Monetary Policy Quotes

It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.

Boom/bust cycles are not inevitable and would not occur were it not for the inflationary monetary policies that always precede recessions.

If something is wrong for you or me, it is also wrong for the cop, the soldier, the mayor, the governor, the general, the Fed chairman, the president. Theft does not become acceptable when they call it taxation, counterfeiting when they call it monetary policy, kidnapping when they call it the draft, mass murder when they call it foreign policy. We understand that it is never acceptable to wield violence nor the threat of violence against the innocent, whether by the mugger or the politician.

The theory of economic shock therapy relies in part on the roleof expectations on feeding an inflationary process. Reining in inflation requires not only changing monetary policy but also changing the behavior of consumers, employers and workers. The role of a sudden, jarring policy shift is that it quickly alters expectations, signaling to the public that the rules of the game have changed dramatically - prices will not keep rising, nor will wages.

Inflation is always and everywhere a monetary phenomenon.

This book (Jarod Kintz's book) is trash. I mean, I assume it is, because that's where I found it while scrounging for lunch. However, I must admit that I haven't read it. I would have, but I am homeless, mainly due to my illiteracy (though Big Government, Keynesian monetary policy, and my struggle with alcoholism certainly played a large role).

Almost as an article of faith, some individuals believe that conspiracies are either kooky fantasies or unimportant aberrations. To be sure, wacko conspiracy theories do exist. There are people who believe that the United States has been invaded by a secret United Nations army equipped with black helicopters, or that the country is secretly controlled by Jews or gays or feminists or black nationalists or communists or extraterrestrial aliens. But it does not logically follow that all conspiracies are imaginary. Conspiracy is a legitimate concept in law: the collusion of two or more people pursuing illegal means to effect some illegal or immoral end. People go to jail for committing conspiratorial acts. Conspiracies are a matter of public record, and some are of real political significance. The Watergate break-in was a conspiracy, as was the Watergate cover-up, which led to Nixon’s downfall. Iran-contra was a conspiracy of immense scope, much of it still uncovered. The savings and loan scandal was described by the Justice Department as “a thousand conspiracies of fraud, theft, and bribery,” the greatest financial crime in history. Often the term “conspiracy” is applied dismissively whenever one suggests that people who occupy positions of political and economic power are consciously dedicated to advancing their elite interests. Even when they openly profess their designs, there are those who deny that intent is involved. In 1994, the officers of the Federal Reserve announced they would pursue monetary policies designed to maintain a high level of unemployment in order to safeguard against “overheating” the economy. Like any creditor class, they preferred a deflationary course. When an acquaintance of mine mentioned this to friends, he was greeted skeptically, “Do you think the Fed bankers are deliberately trying to keep people unemployed?” In fact, not only did he think it, it was announced on the financial pages of the press. Still, his friends assumed he was imagining a conspiracy because he ascribed self-interested collusion to powerful people. At a World Affairs Council meeting in San Francisco, I remarked to a participant that U.S. leaders were pushing hard for the reinstatement of capitalism in the former communist countries. He said, “Do you really think they carry it to that level of conscious intent?” I pointed out it was not a conjecture on my part. They have repeatedly announced their commitment to seeing that “free-market reforms” are introduced in Eastern Europe. Their economic aid is channeled almost exclusively into the private sector. The same policy holds for the monies intended for other countries. Thus, as of the end of 1995, “more than $4.5 million U.S. aid to Haiti has been put on hold because the Aristide government has failed to make progress on a program to privatize state-owned companies” (New York Times 11/25/95). Those who suffer from conspiracy phobia are fond of saying: “Do you actually think there’s a group of people sitting around in a room plotting things?” For some reason that image is assumed to be so patently absurd as to invite only disclaimers. But where else would people of power get together – on park benches or carousels? Indeed, they meet in rooms: corporate boardrooms, Pentagon command rooms, at the Bohemian Grove, in the choice dining rooms at the best restaurants, resorts, hotels, and estates, in the many conference rooms at the White House, the NSA, the CIA, or wherever. And, yes, they consciously plot – though they call it “planning” and “strategizing” – and they do so in great secrecy, often resisting all efforts at public disclosure. No one confabulates and plans more than political and corporate elites and their hired specialists. To make the world safe for those who own it, politically active elements of the owning class have created a national security state that expends billions of dollars and enlists the efforts of vast numbers of people.

In fiscal policy as in monetary policy, all political considerations aside, we simply do not know enough to be able to use deliberate changes in taxation or expenditures as a sensitive stabilizing mechanism.

it (government) can't run out of dollars any more than a carpenter can run out of inches.

For the same reason a disease cannot be cured by more of the germ that caused it, the inflation and debt accumulation of the Obama years will not inflate our way out of it.

Thus, increases in interest rates matter greatly for the economy as a whole. They not only cause direct reductions in investment spending and interest-sensitive consumption spending (the main intent of restrictive monetary policy), but they also may reduce aggregate demand indirectly through their impact on asset prices.

No government can successfully achieve all three goals of having a fixed foreign exchange rate, free capital flows, and an independent monetary policy.

Myth: Bernanke Fed is committed to stimulus until a recovery occurs. Fact: The current monetary policy assures further capital destruction

Inflationism is that monetary policy that seeks to increase the quantity of money.

Inflation via loose monetary policy is in effect a tax, but one that does not have to be legislated and that tends to hurt ordinary people more than elites with real rather than monetary assets.

If not interest rates or monetary policy, then what? Most research on the origins of the bubble has focused on three factors: mass psychology; financial innovations that reduced the incentive for careful lending;

The harder a government, such as a dictatorship, tries to maintain monetary policy autonomy, the more it must either limit the movement of capital into and outside of the country, or the more it must compromise exchange-rate stability.

The problem with fiat is that simply maintaining the wealth you already own requires significant active management and expert decision-making. You need to develop expertise in portfolio allocation, risk management, stock and bond valuation, real estate markets, credit markets, global macro trends, national and international monetary policy, commodity markets, geopolitics, and many other arcane and highly specialized fields in order to make informed investment decisions that allow you to maintain the wealth you already earned. You effectively need to earn your money twice with fiat, once when you work for it, and once when you invest it to beat inflation. The simple gold coin saved you from all of this before fiat.

He who cares to go to the trouble of demonstrating the uselessness of index numbers for monetary theory and the concrete tasks of monetary policy will be able to select a good proportion of his weapons from the writings of the very men who invented them.

Shortcomings in the governments’ handling of monetary matters and the disastrous consequences of policies aimed at lowering the rate of interest and at encouraging business activities through credit expansion gave birth to the ideas which finally generated the slogan “stabilization.” One can explain its emergence and its popular appeal, one can understand it as the fruit of the last hundred and fifty years’ history of currency and banking, one can, as it were, plead extenuating circumstances for the error involved. But no such sympathetic appreciation can render its fallacies any more tenable.

the International Monetary Fund basically acted as the world’s debt enforcers—“You might say, the high-finance equivalent of the guys who come to break your legs.” I launched into historical background, explaining how, during the ’70s oil crisis, OPEC countries ended up pouring so much of their newfound riches into Western banks that the banks couldn’t figure out where to invest the money; how Citibank and Chase therefore began sending agents around the world trying to convince Third World dictators and politicians to take out loans (at the time, this was called “go-go banking”); how they started out at extremely low rates of interest that almost immediately skyrocketed to 20 percent or so due to tight U.S. money policies in the early ’80s; how, during the ’80s and ’90s, this led to the Third World debt crisis; how the IMF then stepped in to insist that, in order to obtain refinancing, poor countries would be obliged to abandon price supports on

The excellence of metallic money in free circulation consists in the fact that it renders impossible the abuse of the power of the government to dispose of the possessions of its citizens by means of its monetary policy and thus serves as the solid foundation of economic liberty within each country and of free trade between one country and another.

