The Eurozone’s tangle of conflicting goals – a series of ‘trilemmas’ – is not without precedent. This column argues that it is reminiscent of the interwar situation. The interwar slump was so intractable not just due to financial issues, but also a crisis of democracy, of social stability, and of the international political system. The big difference in the EZ is that nations cannot go off the euro as they went off the gold standard. That is why the initial EZ crisis may not have been so acute as some of the gold standard sudden stops, but the recovery or bounce back is painfully slow and protracted.Read more ›
Post Tagged with: "gold standard"
Bill Gross, co-chief investment officer at Pacific Investment Management Co., talks about the outlook for Federal Reserve monetary policy and debt purchases, known as quantitative easing. Gross also discusses the state of credit markets and so-called currency wars. He speaks with Trish Regan and Adam Johnson on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)Read more ›
I was on RT’s Capital Account on Friday night talking to Lauren Lyster about QE and the conversation moved more into the realm of fiat currency and government’s coercive taxing power. This is particularly relevant given arguments within Republican circles about returning the US to the gold standard. Last July I wrote a post about fiat money called “Government tax […]Read more ›
I note that several of the policy mistakes listed above date back to the same period, namely the late 1990s. Not only does it demonstrate the gung-ho approach of the time, but it also goes to show that policy mistakes do not necessarily rear their ugly heads immediately and, by the time they do, the damage has been done.Read more ›
We seem to be moving forward with this discussion on monetary policy, banking, and reserves. John Carney does a good job of summarising some of the initial forays in this back and forth. I am going to try my hand at framing the discussion here using my own analysis of the comments iteratively, with the assistance of more comments of course. Where there are mistakes, I will fix them accordingly.Read more ›
In yesterday’s lecture, Federal Reserve Chairman rejected the idea that a return to a gold standard is desirable or practical. His pointed remarks come as Republican presidential candidate Ron Paul has fanned ideas in some quarters of the benefits of the discipline of a gold standard. Previously the outgoing World Bank head Robert Zoellick had also advocated a return to a gold standard. In addition, there have been press reports suggesting that some central banks have recently stepped up their purchases of gold for monetary (reserve) purposes.Read more ›
We (also) do not want black helicopters flying around dropping bags of cash; and we (also) oppose government “pump-priming” demand stimulus—the libertarians and Austrians and even Milton Friedman are correct in their argument that this would generate inflation. Come to think of it, MMTers have more in common with Austerians than with “military Keynesianism” that supposes that high enough spending on the defence sector will cause full employment to “trickle down”. Most MMTers believe we’d get intolerable inflation before the jobs trickle down to Harlem. But can we “afford” full employment?Read more ›
Milton Friedman’s 1948 article, “A Monetary and Fiscal Framework for Economic Stability” put forward a proposal according to which the government would run a balanced budget only at full employment, with deficits in recession and surpluses in economic booms. There is little doubt that most economists in the early postwar period shared Friedman’s views on that. But Friedman went further, almost all the way to Lerner’s functional finance approach: all government spending would be paid for by issuing government money (currency and bank reserves); when taxes were paid, this money would be “destroyed” (just as you tear up your own IOU when it is returned to you). Thus, budget deficits lead to net money creation. Surpluses would lead to net reduction of money.Read more ›
The last post by Randall Wray below is an interesting one because it points out how the world has changed since the end of the gold standard and why the sovereign debt crisis is centered in the euro zone.
While I have an Austrian bias overall, for me, MMT is the best way to think about nonconvertible floating exchange rate systems as distinct from fixed exchange rate, currency board, pegged and convertible systems. The difference is policy space and what I would call the bond vigilante relief valve.Read more ›