price stability

Birth of the Euro
by Otmar Issing
Published 20 Oct 2008

The ECB soon began to use the expression and to speak of its ‘two-pillar strategy’.62 It quickly became clear that we had been right on both counts: the ‘two pillars’ became a trademark, but also drew repeated criticism. The quantitative definition of price stability The EU Treaty states quite plainly that the ECB’s primary objective is to ensure price stability. The wording leaves open the question of when price stability is achieved in concrete terms and by what measure this is to be judged. Since price stability cannot be achieved at any given moment, it remains unclear over what horizon the ECB seeks to reach price stability. Particularly for a new currency, a crucial factor was what expectations economic agents would form concerning the stability of the future currency.

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A central bank might create the wrong impression of attempting to explain away the actual level of inflation suffered by consumers. Such an impression would undermine confidence in the central bank. For these reasons, the ECB decided to define price stability in terms of the HICP. All the same, the ECB does utilise a whole range of other price indices to analyse developments in prices. 2. At first sight, defining price stability in terms of a suitable index looks straightforward: price stability is incompatible with either inflation or deflation and hence, given price stability, the rate of change in the index would be zero. Only then does money perfectly fulfil its role as unit of account and store of value.

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We have, of course, had many discussions on that and my interpretation of this quote is that like me Mr Duisenberg was stressing the benefits of price stability for monetary policy. We have achieved price stability, which is reflected in the lowest interest rates we have seen for decades in Germany and the lowest ever since the Second World War in Italy and some other countries. This is the contribution of monetary policy; this is spurring on investment, this is especially fostering building because long-term rates matter the most and [low] long-term rates are only achieved if people, if savers, believe that price stability will continue in the future. This is the main issue; it is inflationary expectations and not just achieving a one-off situation.

Losing Control: The Emerging Threats to Western Prosperity
by Stephen D. King
Published 14 Jun 2010

Yet, with the rise of the emerging nations, it is no longer so clear that the single-minded pursuit of price stability is delivering the goods. If anything, in a world where price disturbances in the West are increasingly the result of economic developments in the emerging world, the pursuit of price stability has contributed to mounting economic instability. Policymakers – governments, central bankers – like to take credit for the achievement of low inflation. Their institutions are specifically designed to prioritize price stability above all else, often based on the premise that price stability can easily be encapsulated in a single inflation target.

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The German and Swiss experiences show that if other countries allow inflation to run out of control or more generally do not have a commitment to sound money, even the very best performers find the achievement of price stability too difficult. Even if the ambition to achieve stable prices was there – a view some would debate – the ability was not. Monetary sovereignty doesn’t simply grow on trees. Theoretically, Germany and Switzerland might still have been able to achieve price stability had they allowed their currencies to appreciate sufficiently. What, however, counts as sufficient? To this day, central banks struggle with the competing claims of ‘internal’ price stability, as measured by consumer price inflation, and ‘external’ price stability, as measured by the exchange rate.

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But if inflation moves away from the target by more than 1 percentage point … I shall expect you to send an open letter to me … setting out … the reasons why inflation has moved away from target … the policy action which you are taking to deal with it … [and] the period within which you expect inflation to return to the target.8 In other words, price stability is, like the UK prime minister, first among equals. Even for those central banks with more than one economic objective, price stability is typically the most important. The central bank’s job is thus to safeguard the value of the currency. Price stability matters because Adam Smith’s invisible hand works best free of distortions. But in both the American and British mandates, there is no explicit recognition that inflation is determined not just by domestic policies but also by developments elsewhere in the world, other than by reference to ‘shocks and disturbances’.

Crude Volatility: The History and the Future of Boom-Bust Oil Prices
by Robert McNally
Published 17 Jan 2017

These price busts set in motion a chain of events that by the early 1930s would result in the most aggressive system of supply regulation and cartelization ever seen—and usher in four decades of oil price stability the likes of which the world had never seen before or since. Texas and Oklahoma together accounted for 55 percent of all U.S. production in 1927.2 Their local economies became extremely dependent on healthy oil operations and state budgets relied on revenue from taxes on the industry. While wary of appearing to favor monopolies or interfering in the free market, state officials were just as anxious as drillers were about oil supply and price stability. Major discoveries in central Oklahoma in 1926, collectively named the Greater Seminole field, tipped oil prices into another super-bust cycle.

