In a follow up to his recent Mises Wire article, “Paying People Not to Work Won’t Make Us Richer,” Paul Prentice explains in more detail why monetary and fiscal “stimulus” won’t fix the economy. 

August 15 marks a special date in American history: it commemorates the fiftieth anniversary of President Richard Nixon’s suspension of Bretton Woods. With this decision, the United States stopped redeeming foreign governments’ and banks’ dollars for gold. Consequently, the world economy transitioned to unconstrained central bank discretionary monetary policy, an unprecedented era in monetary affairs.

Since August 15, 1971, the US dollar has been completely severed from gold. President Richard Nixon suspended the most important component of the Bretton Woods system, which had been in effect since the end of World War II. Nixon announced that the US would no longer redeem dollars for gold for the last remaining entities that could: foreign governments. Gold redemption had been made illegal for everybody else, so this action finally ended any semblance of a gold standard for the US dollar.

Abstract: In her paper “Corporate Risk Evaluation in the Context of Austrian Business Cycle Theory” recently published in this journal, Joanna Kruk aims to investigate how artificially low interest rates resulting from central bank intervention distort individual investment appraisals and ultimately result in both entrepreneurial misjudgment and resource-wasting malinvestment, fueling the business cycle.

Abstract: The new “secular stagnation hypothesis” developed by Lawrence H. Summers attempts to justify why the demand stimulus applied in the aftermath of the global financial crisis failed to revive growth in a satisfactory manner. Building on previous ideas of Keynes, Hansen, and Bernanke, Summers claims that excess savings together with feeble investment drove the natural rate of interest down to zero and advanced economies into stagnation.

Abstract: China is currently the world’s largest installer of wind power. However, with twice the installed wind capacity compared to the United States in 2015, the Chinese produce less power. The question is: Why is this the case? This article shows that Chinese grid connectivity is low, Chinese firms have few international patents, and that export is low even though production capacity far exceeds domestic production needs.

Restoring the Promise: Higher Education in America
Richard K. Vedder
Oakland, Calif.: Independent Institute, 2019, 400 + xiv pp.

Timothy Terrell (terrelltd@wofford.edu) is T.B. Stackhouse Professor of Economics at Wofford College and a Senior Fellow at the Mises Institute.

Abstract: Recent debates in monetary theory have centered on so-called free banking and the role of banks in providing money in the form of fiduciary media in a pure market economy. This paper examines how and to what extent fiduciary media can emerge in a pure market economy. Based on the theory of value, it is argued that those economists are mistaken who claim that money substitutes must in all cases be interpreted as being money titles. Those economists too are mistaken, however, who claim a large role for the circulation of fiduciary media in a pure market economy.