Money and Banking

The gold price is heading up at the moment, but we can still learn a lot from three big collapses in the gold price which occurred after 1934.

Jeff Deist and Mark Thornton discuss the works of one of the fathers of modern economics: Richard Cantillon. 

The central bank can try to manipulate the interest rate to whatever level it desires. However, it cannot exercise control over the underlying interest rates as dictated by people’s time preferences.

The "Velocity of Money" Is a product of human choices and human values. It's not something we can just plug into an equation.

Are holders of banknotes implicitly lending funds to the issuing bank? Do historical periods of relatively free banking illustrate the stability of the system? A response to Bagus and Howden.

The Fed’s monetary policy, except for very brief periods in 1929 and 1936–1937, was consistently and unremittingly inflationist in the 1920s and 1930s.

What matters is not price rises as such, but the increase in the money supply that sets in motion the exchange of nothing for something or "the counterfeit effect." Business cycles and recessions follow.

Mises declared in 1951: “No boom is possible without credit expansion... the boom which causes the following depression could not occur if the banks did not expand credit."

Ignoring time preference is the fundamental error behind monetary planning. It is why in a successful economy, monetary intervention by the state is kept to a bare minimum, or preferably banished altogether.

Contrary to popular thinking, the velocity of money does not have a life of its own.