking, Cryptocurrency, Financial Markets

Escape Hatches: Migration, Bitcoin, and the Ability to Get Out

– February 27, 2021

“Keep more mobile assets; have larger buffers, financial and physical; instead of a large house in a nice suburb, perhaps aim for a smaller home coupled with a condo or house in a different jurisdiction? Don’t put all your financial eggs in one portfolio – keep some gold and some bitcoin; keep healthy; update your survivability skills. Ensure that your escape hatches remain open.” ~ Joakim Book

Central Banking, Economic Education, Inflation

Yes, This Time We’ll Have Inflation, and Here’s Why

– February 25, 2021

“The political forces supportive of anti-growth policies such as trade restrictions, higher minimum wages, perverse energy regulations, and cronyism appear to be on the rise, and they will dampen future growth. But inflation is going to be the big story of the post-pandemic economy. Get ready for an inflationary ride.” ~ James D. Gwartney

Central Banking, Economic History, Monetary Policy

Central Banking and the Heavy Hand of the State

– February 19, 2021

“The ‘need’ for a central bank is due to economists inaccurately projecting onto historical banking systems their contemporary monetary-macroeconomic paradigms, not any fatal flaw in these systems. Neither theory nor history show we need a central bank to guarantee optimal economic performance.” ~ Alexander W. Salter

Central Banking, Currency, Economic Education

The Banking System and the Evolution of Money

– February 18, 2021

“Many of the public policies that shackle the financial sector are designed to do so, because they help governments accomplish some other political objective. Engaging these political considerations, and how they impinge on banking and finance, is critical if we want to understand the history of monetary institutions, especially in the United States.” ~ Alexander W. Salter

Central Banking, Financial Markets, Inflation

Do These Money Supply Charts Portend Hyperinflation?

– February 13, 2021

“Financial markets indicators suggest that high inflation is not likely. Even with a very large balance sheet, the Fed has proven that it can control inflation by paying high rates of interest on bank reserves. Whether Fed officials choose to do so is the open question.” ~ Thomas L. Hogan

Central Banking, Financial Markets, Monetary Policy

Will the Fed’s “Feelgood” Medicine Cause an Economic Collapse?

– February 9, 2021

“The promise of cheap money leading to perpetual asset price sunshine may seem like a reality today. Tomorrow the consequences will be like Dr. Feelgood’s needles. To avoid the worst, markets—not politicians or bureaucrats, must be free to uncover the real cost of borrowing money.” ~ Barry Brownstein

Central Banking, Economic Education, Economic Theory

That Mystical Monetary Theory

– February 5, 2021

“The MMT mistake lies in believing that any alleged shortfall in money or supply of U.S. Treasuries is big enough to finance their entire policy wish list for the foreseeable future. It also assumes that any potential labor or capital goods not currently used can be effortlessly moved to whatever production line politicians desire, without causing prices or wages to increase.” ~ Joakim Book

Central Banking, Economic Education, Monetary Policy

Incentive Problems with Discretionary Central Banking

– January 31, 2021

“Discretionary central banking creates bad incentives. To overcome bad incentives, we must take away the discretion. The Fed, so long as it exists, should follow a rule.” ~ Alexander W. Salter

Central Banking, Economic Education, Economic Trends

Global Productivity Growth Post-Covid – Down But By No Means Out

– January 30, 2021

“The current pandemic has yet to run its course, and the social and economic impact will take much longer to work its way through. Productivity growth, in the medium term, is liable to disappoint, but deferred creative disruption – a deferral which artificially low interest rates have allowed to persist since 2008, if not earlier – could set the stage for an era of dramatic productivity growth in the decades ahead.” ~ Colin Lloyd

Central Banking, Economic Theory, Monetary Policy

Galbraith Offers a Poor Defense of MMT

– January 16, 2021

“The rise of MMT on the political left will no doubt continue. It is politically expedient. It provides a justification for spending. Political expediency does not imply theoretical soundness, however. And defenses along the lines offered by Galbraith do little to assuage very real concerns.” ~ Nicolás Cachanosky

Central Banking, Economic Education, Monetary Policy

Monetary Rules have been Interpreted to Justify the Status Quo

– January 15, 2021

“I can only imagine that those in charge of monetary policy, following Woodford and the precedent set by Bernanke, see stable implementation of a fixed monetary rule as being an antiquated idea, obviously inferior to their more flexible interpretation of rule-based policy. Their perspective, now widely shared among monetary theorists and policymakers, risks leaving us sleepwalking toward a state of fiscal insolvency.” ~ James L. Caton