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It depended on Saudi Arabia playing the swing producer role—which it abandoned spectacularly in 1985 and 1986, triggering a price collapse. Fortuitous supply cuts outside OPEC and stronger demand later in the decade enabled OPEC to enjoy relative price stability. The Gulf War further cemented Saudi Arabia’s primacy within OPEC. But the 1980s demonstrated that if the OPEC era was to achieve the goal of oil price stability producers and consumers craved, it would require either Saudi leadership or luck—or both. 8 OPEC MUDDLES THROUGH: 1991–2003 The first two decades of the OPEC Era were extraordinarily tumultuous and marked by price upheavals instead of stability.

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–Saudi Deputy Crown Prince Mohammed bin Salman, April 21, 2016 CONTENTS Preface Acknowledgments Author’s Note INTRODUCTION: THE TEXAS PARADOX PART ONE: THE LONG STRUGGLE FOR STABILITY: 1859–1972 1. AND THEN THERE WAS LIGHT: FROM CHAOS TO ORDER IN THE KEROSENE ERA (1859–1911) 2. NO ROCKEFELLER, NO PEACE: BOOM-BUST RETURNS 3. WHY ARE OIL PRICES PRONE TO BOOM-BUST CYCLES? 4. THE TEXAS ERA OF PRICE STABILITY: U.S. SUPPLY CONTROLS AND INTERNATIONAL CARTELIZATION (1934–1972) PART TWO: THE OPEC ERA: 1973–2008 5. THE BIRTH OF OPEC: 1960–1969 6. OPEC TAKES CONTROL FROM TEXAS AND THE SEVEN SISTERS: 1970–1980 7. OPEC’S RUDE AWAKENING: 1981–1990 8. OPEC MUDDLES THROUGH: 1991–2003 9. TWILIGHT: OPEC’S POWER TO PREVENT PRICE SPIKES EBBS AND VANISHES: 2004–2008 10.

Unelected Power: The Quest for Legitimacy in Central Banking and the Regulatory State
by Paul Tucker
Published 21 Apr 2018

Rather, it is that questions of purpose run deep in this field, placing a burden on elected legislators, especially if they seek to put policy beyond their own day-to-day reach (an issue we return to in chapter 11). Price Stability under Different Political Creeds Price stability, the traditional core purpose of central banking, is different. Although independent central banks are often seen as the embodiment of liberalism, or even neoliberalism, I want to argue that price stability can be seen as a legitimate goal for the state under both liberal and republican conceptions of politics and, subject to one qualification, under social democracy too. For liberals (progressive as well as conservative), the definition of price stability favored by former Fed chair Alan Greenspan seems to warrant its legitimacy: that it obtains when “economic agents no longer take account of the prospective change in the general price level in their economic decision-making.”44 That is almost the canonical liberal case for any measure or regime: that it helps to leave autonomous people (and businesses) free to pursue their private projects and well-being without interference (in this case from noise in the value of money).

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For republicans, a means of embedding price stability should be attractive because it helps protect the people from the possibility of an arbitrary imposition of taxation through (unexpected) inflation. Republicans would want this to reflect the people’s wishes for stability as a collective good, rather than the outcome of a battle between competing interests. They would also desire an arrangement—an institution in the broad sense—that constrains the state from reneging on promises of price stability: insulation from domination by the state. On this view, price stability helps—is even necessary—to underpin the legitimacy of the state itself.

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Lighthouses and national defense are canonical examples.14 Arguably, so is the macroeconomic stability that central banks exist to preserve, but in fact it is not quite so straightforward. As proves important in part IV, price stability—stability in the value of money—is a public good, but the stability of the financial system is slightly different. In both cases, no one can be excluded from the benefits; but, unlike price stability, financial-system stability is, in the jargon, rivalrous. Like common grazing ground, the resilience of the financial system can be “consumed,” leaving it depleted and, thus, reducing the flow of benefits over time.

