Whatever the Fed imagines they can control and whatever their real intentions are, a central authority cannot optimally set prices that are in line with people’s preferences. This is especially important for interest rates, which have far-reaching influence throughout the economy.
In a recent exchange with Janet Yellen, Senator Ted Cruz blamed the Fed for being too "tight" with monetary policy, thus causing the financial crisis of 2008. Cruz is right that the Fed was at fault, but he's wrong about how.
ZIRP has created massive asset bubbles throughout the world economy, but also has a diabolical impact on ordinary people who are largely disconnected to the bubbles.
The world waits to see if next week is finally the week that the Fed announces its rate hike. Can the economy survive whatever small bump the Fed deals out? Perhaps, but that won’t change the inherent instability of our current monetary regime.
Central bankers would have us believe that creating money “out of thin air” is no problem as long as the “demand for money” increases. They also claim that gold-backed money is more prone to booms and busts. But they’re wrong on both counts.
Opponents of austerity have come out to denounce the idea that it’s bad for governments to borrow. They note that there are benefits to borrowing. The distinction they fail to make is that there’s a big difference between private borrowing and government borrowing.
Government failure was being felt everywhere this week, from the massive law-enforcement failure in Sen Bernardino to the crumbling economy in Brazil. Meanwhile, government tells us it only needs a little more money, power, and time to solve all problems.
Today's BLS employment data release may not be as "solid" as the media are reporting.
Fractional-reserve banking systems create money out of thin air, and this causes malinvestments into less valuable and less productive activities. Eventually, banks realize there's trouble ahead, so they cut back on loans which leads to deflation and crisis.
The continuing power of the US dollar was called into question this week as the International Monetary Fund added the Chinese yuan as a part of the IMF's "currency" known as Special Drawing Rights. What does this mean for the US and China?
