Stagflation is a term that originated in the early 1970s to identify the simultaneous occurrence of recession and inflation—a phenomenon that Keynesian theory had previously suggested was impossible. The industrialized world is being rudely reminded that stagflation is indeed possible, and policymakers are at a loss as to what to do about it.
No other currency, national or international, can conceivably take the place of the American dollar. They all suffer seriously from the same ideological malady: they are the creation of political concern and authority. Whatever we may think of gold, it always looms in the background, beckoning to be used as money, as it has been since the dawn of civilization.
The classical economists were opponents of paper money. And yet in their positive case for commodity money, they made two great errors: believing that an additional supply of notes on the market confers some social benefit and believing that money's value needs to be stable in order to meet the needs of trade. These errors inadvertantly paved the way for political intervention.
Sympathy and justice are wonderful. But neither is furthered by the "living wage" movement, writes John Egger. A university shouldn't put its workers on its own welfare system. To respect their dignity we must pay them what they earn, and that can be established only on the market.
Late last year, in a move that gives even politics a bad name, the Federal Reserve announced yet another cut in its key interest rates. Around the same time, Fed Governor Ben Bernanke gave a speech praising the power of alchemy to lower the price of gold, and, similarly, the power of the Fed to print as many dollars as it wants. Hence, the Federal Funds Rate is down to 1.25 percent, while the discount rate stands at 0.75 percent.
Do deficits cause interest rates to be higher than they otherwise would be? Supply Siders, armed with historical data, say no. Unfortunately for them, writes Christopher Mayer, the conventional wisdom is closer to the truth. Deficits crowd out private investment, fritter away savings, and rob the public of valuable capital.
Rothbard makes sense of these complex events in American banking history--power struggles, recessions, foreign relations--wielding the principles of monetary theory and Austrian business cycle theory, which he explains very well, on the run. Joseph Stromberg reviews A History of Money and Banking in the United States.
The consequences of a markedly diminished position of the US dollar would be dramatic and of global proportions. While it would affect all economies that are closely related to the US economy, the major impact would fall on the United States itself. A demise of the US dollar as the dominant global currency would mean that the current relation between domestic absorption and production could no longer be maintained.
By defaulting on one loan, Argentina may be acknowledging that no country ever became wealthy depending on public financing organizations from another hemisphere. One can hope. Such ideas can lead to economic sovereignty and wealth creation. Such ideas, if spread, can cause industrial revolutions.
The existence of the money multiplier is the outcome of fractional reserve banking, writes Frank Shostak, which the current banking system makes possible. The money multiplier is not only real; it is a good tool to help us understand the process by which the banking system creates inflationary credit and all of its associated effects.