The central lesson of the COVID-19 fiscal response is that money is not scarce. Without delay, governments around the world appropriated budgets that dwarfed any other post-war crisis policy.

The gold standard created what economists have called a “golden straitjacket.” Debtor nations would exchange control over their monetary policy for capital mobility and stable exchange rates. Although the cost of borrowing abroad would fall, the United States would lose the ability to drive domestic interest rates below international interest rates. Gold dollars would flee abroad if interest rates elsewhere were higher.

Restrictionistic ideas have never met with any measure of popular sympathy except after a time of monetary depreciation when it has been necessary to decide what should take the place of the abandoned inflationary policy.

The oldest and most popular instrument of etatistic monetary policy is the official fixing of maximum prices. High prices, thinks the etatist, are not a consequence of an increase in the quantity of money, but a consequence of reprehensible activity on the part of 'bulls' and 'profiteers'; it will suffice to suppress their machinations in order to ensure the cessation of the rise of prices. Thus it is made a punishable offence to demand, or even to pay, 'excessive' prices.

Hamilton, wanting the bank to remain predominantly in private hands, advanced a theory that became a truism of central banking—that monetary policy was so liable to abuse that it needed some insulation from interfering politicians: “To attach full confidence to an institution of this nature, it appears to be an essential ingredient in its structure that it shall be under a private not a public direction, under the guidance of individual interest, not of public policy.” 18 At

Ever since the 2008 global financial crisis, central banks had ventured, not by choice but by necessity, ever deeper into the unfamiliar and tricky terrain of “unconventional monetary policies.” They floored interest rates, heavily intervened in the functioning of markets, and pursued large-scale programs that outcompeted one another in purchasing securities in the marketplace; to top it all off, they aggressively sought to manipulate investor expectations and portfolio decisions.

For fiscal policy, the appropriate counterpart to the monetary rule would be to plan expenditure programs entirely in terms of what the community wants to do through government rather than privately, and without any regard to problems of year-to-year economic stability; to plan tax rates so as to provide sufficient revenues to cover planned expenditures on the average of one year with another, again without regard to year-to-year changes in economic stability; and to avoid erratic changes in either governmental expenditures or taxes.

In the immediate postbubble period, the wealth effect of asset price movements has a bigger impact on economic growth rates than monetary policy does. People tend to underestimate the size of this effect. In the early stages of a bubble bursting, when stock prices fall and earnings have not yet declined, people mistakenly judge the decline to be a buying opportunity and find stocks cheap in relation to both past earnings and expected earnings, failing to account for the amount of decline in earnings that is likely to result from what’s to come. But the reversal is self-reinforcing. As wealth falls first and incomes fall later, creditworthiness worsens, which constricts lending activity, which hurts spending and lowers investment rates while also making it less appealing to borrow to buy financial assets. This in turn worsens the fundamentals of the asset (e.g., the weaker economic activity leads corporate earnings to chronically disappoint), leading people to sell and driving down prices further. This has an accelerating downward impact on asset prices, income, and wealth.

If the State uses this power systematically in order to force the community to accept a particular sort of money whose employment it desires for reasons of monetary policy, then it is actually carrying through a measure of monetary policy. The States which completed the transition to a gold standard a generation ago, did so from motives of monetary policy. They gave up the silver standard or the credit-money standard because they recognized that the behaviour of the value of silver or of credit money was unsuited to the economic policy they were following.

As long as there are no routes back to full employment except that of somehow restoring business confidence, he pointed out, business lobbies in effect have veto power over government actions: propose doing anything they dislike, such as raising taxes or enhancing workers' bargaining power, and they can issue dire warnings that this will reduce confidence and plunge the nation into depression. But let monetary and fiscal policy be deployed to fight unemployment, and suddenly business confidence becomes less necessary, and the need to cater to capitalists' concern is much reduced.

The boom brought about by the banks’ policy of extending credit must necessarily end sooner or later. Unless they are willing to let their policy completely destroy the monetary and credit system, the banks themselves must cut it short before the catastrophe occurs. The longer the period of credit expansion and the longer the banks delay in changing their policy, the worse will be the consequences of the malinvestments and of the inordinate speculation characterizing the boom; and as a result the longer will be the period of depression and the more uncertain the date of recovery and return to normal economic activity

What with the doctrines that are now widely accepted and the policies accordingly expected from the monetary authorities, there can be little doubt that current union policies must lead to continuous and progressive infl ation. The chief reason for this is that the dominant “fullemployment” doctrines explicitly relieve the unions of the responsibility for any unemployment and place the duty of preserving full employment on the monetary and fiscal authorities. The only way in which the latter can prevent union policy from producing unemployment is, however, to counter through inflation whatever excessive rises in real wages unions tend to cause.

The idea that the euro has “failed” is dangerously naive. The euro is doing exactly what its progenitor – and the wealthy 1%-ers who adopted it – predicted and planned for it to do. … Removing a government's control over currency would prevent nasty little elected officials from using Keynesian monetary and fiscal juice to pull a nation out of recession. “It puts monetary policy out of the reach of politicians,” [Robert] Mundell explained]. “Without fiscal policy, the only way nations can keep jobs is by the competitive reduction of rules on business.” … Hence, currency union is class war by other means. — Greg Palast, “Robert Mundell, evil genius of the euro.” Unlike

The only solution was to tie the hands of macroeconomic policy makers.7 Instead of giving the Federal Reserve discretion to trade lower unemployment for higher inflation, the central bank should be forced to accept the fact that a certain amount of unemployment was necessary to keep inflation stable. As we will see, MMT contests this framework.

While I won’t go into exactly how it works here, the most defining characteristics of bubbles that can be measured are: Prices are high relative to traditional measures Prices are discounting future rapid price appreciation from these high levels There is broad bullish sentiment Purchases are being financed by high leverage Buyers have made exceptionally extended forward purchases (e.g., built inventory, contracted for supplies, etc.) to speculate or to protect themselves against future price gains New buyers (i.e., those who weren’t previously in the market) have entered the market Stimulative monetary policy threatens to inflate the bubble even more (and tight policy to cause its popping)

The collapse of an inflation policy carried to its extreme -- as in the United States in 1781 and in France in 1796 -- does not destroy the monetary system, but only the credit money or fiat money of the State that has overestimated the effectiveness of its own policy. The collapse emancipates commerce from etatism and establishes metallic money again.

For NED and American neocons, Yanukovych’s electoral legitimacy lasted only as long as he accepted European demands for new ‘trade agreements’ and stern economic ‘reforms’ required by the International Monetary Fund. When Yanukovych was negotiating those pacts, he won praise, but when he judged the price too high for Ukraine and opted for a more generous deal from Russia, he immediately became a target for ‘regime change.’ Thus, we have to ask, as Mr Putin asked - ‘Why?’ Why was NED funding sixty-five projects in one foreign country? Why were Washington officials grooming a replacement for President Yanukovych, legally and democratically elected in 2010, who, in the face of protests, moved elections up so he could have been voted out of office - not thrown out by a mob?

