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.
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.
The Fed has changed the rules under which it can inject liquidity into the system, says Sean Corrigan in this wide-ranging interview. The Fed has made several overt statements of intent that, if necessary, it will buy anything—corporate securities, mortgages, physical assets—it will conduct a "money rain" if it has to.
Murray Rothbard had a remarkable ability to throw unexpected light on historical controversies. Again and again in his work, he pointed out factors that earlier authors had overlooked.
To speak about average prices is like talking about average precipitation to a golfer, writes Chris Mayer. It either rains during a specific time period or it doesn't. There is no average that is anyway useful for an acting human being on a golf course. The only information that counts is what it is doing right now while he is teeing off. It is the same with prices.
