Category Archives: Monetary Economics

The Bretton Woods Consensual Hallucination

Scott Sumner writes, You might think it’s no big deal that exchange rates becomes more volatile after the end of Bretton Woods—after all, Bretton Woods was a fixed exchange rate regime. Actually, it’s a huge deal, as you’d expect the … Continue reading

Posted in Monetary Economics, Scott Sumner is Coherent | 9 Comments

Macroeconomics as narrative

Challenging the narrative that the Fed’s quantitative easing was a success, Brian S. Wesbury and Robert Stein write, The Fed boosted bank reserves, but the banks never lent out and multiplied it like they had in previous decades. In fact, … Continue reading

Posted in Monetary Economics, PSST and Macro | 5 Comments

Jeffrey Hummel on central banking

He writes, The Fed cannot have much impact on market rates through pure intermediation—borrowing with interest-earning deposits to purchase other financial assets—any more than Fannie Mae or Freddie Mac can. The Fed can do so, even in a highly segmented … Continue reading

Posted in Monetary Economics | 6 Comments

Money, interest, and the economy

John Cochrane writes, Investment responds to the stock market, and the stock market moves because risk premiums move, not because interest rates move. He goes on to suggest that if monetary policy can effect the economy, it must work through … Continue reading

Posted in Monetary Economics, PSST and Macro | 8 Comments

Scott Sumner’s macroeconomics: my thoughts

He writes, I’ll use “(e)” to denote a (market) expected value. NGDP(e) is the single most important variable in macro; it should be the centerpiece of modern macro. How can we work with a central concept that is purely mental? … Continue reading

Posted in Monetary Economics, PSST and Macro, Scott Sumner is Coherent | 13 Comments

How to Handle the payments system

The commenter suggests, simply nationalize the “deposits taking and transaction processing” function of the banking industry? Everyone gets a zero-service-fee fully electronic (no paper checks) account at the Federal Reserve Picture this as a retail version of the Fed Funds … Continue reading

Posted in financial markets, Monetary Economics | 23 Comments

Don’t Blame the Euro

John Cochrane writes, It is a new proposition in monetary economics to me that adopting a common currency forces countries to move to common productivity, any more than adopting the meter forces countries to do so. Alabama and California share … Continue reading

Posted in Monetary Economics | 10 Comments

Japan and the Consensual Hallucination Hypothesis

Kevin Drum writes, Japan’s deflation has persisted even in the face of massive BOJ efforts that, according to conventional economics, should have restored normal levels of inflation. Pointer from Mark Thoma. BOJ = Bank of Japan, their central bank. We … Continue reading

Posted in Mark Thoma is Indispensable, Monetary Economics | 7 Comments

Kevin Grier rants

He writes, This Fed worship is more religious than scientific. The past 10 years should be enough to convince anyone with an open mind that the Fed’s power over the economy is quite limited and tenuous. More at the link. … Continue reading

Posted in Monetary Economics, Scott Sumner is Coherent | 10 Comments

Greenspan and Financial Regulation

In his new biography of Alan Greenspan, Sebastian Mallaby says some things I agree with, but he also rides a number of hobby horses that I take issue with. Where I agree: 1. I agree that it is hard to … Continue reading

Posted in books and book reviews, financial markets, Monetary Economics | Tagged | 5 Comments