Keynes argued that when short-term and long-term interest rates had reached their respective lower bounds, further increases in the money supply would just be absorbed by the hoarding of money and would not lead to lower interest rates and higher spending. Once caught in this liquidity trap, the economy could persist in a depressed state indefinitely. Since economies were likely to find themselves in such conditions only infrequently, Hicks described Keynes’s theory as special rather than general, and relevant only to depression conditions. And this has remained the textbook interpretation of Keynes ever since. Its main implication is that in a liquidity trap monetary policy is impotent, whereas fiscal policy is powerful because additional government expenditure is quickly translated into higher output.

Achild acquires stuffed animals throughout their life, but the core team is usually in place by the time they’re five. Louise got Red Rabbit, a hard, heavy bunny made of maroon burlap, for her first Easter as a gift from Aunt Honey. Buffalo Jones, an enormous white bison with a collar of soft wispy fur, came back with her dad from a monetary policy conference in Oklahoma. Dumbo, a pale blue hard rubber piggy bank with a detachable head shaped like the star of the Disney movie, had been spotted at Goodwill and Louise claimed him as “mine” when she was three. Hedgie Hoggie, a plush hedgehog Christmas ornament, had been a special present from the checkout girl after Louise fell in love with him in the supermarket checkout line and would strike up a conversation with him every time they visited. But Pupkin was their leader.

Despite the Bank of England gaining independence for setting UK monetary policy in 1998 and in the process being freed from political meddling; it has recently come under renewed attack from the lunatic fringe within the UK's Conservative Party, especially amongst arch Brexiteers such as Jacob Rees-Mogg (a.k.a. JackOff Grease-Smug to his growing number of detractors) who appear hell-bent on undermining the current bank governor's every move. When Mark Carney rightly sounds the alarm bells of the potential dangers to the UK economy resulting from a 'no deal' Brexit, he should be allowed to offer those wise words of warning without being subjected to Rees-Mogg's tiresome whining and monotonous droning on about politically motivated statements. It's high time this pestilent gnat modified his tune before a large fly swat of public outrage takes him down.

With the growth of market individualism comes a corollary desire to look for collective, democratic responses when major dislocations of financial collapse, unemployment, heightened inequality, runaway inflation, and the like occur. The more such dislocations occur, the more powerful and internalized, Hayek insists, neoliberal ideology must become; it must become embedded in the media, in economic talking heads, in law and the jurisprudence of the courts, in government policy, and in the souls of participants. Neoliberal ideology must become a machine or engine that infuses economic life as well as a camera that provides a snapshot of it. That means, in turn, that the impersonal processes of regulation work best if courts, churches, schools, the media, music, localities, electoral politics, legislatures, monetary authorities, and corporate organizations internalize and publicize these norms.

The euro and the ECB were designed in a way that blocks government money creation for any purpose other than to support the banks and bondholders. Their monetary and fiscal straitjacket obliges the eurozone economies to rely on bank creation of credit and debt. The financial sector takes over the role of economic planner, putting its technicians in charge of monetary and fiscal policy without democratic voice or referendums over debt and tax policies.

A third group of inflationists do not deny that inflation involves serious disadvantages. Nevertheless, they think that there are higher and more important aims of economic policy than a sound monetary system. They hold that although inflation may be a great evil, yet it is not the greatest evil, and that the State might under certain circumstances find itself in a position where it would do well to oppose greater evils with the lesser evil of inflation.

Generally the causes of the top-reversal fall into a few categories: The income from selling goods and services to foreigners drops (e.g., the currency has risen to a point where it’s made the country’s exports expensive; commodity-exporting countries may suffer from a fall in commodity prices). The costs of items bought from abroad or the cost of borrowing rises. Declines in capital flows coming into the country (e.g., foreign investors reduce their net lending or net investment into the country). This occurs because: The unsustainable pace naturally slows, Something leads to greater worries about economic or political conditions, or A tightening of monetary policy in the local currency and/or in the currency those debts are denominated in (or in some cases, tightening abroad creates pressure for foreign capital to pull out of the country). A country’s own citizens or companies want to get their money out of their country/currency.

Harry Markowitz won a Nobel Prize for the insight that diversification is the only free lunch in the investment business. However, if all investments are in tech, much of the benefit of diversification is lost since tech valuations are correlated. For early-stage companies, profits are in the distant future, and therefore valuations are sensitive to interest rates. Shifting sentiment plays a role, and frequently both market psychology and monetary policy are factors, creating boom/bust cycles such as the internet bubble of 1999–2000 and the more recent recalibration of tech in 2022. There is a frequently overlooked temporal dimension to diversification. Other things being equal, a fund that invests $100 million a year over ten years is less risky than a fund that invests $500 million a year over two years. The former fund will likely invest across market cycles, which should lead to a lower volatility of outcomes, even if both funds make an identical number of investments with a similar risk profile.

In January 1971 he startled the newsman Howard K. Smith by telling him, "I am now a Keynesian in economics," and in August he jolted the nation by announcing a New Economic Policy. This entailed fighting inflation by imposing a ninety-day freeze on wages and prices. Nixon also sought to lower the cost of American exports by ending the convertibility of dollars into gold, thereby allowing the dollar to float in world markets. This action transformed with dramatic suddenness an international monetary system of fixed exchange rates that had been established, with the dollar as the reserve currency, in 1946.

Hamilton wanted his central bank to be profitable enough to attract private investors while serving the public interest. He knew the composition of its board would be an inflammatory issue. Directors would consist of a “small and select class of men.” To prevent an abuse of trust, Hamilton suggested mandatory rotation. “The necessary secrecy” of directors’ transactions will give “unlimited scope to imagination to infer that something is or may be wrong. And this inevitable mystery is a solid reason for inserting in the constitution of a Bank the necessity of a change of men.”17 But who would direct this mysterious bastion of money? Its ten million dollars in capital would be several times larger than the combined capital of all existing banks, eclipsing anything ever seen in America. Hamilton, wanting the bank to remain predominantly in private hands, advanced a theory that became a truism of central banking—that monetary policy was so liable to abuse that it needed some insulation from interfering politicians: “To attach full confidence to an institution of this nature, it appears to be an essential ingredient in its structure that it shall be under a private not a public direction, under the guidance of individual interest, not of public policy.”18

It has been proposed that monetary liabilities should be settled in terms of gold and not according to their nominal amount. If this proposal were adopted, for each mark that had been borrowed that sum would have to be repaid that could at the time of repayment buy the same weight of gold as one mark could at the time when the debt contract was entered into. The fact that such proposals are now put forward and meet with approval shows that etatism has already lost its hold on the monetary system and that inflationary policies are inevitably approaching their end. Even only a few years ago, such a proposal would either have been ridiculed or else branded as high treason.

THE economic consequences of fluctuations in the objective exchange-value of money have such important bearings on the life of the community and of the individual that as soon as the State had abandoned the attempt to exploit for fiscal ends its authority in monetary matters, and as soon as the large-scale development of the modern economic community had enabled the State to exert a decisive influence on the kind of money chosen by the market, it was an obvious step to think of attaining certain socio-political aims by influencing these consequences in a systematic manner. Modern currency policy is something essentially new; it differs fundamentally from earlier State activity in the monetary sphere.

