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Lately there has been somewhat of a debate between some Market Monetarists and some Austrians about the so-called Cantillon effect. I have not participated in the debated - last time I wrote about the Cantillon effect was actually in my Master thesis on Austrian Business Cycle theory in the mid-1990s and to be frank I have not made up my mind entirely on this discussion. Therefore, I am happy Justin Merrill have written a guest post for my blog on the topic.
Turn on the TV and watch five minutes of CNBC or Bloomberg TV these days and you get the impression that the world is coming to an end as a result of the fiscal cliff. However, the contrast to this is the development in the US financial markets. Yes, there are some jitters in the markets, but the market developments do not exactly indicate that we falling into the abyss in a couple of days. This is the theme of a new excellent post from JPIrving.
Scott Sumner has a new post in which he claims that "I do not think all recessions are caused by demand shocks". Well, Scott I disagree as I like Nick Rowe believe that "Recessions are always and everywhere a monetary phenomena".
Today is Christmas Eve and in Denmark that is the most important day of Christmas (just ask my son!) so it is not really time for blogging. So instead I will do a bit of a re-run of a blog post I wrote exactly a year ago. If there is a area where my thinking about monetary policy has developed a lot over the last couple of years it is in regard to my view of exchange rates as a monetary policy instrument. As I explained a year ago:
Guest post: Market Monetarism and Financial Crisis
Today is supposed to be the end of the world - at least according to classic Mayan accounts (and Hollywood?). But so far we are still here and there are not really any signs that the world really is coming to an end today. However, judging from media reports the world might be coming to an end at least in economic terms as the feared "fiscal cliff" is drawing closer after U.S. House of Representatives Speaker John Boehner yesterday failed to get support for his so-called "plan B".
I am sitting in Copenhagen airport waiting for a flight to Dublin, but to be frank I am thinking a bit more about the Czech economy today than about the Irish economy. The reason is that the Czech central bank (CNB) today will have it's monthly board meeting and the CNB board might (fingers crossed) finally act to steer away the Czech economy from the present deflationary path by finally starting to use the exchange rate channel to ease monetary policy.