Anatomy of the Bear: Lessons From Wall Street's Four Great Bottoms
by Russell Napier
Published 18 Jan 2016

However, the most striking similarity in the two periods is that a positive chain of events began once evidence of price stability returned to the commodity markets. It is these price trends, evident from the headlines of the day, which provided the most accurate indicator that the bear market in equities was coming to an end. Price stability and the bear ‘Look, Bill, at that gorgeous black crepe. It’s only twelve dollars. Clothes are dirt cheap now.’ James T. Farrell, Judgement Day Signs of price stability, as in 1921, coincided with the bottom of the bear market in 1932. As in 1921, growing stability in selected commodity prices broadened to include more commodities and finally reached the wholesale price index.

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As it had been deflation that was crushing corporate earnings, it is not surprising that the equity market responded so positively to the first evidence of price stability. The rise in demand and prices happened at different times for different goods and commodities. In 1949, as in 1921 and 1932, a return of general price stability coincided with the end of the bear market in equities. As in 1921 and 1932, spreading demand for and price stability of selected commodities augured well for general price stabilisation. In 1949, as in 1921 and 1932, low levels of inventory in the system suggested that any price rises might be sustainable.

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We have seen that all four of our bear-market bottoms occurred during economic recession. We have also seen that a return of price stability, following a period of deflation, signals the bottom of the bear market in equities. In particular, stabilising commodity prices augur more general price stability ahead and signal the rebound in equity prices. Of all the commodities, the change in the trend of the price of copper has been a particularly accurate signal of better equity prices. In assessing whether price stability is sustainable, investors should look for low inventory levels, rising demand for products at lower prices, and whether producers have been selling below cost.

The Price of Time: The Real Story of Interest
by Edward Chancellor
Published 15 Aug 2022

Keynes appeared to be suggesting that credit inflation, and not the inflation of consumer prices, was the true sign that interest rates were out of equilibrium – a position close to Hayek’s from which he soon reneged.fn13 ‘Better no credit control at all,’ proclaimed the German economist Wilhelm Röpke, ‘than one based on this treacherous and dangerous criterion [of price stability]!’66 Central bankers also came around to this view. In 1937, the Federal Reserve’s Objectives of Monetary Policy affirmed ‘the inadequacy of price stability as a guide to policy’. The Australian Monetary and Banking Commission concluded in the same year that ‘price fluctuations are little more than symptoms’ and that the monetary authorities should not attempt to regulate credit by reference to a selected price index.67 Most financial histories of the 1920s and its aftermath fail to mention contemporary criticisms of the Federal Reserve’s price stabilization policy and pass over the coup de whisky delivered to the US stock market after the Long Island meeting.

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Former Bank of England Governor Mervyn King, 2016 MONETARY STABILITY IN JAPAN IN THE 1980s The failure of Hayek’s interpretation of the 1920s’ boom and the aftermath to gain widespread acceptance explains why later generations of economists and policymakers returned so enthusiastically to the pursuit of price stability. Anna Schwartz, co-author of The Monetary History of the United States, proclaimed that ‘Monetary stability is a prerequisite of price stability, and price stability is a prerequisite of financial stability.’1 By 1995, when Schwartz wrote these words, it should have been clear from events then unfolding in Japan that something was desperately wrong with this dogma. Over the course of the twentieth century, Japan had experienced bouts of extreme monetary instability.

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In 1927, Hayek was appointed the first director of the Austrian Institute for Business Cycle Research, having previously studied monetary policy in New York. Hayek thought that the policy of price stabilization – as advocated by Irving Fisher and others and implemented by Ben Strong at the Federal Reserve – was misguided, and lamented that Fisher’s Stable Money Association (a successor to the Stable Money League) had turned the ‘concept of price stabilization as the objective of monetary policy into a virtually unassailable dogma’.57 In a capitalist economy, Hayek said, continuous advances in productivity mean that consumer prices have a natural tendency to decline.