Neoliberalism doesn’t want to do away with politics – neoliberalism wants to put politics at the service of the market. Neoliberals don’t think that the economy should be left in peace, but rather they are for the economy being guided, supported and protected through the spreading of social norms that facilitate competition and rational behaviour. Neoliberal economic theory isn’t built on keeping the hands of politics off the market, it’s built on keeping the hands of politics busy with satisfying the needs of the market. It’s not true that neoliberalism doesn’t want to pursue monetary, fiscal, family or criminal policies. It is rather that monetary, fiscal, family and criminal policies should all be used to procure what the market needs.

Today, in the United States, government spending, federal, state, and local, amounts to almost half of the monetary incomes of the portion of the citizenry that does not work for the government. Fifteen federal cabinet departments, and a much larger number of federal regulatory agencies, together in most instances with counterparts at the state and local level, routinely intrude into virtually every area of the individual citizen’s life. In countless ways he is taxed, compelled, and prohibited. The effect of such massive government interference is unemployment, rising prices, falling real wages, a need to work longer and harder, and growing economic insecurity. The further effect is growing anger and resentment. Though the government’s policy of interventionism is their logical target, the anger and resentment people feel are typically directed at businessmen and the rich instead. This is a mistake which is fueled for the most part by an ignorant and envious intellectual establishment and media.

KEYNESIAN ECONOMICS AND STIMULUS Keynesian economics is based on the notion that unemployment arises when total or aggregate demand in an economy falls short of the economy’s ability to supply goods and services. When products go unsold, jobs are lost. Aggregate demand, in turn, comes from two sources: the private sector (which is the majority) and the government. At times, aggregate demand is too buoyant—goods fly off the shelves and labor is in great demand—and we get rising inflation. At other times, aggregate demand is inadequate—goods are hard to sell and jobs are hard to find. In those cases, Keynes argued in the 1930s, governments can boost employment by cutting interest rates (what we now call looser monetary policy), raising their own spending, or cutting people’s taxes (what we now call looser fiscal policy). By the same logic, when there is too much demand, governments can fight actual or incipient inflation by raising interest rates (tightening monetary policy), increasing taxes, or reducing its own spending (thus tightening fiscal policy). That’s part of standard Keynesian economics, too, although Keynes, writing during the Great Depression, did not emphasize it. Setting aside the underlying theory, the central Keynesian policy idea is that the government can—and, Keynes argued, should—act as a kind of balance wheel, stimulating aggregate demand when it’s too weak and restraining aggregate demand when it’s too strong. For decades, American economists took for granted that most of that job should and would be done by monetary policy. Fiscal policy, they thought, was too slow, too cumbersome, and too political. And in the months after the Lehman Brothers failure, the Federal Reserve did, indeed, pull out all the stops—while fiscal policy did nothing. But what happens when, as was more or less the case by December 2008, the central bank has done almost everything it can, and yet the economy is still sinking? That’s why eyes started turning toward Congress and the president—that is, toward fiscal stimulus—after the 2008 election.

What are the health effects of the choice between austerity and stimulus? Today there is a vast natural experiment being conducted on the body economic. It is similar to the policy experiments that occurred in the Great Depression, the post-communist crisis in eastern Europe, and the East Asian Financial Crisis. As in those prior trials, health statistics from the Great Recession reveal the deadly price of austerity—a price that can be calculated not just in the ticks to economic growth rates, but in the number of years of life lost and avoidable deaths. Had the austerity experiments been governed by the same rigorous standards as clinical trials, they would have been discontinued long ago by a board of medical ethics. The side effects of the austerity treatment have been severe and often deadly. The benefits of the treatment have failed to materialize. Instead of austerity, we should enact evidence-based policies to protect health during hard times. Social protection saves lives. If administered correctly, these programs don’t bust the budget, but—as we have shown throughout this book—they boost economic growth and improve public health. Austerity’s advocates have ignored evidence of the health and economic consequences of their recommendations. They ignore it even though—as with the International Monetary Fund—the evidence often comes from their own data. Austerity’s proponents, such as British Prime Minister David Cameron, continue to write prescriptions of austerity for the body economic, in spite of evidence that it has failed. Ultimately austerity has failed because it is unsupported by sound logic or data. It is an economic ideology. It stems from the belief that small government and free markets are always better than state intervention. It is a socially constructed myth—a convenient belief among politicians taken advantage of by those who have a vested interest in shrinking the role of the state, in privatizing social welfare systems for personal gain. It does great harm—punishing the most vulnerable, rather than those who caused this recession.

Politicians are the only people in the world who create problems and then campaign against them. Have you ever wondered why, if both the Democrats and Republicans are against deficits, we have deficits? Have you ever wondered why if all politicians are against inflation and high taxes, we have inflation and high taxes? You and I don’t propose a federal budget. The president does. You and I don’t have Constitutional authority to vote on appropriations. The House of Representatives does. You and I don’t write the tax code. Congress does. You and I don’t set fiscal policy. Congress does. You and I don’t control monetary policy. The Federal Reserve Bank does. One hundred senators, 435 congressmen, one president and nine Supreme Court justices — 545 human beings out of 235 million — are directly, legally, morally and individually responsible for the domestic problems that plague this country. I excused the members of the Federal Reserve Board because that problem was created by the Congress. In 1913, Congress delegated its Constitutional duty to provide a sound currency to a federally chartered by private central bank. I exclude all of the special interests and lobbyists for a sound reason. They have no legal authority. They have no ability to coerce a senator, a congressman or a president to do one cotton-picking thing. I don’t care if they offer a politician $1 million in cash. The politician has the power to accept or reject it. No matter what the lobbyist promises, it is the legislators’ responsibility to determine how he votes. Don’t you see the con game that is played on the people by the politicians? Those 545 human beings spend much of their energy convincing you that what they did is not their fault. They cooperate in this common con regardless of party. What separates a politician from a normal human being is an excessive amount of gall. No normal human being would have the gall of Tip O’Neill, who stood up and criticized Ronald Reagan for creating deficits. The president can only propose a budget. He cannot force the Congress to accept it. The Constitution, which is the supreme law of the land, gives sole responsibility to the House of Representatives for originating appropriations and taxes. Those 545 people and they alone are responsible. They and they alone should be held accountable by the people who are their bosses — provided they have the gumption to manage their own employees.

centuries-long debate over the nature of money can be reduced to two sides. One school sees money as merely a commodity, a preexisting thing, with its own inherent value. This group believes that societies chose certain commodities to become mutually recognized units of exchange in order to overcome the cumbersome business of barter. Exchanging sheep for bread was imprecise, so in our agrarian past traders agreed that a certain commodity, be it shells or rocks or gold, could be a stand-in for everything else. This “metallism” viewpoint, as it is known, encourages the notion that a currency should itself be, or at least be backed by, some tangible material. This orthodox view of currency is embraced by many gold bugs and hard-money advocates from the so-called Austrian school of economics, a group that has enjoyed a renaissance in the wake of the financial crisis with its critiques of expansionist central-bank policies and inflationary fiat currencies. They blame the asset bubble that led to the crisis on reckless monetary expansion by unfettered central banks. The other side of the argument belongs to the “chartalist” school, a group that looks past the thing of currency and focuses instead on the credit and trust relationships between the individual and society at large that currency embodies. This view, the one we subscribe to and which informs

