The World in Depression, a Money View

Does this sound familiar?  Falling commodity prices, unsustainable official debts, crashing stock markets, pullback in global lending by dominant megabanks, misaligned currencies, plus a healthy dose of political dysfunction. These are the ingredients, according to Charles Kindleberger, that made for world depression in 1929-1939.  “My contention is that the difficulty lay in considerable latent instability in the system and the

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China’s Rocky Road Ahead, Financial Liberalization versus Financial Stability

A summary of the 3rd annual joint conference of the People’s Bank of China and the International Monetary Fund offers a snapshot of the state of debate.  So-called “renminbi internationalization” has been official policy since 2009.  By the end of this year, expect to see the launch of a new “China International Payments System” to facilitate use of RMB as a

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Old economic thinking is the problem, says BIS

The 85th Annual Report of the BIS is not perhaps the obvious first choice for beach-reading on a holiday weekend, but having read through its 119 pages, the core message reminds me of nothing so much as the most memorable line of the 40-year-old summer blockbuster “Jaws”:  “You’re going to need a bigger boat.” Notwithstanding everything that has been done since

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Why is money difficult?

As regular readers know, I emphasize two central functions of monetary systems:  payments and market-making. These are the foundation pillars of what I call the “money view”. In my teaching, I have come to appreciate a variety of barriers that people bring with them to the study of money, and to appreciate the necessity of bringing these barriers up to

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Exit strategy, Part One: ZIRP

The Fed has announced plans to raise rates in the imminent future, but the market does not believe it.  Why not?  Conventional wisdom appears to be that the Fed will chicken out, just as it did during the so-called Taper Tantrum.  The Fed has signaled its appreciation that “liftoff” will involve increased volatility, and has stated its resolve this time

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Home (and solvency) bias at the Fed

At the INET conference in DC yesterday, Janet Yellen and Christine Lagarde both gave brief statements, and then they asked each other questions, back and forth, until the moderator called time. No surprises in any of it, perhaps, but still a useful check on the current thinking of the leaders of the Fed and the IMF respectively, and as such

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