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When presented with the idea of Free Banking - that is private money issuance - most people will shake their head and even most free market oriented think the idea of private money is insane or at least highly unrealistic. However, the fact is that money is not a government invention. Money developed spontaneously way before government got involved and there is no reason to believe that money could not be provided by the market rather than by governments in the future.
If one go through the huge empirical literature on the real and nominal effects of monetary policy one will realize that most of this research is based on extremely simple and often very wrong measures of monetary policy.
And that might well be the case, but if we look at a little bit longer period then it is hard to argue that something special is going on in the US stock
I have gotten very nice feedback on my post on why there is no bubble in the US stock market and a couple of great questions.
I have increasingly come to the conclusion come to the conclusion that you can tell most macroeconomic stories within a simple AS/AD framework - or at least the business cycle stories. I really always thought so, but it is only recently that I have come to the conclusion that there is really no reason to make any excuses for thinking like this.
If one follows the financial media on a daily basis as I do there is ample room to get both depressed and frustrated over the coverage of the financial markets. Often market movements are described as being very irrational and the description of what is happening in the markets is often based on an "understanding" of economic agents as somebody who have huge mood swings due to what Keynes terms animal spirits.
US Stock markets plumments today. Here is why:
This week the full transcripts of the Fed’s monetary policy meetings for 2008 has been published. It has gotten quite a bit of attention. This is of course not surprising given what happened in 2008. However, I would argue that it is significantly less important what individual FOMC members and Fed officials said in 2008 than it is made up to be.
I know I have paid a lot of attention to the discussion about 'currency war' recently, but I think the debate to a very large extent shows everything that is wrong about the general perception among commentators, financial journalists and policy makers. And worse - if the 'currency war worriers' are successful then that could derail the fragile global recovery. So you have to bare with me for one more post on this issue.