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Does the Central Bank Determine Interest Rates?
DOES THE CENTRAL BANK DETERMINE INTEREST RATES? According to mainstream thinking, the central bank is the key factor in determining interest rates. By setting short-term interest rates, the central bank, it is argued, through expectations about the future course of its interest rate policy can influence the entire interest rate structure. Thus according to the […]
Is Chinese Growth About to Falter?
IS CHINESE GROWTH ABOUT TO FALTER? The IMF revised Chinese growth forecasts higher in July – were they premature? Retail sales, industrial output and fixed investment have slowed The Real Estate sector is still buoyant but home price increases are moderating Narrow money supply growth has slowed, other parts of the economy will follow China […]
Further Thoughts on Gibson’s Paradox
FURTHER THOUGHTS ON GIBSON’S PARADOX “The paradox is one of the most completely established empirical facts in the whole field of quantitative economics.” – John Maynard Keynes “The Gibson paradox remains an empirical phenomenon without a theoretical explanation” -Friedman and Schwartz “No problem in economics has been more hotly debated.” – Irving Fisher Introduction Two […]
Money Multiplier is Really About Credit Out of “Thin Air”
MONEY MULTIPLIER IS REALLY ABOUT CREDIT OUT OF “THIN AIR” According to traditional economics textbooks, the current monetary system amplifies the initial monetary injections of money. The popular story goes as follows: if the central bank injects $1 billion into the economy and banks have to hold 10% in reserve against their deposits the initial […]
Deaf blind
DEAFBLIND “Most economists, it seems, believe strongly in their own superior intelligence and take themselves far too seriously. In his open letter of 22 July 2001 to Joseph Stiglitz, Kenneth Rogoff identified this problem. ‘One of my favourite stories from that era is a lunch with you and our former colleague Carl Shapiro, at which […]
See No Evil, Speak No Evil…
SEE NO EVIL, SPEAK NO EVIL… The Jackson Hole speeches of Janet Yellen and Mario Draghi last week were notable for the omission of any comment about the burning issues of the day: …where do the Fed and the ECB respectively think America and the Eurozone are in the central bank induced credit cycle, and […]
Taken to the Cleaners
TAKEN TO THE CLEANERS Introduction Should regulators call the market? It has been a matter of vigorous debate in the regulatory community since the crisis. ‘Cleaners’ think you shouldn’t mess around with the market, although be prepared to clean up if markets collapse. ‘Leaners’ take the opposite view, divided between those who want to lean […]
The Golden Revolution, Revisited
THE GOLDEN REVOLUTION, REVISITED The latest edition of The Golden Revolution is available from Amazon here https://www.amazon.com/dp/1535608994 Back in 2012 John Wiley and Sons published my first book, The Golden Revolution, the core thesis of which was that a longer-term consequence of the global financial crisis of 2008 would be the remonetization of gold. This would […]
Austrian Monetary Theory vs. Federal Reserve Inflation Targeting
AUSTRIAN MONETARY THEORY VS. FEDERAL RESERVE INFLATION TARGETING One of the leading policy guideposts for central banks and many monetary policy proponents nowadays is the idea of “inflation targeting.” Several major central banks around the world, including the Federal Reserve in the United States, have set a goal of two percent price inflation. The problem […]
Should Bank Regulation be Relaxed?
SHOULD BANK REGULATION BE RELAXED? Leading Federal Reserve policymaker Stanley Fischer has hit out at plans to unwind banking regulation, calling it a “terrible mistake.” President Donald Trump and republican politicians have advocated the repeal of Dodd Frank, a major piece of post-crisis legislation, and the loosening of some capital and liquidity requirements in a […]
The 2017 Stress Tests: Are US Banks Really in Good Shape?
THE 2017 STRESS TESTS: ARE US BANKS REALLY IN GOOD SHAPE? “… equally efficacious, and equally a hoax.” – Benjamin Disraeli, 1848[1] One of the highlights of the U.S. summer for Fed watchers is the annual ritual in which the Fed’s economic soothsayers peer into their crystal balls, a.k.a. their stress tests, to reassure us that the […]
Can Switzerland Survive Today’s Assault on Cash and Sound Money?
CAN SWITZERLAND SURVIVE TODAY’S ASSAULT ON CASH AND SOUND MONEY? “Switzerland will have the last word,” wrote Victor Hugo in the late 19th century. “It possesses one of the most perfect forms of government in the world.” A contemporary of his, Frederick Kuenzli, a scholar of the Swiss Army, boasted: “No purer type of Republican […]
Lord Liverpool and the Return to Gold
LORD LIVERPOOL AND THE RETURN TO GOLD The following is an excerpt from Martin Hutchinson’s forthcoming book, “Britain’s Greatest Prime Minister”, a biography of Robert Banks Jenkinson, 2nd Earl of Liverpool (1770-1828). Lord Liverpool was Prime Minister from 1812 to 1827 and had led Britain through the later part of the Napoleonic Wars. The following […]
Freedom and the Fear of Self-Responsibility
FREEDOM AND THE FEAR OF SELF-RESPONSIBILITY Liberty is under a renewed challenge and attack in the contemporary world. From “political correctness” and its accompanying growing totalitarian closed-mindedness at institutions of higher learning in both America and Europe, to the rebirth of economic nationalism with its rejection of freedom of trade, investment and people in places […]
Saving and Money–What is the Relationship?
SAVING AND MONEY – WHAT IS THE RELATIONSHIP? Conventional wisdom says that savings is the amount of money left after monetary income was used for consumer outlays, implying that saving is synonymous with money. Hence, for a given consumer outlays an increase in money income implies more saving and thus more funding for investment. This […]
