Föhrenbergkreis Finanzwirtschaft

Unkonventionelle Lösungen für eine zukunftsfähige Gesellschaft

Posts Tagged ‘Monetary System’

Central Bankers’ Shifting Goalposts

Posted by hkarner - 7. September 2017

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Rewriting the Monetary-Policy Script

Posted by hkarner - 3. März 2017

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An Inheritance of Incompetence

Posted by hkarner - 16. August 2016

By John Mauldin, August 13, 2016mauldin 

– Dean Acheson

“Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.”

– John Maynard Keynes

I don’t often agree with Keynes, but he is the most quotable of all major economists. The above sentence was one of his best. He was right about defunct economists. Of course, he was talking about all those other defunct economists who no longer kept up with his new and improved way of thinking about all things economic. Now his quip comes back to haunt his legacy and his followers.

Theories and practices often outlive their usefulness in our fast-changing world. So do institutions, including those chartered at the 1944 Bretton Woods Conference. In today’s letter we are going to look closely at the International Monetary Fund and a scathing report from its own internal auditors. For those of us who have been following the IMF for decades, the report is not all that surprising.

My real purpose here is not to point the finger at the IMF but to point out where its problems are part and parcel of a greater problem in global institutions. During the next global recession we are going to see a continuation of the same approaches to crisis solving that we’ve seen in the past, based on the theories of defunct economists mixed with personal and institutional biases. Their prescription is a witches’ brew that we will be told is good for us but that will in fact ensure that those of us least able to cope will bear the brunt of its impact. Den Rest des Beitrags lesen »

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The Way Back for Monetary Policy

Posted by hkarner - 18. Mai 2016

Photo of Lee Jong-Wha

Lee Jong-Wha

Lee Jong-Wha, Professor of Economics and Director of the Asiatic Research Institute at Korea University, served as Chief Economist and Head of the Office of Regional Economic Integration at the Asian Development Bank and was a senior adviser for international economic affairs to former President Lee Myung-bak of South Korea. His most recent book, co-authored with Harvard’s Robert J. Barro, is Education Matters: Global Gains from the 19th to the 21st Century.

MAY 17, 2016

SEOUL – The central banks of major advanced economies have been navigating uncharted territory in recent years. While their use of a range of unconventional monetary-policy tools has had benefits, it has also generated significant uncertainty, without fully stabilizing the world economy. Now the time has come to head back toward more familiar policy terrain.

Following the 2008 financial meltdown, the US Federal Reserve cut the policy rate to almost zero and pursued so-called quantitative easing (QE), by purchasing long-term securities from the public and private sectors. The central banks of the European Union, Japan, and the United Kingdom soon launched similar unconventional programs. The result was a vast amount of cheap liquidity that helped to stabilize the financial sector, restore stock and real-estate prices, and increase domestic demand. All of this helped to limit the fallout of the financial crisis and push the global economy toward recovery. Den Rest des Beitrags lesen »

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Warren Mosler

Posted by hkarner - 6. März 2016

Mosler CCWarren Mosler (born September 18, 1949) is an American economist, broker and sportscar engineer. He has mosler 7 deadly fraudsbeen the founder of Mosler Automotive and a co-founder of the Center for Full Employment And Price Stability at University of Missouri-Kansas City.

An influential proponent of post-Keynesian Modern Monetary Theory, Mosler was awarded a Doctor h.c. by the Franklin University Switzerland, and in 2014 was appointed Visiting Professor at the University of Bergamo, Italy.

Academically, he is known for his writings on Modern Monetary Theory, an economic theory that describes the way fiat money is created and used in modern economies. His unorthodox views have gained a substantial following among the Internet and academia.[4]

In 2010 he published Seven Deadly Innocent Frauds of Economic Policy outlining errors that can be made in the development of policy and explains what he deems „true“ as proper alternatives.

2010 Mosler W 7 deadly innocent frauds of EconPolicy

Mit Dank an H.F.!

 

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America is at the centre of a global monetary disorder

Posted by hkarner - 4. Oktober 2015

Date: 04-10-2015
Source: The Economist
Subject: Global monetary system: Thrills and spills

JOHN MAYNARD KEYNES observed that in the late 19th century London’s influence on the global financial system was such that the Bank of England could be considered the world’s orchestra conductor. Today America is like the dominant rapper in an anarchic transnational collective. Some politicians reckon that the global monetary system is a source of American soft power. This article will argue that it is unstable and, if unreformed, poses a threat to American interests.

