Beyond the Taylor Rule

The following is in blog form the substance of a talk I gave Sept 7 at a Mercatus conference, “Monetary Policy Rules for a Post-Crisis World.“ “Rules versus discretion” is a hardy perennial of monetary policy debate, dating from earliest debates between Bullionists and anti-Bullionists, to the 19th century Currency School versus Banking School, up to the 20th century monetarists

Read more

Family Reunion at Jackson Hole

You can title your conference whatever you want, but the actual content will depend on the speaker list.  The convenors of the Jackson Hole Economic Symposium apparently hoped to generate discussion about “Designing Resilient Monetary Policy Frameworks for the Future“.  Having read all the papers, I can report that only one of them really engages the conference title.  Everyone else

Read more

BIS looks through the financial cycle

“I wouldn’t start from here,” the BIS never says explicitly in its recent Annual Report, but nevertheless it goes on to paint a rather comprehensive and compelling picture of a possible future toward which they think we should be trying to head, and of the present dysfunctional economic policies that are daily making it harder to achieve that possible future.

Read more

Global Money, a Work in Progress

Today global money is largely private credit money, the issue of a profit-seeking bank that promises ultimate payment in public money which is the issue of some state, quite possibly a different state from the one where the bank is chartered and does its business.  Global money is also largely dollar-denominated, even when the ultimate users of that money lie

Read more

Independence versus Accountability?: Evolution of the Fed

Peter Conti-Brown, The Power and Independence of the Federal Reserve (Princeton 2016) A powerful meme has taken possession of popular, and even professional, understanding of the role of the Fed.  To wit, political forces (specifically the US President) are supposedly always pushing for excessive expansion, and the role of the Fed (specifically the Fed Chair) is to resist that pressure. 

Read more

Turbulent Exit Redux

A lot of people have speculated about what would happen when the Fed raised rates, and almost all of them have been surprised. One of them is Zoltan Pozsar, who boldly went on record with the view that corporate cash pools of various kinds would shift out of bank deposits into government-only mutual funds, which would invest the funds in

Read more

RMB in SDR, now what?

“Governments propose, markets dispose,” as Charles Kindleberger liked to say. Starting next year the RMB will be included in the official SDR basket, and that inclusion will have some immediate automatic consequences for official government reserve holdings, but that’s all.  History tells us that you don’t get to be a world reserve currency just because a group of finance ministers

Read more

Defending the RMB

It’s hard to short China, but not so hard to short China’s currency, and that’s a problem for the central bank. We’ve all heard about PBOC intervention in the spot exchange market, where the central bank is selling some of its vast horde of USD Treasury securities and buying RMB (thus shrinking its own balance sheet, since RMB are its

Read more
1 2