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Ukraine and the Next Wave of Inflation, Part I
Ukraine and the Next Wave of Inflation, Part I Inflation from Useless Ingredients The cause of rising prices is not always monetary. Before Covid, we wrote a lot about mandatory useless ingredients. This is when regulators and taxinators force producers to add things to their products, which buyers do not care about (and often do not know […]
Response: Money and Payments: The US Dollar in the Age of Digital Transformation
Response: Money and Payments: The US Dollar in the Age of Digital Transformation Implications from the Federal Reserve’s Paper Our first comment is that every monetary change from the Founding of America through present has been to move away from free markets, and to adulterate our currency. An analogy could be made to the Ship […]
The Zombie Ship of Theseus
The Zombie Ship of Theseus The Ship of Theseus is an old philosophical thought experiment. It asks a question about identity. Suppose you replace all of the boards of a ship with new ones—is it still the same ship? We are not going to try to resolve this millennia-old paradox. Instead, we are going to add one […]
Perversity: Thy Name is Dollar
Perversity: Thy Name is Dollar If you ask most people, “what is money?” they will answer that money is the generally accepted medium of exchange. If you ask Google Images, it will show you many pictures of green pieces of paper. Virtually everyone agrees that money means the dollar. Image credit: Cildo Meireles Breaking Down the Dollar Monetary […]
Open Letter to Gregory Mankiw From Keith Weiner
OPEN LETTER TO GREGORY MANKIW FROM KEITH WEINER Dear Professor Mankiw: I am writing in response to your article in the New York Times, “The Puzzle of Low Interest Rates”. I commend you for recognizing two important truths, which are missed by many other observers. One, that there has been a breathtaking drop in the […]
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 […]
Curious Events in Risk-Free Collateral-Land – Precious Metals Supply and Demand
Curious Events in Risk-Free Collateral-Land – Precious Metals Supply and Demand Liquidity Shortage Last week the price of gold rose $28, and silver $0.53. But the prices of the metals was not the big news last week. The price of repo — a repurchase agreement, to sell and repurchase a treasuries — skyrocketed. Banks were […]
How Is Negative Interest Possible?
HOW IS NEGATIVE INTEREST POSSIBLE? Germany has recently joined Switzerland in the dubious All Negative Club. The interest rate on every government bond, from short to 30 years, is now negative. Many would say “congratulations”, in the belief that this proves their credit risk is … well … umm … negative(?) And anyways, it will […]
China’s Nuclear Option to Sell US Treasurys, Report 19 May
China’s Nuclear Option to Sell US Treasurys, Report 19 May There is a drumbeat pounding on a monetary issue, which is now rising into a crescendo. The issue is: China might sell its holdings of Treasury bonds—well over $1 trillion—and crash the Treasury bond market. Since the interest rate is inverse to the bond price, […]
Who Knows the Right Interest Rate
WHO KNOWS THE RIGHT INTEREST RATE On January 6, we wrote the Surest Way to Overthrow Capitalism. We said: “In a future article, we will expand on why these two statements are true principles: (1) there is no way a central planner could set the right rate, even if he knew and (2) only a free […]
