and Investing
The wait continues regarding the tax reform proposal to come out of the White House and be taken up by Congress. Despite the headlines dominated by more peripheral matters, tax reform is shaping up to be one of the cruxes to the success of the new administration. It is not simply a matter of reducing … Continue reading “A Monetary Solution to Trade Imbalances? Gilder and the Gold Standard“
The British vote on June 23rd, 2016, to leave the European Union, is one of those events that will long be remembered. Yet there was another event involving Britain on the one hand and the European Union (then Community) on the other, that likewise came as a shock, and which likewise lives on in the … Continue reading “Maggie’s Revenge”
When Schumpeter writes, “Now to the question: what is a savings account?”,[1] he is not being facetious. There is more to savings than meets the eye. Of course, the bare fact of saving is simple enough to understand. Rather than spend all of our earnings, we take some and put it to one side. What … Continue reading “The Problem of Saving”
Do floating exchange rates work? By which we mean, do floating exchange rates bring countries, national economies, into equilibrium? Equilibrium here means that trade between countries is in balance. Thus, exports and imports of goods and services, although in constant fluctuation as economies progress along divergent paths, balance each other over time. With this we do … Continue reading “The Trouble with Exchange Rates”
Michael Lewis, the author of various illuminating accounts of the events and progressions of the great financial crisis of 2008 – one of which became an Oscar-winning Hollywood movie – this time provides us with an illuminating account of someone else’s book – Mervyn King’s newly published The End of Alchemy. The thesis is a … Continue reading “An End to Alchemy?”
Western Christendom experienced a sea change in the late 17th century. On one side of that divide was theological dogmatics, scholastic philosophy, the divine right of kings and priests, and, seemingly in their train, wars of religion; on the other side, there was theological indifference, mechanical philosophy, government by consent of the governed, latitudinarian and … Continue reading “Isaac Newton and the Alchemy of Finance”
“Honest money” is a phrase bandied about as a self-evident truth. As the accompanying graph indicates, its incidence coincides with the heyday of the gold standard. As such, it is the pithy summary of a strongly-held view on the nature of money, which at the time of the gold standard had a highly political charge. … Continue reading “Honest Money?”
Seeing as how the gold standard is a “money method”[1] by which all exchange value is made dependent upon the weight of a certain substance, viz., gold, it would seem appropriate to “weigh it up” to determine whether or not, “weighed in the balance,” it is “found wanting.” Indeed, weight measurement was the standard of … Continue reading “Weighing the Gold Standard”
In a previous post (“Quantitative Easing and Substitutionary Atonement”), I discussed some of the underlying philosophy of quantitative easing, the latest of the Fed’s attempts to “stimulate” the economy. Quantitative easing, to recap, is the term for central bank purchases of assets on the open market. The difference with traditional “open-market operations” is twofold. Firstly, the purpose: … Continue reading “Another Look at Quantitative Easing”
As is the case with the vast majority of commentators on this topic, I have not read Thomas Piketty’s book (Capital in the Twenty-First Century). The following is therefore gleaned from other sources, mainly this interview, from which, unless otherwise indicated, the following quotations are taken. The first thing to say is that, on the … Continue reading “Thoughts on the Piketty Thesis”
In attempting to explain to my wife why investing in the stock market right now is not such a good idea, I came up with a little graph, which at one glance reveals the matter succinctly. Here it is: It shows that the stock market growth of recent years has less to do with … Continue reading “Quantitative Easing and Substitutionary Atonement”
“It is a truth universally acknowledged that a single country in possession of a current account surplus must be in need of an export market.” With apologies to Jane Austen, of course: the sentiment thus expressed actually is anything but universally acknowledged. In fact, it flies in the face of received wisdom. We are accustomed … Continue reading “Is There a PIIG in Germany’s Parlor?”
In the system we have now, we do use both a reserve restriction and an asset restriction. But, the modern reserve restriction has changed fundamentally, and has nothing to do with the monetarist understanding of reserve restrictions, except in a purely formal sense. In the day of specie convertibility, reserve restriction had a definite functionality. … Continue reading “Fact and Fiction on Reserve Requirements”
This blog entry is for anyone who believes, as John Tamny here puts it, that “Fractional reserve banking quite simple IS.” Among the many good points Tamny makes in his article, there is the underlying assumption that our system is, in some important sense, a fractional-reserve system. But is this a valid contention? My contention … Continue reading “Why We Do NOT Have a Fractional-Reserve System”
In a comment posted under an article by my friend Jerry Bowyer (Where’s the Hyperinflation?), “ps61penn62prin64” writes that “private currency monetary systems… are doomed to fail the interest of American citizens.” Bowyer’s article discusses the sizeable increase in the money supply generated by the Fed, and how this has — or has not — affected … Continue reading “Private Issue of Money — the Root of Our Monetary Problem?”
In his excellent book The New Lombard Street, Perry Mehrling writes of “a world that never was … Jimmy Stewart banking of blessed memory” (p. 117). This is an obvious reference to one of Jimmy Stewart’s most famous roles: George Bailey in the holiday classic movie It’s a Wonderful Life. In the movie, Bailey is … Continue reading “Jimmy Stewart Banking versus James Steuart Banking”
The euro seems to be on its last legs, and the vision which inspired its genesis seems to have vanished from the politicians sponsoring it. The recent spat with England and Prime Minister Cameron has only served to highlight the vacuum in vision. Previously, whenever England was scapegoated, English politicians skulked like whipped curs, and … Continue reading “How to Make the Euro Project Work”
The stock markets continue to plummet in unnerving fashion. The blame for it is centering on the “bailout” package — was it too little too late, was it too much, was the passage of it a dispiriting display of bad leadership. I think it goes deeper than that. The bailout was never meant to solve … Continue reading “What’s Behind the Meltdown”
At bottom, the issue involved in this financial crisis is false weights and measures. That is, a standard of valuation that is manipulated, making people believe they are receiving something other (of lesser value) than they actually are. The Bible has this to say about such false weights and measures: Le 19:36 Just balances, just … Continue reading “The Bottom Line: False Weights and Measures”