Monetary Theory

The cry of the Wall Street reformer is always the same: Let's have more regulators and regulations to correct the problem of prior regulators and regulations! Gregory Bresiger reviews Arthur Levitt's new book.

Coercive transfers are wasteful, inefficient, and inequitable. The Left uses Demand-Side Dogma to instill false legitimacy into these policies, writes D.W. MacKenzie. The Right, including the Bush administration, plays along with this rhetoric all too often.

The Spitzer settlement is a travesty of justice. If it is true that individuals in the securities industry perpetrated fraud in order to garner investment banking fees, they should be criminally prosecuted and punished. Only a corrupt politician would ignore possible crimes in return for an industry’s support in future political campaigns. The liberal New York democrat helped himself, not investors.

William Anderson suggests a new slogan to fight the recession: It's the liquidation, stupid. While he doubts that the motto will catch on with Bush and his political rivals, in the end, it really is the liquidation. Those who ignore this kernel of truth really are the stupid ones. 

The consequences of a markedly diminished position of the US dollar would be dramatic and of global proportions. While it would affect all economies that are closely related to the US economy, the major impact would fall on the United States itself. A demise of the US dollar as the dominant global currency would mean that the current relation between domestic absorption and production could no longer be maintained.

Was it just a Freudian slip that Greenspand started his recent encomium for Keynesian debasement with a reference to the Gold standard? It was probably inadvertent, but the contrast suggested between real, hard money, freely chosen by market processes, not arbitrarily by the State and its Financiers, was no less resonant for the fact that it was implicit, rather than as shockingly explicit as in Bernanke's recent speech on the subject.

The existence of the money multiplier is the outcome of fractional reserve banking, writes Frank Shostak, which the current banking system makes possible. The money multiplier is not only real; it is a good tool to help us understand the process by which the banking system creates inflationary credit and all of its associated effects.

The Fed has changed the rules under which it can inject liquidity into the system, says Sean Corrigan in this wide-ranging interview. The Fed has made several overt statements of intent that, if necessary, it will buy anything—corporate securities, mortgages, physical assets—it will conduct a "money rain" if it has to.

Most commentators have focussed, with merit, the Fed's official's alarmingly sanguine view that monetary inflation is a tool to combat evils and achieve all manner of economic good. But Ben Bernanke's most revealing remarks concern his subtle references to the Fed as just another branch of the federal government.

Japan has experienced an Austrian business cycle, writes Benjamin Powell. For Japan's economy to recover the government must stop intervening in the economy and allow the market process to realign the structure of production to match consumer preferences.