ALL BLOG POSTS
University of Chicago economics professor Casey Mulligan has a new comment on Economix. In his post "Who cares about Fed funds?" Mulligan has the following remarkable quote:
When crisis hit in 2008 it was mostly called the subprime crisis and it was normally assumed that the crisis had an US origin. I have always been skeptical about the US centric description of the crisis. As I see it the initial “impulse” to the crisis came from Europe rather than the US. However, the consequence of this impulse stemming from Europe led to a “passive” tightening of US monetary conditions as the Fed failed to meet the increased demand for dollars.
It is no secret that I would prefer that the ECB would introduce an NGDP level target. However, that is obviously utopian - I might be a dreamer, but I am not naïve. Furthermore, I think less could do it. In fact I believe that the ECB could end the euro crisis by just simply returning to the old second pillar of monetary policy in the euro zone - the M3 reference rate - and sticking to that rather than the highly damaging focus on headline inflation (HICP inflation).
Dajeeps is a frequent commentator on this blog and the other Market Monetarist blogs. Dajeeps also writes her own blog. Dajeeps's latest post - The Implications of the Sumner Critique to the current Monetary Policy Framework - is rather insightful and highly relevant to the present discussion about whether the Federal Reserve should implement another round of quantitative easing (QE3).
Over the last 1-2 decades so-called DSGE (dynamic stochastic general equilibrium) models have become the dominate research tool for central banks around the world. These models certainly have some advantages, but it is notable that these models generally are models without money. Yes, that is right the favourite models of central bankers are not telling them anything about money and the impact of money on the economy. That is not necessarily a major problem when everything is on track and interest rates are well above zero. However, in the present environment with interest rates close to zero in many countries these models become completely worthless in assessing monetary policy.
Most of the blogging Market Monetarists have their roots in a strong free market tradition and nearly all of us would probably describe ourselves as libertarians or classical liberal economists who believe that economic allocation is best left to market forces. Therefore most of us would also tend to agree with general free market positions regarding for example trade restrictions or minimum wages and generally consider government intervention in the economy as harmful.
The latest book I have got in the mail is Georgina M. Gómez's "Argentina's Parallel Currency" about Argentina's experience with parallel currencies or what has also been termed Complementary Currency Systems (CCS).
One day George Selgin is picking a friendly fight with the Market Monetarists, the next day he is picking a fight with the Rothbardian Austrians. You will have to respect George for always being 100% intellectually honest and behaving like a true gentleman - something you can not always say about his opponents. His latest fight is over the old story of fractional reserve banking versus 100% reserve banking.