Category Archives: Monetary Policy

Quote for the Day–John Maynard Keynes!

Whoever thought Bereansatthegate would feature a quote for the day from Lord Keynes?  Yet here we are: Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The… Continue Reading ››

Janet Yellen’s Nomination and Her Confirmation’s Impact on Monetary Policy

Yesterday Barack Obama nominated Janet Yellen to become Chairwoman of the Board of Governors of the Federal Reserve. Borrowing from Stanly Kubrick’s classic film Dr. Strangelove or: How I Learned to Stop Worrying and Love the Bomb and with apologies to Slim Pickens, this is how I perceive Yellen’s nomination (and subsequent Senate confirmation) will impact monetary policy. Monetary policy before Yellen’s confirmation:           Monetary policy after Yellen’s confirmation:

Bubble, Bubble, Toil & Trouble: The Fed found it easy to build a bond bubble, but finding it more difficult to unwind

There is little doubt the Fed’s easy money policy, and especially the deliberate QE of buying long term instruments, has resulted in speculative flows investing in those assets.  As we related last week, the Fed’s discussion of tapering has resulted in immense turmoil, as speculators are wondering if capital needs to be redeployed away from U.S. government-favored assets.  Long bond yields, while still historically low, rose dramatically over the last several weeks.  The 10 year Treasure is now yielding ~2.6%,… Continue Reading ››

Market uncertainty w/end of QE proof of central claim of Austrian Business Cycle Theory

Many critics of Austrian economic theory on the causes of business cycles suggest that the lack of significant CPI-based inflation shows the Austrians are all wrong.  Yet, as I have argued earlier, CPI inflation is NOT what Austrians are concerned with.  Rather the central banks artificially lowering interest rates leads to malinvestment and a distortion of the capital structure.  In layman’s turns, the Fed’s lowering of interest rates causes entrepreneurs to invest in projects because of central bank policy, not… Continue Reading ››

Margaret Thatcher: October 13, 1925 – April 8, 2013 “No liberty unless there is economic liberty”

Freedom lost a true ally with the passing of the “Iron Lady”, Margaret Thatcher. The quote in the title is from a Time interview from May 14, 1979 as her successful campaign for Prime Minister was coming to a conclusion. Prime Minister Thatcher was a (perhaps the) leading politician along with Ronald Reagan (the “second most important man” in her life) in the battle against old-line state ownership socialism. She was born to church going devout Methodist parents in 1925.… Continue Reading ››

Texas Gold going home: the latest body blow to Federal Reserve credibility?

A few months ago the big revelation to gold bugs was Germany wanted its gold back from the Federal Reserve.  What’s the world coming to when central banks don’t trust each other?  Further, with central banks net buyers of gold for the last few years, something seems afoot in the global currency markets.  In perhaps a move of political theater, Texas is the latest to jump in the fray by introducing a bill to bring $1B in gold bars stored… Continue Reading ››

Paul Krugman on Cults and Economics

 “But woe to you, scribes and Pharisees, hypocrites, because you shut off the kingdom of heaven from people; for you do not enter in yourselves, nor do you allow those who are entering to go in. When I think about this verse from Matthew 23 of the Eight Woes, I can’t help but see some applicability to economists such as Nobel Laureate Paul Krugman.  Not only will Professor Krugman not embrace good economics, but he’s doing his best to ensure… Continue Reading ››

Janet Yellen: Has she ever met an inflation she didn’t like?

Janet Yellen, the current Vice-Chair of the Federal Reserve is rumored to be next in line to replace “Helicopter” Ben Bernanke.  This is troubling because, as a committed Keynesian, she is a big fan of inflation as a way to lesson the pain of unemployment.  Indeed, she is–as many others are–convinced that inflation causes small harms to society in comparison to the evils of unemployment.  While she undoubtedly doesn’t support all levels of inflation, she has a history of calling… Continue Reading ››

Bernanke–the best inflation fighter ever?

That’s at least what Mr. Bernanke suggests when challenged by Senator Corker during congressional testimony on Tuesday: Perhaps its true, IF the measure of inflation we should be concerned about is the rate of change of CPI.  But there are at least two ways to criticize this way of thinking, in addition to the serious questions raised by Senator Corker regarding the damage done to fixed income savers in our society.  First, the flawed thinking and theory that suggests the… Continue Reading ››