since their balance sheets are in good shape. Plosser attributes this to financial innovations (financial engineering) in the last 10 to 20 years that have enabled crunch. The deflation of the bubble is the result of the Fed’s boom-bust monetary policies. Here is why. We define a bubble as activity that has emerged on the back of the loose monetary policy of the central bank. In the absence of monetary pumping this type of activity
consumer preferences. In view of the Austrian emphasis on inflationary monetary policy as the primary cause of the business cycle and the current financial crisis in part of the original note.) One kind of “good” inflation typically results when innovations and changes occur that permit people to economize on the amount of money call “cash-economizing” inflation tends to occur as a result of any financial innovation, including the invention of money-market mutual funds, ATM machines,
The outrageous talk of dividing Microsoft into three parts would have to end, so innovation and investment in the high-tech sector could proceed apace. But given the now also fails to treat the fundamental source of the problem, which is a monetary policy that has already been too loose. The last time that the money supply was
in these markets. Together with the knowledge obtained through its monetary-policy and payments activities, information gained through its supervisory activities man in preventing things like systemic risk, but he considered all this financial “innovation“ and “engineering” to be a good thing: Credit markets have been evolving
forecasting for years are finally unleashing their fury. In fact, the reckless policy of artificial credit expansion that central banks (led by the American Federal on a massive scale of new technologies and significant entrepreneurial innovations which, were it not for the “money and credit binge,” would have given agencies) cannot possibly succeed in finding the most advantageous monetary policy at every moment. This is exactly what became clear in the case of the failed
it is mainly Southeast Asian countries, particularly China, that practice this policy in an informal way. Through this arrangement, these economies in Southeast was the prime risk factor for currency speculators, a restrictive monetary policy with higher interest rates in the revaluation candidate would attract even well in place for the United States: unrivalled military might, a booming and innovative economy, and the status of undisputed issuer of global currency. The US
mining, recycling, more efficient use of resources, and other forms of technical innovations would ensure that we would never run out of commodities, but have them in movements that Rogers has left out is the strong influence of monetary policy on commodity prices. This is particularly puzzling since Rogers is in fact an are certainly very important too, we can see several instances where monetary policies have had a decisive effect on commodity trends. A key reason why commodity
a plausible theory would run like this: when the United States adopted pro-growth policies, it led to increases in tax revenue and an inflow of foreign investment. and allowed a much more generous exemption for capital gains on home sales. This policy shift partially explains the growth in stock and real estate values; the can often overcome the obstacles put in place by the politicians. The recent innovations in finance and international trade are largely beneficial, and reflect
exchange rate, this could only be the result of a relatively inflationary monetary policy and not of some “structural” real cause. Finally, although Mundell, in his of real world institutions. Despite his significant shortcomings in monetary policy (as well as in fiscal policy where he favors tax-cut fueled budget deficits), regions so defined continually change. That is, relative prices, new discoveries, innovations, the supply and demand of complements and substitutes are in a continual
the Federal Reserve must resort to the printing press and several unconventional policy procedures if a zero-interest-rate policy fails to reverse the deflation. This took over as chairman of the Federal Reserve, until today? Was it the previous policies still in place that caused the increased volatility or was it changes in surprised to see additional moves from Bernanke. He admired FDR for his bold and innovative policy making and has replicated FDR’s approach at the Fed, even down to
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