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“…political news kept slipping into the financial section”

“…political news kept slipping into the financial section”

As global stock markets once again takes another downturn on the back of renewed European worries I am reminded about a great blog post Scott Sumner wrote a couple a months ago about his studies of the Great Depression.

Sexy new model could shed light on the Great Recession

Sexy new model could shed light on the Great Recession

Market Monetarists like myself claim that the Great Recession mostly was caused by the fact that the Federal Reserve and other central banks failed to meet a sharp increase in the demand for dollars. Hence, what we saw is what David Beckworth has termed a “passive” tightening of monetary policy.

Chuck Norris on monetary policy #1

Chuck Norris on monetary policy #1

In the coming time I will pay tribute to the great Chuck Norris by analyzing the monetary policy implications of some well-known facts and quotes from the great hero. These "facts" all come from www.chucknorrisfacts.com

Japan’s deflation story is not really a horror story

Japan’s deflation story is not really a horror story

Many economists – including some Market Monetarists – tell the story about Japan’s economy as a true horror story and there is no doubt that Japan’s growth story for more than 15 years has not been too impressive – and it has certainly not been great to have been invested in Japanese stocks over last decade.

 ”Recessions are always and everywhere a monetary phenomena”

”Recessions are always and everywhere a monetary phenomena”

At the core of Market Monetarist thinking, as in traditional monetarism, is the maxim that “money matters”. Hence, Market Monetarists share the view that inflation is always and everywhere a monetary phenomenon. However, it should also be noted that the focus of Market Monetarists has not been as much on inflation (risks) as on the cause of recession, as the starting point for the school has been the outbreak of the Great Recession.

Gustav Cassel on recessions

Gustav Cassel on recessions

Swedish economist Gustav Cassel (1866-1945) had many views today is shared by Market Monetarism. I today was reminded by a Cassel quote that pretty much spells out the Market Monetarist view of the causes of recessions:

Never underestimate the importance of luck

Never underestimate the importance of luck

The financial media is full of stories about some countries are doing the right thing and other are doing the wrong thing. Everybody today agree that it was obvious that the Icelandic financial system was going to collapse and everybody agrees that Greek’s economic problems could have been forecasted easily. I actually think that both cases were pretty obvious examples of accidents waiting to happen and the only reason that they did not play out earlier was investors where betting on some kind of rescue if we would see a collapse. However, it is not always so clear. Why for example has Belgium with very high public debt not been as hard hits by the European debt crisis as for example Italy or Spain? We can surely find explanations, but many of these explanations have to do with pure luck rather than fantastic skills of policy makers.

Horwitz, McCallum and Markets (and nothing about Rush)

Horwitz, McCallum and Markets (and nothing about Rush)

Alex Salter has made a forceful argument that there are strong theoretical similarities between Market Monetarist thinking and Austrian School Monetary Equilibrium Theorists (MET). I on my part have noted that METs like Steven Horwitz have similar policy recommendations as Market Monetarists - particularly NGDP targeting.

Market Monetarism - now on Wikipedia

Market Monetarism - now on Wikipedia

Believe it or not - "Market Monetarism" i now on Wikipedia. I have no clue who is behind it, but as far as I can read most of the text makes perfectly good sense. That said, it needs a bit more work...

Reagan supply siders = market monetarists?

Reagan supply siders = market monetarists?

I have noticed that a increasing number of 1980s US supply siders are coming out views on US monetary policy which is very close to the Market Monetarist views. This is not really surprising if one studies what the supply siders were saying in the 80s, but it is nonetheless in stark contrast to the core views of today's GOP.

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