A slightly off-center perspective on monetary problems.
It’s never the central bank’s fault. Or at least that’s what I hope to show.
I will argue that there has never been an inflation or deflation that was “blamed” on central bank policy. More specifically, this is my argument:
Undesirable inflations and deflations are never blamed on central banks by the consensus of expert opinion in the country affected, during the period when prices are actually changing. Can you think of any counterexamples?
Suppose you have a crystal ball, and are given one peak at the future, say May 2011. But you are only allowed to look at one variable—and it’s not the Dow, it’s the fed funds rate. Now suppose I tell you the following, it will be one of these two numbers:
a. 0.25%
b. 3.75%
In an earlier post I discussed the amazing number of categories in which Denmark led the world.
1. Most liberal (or idealistic) values
2. Most free market economy
3. Most equal income distribution
4. Happiest
That raises the question of whether there is a “Denmark of America.” Probably not, but there is one state that comes pretty close.
Here I’ll try a couple analogies to better explain earlier posts on causation and NGDP targeting. As you will soon see, my literary skills are at the 5th grade level.
I’d like to welcome any new readers from China, who may have discovered this blog through the Netease version. I generally focus on U.S. monetary policy, but today I will discuss the Chinese yuan. I should also mention that I will have to slow down for a few weeks, in order to revise a manuscript on the Great Depression that I am trying to get published. If you are a new reader, there are plenty of older posts that discuss my view of how the current crisis has been misinterpreted. Those views are quickly sketched out in the very first post, “About the blog.” I will take a fairly long trip to China later this year—which might also lead to posts on topics related to China.