Neoliberal economics, the logic of which is tending today to win out throughout the world thanks to international bodies like the World Bank or the International Monetary Fund and the governments to whom they, directly or indirectly, dictate their principles of ‘governance’,10 owes a certain number of its allegedly universal characteristics to the fact that it is immersed or embedded in a particular society, that is to say, rooted in a system of beliefs and values, an ethos and a moral view of the world, in short, an economic common sense, linked, as such, to the social and cognitive structures of a particular social order. It is from this particular economy that neoclassical economic theory borrows its fundamental assumptions, which it formalizes and rationalizes, thereby establishing them as the foundations of a universal model. That model rests on two postulates (which their advocates regard as proven propositions): the economy is a separate domain governed by natural and universal laws with which governments must not interfere by inappropriate intervention; the market is the optimum means for organizing production and trade efficiently and equitably in democratic societies. It is the universalization of a particular case, that of the United States of America, characterized fundamentally by the weakness of the state which, though already reduced to a bare minimum, has been further weakened by the ultra-liberal conservative revolution, giving rise as a consequence to various typical characteristics: a policy oriented towards withdrawal or abstention by the state in economic matters; the shifting into the private sector (or the contracting out) of ‘public services’ and the conversion of public goods such as health, housing, safety, education and culture – books, films, television and radio – into commercial goods and the users of those services into clients; a renunciation (linked to the reduction in the capacity to intervene in the economy) of the power to equalize opportunities and reduce inequality (which is tending to increase excessively) in the name of the old liberal ‘self-help’ tradition (a legacy of the Calvinist belief that God helps those who help themselves) and of the conservative glorification of individual responsibility (which leads, for example, to ascribing responsibility for unemployment or economic failure primarily to individuals, not to the social order, and encourages the delegation of functions of social assistance to lower levels of authority, such as the region or city); the withering away of the Hegelian–Durkheimian view of the state as a collective authority with a responsibility to act as the collective will and consciousness, and a duty to make decisions in keeping with the general interest and contribute to promoting greater solidarity. Moreover,

Many models are constructed to account for regularly observed phenomena. By design, their direct implications are consistent with reality. But others are built up from first principles, using the profession’s preferred building blocks. They may be mathematically elegant and match up well with the prevailing modeling conventions of the day. However, this does not make them necessarily more useful, especially when their conclusions have a tenuous relationship with reality. Macroeconomists have been particularly prone to this problem. In recent decades they have put considerable effort into developing macro models that require sophisticated mathematical tools, populated by fully rational, infinitely lived individuals solving complicated dynamic optimization problems under uncertainty. These are models that are “microfounded,” in the profession’s parlance: The macro-level implications are derived from the behavior of individuals, rather than simply postulated. This is a good thing, in principle. For example, aggregate saving behavior derives from the optimization problem in which a representative consumer maximizes his consumption while adhering to a lifetime (intertemporal) budget constraint.† Keynesian models, by contrast, take a shortcut, assuming a fixed relationship between saving and national income. However, these models shed limited light on the classical questions of macroeconomics: Why are there economic booms and recessions? What generates unemployment? What roles can fiscal and monetary policy play in stabilizing the economy? In trying to render their models tractable, economists neglected many important aspects of the real world. In particular, they assumed away imperfections and frictions in markets for labor, capital, and goods. The ups and downs of the economy were ascribed to exogenous and vague “shocks” to technology and consumer preferences. The unemployed weren’t looking for jobs they couldn’t find; they represented a worker’s optimal trade-off between leisure and labor. Perhaps unsurprisingly, these models were poor forecasters of major macroeconomic variables such as inflation and growth.8 As long as the economy hummed along at a steady clip and unemployment was low, these shortcomings were not particularly evident. But their failures become more apparent and costly in the aftermath of the financial crisis of 2008–9. These newfangled models simply could not explain the magnitude and duration of the recession that followed. They needed, at the very least, to incorporate more realism about financial-market imperfections. Traditional Keynesian models, despite their lack of microfoundations, could explain how economies can get stuck with high unemployment and seemed more relevant than ever. Yet the advocates of the new models were reluctant to give up on them—not because these models did a better job of tracking reality, but because they were what models were supposed to look like. Their modeling strategy trumped the realism of conclusions. Economists’ attachment to particular modeling conventions—rational, forward-looking individuals, well-functioning markets, and so on—often leads them to overlook obvious conflicts with the world around them.

The overall U.S. homeownership rate increased from 64 percent in 1994 to a peak in 2004 with an all-time high of 69.2 percent. Real estate had become the leading business in America, more and more speculators invested money in the business. During 2006, 22 percent of homes purchased (1.65 million units) were for investment purposes, with an additional 14 percent (1.07 million units) purchased as vacation homes. These figures led Americans to believe that their economy was indeed booming. And when an economy is booming nobody is really interested in foreign affairs, certainly not in a million dead Iraqis. But then the grave reality dawned on the many struggling, working class Americans and immigrants, who were failing to pay back money they didn't have in the first place. Due to the rise in oil prices and the rise of interest rates, millions of disadvantaged Americans fell behind. By the time they drove back to their newly purchased suburban dream houses, there was not enough money in the kitty to pay the mortgage or elementary needs. Consequently, within a very short time, millions of houses were repossessed. Clearly, there was no one around who could afford to buy those newly repossessed houses. Consequently, the poor people of America became poorer than ever. Just as Wolfowitz's toppled Saddam, who dragged the American Empire down with him, the poor Americans, that were set to facilitate Wolfowitz's war, pulled down American capitalism as well as the American monetary and banking system. Greenspan's policy led an entire class to ruin, leaving America's financial system with a hole that now stands at a trillion dollars.

Financial Times commentator Martin Wolf concluded in 2010: "We already know that the earthquake of the past few years has damaged Western economies, while leaving those of emerging countries, particularly Asia, standing. It has also destroyed Western prestige. The West has dominated the world economically and intellectually for at least two centuries. That epoch is now over. Hitherto, the rulers of emerging countries disliked the West's pretensions, but respected its competence. This is true no longer. Never again will the West have the sole word." I was reminded of the Asian financial crisis in 1997. When Asian economies were devastated by similarly foolish borrowing the West – including the International Monetary Fund and World Bank – prescribed bitter medicine. They extolled traditional free market principles: Asia should raise interest rates to support sagging currencies, while state spending, debt, subsidies should be cut drastically. Banks and companies in trouble should be left to fail, there should be no bail-outs. South Korea, Thailand, Indonesia were pressured into swallowing the bitter medicine. President Suharto paid the ultimate price: he was forced to resign. Anger against the IMF was widespread. I was in Los Angeles for a seminar organised by the Claremont McKenna College to discuss, among other things, the Asian crisis. The Thai speaker resorted to profanity: F-- the IMF, he screamed. The Asian press was blamed by some Western academics. If we had the kind of press freedoms the West enjoyed, we could have flagged the danger before the crisis hit. Western credibility was torn to shreds when the financial tsunami struck Wall Street. Shamelessly abandoning the policy prescriptions they imposed on Asia, they decided their banks and companies like General Motors were too big to fail. How many Asian countries could have been spared severe pain if they had ignored the IMF? How vain was their criticism of the Asian press, for the almost unfettered press freedoms the West enjoyed had failed to prevent catastrophe.

