Central Banking and the Heavy Hand of the State
“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
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Monetary Policy in a Pandemic
“The Fed’s new lending programs were not very helpful, and they come at a potentially high cost. Insofar as they were designed to allocate credit, as opposed to merely providing liquidity, they amount to an expansion of the Fed’s mandate. And, although the extent of the Fed’s credit allocation was limited this time, it has set a dangerous precedent, which risks subjecting the Fed to even more political influence going forward.” ~ William J. Luther
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Will the Fed’s “Feelgood” Medicine Cause an Economic Collapse?
“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
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Monetary Policy is Pushing Americans, Kicking and Screaming, Up the Risk Curve
“Gamestop is only a symptom. The size and frequency of monetary policy interventions is pushing investors further and further up the risk curve.” ~ Peter C. Earle
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Algorithmic Stablecoins
“Efforts to create stability without collateral are ambitious. The evidence that Empty Set Dollar and Dynamic Set Dollar have provided over the last few months suggests they are too ambitious. An algorithmic stablecoin only works so long as its users’ self-referential beliefs persist.” ~ J.P. Koning
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Incentive Problems with Discretionary Central Banking
“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
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Who’s to Blame for the Rash of Short Squeezes?
“Cantillon Effects, not overzealous short selling or swarming retail traders, are the ultimate cause of the rash of explosive short squeezes in US equity markets.” ~ Peter C. Earle
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Exit the Bond Vigilantes, Enter the Crypto Vigilantes
“With the heightened pace and expanded scope of economic intervention over the last ten or fifteen years, the avenues through which markets can respond to government policies have been blunted. But fortunately for the genius of Satoshi Nakamoto, where the bond vigilantes once stood––and may someday return––now stand the crypto vigilantes.” ~ Peter C. Earle
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The Case for Decentralizing Monetary Policy
“Wood’s book was published in the year 2000 and cites history dating back hundreds of years, yet today those lessons are as timely as ever. Policy makers should heed the lessons of history and the principles of sound money to ensure that the future of money is guided by the democratic tendencies of the market rather than the arbitrary hand of the state.” ~ Ethan Yang
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Galbraith Offers a Poor Defense of MMT
“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
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Monetary Rules have been Interpreted to Justify the Status Quo
“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
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Dry Tinder at the Fed
“A more significant stash of dry tinder lurks in the Federal Reserve computers (hat tip: Cathie Wood). I refer to the reserves that commercial banks hold in their accounts at the Fed. At one time, they were required to hold balances equal to 10% of their demand deposit liabilities and were free to hold more—excess reserves. As banks chose to hold reserves far in excess of requirements, the Fed removed the nonbinding requirement. Bank reserves have risen above $3 trillion, nearly double the year-ago level.” ~ Warren Gibson
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