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Fed Accountability is a Farce
FED ACCOUNTABILITY IS A FARCE The Fed claims they are “accountable to the public and the U.S. Congress.” But what good is accountability, if the public and Congress have little understanding of what the Fed does? Even worse, if no one has the power to stop the inflationary actions of the Fed, what good are […]
Why the New Economics Just Boils Down to Printing More Money
WHY THE NEW ECONOMICS JUST BOILS DOWN TO PRINTING MORE MONEY [Editor’s Note: this article is adapted from a 2003 essay in the Quarterly Journal of Austrian Economics entitled “New Keynesian Monetary Views: A Comment.” As economists abandon theory in favor of makeshift plans to flood the economy with stimulus, Hülsmann here provides some helpful reminders of […]
Tragedies of Our Time: Pandemic, Planning, and Racial Politics
TRAGEDIES OF OUR TIME: PANDEMIC, PLANNING, AND RACIAL POLITICS An old adage says that tragedies often come in threes. Certainly, the first half of 2020 has seen a version of this. First, the coronavirus that has infected millions of people and killed hundreds of thousands. Second, the response by most governments to the virus by […]
Unintended Consequences of Monetary Inflation
UNINTENDED CONSEQUENCES OF MONETARY INFLATION “In short, the Fed is committed to rescue businesses from the greatest economic catastrophe since the great depression and probably even greater than that, to fund the US Government’s rocketing budget deficits, fund the maintenance of domestic consumption directly or indirectly through the US Treasury, while pumping up financial markets […]
There Will Be No Recovery Without Production
THERE WILL BE NO RECOVERY WITHOUT PRODUCTION Through most of the coronavirus crisis, those who have made the case for stay-at-home, reduce or stop work, and narrow the range of retail shopping to assure “social distancing” to reduce the spread of the virus have accused their critics of being more interested in preserving livelihoods than […]
How to Maintain a Bull Market After Coronavirus
HOW TO MAINTAIN A BULL MARKET AFTER CORONAVIRUS Everyone thinks they know the cause and effect of the Federal Reserve’s response to crises such as 2008 and 2020. The Fed prints money to buy assets. This increases the quantity of money. And this causes prices to rise. The Fed wants this, because it thinks that inflation eases the burden on […]
It’s Only Paper
IT’S ONLY PAPER The response to the virus has added a new mechanism of capital consumption to the many we have documented over the years. Businesses are shut down, yet they continue to incur expenses. There is a popular misconception out there that this is merely a paper loss. One can almost picture a neutron bomb that somehow […]
How the GDP Framework Creates the Illusion That By Means of Money Pumping the Central Bank Can Grow an Economy
HOW THE GDP FRAMEWORK CREATES THE ILLUSION THAT BY MEANS OF MONEY PUMPING THE CENTRAL BANK CAN GROW AN ECONOMY In response to a weakening in the yearly growth rate of key economic indicators such as industrial production and real gross domestic product (GDP) some commentators have raised the alarm of the possibility of a […]
Do Banks Require Savings to Accommodate Demand for Lending?
DO BANKS REQUIRE SAVINGS TO ACCOMMODATE DEMAND FOR LENDING? There is an emerging view held by many commentators that it is banks and not the central bank that are key for the expansion of money. This way of thinking is promoted these days by the followers of the post Keynesian school of economics (PK).[1] In a […]
The Ghost of Failed Banks Returns
THE GHOST OF FAILED BANKS RETURNS Last week’s failure in the US repo market might have had something to do with Deutsche Bank’s disposal of its prime brokerage to BNP, bringing an unwelcome spotlight to the troubled bank and other foreign banks with prime brokerages in America. There are also worrying similarities between Germany’s Deutsche […]
How Fractional Reserve Banking Contributes to Increases in Money Supply
HOW FRACTIONAL RESERVE BANKING CONTRIBUTES TO INCREASES IN MONEY SUPPLY Some commentators consider fractional reserve banking as a major vehicle for the expansion in the money supply growth rate. What is the nature of this vehicle? We suggest that fractional reserve banking arises because banks legally are permitted to use money placed with them in […]
Inflationary Financing and GDP
INFLATIONARY FINANCING AND GDP This article demonstrates that only government borrowing in the US and UK drives GDP growth. This surprising conclusion is confirmed by long-run statistics. GDP does not represent economic progress, nor does it include the expansion of activity in the non-financial private sector, because that marries up with larger trade deficits, which […]
The Bank’s ‘Stress’ Tests
THE BANK’S ‘STRESS’ TESTS MY REPORT ON THE BANK OF ENGLAND’S LATEST (NOVEMBER 2018) STRESS TESTS WAS PUBLISHED BY THE ADAM SMITH INSTITUTE ON AUGUST 3RD. The purpose of the stress tests is, in essence, to persuade us that the banking system is in good shape on the basis of a make-believe exercise which purports to show what might […]
Low Yield, No Yield, Negative Yield–Buy Now But Don’t Forget to Sell
LOW YIELD, NO YIELD, NEGATIVE YIELD – BUY NOW BUT DON’T FORGET TO SELL The amount of negative yielding fixed securities has hit a new record The Federal Reserve and the ECB are expected to resume easing of interest rates Secondary market liquidity for many fixed income securities is dying Outstanding debt is setting all-time […]
For Those Who Don’t Understand Inflation
FOR THOSE WHO DON’T UNDERSTAND INFLATION This article is a wake-up call for those who do not understand the true purpose of monetary inflation, and do not realise they are the suckers being robbed by monetary policy. With the world facing a deepening recession, monetary inflation will accelerate again. It is time for everyone to […]
