Official Money
How to control those central bankers
Stop treating people like donkeys!
Last Tuesday I went along to the Adam Smith Institute to listen to Brendan Brown launch his new book, “The Global Curse of the Federal Reserve”. Brendan picked out three channels through which central banks’ ultra-low interest rate polices can trigger asset price inflation (followed invariably by a crash): Central bank pegging of…
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Bank of Japan enters the money trap
Sad to see Japan joining the currency war
The first thing to say about Haruhiko Kuroda, nominated as the next governor of the Bank of Japan, is that he is a very nice man. Whenever I have met him, he has been not only modest and friendly, but also ready, willing and able to discuss policy issues and ready to modify his opinion…
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The ECB should cap the euro
The current monetary system threatens the open trading order
Governments of the Euro area and the ECB must not let the euro strengthen to the point where it threatens the euro area recovery. It should not rise above $1.40 – it is now at $1.31. When the euro strengthened sharply in 2009, it triggered weakness that led to the euro sovereign debt crisis. But…
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Why Asia did not cause the financial crises
A good GFS can sustain global imbalances safely
New attempts are being made to resuscitate the “savings glut” hypothesis of the origins of the great financial collapse and recession and the eurozone’s agony. This hypothesis is wrong. What matters is not saving but financing. Countries running current account surpluses do not finance those running current account deficits.The deficits are financed…
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Christine Lagarde gets it wrong
This is sad, because if you don't urge system reform, nobody will
“The financial system can work if each of its members follow the right principles for their economy” M Lagarde has had a successful year at the Fund but this statement at the G20 meeting in Moscow yesterday shows the Fund has not learnt the key lesson of the economic disaster. The mistaken…
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The G30 plays blind man’s bluff
The G30 has flinched from tackling the big obstacles standing in the way of long-term finance
Watching governments, central bankers and economists explore the remaining ruins of the old pre-2007 economic structure is like watching children playing a game of blind man’s bluff. Being blindfolded, they cannot see what is around them, and are compelled to rely on their other senses. Much amusement is to be had for the onlookers,…
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Bury inflation targets and get a real monetary framework
How much agony do we have to endure first?
To wean central banks from inflation targeting you’ll have to snatch it from them by force; they are clutching it ever more tightly to their breasts. But they must bid it a tearful goodbye. The big question is what will replace it. Mark Carney has said that: “Flexible inflation targeting is the most successful…
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The Fed at 100
The Fed keeps on making the same mistakes
The Federal Reserve Act was signed into law by President Wilson on December 23 1913. Its purposes were “To provide for the establishment of Federal reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes.”…
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A North Atlantic trade and currency zone?
Preparing for a possible break-up of the EU
David Cameron’s speech threatening to pull the UK out of the EU unless the other members agree to its demands may have started a process of withdrawal that could become irreversible. Although this outcome would be contrary to the stated objectives of the UK prime minister and British government, commentators on both sides of the…
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Gordon Brown on stubborn national politics
The former UK prime minister is worth listening to
Gordon Brown is far from being my favourite politician. As economic Czar of Britain’s Labour government from 1997 to 2007 he started well – struggling hard and long to establish fiscal credibility – only to throw it all away. He then spent a miserable three years as prime minister to 2010 trying to contain the…
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