EuroTragedy: A Drama in Nine Acts
by Ashoka Mody
Published 7 May 2018

The Fed had a dual mandate: to support employment and to maintain price stability.30 In contrast, the ECB’s only objective was to maintain price stability. However, these mandate differences do not explain why the Fed and the ECB went in opposite directions.31 The ECB was required to achieve price stability over the “medium term,” over a two-​year period during which slowing activity was likely to lower the inflation rate. Trying to bring inflation down instantly could only choke the economy and cause an unnecessarily painful economic downturn. In practice, therefore, central banks with a price stability objective act to counter recessions in the same way as the dual mandate Fed does.

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The view was that even a bad rule is better than no rule. The ECB, set up to conduct the single monetary policy, reinforced the stability ideology through its commitment to price stability. Two Nobel Laureates in economics, Franco Modigliani and Robert Solow, warned that excessive commitment to price stability would restrain output growth and, hence, would raise the eurozone’s unemployment rate. Moreover, like the budget rule, price stability when pursued unthinkingly, can—​as it did during the eurozone’s financial crisis—​become a source of instability. But the ECB’s stability ideology is even more insulated from criticism than the budget rule, because the ECB is accountable to no one.

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The German position won the day because there appeared to be no other legitimate option. The proposed central bank’s independence necessarily came with a simple rule to determine the conduct of monetary policy. Achieving price stability would be the only goal of the ECB. Unlike the Fed, which famously had a “dual mandate” of fostering both price stability and “maximum sustainable employment,” the ECB would not act specifically to improve employment prospects. The ECB’s focus on price stability was less controversial than the simple fiscal rules were. Some prominent voices, however, did object. Franco Modigliani, an MIT economics professor and Nobel laureate, along with his colleague and fellow Nobel laureate Robert Solow, warned that the ECB’s mandate would make it focus obsessively on keeping inflation low.

The End of Alchemy: Money, Banking and the Future of the Global Economy
by Mervyn King
Published 3 Mar 2016

In the twenty-five years before the Bank of England adopted an inflation target in 1992, prices rose by over 750 per cent, more than over the previous two hundred and fifty years.12 Inflation was simply taken for granted. Price stability seemed an unlikely state of affairs. Alan Greenspan, former Chairman of the Fed, defined price stability as when ‘inflation is so low and stable over time that it does not materially enter into the decisions of households and firms’.13 Alan Blinder, the Princeton economist who was Greenspan’s deputy at the Federal Reserve Board, put it even more clearly. Price stability, he said, was ‘when ordinary people stop talking and worrying about inflation’.14 In recent years, we have started to take price stability for granted; so much so that some people have become exercised about the possibility of deflation – when prices fall.

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The first is to ensure that in good times the amount of money grows at a rate sufficient to maintain broad stability of the value of money, and the second is to ensure that in bad times the amount of money grows at a rate sufficient to provide the liquidity – a reserve of future purchasing power – required to meet unpredictable swings in the demand for it by the private sector (see Chapters 2 and 3 respectively). Those two functions are rather simple to state, if hard to carry out. They correspond to the twin objectives of price stability and the provision of liquidity by a ‘lender of last resort’. Price stability – inflation targeting as a coping strategy Eighteenth-century thinkers, such as David Hume and Adam Smith, understood the relationship between the amount of money in circulation and the prices at which goods and services were bought and sold: ‘if we consider any kingdom by itself, it is evident, that the greater or less plenty of money is of no consequence; since the prices of commodities are always proportioned to the plenty of money’.11 In the long run, more money means higher prices.

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There was an underlying need to find a way to retain domestic control over the supply of money and liquidity while at the same time retaining a long-term commitment to price stability. Unfortunately, the switch from a fixed rule, such as the gold standard, to the use of unfettered discretion led to the failure to control inflation, culminating in the Great Inflation of the 1970s. Attention turned to the idea of delegating monetary policy to independent central banks with a clear mandate to achieve price stability. Central banks were not born with independence, they had it thrust upon them – literally, in the case of Germany when, after the Second World War, the Allies imposed the model of an independent central bank.

