In the system we have now, we do use both a reserve restriction and an asset restriction. But, the modern reserve restriction has changed fundamentally, and has nothing to do with the monetarist understanding of reserve restrictions, except in a purely formal sense. In the day of specie convertibility, reserve restriction had a definite functionality….Continue Reading “Fact and Fiction on Reserve Requirements”

In a comment posted under an article by my friend Jerry Bowyer (Where’s the Hyperinflation?), “ps61penn62prin64” writes that “private currency monetary systems… are doomed to fail the interest of American citizens.” Bowyer’s article discusses the sizeable increase in the money supply generated by the Fed, and how this has — or has not — affected…Continue Reading “Private Issue of Money — the Root of Our Monetary Problem?”

In his excellent book The New Lombard Street, Perry Mehrling writes of “a world that never was … Jimmy Stewart banking of blessed memory” (p. 117). This is an obvious  reference to one of Jimmy Stewart’s most famous roles: George Bailey in the holiday classic movie It’s a Wonderful Life. In the movie, Bailey is…Continue Reading “Jimmy Stewart Banking versus James Steuart Banking”

The euro seems to be on its last legs, and the vision which inspired its genesis seems to have vanished from the politicians sponsoring it. The recent spat with England and Prime Minister Cameron has only served to highlight the vacuum in vision. Previously, whenever England was scapegoated, English politicians skulked like whipped curs, and…Continue Reading “How to Make the Euro Project Work”

If the Fed wants to boost economic activity, it should think about raising the federal funds target rate. Why? Wouldn’t that restrict lending? Paradoxically, it would likely increase lending. This would force banks to engage in more lending in order to make a profit. Currently, banks can make money doing virtually nothing, as they borrow…Continue Reading “Why the Fed Should Boost Interest Rates”