Money and Banks

Those analysts that insist on following the Phillips curve in order to ascertain the future course of the momentum of prices of goods are deceiving themselves.

The outcome of today's currency race is uncertain. The credibility of the leading fiat currencies has suffered substantially. Their instability has fueled crises and weakened growth, so the demand for an alternative store of value is high. 

Without money, specialization is constrained; without money, dreams of constructing an advanced society are merely a utopian pipe dream. 

Bob concludes his series on areas where he’s changed his mind. This episode covers the economics of climate change, fractional reserve banking, the US gold standard, and more.

The Fed says rate hikes are at least two years away. A lot can happen in two years, and since when is forecasting a couple rate bumps two years from now considered hawkish to the point of making the dollar pop and gold flop?

The creation and enforcement of fiat money enables larger and more centralized government. Large government programs become possible that were not possible or sustainable under a market-chosen, sound money standard. 

An increase in the supply of money does not necessarily cause the boom-bust cycle. It is only when more money is created out of nothing that the cycle begins. 

The last time a major central bank knowingly tried to end a low-rate policy regime occurred in Japan in the late 1980s. Since then, no central banker has wanted to repeat this unhappy experience.

One of the areas of the economy that the Fed recently needed to bail out was money market funds. Most investors consider these funds cash. One wonders why the Fed would be forced to provide liquidity to shore up liquidity.

If the Fed were to embark on aggressive monetary pumping to counter economic recession this will not produce the intended effect. It will only dilute the pool of real savings and make things worse.