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Dear Milton

Dear Milton

Happy birthday. I am sure that you are celebrating it with your beloved wife Rose in economist heaven.

Remember when economists were writing books about sumo wrestlers and pirates?

Remember when economists were writing books about sumo wrestlers and pirates?

I just took out a few books from my bookshelf. What do you think when you see the titles of these books:

Forget about East African Monetary Union - let the M-pesa do the job

Forget about East African Monetary Union - let the M-pesa do the job

It is not only in Europe that the idea of currency union has considerable political backing. This is certainly also the case in Africa. In fact there is already de facto a currency union (officially two currency unions) in Central and Western Africa in the form of the two CFA franc zones. Furthermore, there are also discussions about currency unions in Eastern Africa and in Southern Africa.

Draghi and European dollar demand - an answer to JP Irving's puzzle

Draghi and European dollar demand - an answer to JP Irving's puzzle

Yesterday, ECB chief Mario Draghi hinted quite clearly that monetary easing would be forthcoming in the euro zone. In fact he said the ECB would do everything to save the euro. However, something paradoxical happened on the back of Draghi's comments. Here is JP Irving on his blog Economic Sophisms:

Did Casey Mulligan ever spend any time in the real world?

Did Casey Mulligan ever spend any time in the real world?

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:

Between the money supply and velocity - the euro zone vs the US

Between the money supply and velocity - the euro zone vs the US

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.

John Williams understands the Chuck Norris effect

John Williams understands the Chuck Norris effect

Here is ft.com quoting John Williams president of the Federal Reserve Bank of San Francisco:

Failed monetary policy – (another) one graph version

Failed monetary policy – (another) one graph version

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).

The "Dajeeps" Critique and why I am skeptical about QE3

The "Dajeeps" Critique and why I am skeptical about QE3

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).

"The impact of QE on the UK economy — some supportive monetarist arithmetic"

"The impact of QE on the UK economy — some supportive monetarist arithmetic"

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.

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