...the centrality of competitiveness as the key to growth is a recurrent EU motif. Two decades of EC directives on increasing competition in every area, from telecommunications to power generation to collateralizing wholesale funding markets for banks, all bear the same ordoliberal imprint. Similarly, the consistent focus on the periphery states’ loss of competitiveness and the need for deep wage and cost reductions therein, while the role of surplus countries in generating the crisis is utterly ignored, speaks to a deeply ordoliberal understanding of economic management. Savers, after all, cannot be sinners. Similarly, the most recent German innovation of a constitutional debt brake (Schuldenbremse) for all EU countries regardless of their business cycles or structural positions, coupled with a new rules-based fiscal treaty as the solution to the crisis, is simply an ever-tighter ordo by another name. If states have broken the rules, the only possible policy is a diet of strict austerity to bring them back into conformity with the rules, plus automatic sanctions for those who cannot stay within the rules. There are no fallacies of composition, only good and bad policies. And since states, from an ordoliberal viewpoint, cannot be relied upon to provide the necessary austerity because they are prone to capture, we must have rules and an independent monetary authority to ensure that states conform to the ordo imperative; hence, the ECB. Then, and only then, will growth return. In the case of Greece and Italy in 2011, if that meant deposing a few democratically elected governments, then so be it. The most remarkable thing about this ordoliberalization of Europe is how it replicates the same error often attributed to the Anglo-American economies: the insistence that all developing states follow their liberal instruction sheets to get rich, the so-called Washington Consensus approach to development that we shall discuss shortly. The basic objection made by late-developing states, such as the countries of East Asia, to the Washington Consensus/Anglo-American idea “liberalize and then growth follows” was twofold. First, this understanding mistakes the outcomes of growth, stable public finances, low inflation, cost competitiveness, and so on, for the causes of growth. Second, the liberal path to growth only makes sense if you are an early developer, since you have no competitors—pace the United Kingdom in the eighteenth century and the United States in the nineteenth century. Yet in the contemporary world, development is almost always state led.

Having won the election in 2016, Trump has continued to stick with the message that the US is locked in a losing competition when it comes to trade. Even some of his presumptive opponents echoed those sentiments. Senator Bernie Sanders, for example, has tweeted: “It’s wrong to pretend that China isn’t one of our major economic competitors. When we are in the White House we will win that competition by fixing our trade policies.” Certainly, Sanders aimed (and still aims) to fix trade policy by protecting workers and the environment. Yet there is a tinge of anxiety that progressives share with conservatives: fear of the trade deficit itself.

The truth is, a trade deficit is not in and of itself something to fear. America doesn’t need to zero out its trade deficit to protect jobs and rebuild communities. As long as the federal government stands ready to use its fiscal capacity to maintain full employment at home, there is no reason to resort to a trade war. Instead, we can envision a new world trade order that works better, not for corporations seeking to exploit cheap labor and escape regulations, but for millions of workers who’ve received such a raw deal under previous “free trade” policies in the post-NAFTA era. Reenvisioning trade also can lead to better policies for developing countries and for the global environment.

Gold standard” is a common phrase meaning that something is good and trustworthy — but the actual gold standard, which started in the 1790s, didn’t work well at all. Gold standard economies went through manic boom-and-bust cycles and financial crises. Countries came out of the Great Depression of the 1930s as they moved off a rigid gold standard, and the last traces of the gold standard were abandoned in 1971. Real economies need credit and monetary policy for any sort of stability. Bitcoiners think that this is incorrect and immoral, and that bad ideas that didn’t work before will surely work again if they’re programmed well enough.

As former Fed governor Kevin Warsh has said, “Economics, and the conduct of monetary policy, after all, is not physics.

We want the impossibility set: the benefits of free-flowing capital without the disruptions; the flexibility of floating exchange rates without the unpredictability; and the ability to adapt monetary policy to domestic needs without the headaches caused when other countries do the same.

was a rhetorically deft presentation, delivered by a master storyteller. But there were problems with the story. Keynes himself had predicted a postwar boom, not a depression (so had Galbraith, in “194Q”). He had never claimed that monetary policy didn’t matter. He had opposed using high interest rates as a policy device because they were the most socially destructive method available for bringing down prices. He never claimed it didn’t work. And although it was true that Keynes had

Hughes has put forward a number of promising policy proposals to remain competitive. These include collaboration between the U.S. private and public sectors to increase competitiveness; fiscal and monetary reform; technological innovation; the creation of a lifelong learning culture;3 and increased U.S. civilian research and development.

digress just for a bit of fun. This was a difficult political period that coincided with the birth of populism in the US. Indeed, L. Frank Baum’s book The Wonderful Wizard of Oz is regarded by some as a clever political satire, a parable on populism, and a commentary on monetary policy. References are numerous. Yellow brick road? Gold. Ruby slippers? In the book, they were silver, and a reference to a populist demand for ‘free and unlimited coinage of silver and gold’ at the 16:1 ratio. Scarecrow? Farmers who weren’t as dim as first thought. Tin Man? Industrial workers. Flying monkeys? Plains Indians. The Cowardly Lion? William Jennings Bryan, Nebraska representative in Congress and later the democratic presidential candidate. Emerald City, where the Wizard lives? Washington DC. The Wizard, an old man whose power is achieved through acts of deception? Well, pick any politician in Washington. Now can you guess what ‘Oz’ is a reference to? Yes, the unit for precious metals. These parallels are discussed in more detail by Quentin P. Taylor, Professor of History, Rogers State College in a fascinating essay “Money and Politics in the Land of Oz.

Taxes reduce the demand for physical resources from the non-government sectors. Resources which then become available for purchase by the government in pursuit of the socio-economic programme it was elected to provide.

Taxation policy has to be framed with the end goal in mind, which is to release real resources the public sector wishes to buy in the current period.

For those with an open mind, it has become increasingly clear that MMT provides a sound basis for developing an understanding of the operation of a monetary economy, enabling economists and political analysts to better understand the nature of the opportunities that are available for policy.

A once-and-for-all increase in prices due to low-end workers finally seeing their wages catch up to historical productivity increases is a desired policy outcome, not something to be avoided. Thereafter, the goal would be for wages to stay roughly par with productivity, thereby creating price stability.

inflation is a zero-sum game: there are always winners and losers, not just losers. The idea that it is only the latter has been encouraged by neoliberal scholars in order to justify policies that lead to economic contraction every time upward pressure is placed on wages by low unemployment rates.

Given the differences in pandemic-related job losses across the globe, the second lesson of the pandemic was that unemployment is a policy choice.

How do you draw the line between a healthy, exciting economic boom and a wanton, speculative stock-market bubble driven by the less savory aspects of human nature? As I pointed out drily to the House Banking Committee, the question was all the more complicated because the two can coexist.

The multilateral institutions that were introduced in the Post World War II period to coordinate international aid – the IMF and the World Bank – have failed in their respective missions. They became agents for the ‘free market’ ideology and through their structural adjustment packages and related policies have made it harder for a nation to develop.