The global monetary system has long been a headache. The gold standard of the 19th century dissolved into depression and chaos in the 1930s. The post-war Bretton Woods system of fixed exchange rates collapsed in the 1970s, to be replaced by a freewheeling system of floating currencies and mobile capital. Today it suffers from three related problems. First, the old collective-action one that Keynes grappled with: how to resolve the imbalances between countries (their current-account deficits and surpluses) in a way that does not hurt world economic growth. If deficit countries are forced to bear all the burden of adjustment by cutting back their imports, world output will be lower. This has haunted the euro zone, where tensions between northern countries with surpluses and southern ones with deficits were partly responsible for the crisis. Countries that try to cheapen their currency to boost their exports can set off tit-for-tat devaluations that benefit no one. China’s devaluation in August has raised fears of such beggar-thy-neighbour policies. Den Rest des Beitrags lesen »

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What the general public knows about monetary policy

Posted by hkarner - 23. August 2015

Carin van der Cruijsen, David-Jan Jansen, Jakob de Haan 23 August 2015, voxeu

Head of Research, De Nederlandsche Bank (DNB); Professor of Political Economy, University of Groningen

Researcher at De Nederlandsche Bank

Researcher, De Nederlandsche Bank

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Making Monetary Policy Decisions in the Dark

Posted by hkarner - 15. August 2015

Posted on by iMFdirect

By Francesco Grigoli, Alexander Herman, Andrew Swiston, and Gabriel Di Bella

(Version in Español and Português)

In the wake of the global financial crisis, monetary and fiscal policies were used aggressively to counteract the effects of the crisis on economic activity. Policymakers look at a number of indicators to guide them in assessing an economy’s level of activity relative to its productive capacity. But trying to figure out the position of the economy in real time is often quite challenging, with consequences for setting policy.

In the case of Brazil in 2011, for example, policymakers estimated in real time that the economy was at a level of output consistent with its productive capacity. Over time, however, the assessment of the cyclical position of the Brazilian economy changed drastically. It had not just been at full capacity, but was overheating. The economy was actually facing inflationary pressures, requiring policy tightening to bring it back to the central bank’s target.

Monetary Policy in the Dark 1

While striking, this experience is not unique to Brazil. In a recent study, we look at the implications for setting monetary policy in real time for a large set of countries, including five Latin American economies (Brazil, Chile, Colombia, Mexico, and Peru).

Output gap: important yet unpredictable 

Imagine an economy operating at full productive capacity and a sustainable level of employment consistent with low and stable inflation. In other words, everything is in perfect balance, economically speaking. Economists refer to the amount an economy can produce in this state as potential output. Because it is not directly observable, potential output is difficult to measure. Nevertheless, it is useful to estimate it to serve as a benchmark against the actual state of the economy.

This difference between actual and potential output plays a crucial role in macroeconomics. If actual economic activity is below what the economy can produce at its capacity, stimulative policies (such as lowering interest rates) would normally be put in place to return the economy to potential. Conversely, more restrictive policies would be in order if actual activity is above potential output, to reduce overheating risks that could lead to a sudden, sharp downturn. Den Rest des Beitrags lesen »

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The Coming $10 Trillion Loss in Paper Wealth

Posted by hkarner - 10. April 2015

by  • April 8, 2015, Stockman News

By John Hussman at Hussman Funds

Many of the misconceptions that investors hold about the economy and the financial markets can be clarified by understanding the relationship between the “flow” and “stock” of various quantities in the economy.

Before going further, let’s take a minute for some background. The total quantity of currency and bank reserves in the economy – what’s known as the “monetary base” – is uniquely determined by the Federal Reserve, and is equal to the stock of Treasury and mortgage securities on the Fed’s balance sheet. Once the Fed creates a dollar of monetary base (which the Fed does by purchasing a government security and paying for it with Fed-created base money), that dollar remains in the form of base money until that dollar is retired by the Fed. Monetary base is retired when the Fed sells a government security, or receives payment at maturity. In both cases, the assets on the Fed’s balance sheet are reduced by the amount of government securities it no longer owns, and the liabilities on the Fed’s balance sheet are reduced by the amount of base money it takes back in. To see that a dollar bill is a liability of the Fed, read the top line of any bill in your pocket. Den Rest des Beitrags lesen »

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The End of Monetary Policy

Posted by hkarner - 29. September 2014

By John Mauldin September 28, 2014Mauldin Video

We are the stuffed men
Leaning together
Headpiece filled with straw. Alas!
Our dried voices, when
We whisper together
Are quiet and meaningless
As wind in dry grass
Or rats’ feet over broken glass
In our dry cellar…

This is the way the world ends
This is the way the world ends
This is the way the world ends
Not with a bang but a whimper.

–  T. S. Eliot, “The Hollow Men

What we may be witnessing is not just the end of the Cold War, or the passing of a particular period of postwar history, but the end of history as such: that is, the end point of mankind’s ideological evolution and the universalization of Western liberal democracy as the final form of human government. This is not to say that there will no longer be events to fill the pages of Foreign Affair’s yearly summaries of international relations, for the victory of liberalism has occurred primarily in the realm of ideas or consciousness and is as yet incomplete in the real or material world. But there are powerful reasons for believing that it is the ideal that will govern the material world in the long run.

– Francis Fukuyama, The End of History and the Last Man Den Rest des Beitrags lesen »

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