Money & Banking

Scott Sumner said he had a “modest” proposal: there should be a highly liquid futures market in Nominal Gross Domestic Product (NGDP). Let’s look at that.

The flip side of falling interest rates is the rising price of bonds. Bonds are in an endless, ferocious bull market. Why do I call it ferocious? Perhaps voracious is a better word, as it is gobbling up capital like the Cookie Monster jamming tollhouses into his maw. There are several mechanisms by which this occurs, let’s look at one here.

Many people agree that it’s important to move to a free market in money (i.e. the gold standard). They also say that it’s just as important to fight bad taxes and regulation. In their view, government interference in the economy is like friction in a car. The more friction you add, the slower the car goes. One source of friction is much the same as any other.

Let me explain why money doesn’t quite work that way, using a few examples.

Governments and their central banks have usurped market-based money systems to serve the plundering purposes of kings, parliaments, and special interest groups.

Money, Banking, and the Business Cycle provides a comprehensive defense of Austrian business cycle theory (ABCT). It shows that a free market in money and banking will create the most stable banking and monetary system that is possible.

If you borrow then it’s not income. This is why no one in his right mind borrows to buy consumer goods. Those who try cannot sustain it for long… But what if someone else borrows?

Central bank apologists assert that zero interest will help the economy. It hasn’t yet, and it never will. However, the main concern by both Fed defenders and foes alike is the worry that prices might rise. Well, prices aren’t rising now. So the former are smug and the latter are frustrated.

They miss the real harm of zero interest.

To make people eat their seed corn, we need to add the essential element: a perverse incentive. Let’s look at monetary policy in this light.

In his July 17th Blog, Let's Get Real About Gold, author and Wall Street Journal columnist Jason Zweig likened investor interest in gold with the "Pet Rock" craze of the 1970's, when consumers became convinced that a rock in a box would provide continuous...

A woman will be on the new $10 bill, bumping Alexander Hamilton aside.

The notion of nominal interest paints a misleading picture of losing purchasing power..

The stories are all over the Internet. Governments are forcing us into a cashless society. Supposedly the pretext is terrorism, and the real reason is to take more control.

Fed apologists argue that the economy would be even more unstable, if we had no monetary central planner. However, the fact is that it became a lot less stable after the Fed was created.

The biggest deflation in the history of the country came after the Fed was founded, and that deflation contributed to the Great Depression of the 1930s. As for bank failures, they reached levels unheard of before there was a Federal Reserve System.

It isn’t clear that the Fed has brought any substantial improvement in macroeconomic stability.

Our monetary system is failing, but explaining that isn’t easy.

In a recent Washington Post op-ed, Harold Meyerson, an avowed socialist, compares corporations who buy back their own shares to Las Vegas mafia bosses who used to skim casino profits.  The basis for his smear is "a recent paper by J.W. Mason, an economist at the City...

The Fed is a large and aloof agency that needs to be tamed.

Central banking requires that government bureaucrats act in a way to distort the entire economic system by introducing counterfeit credit into the monetary system in such a way that businessmen are continually fooled into acting in a way that mimics the behavior of businessmen operating in an actual economic boom.

The gold tax is the key to socialized money. We can never have a free market in money if gold is penalized with a tax every time the dollar loses value.

The coming destruction has nothing to do with the quantity of money. It is a story of what happens when interest rates fall into a black hole.

The situation that forced the Swiss to abandon the peg will soon be faced by bankers of much larger countries in the coming years, the implications of which can have more profound implications for global financial markets.

The U.S. was able to recover relatively quickly from at least one deep slump despite authorities’ refusal to resort to either fiscal or monetary stimulus.

While I’m all for monetary freedom and competition, I’m also for reforming the U.S. dollar, which for me means freeing it from control by discretionary central bankers.

If even economists who’ve never heard of free banking, or who dismiss both it and the people who take it seriously, nevertheless subscribe to some free banking theories of their own, where do their theories come from?

While other countries were undermined by the promises politicians made with a printing press, the Swiss economy prospered thanks to the discipline provided by gold.

Central planners constantly run into the problem that people are not willing cogs.

Inflation is not needed to grow economies but to grow governments.

History shows that, whenever financial institutions, whether domestic or global, have been allowed to develop freely, the results have been far more satisfactory than those from government-designed schemes.