Monetary Policy

David Brady, Jr. reviews The Magic Coin by Dr. Jonathan Newman, a children‘s book that explains money in a way that even modern adults can understand.

William Nordhaus coined the term “political business cycle” a half-century ago. The idea was that government authorities, particularly the central bank, would manipulate the economy to correspond with election cycles, a practice that continues to this day.

Mainstream economists define inflation as the increase in an imaginary “price level” that is relatively neutral in its effects. Austrian economists, however, know better, as they realize that the effects of inflating the money supply are anything but neutral.

The Trump White House has enacted tariffs in the belief that other countries are “cheating” by enacting tariffs against US goods and “manipulating” their currencies. However, with the US dollar being the world's reserve currency, the US has engaged in dollar manipulation through inflation.

MMT uses chartalism and a few dubious examples to appeal to history to establish the theory‘s authority and validity, only to discard this element as irrelevant and unnecessary.

MMT uses chartalism and a few dubious examples to appeal to history to establish the theory‘s authority and validity, only to discard this element as irrelevant and unnecessary.

In a sound monetary system and a free market, overall prices would generally fall as the economy grows faster than the money supply, enabling people to purchase more with their money.

Ultimately, interest rate caps would cost Americans access to a convenient and reliable source of credit. Instead of saving them money, a rate cap would push consumers into worse credit options.

While Austrian economists have engaged Modern Monetary Theorists on economic terms, one should not forget that this theory promotes totalitarian governance. 

The MMT crowd now claims that the monetary history of the US is an example of chartalism. US history is actually an example of the opposite.