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Tag Archives: Monetary Policy

If we want things to stay as they are, things will have to change

I checked out the financial news network yesterday afternoon, and one commentator was incredulous that people were asking the Fed to step in to help solve the coronavirus epidemic. Of course there have also been eyes rolled in response to calls for central banks to address climate change. I certainly agree with those who are skeptical of central banks getting involved with climate change, and even have some sympathy for skepticism that central banks can do anything...

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Peter Schiff Doubles Down on the Dollar

Last year at the Vancouver Resource Investment Conference, Peter Schiff bet Brent Johnson a gold coin that the Fed’s next move would be a rate cut. At this year’s conference, Peter collected his gold coin.Brent and Peter went on to debate the future of the US dollar. Brent says the dollar will go up this year. Peter thinks it’s going down. Peter put his money where is mouth is and went double or nothing against the dollar. Peter’s Highlights from the Discussion“The...

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Can monetary policy prevent an epidemic from hurting the economy?

No, but monetary policy can greatly magnify the damage from an epidemic. Suppose an epidemic disrupts manufacturing supply chains. This is an adverse supply shock, which shifts the aggregate supply curve to the left. However, it does not directly cause a decrease in aggregate demand, or a decrease in nominal GDP. Instead, prices will rise and real GDP will fall.  Monetary policy cannot fix that problem.  But it can make the problem much worse. If an epidemic...

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Currency Manipulation, Saving Manipulation, and the Current Account Balance

That’s the title of my new Mercatus working paper. Here’s the abstract: Concern over currency manipulation plays a major role in international economic diplomacy. Unfortunately, the concept is not well defined, and the most coherent explanations apply to a concept more accurately termed “saving manipulation,” as it has little to do with market exchange rates. I argue that the costs of currency manipulation are far lower than they are widely assumed to be and that the...

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Some Links

My intrepid Mercatus Center colleague Veronique de Rugy laments the U.S. government’s on-going fiscal shenanigans. A slice: Now there is nothing historic about Mr. Trump’s making his budget look good by using fantastical assumptions. All presidents perform this theatrical trick. For instance, no president ever projects that the economy will experience a slowdown in the next ten years of the budget window even though, on average, the economy slows down every 7 years. “The Battle to Feed...

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Don’t anthropomorphize the economy

Here’s a nice graph from the Financial Times: These graphs are very manipulative, as we think we are seeing the impact of various presidents on the economy.  But is that really so? I’ve argued that the performance of the US (economic, military, social, etc.) is about 3% the president and 97% other factors.  Three percent is not nothing; it’s way more influence than a blogger has.  But it’s not enough to be decisive. This tendency to think in terms of a “Bush...

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Something Is Out of Kilter: Friday Gold Wrap Podcast Feb. 14, 2020

Jerome Powell went to Capitol Hill this week. During his testimony before a congressional committee, the Fed chair insisted, “There is nothing about this economy that is out of kilter or imbalanced.” In this episode of the Friday Gold Wrap Podcast, host Mike Maharrey takes issue with Powell’s assessment and points out some things that are, in fact, way out of kilter.” He also touches on coronavirus and the markets, consumer debt, and Donald Trump. The SchiffGold Friday Gold Wrap podcast...

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Peter Schiff: Nobody Should Be Taking Credit for the US Economy

Last week, Peter Schiff gave a speech at the Orlando Money Show and made the case that all the hype about the greatest economy in history is just that – hype. Nobody should be taking credit for the economy. We should be asking who is to blame. During his State of the Union Address, President Trump talked up the economy. He said we are now experiencing an economic boom, unlike anything the world has ever seen. But Peter said we have seen it before — just before he was elected during...

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Is Powell relying on help from fiscal policy?

There’s been a lot of buzz regarding some recent statements by Jay Powell on the possible role of fiscal policy during the next recession: The current low level of interest rates “means that it would be important for fiscal policy to support the economy if it weakens,” he told the House Financial Services Committee on Tuesday. Less emphasis is being placed on some of his other statements, which suggest that fiscal policy is unlikely to be effective during the next...

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The Indian currency experiment

In 2016, the Indian government demonetized all 500 and 1000 rupee bills. These were worth roughly $7.50 and $15, but are considered large denomination in a low-income country like India. The goal was to reduce corruption, and the experiment was widely seen to have failed. Here I’d like to focus on another aspect of this natural experiment, the impact on the macroeconomy. Interestingly, India ended up testing a very important tenet of modern macroeconomic theory—the...

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