What did not happen in Florida, in either the Second or Third Seminole War, was the provision of enough forces and transportation to affect the object of these wars, the final removal of all Native Americans from the peninsula. Prior to the war’s end, rewards were offered by the United States government for the capture of Seminoles. This policy failed to bring in any significant number of Native Americans; however, by early 1858, the war was winding down. White flags and other signs were hung out on known paths used by the Seminoles, and military operations were ordered stopped by Colonel Loomis. Elias Rector, the superintendent for Indian Affairs in the southern superintendency, came to Florida in January 1858 to assist in the negotiations for peace. After a conference was held 35 miles from Fort Myers with Assinwah’s band and others, the terms were offered and monetary inducements guaranteed. On May 4, 1858, Billy Bowlegs and most of his band boarded the Grey Cloud and sailed to Egmont Key, at the mouth of Tampa Bay. Here this group was joined by 41 prisoners and made ready for the trip west. By May 8, the war was declared officially over. The army believed that there were only about 100 Seminoles and Miccosukees left in Florida. This number included the aged leader Sam Jones. There is a debate on just when this ancient and respected leader died; however, it is known that he was gone before the end of Civil War. Where his remains were deposited is a secret to this day. It is from this small number of Seminoles and Miccosukees that today’s recognized tribes have descended as a continuing tribute to the tenacity of their ancestors’ will to survive. As historian Patsy West has aptly called them, they are “The Enduring Seminoles.” BIBLIOGRAPHY DOCUMENTS A number of collections of documents exist from which the above was drawn, including the Letters Received by the Secretary of War, Registered Series, 1801–1860; Letters Sent by the Secretary of War Relating to Military Affairs, 1800–1889; Letters Received by the Office of the Adjutant General (Main Series) 1822–1860; and Letters Sent, Registers of Letters Received, and Letters Received by Headquarters, Troops in Florida, and Headquarters Department of Florida, 1850–1858. The collections are all on microfilm from the National Archives. Numerous Congressional documents were also consulted

History, it is said, is written by the victors. In the late 1920s, Hayek claimed that monetary policy had taken the wrong course and predicted a deflationary bust. Irving Fisher, on the other hand, saw nothing wrong at the time with either America’s economy or its monetary policy, famously opining in the summer of 1929 that US stocks had reached a ‘permanently high plateau’. If accuracy of prediction is what matters for economic theory, as Milton Friedman later claimed, then Hayek’s interpretation should have become the received wisdom of his profession. Yet the Austrian’s interpretation of the 1920s and its aftermath has been more or less air-brushed from the history books, while Fisher’s monetarist view has become received wisdom.

The prospect of German unification had alarmed the French, who feared that the larger Germany might downgrade the Franco-German partnership and pursue an autonomous Eastern policy. Just as they promoted the single currency to anchor Germany in the Community, so they wanted a common foreign policy to limit German autonomy in relations with the East; the Germans, far from opposing this, saw it as part of the design for a Europe united on federal lines; and both President Mitterrand and Chancellor Kohl saw a common foreign policy together with the single currency as cementing permanent peace in Europe (Figure 11). So they proposed the IGC on ‘political union’ to run in parallel with the one on economic and monetary union. 11.

The wealth effect is one pillar supporting the Fed’s zero-interest-rate policy and profligate money printing since 2008. The transmission channels are easy to follow. If rates are low, more Americans can afford mortgages, which increases home buying, resulting in higher prices for homes. Similarly, with low rates, brokers offer cheap margin loans to clients, which result in more stock buying and higher stock prices.

These rules meant that, unlike Britain, the United States was able to pursue its Cold War spending in Asia and elsewhere in the world without constraint, as well as social welfare spending at home. This was just the reverse of Britain’s stop–go policies or the austerity programs that the IMF imposed on Third World debtors when their balance of payments fell into deficit.

This book is for anyone who wants to understand how the economy works and their role in it, anyone trying to make sense of the way monetary policy plays games with their bank account balance, anyone wondering why borrowing money is expensive and how a downturn could impact their home buying opportunities, anyone intimidated by the terrible terminology and dusty theories, and anyone who’s ever looked outside their window into the world beyond and said, “Hmm, what really is going on out there?

There should be no doubt by now that markets, economists, and pretty much everyone for the past generation has underrated the power/utility/capacity of fiscal policy, and overrated the power/utility/capacity of monetary policy.

There are a lot of examples of central banks losing their independence, as political interference begins to influence monetary policy. “In Turkey, central bank independence is now an endangered species,” political scientists writing in Foreign Policy warned in 2022. As of the time of writing of this book, Turkish president Recep Tayyip Erdoğan has fired three bank governors who disagreed with his economic agenda, packing the bench with loyalists who enable his meddling. Despite surging inflation peaking at 85.5 percent in October 2022, Erdoğan pushed to lower interest rates dramatically, a puzzling move that defied economic orthodoxy. Naturally, this has raised concerns about the central bank’s ability to maintain price stability independently and do its job well.

When the Fed makes a loan, taking securities or bank loans as collateral, the recipient of the loan deposits the funds in a commercial bank. The bank in turn adds the funds to its reserve account at the Fed. When banks hold substantial reserves, they have little need to borrow from other banks, and so the interest rate that banks charge each other for short-term loans—the federal funds rate—tends to fall. But the FOMC targets that same short-term interest rate when making monetary policy. Without offsetting action, our emergency lending—by increasing the reserves that banks held at the Fed—would tend to push down the federal funds rate and other short-term interest rates. Since April, we had set our target for the federal funds rate at 2 percent—the right level, we thought, to balance our goals of supporting employment and keeping inflation under control. We needed to continue our emergency lending and at the same time prevent the federal funds rate from falling below 2 percent. Thus far, we had successfully resolved the potential inconsistency by selling a dollar’s worth of Treasury securities from our portfolio for each dollar of our emergency lending. The sales of Treasuries drained reserves from the banking system, offsetting the increase in reserves created by our lending. This procedure, known as sterilization, allowed us to make loans as needed while keeping short-term interest rates where we wanted them.

The RBI Governor influences a wide range of microeconomic and macroeconomic issues in the country. His signature appears on currency notes and he controls the country's monetary, currency, and credit systems. His actions influence not only the entire banking system, but also stock markets, the economy, and people's lives at large. It is said that if he sneezes, markets tend to catch a cold!

Paradoxical as it may seem, the riches of nations can be measured by the violence of the crises which they experience,’ opined the nineteenth-century French economist Clément Juglar.13 Once creative destruction is taken into account, Juglar’s observation doesn’t appear so puzzling. Some economists take a ‘pit-stop’ view of recessions, seeing them as periods when efficiency measures are most likely to be undertaken.14 Business failures, which soar during economic downturns, are seen as essential to the economy’s evolution over time. As the saying attributed to the former astronaut and airline boss Frank Borman goes, ‘capitalism without bankruptcy is like Christianity without hell.’ If that is the case, then monetary policy should not interrupt a recession’s cleansing effect.fn4 Put another way, if financial stability is destabilizing (as Hyman Minsky maintained), too much economic stability induces sclerosis.

the most defining characteristics of bubbles that can be measured are: Prices are high relative to traditional measures Prices are discounting future rapid price appreciation from these high levels There is broad bullish sentiment Purchases are being financed by high leverage Buyers have made exceptionally extended forward purchases (e.g., built inventory, contracted for supplies, etc.) to speculate or to protect themselves against future price gains New buyers (i.e., those who weren’t previously in the market) have entered the market Stimulative monetary policy threatens to inflate the bubble even more (and tight policy to cause its popping)

It is here you'll find economists are not only a very myopic group, but a very timid group as well.  And the radical idea that sex is the primary driver of economic growth is just too...well...sexy for them.  However, just because an idea is radical doesn't mean it isn't correct or true.  Matter of fact, while economists, politicians, academics, and feminists are clutching their pearls over the concept that sex powers our economy, there's a street-smart, common-sense American blue collar Joe who is yelling, "You needed a study for that???" But this presents a problem, not only for economists, but all of society, and especially women.  Because if sex (which also includes love, family, children/progeny) is the primary motivator for men to maximize their economic production, no amount of government spending, monetary policy, stimulus checks, or any other economic measures are going to prompt men to produce.  The responsibility of motivating men to be economically productive falls solely into the hands of women.  And when you consider what would be required of women to fire up men's economic engines once again, you can see where such a "sex-based economic policy" might run into some issues.

