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Charles Calomiris undoubtedly is one of the leading experts on banking crisis in the world. Calomiris has a new book coming out - co-authored with Stephen Haber. The main thesis in the book - "Fragile by Design: Banking Crises, Scarce Credit,and Political Bargains" - is that banking crisis is not an inherent characteristic of a free-market financial system, but rather the outcome of what Calomiris and Haber terms the "Game of Bank Bargains" between the government and special interests and how this game lead to different incentives for excessive risk taking or not.
The graph below shows the yearly growth rate of Chinese currency reserves and the yearly change in the gold price. If the Chinese central banks stops intervening in the currency markets to curb the strengthening the yuan then it effectively is monetary tightening - the FX reserve accumulation will slow as will money supply growth.
I will leave it to my readers to speculate whether the People Bank's of China should be blamed for the drop in gold prices.
The big story in the financial markets this week is the continued decline in commodity prices - particularly the drop in gold prices is getting a lot of attention.
One of my ambitions with my blog has always been to be a facilitator in the sense of trying to get different people with interest in monetary policy issues together - whether we talk about financial sector professionals, professors, students or policy makers - yeah even journalists. This is also the reason why I have started the Global Monetary Policy Network (find GMNP on Linkedin here).
There is no doubt that the main monetary policy problem in world over the last five years has been overly tight monetary policy - particularly in the US and the euro zone. However, there are certainly also central banks of the world that have erred on the other side.
A couple of days ago I wrote a post on the behavior of prices in the 'bust' phase of an Austrian style business cycle. My argument was that the Austrian business cycle story basically is a supply side story and that in the bust there is a negative supply shock. As a consequence one should expect inflation to increase during the 'bust' phase.
Former UK Prime Minister Margaret Thatcher died earlier today. It is truly sad news.
I have been thinking about an issue that puzzles me - it is about inflation in an Austrian School style bust.
If you write a blog you obviously want people to read what you write and even better you want to inspire discussion. I was therefore very happy when Duncan Brown sent me his two latest blog posts, which both are inspired by stuff I have written.