News and Comment

The lowest interest rates in history are failing to spur sustained recovery. Rather, low real rates mirror financial and structural weaknesses Economists cannot agree on the causes of these low real rates. They discuss various hypotheses. Central banks have held policy rates low for years – have these ultra low nominal rates reduced real rates,…
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  In The Money Trap, I argue that our problems result from the way in which we have applied a particular concept of money – the state theory of money. This dominated government policy in the 20th century. As Keynes said, all modern money is state money – it is seen as a creature of…
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The current debate about monetary policies reminds me of the 1970s. Keynesian policies as then understood involved adjusting the fiscal “stance” of policy to ensure sufficient, but not excessive, effective demand. But these policies no longer had “traction”. The world was changing in ways that economists at the time struggled to understand.  Money was becoming…
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Martin Wolf’s recent radio programme – “How Low can Rates Go?” – described and illustrated the dilemmas facing monetary policy-makers. Nine years from the start of the great financial crisis, Wolf reported, economies had still not returned to “normal”.  Capitalism was perceived by many to be failing to deliver; globalisation a con trick.  The political…
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Henry Kissinger says that today’s international order was “founded upon conceptions that emerged from the British Isles, were carried by Europe around the world, and ultimately took deep root in North America” He adds that “American leadership in reinvigorating the contemporary order is imperative.” In a few words, Kissinger shows a depth of understanding and a…
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  “Yesterday’s vote speaks to the ongoing changes and challenges that are raised by globalization,” President Obama said yesterday in his first comment on the UK referendum. He is right. The “Out” vote should be viewed as part of the geo-political fallout of the financial crisis and the failure of governments and bodies such as…
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The vote for Brexit is about much more than the UK and Europe. It shows that new rules to guide the process of globalization are needed. The policies followed since the financial crisis have two major errors. First there is a failure to diagnose the true causes of the crisis. Second, governments have failed to…
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According to the World Gold Council, Mervyn King, former governor of the Bank of England, believes that in certain circumstances China’s assets in the US could be “annulled”. Mervyn King’s alarmist warning is  made in an interview, entitled “Present perilous, future imperfect” that appears in the June issue of Gold Investor,  a WGC publication.  After pointing…
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What is the money trap? How can we get out of it? Let me try to reformulate the thesis of my book in the light of recent developments. Since the 1970s we have been in a period of transition to a new paradigm of monetary policy. Governments have tried various approaches to the challenges of…
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  Money is a social construct that enables price comparisons, calculations of profits and loss, budgeting and financial planning from individual to enterprise to national and international  levels. Its primary function is as a unit of account, and a given monetary unit has greatest benefit when used by the largest possible number of people and…
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