Friedman’s version diverged from the general departmental approach. Rather than being a closed community, Money and Banking was open to bystanders and visiting scholars. Unlike other workshop leaders, Friedman did not allow the featured scholar to present. Instead, he led a discussion through the paper, page by page. The overall gist of the workshop was simple, according to one participant: “prove it.” In this hothouse environment student research grew into papers, and then dissertations. For Friedman, the workshop became an essential forum to test, refine, and expand his ideas about money, while forming a school of rising scholars steeped in his approach to the subject.33 Friedman saw a direct link between his research, his students, and what he called “an aberrant tradition” of Chicago monetary economics, focused on the quantity theory of money. In a 1956 volume, he celebrated the “subtle and relevant version” of quantity theory developed at Chicago in the Depression era by Simons, Mints, Knight, and Viner. This version of the quantity theory, Friedman argued, was “a flexible and sensitive tool for interpreting movements in aggregate economic activity and for developing relevant policy prescriptions.” Here, he was no doubt referring to the 1933 Chicago plan, the department’s response to the Great Depression.

It was a strike against the edifice of policy and politics coming to rest upon Keynesian concepts of savings and consumption. Years later, Friedman spelled out the ultimate implications. Dorothy and Rose’s paper fed into a much larger body of research, the permanent income hypothesis, that “removes completely one of the pillars of the ‘secular stagnation’ thesis.” It also had implications for the Keynesian proposition that there was “no automatic force in a monetary economy to assure the existence of a full-employment equilibrium.”9 On the surface, Dorothy and Rose had published a basic research report. Considered in the bigger picture, their conclusions spoke to the politically charged question of consumption. Was the paper deliberately framed as an attack upon Keynes?10 Both women were dedicated empiricists, and the problem in the data was compelling. At the same time, the solution they came up with dovetailed nicely with each woman’s intellectual inclinations. The paper’s emphasis on relative income reflected the traditional approach of consumption research that Dorothy knew well. Dorothy’s long tenure in reformist D.C. agencies suggests that like most consumption economists, she was probably sympathetic to New Deal social spending. By contrast, although Rose has left little trace of her thinking in this period, she was among the most loyal of Frank Knight’s students. His teachings would have primed her to be skeptical of both the New Deal and the Keynesian concepts that were newly popular among economists.

But this work paled in comparison to the force and impact of A Monetary History of the United States. What had begun as a favor to Arthur Burns had become a book that would turn the conventional wisdom of academic economists, policy-makers, and politicians alike upside down. The American Historical Review put it simply: “This is one of the most important books of our time.”39 Friedman and Schwartz presented voluminous data on nearly a century of U.S. history; but beyond piling up facts, they also advanced a theory of how money worked in the economy. How did money affect business cycles? Friedman and Schwartz had an answer they considered definitive: money mattered. It was the hidden force behind the ups and downs, the breadlines and the bubbles. Friedman knew the book would make an impact. He knew it was the best work he had ever done, or would ever do. He knew that for all his deviationist politics, for all the force of Keynesian assumption, for all the habitual scorn heaped upon the quantity theory of money, their book would have to be answered. It would compel conversation. The book’s centerpiece was its stunning analysis of the Great Depression. Friedman and Schwartz’s data showed a precipitous 33 percent decline in the quantity of money during what they called “the great contraction.” They convincingly argued that this lack of money transformed an unremarkable dip in the business cycle into a crisis of global proportions. Here was a provocative new explanation for a disaster that continued to cast its shadow across the century. But threaded through the economic argument was another thesis. In 1914, the United States had created a central bank system designed expressly to stabilize the economy. As the lender of last resort, the Federal Reserve Board could have opened the spigots and flooded the economy with cash. Why did it fail to do so?

Into this situation, came the Reagan Administration’s bizarre collection of “free market” economic conundrums, called by their advocates, “Supply-Side” economics. The idea was thin cover for unleashing some of the highest rates of short-term personal profiteering in history, at the expense of the greater good of the country’s long-term economic health. While policies imposed after October 1982 to collect billions from Third World countries, brought a huge windfall of financial liquidity to the American banking system, the ideology of Wall Street, and Treasury Secretary Donald Regan‘s zeal for lifting the government “shackles” off financial markets, resulted in the greatest extravaganza in world financial history. When the dust settled by the end of that decade, some began to realize that Reagan’s “free market” had destroyed an entire national economy. It happened to be the world’s largest economy, and the base of world monetary stability as well. On the simple-minded and quite mistaken argument that a mere removing of the tax burden on the individual or company would allow them to release “stifled creative energies” and other entrepreneurial talents, President Ronald Reagan signed the largest tax reduction bill in postwar history in August 1981. The bill contained provisions which also gave generous tax relief for certain speculative forms of real estate investment, especially commercial real estate. Government restrictions on corporate takeovers were also removed, and Washington gave the clear signal that “anything goes,” so long as it stimulated the Dow Jones Industrials stock index.

Before the crisis, for example, whenever the periphery needed monetary containment during a credit and demand boom, the ECB would orchestrate a lax policy of low interest rates. Fourthly, a Central Bank whose sole mandate was to preserve the stability of the currency at any cost was an oxymoron that was bound to fail.

And in a free economy, people don’t take risks (for the most part) because they are daredevils. They take risks because of who and what they love. Civilizations are built by men who have families to feed. And this means that no currency was ever corrupted unless the worldview of the people is corrupted first. No talent was ever buried in the ground unless the faithless steward entrusted with it was buried in the ground first. In other words, all the disasters of monetary policy we might be able to itemize, and there have been many, they all have a counterpart in the hearts of the people. And that is where the real trouble is.

Currency doesn’t chase anything, people with currency chase things. Gold doesn’t horde itself, people with gold horde it. Printing presses don’t expand the currency, officials at the Fed make their decisions to expand the currency, and then go home to dinner. In other words, monetary policy, and the economic consequences of monetary policy, are personal. And when all these people are making their respective decisions, they are doing so out of the framework of a particular worldview.

We’ve built a world that seems regular and controllable, so long as we pass the right laws and enact the correct monetary policy. When we’re surprised by a social shock, the lesson people tend to learn is that we just need to work harder to control the world better. If only we had better laws, better regulation, better forecasting data, Black Swans might become a scourge of the past. That’s not true. The real lesson is that the modern world, like the locust swarm, is fundamentally uncontrollable and unpredictable. Our hubris deludes us. Modern society is a complex system, seemingly stable, teetering on the edge of chaos—until everything falls apart due to a small change, from the accidental to the infinitesimal.

Still, the accomplishments of the final two years of Madison’s term can hardly be understated. With the president’s encouragement, men like Dallas, Clay, and Calhoun charted a new course for the nation, to lasting effect. James Monroe and John Quincy Adams, who followed Madison in the presidency, would advocate the same policies. Over the next generation, Clay would place them at the center of the “American System,” his political alternative to the Democratic Party of Andrew Jackson. Eventually, the Republican Party of Abraham Lincoln and Ulysses S. Grant would call for internal improvements, a strong monetary system, and industrial protection—ideas that can all be traced to the policy initiatives Madison championed following the War of 1812.