The Euro and the Battle of Ideas
by Markus K. Brunnermeier , Harold James and Jean-Pierre Landau
Published 3 Aug 2016

The ECB’s representatives—and at the fore its president Jean-Claude Trichet—were most proud of their record in delivering an inflation performance superior to even the historic legacy of the stability-focused German Bundesbank. Perfectly in line with the ECB’s primary mandate of price stability, inflation had averaged 1.97 percent during the euro’s first decade. This illustrates a defining factor of the ECB’s economic principles: its primary objective, as written in the Treaty on the Functioning of the European Union, is to maintain price stability. This contrasts with the US Fed, for example, which has a dual mandate of both price and economic stability. This focus on price stability is a clear heritage from the Bundesbank, which adopted a hawkish position after the previous historical inflation episodes that Germans had experienced.

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The emphasis shifted first to credit growth, which was also seen as an early-warning indicator of financial imbalances, and then to a broad range of monetary and financial variables.6 The search for a new approach became evident in a high-level conference organized in 2006.7 Finally, the ECB restated its definition of price stability. When the euro was created, the ECB had taken the initiative of quantifying its definition of price stability, which the Maastricht Treaty left to the ECB’s Governing Council. It thus “took control” over that definition, whereas, for instance, in the United Kingdom that power belongs to the executive (the chancellor of the exchequer). The ECB initially decided that price stability would be achieved if inflation was below 2 percent. It was immediately confronted with a barrage of questions by economists and market participants.

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As the relentless logic of events went on, the French appeared ever more French and the Germans ever more German. The Maastricht Negotiations: Ambiguities and Master Plans The Maastricht Treaty—the document that provides the legal framework for the euro—lies at the root of the current problems. It assumed too simply that price stability was sufficient to ensure financial stability and that fiscal policy had no role to play in the provision of price stability. It allowed French and German thinkers and politicians to operate with incompatible visions of economic governance. In short, it was about what the treaty labeled “European Union,” but the Europeans looked as if they did not really intend or understand the concept of “union.”

The Tyranny of Nostalgia: Half a Century of British Economic Decline
by Russell Jones
Published 15 Jan 2023

A month or so later, the government published its remit for the MPC, in which it specified an inflation target, and it outlined the mechanisms by which it would be held to account for meeting this target.8 After acting on a de facto basis for twelve months, the new framework for monetary policy was formalized in the June 1998 Bank of England Act. The Bank’s primary responsibility was to be relative price stability, although subject to this it was required to support the government’s other economic policy objectives, including those for growth and employment. Price stability was viewed not as an end in itself but as being necessary to achieve those other goals. The level of the exchange rate was downplayed in all of this. The price stability goal was initially set by the government at 2.5% per year in terms of the RPIX – the same index prioritized by the previous government.

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Macro policy should be constrained to assisting the economy’s own underlying self-correcting properties. Monetary instruments, and in particular official interest rates, should be the primary tools of stabilization policy, and they should focus on the pursuit of long-term relative price stability as an essential precondition for high and stable levels of growth and employment. The anchoring of inflation expectations around the price stability target should be prioritized. This will ensure that deviations from that target are minimized, and it will enhance the leeway for monetary policy interventions, if required. Fiscal policy should be of secondary importance and should be largely confined to the unencumbered operation of the ‘automatic stabilizers’ and to the sustainable management of public debt.

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Rather than macroeconomic considerations, however, it was external events – in the form of the 9/11 attack on the US and the subsequent invasions of Afghanistan and Iraq – that more than anything else were to dominate the politics of this parliament. In hindsight, the decisions made in that context were to mark the beginning of the end for New Labour, and those mistakes still resonate in the minds of the electorate today. more price stability, but … Ostensibly, the Bank of England continued to do an admirable job in delivering on its price stability mandate during New Labour’s second term. Monetary policy remained free from political influence and more systematic and predictable. Inflation expectations were subdued. That said, it should be acknowledged that the Bank was assisted in its quest for stable prices by the global environment.

Currency Wars: The Making of the Next Gobal Crisis
by James Rickards
Published 10 Nov 2011

However, this would lead to increased costs for gold producers that would eventually lower production and reestablish the long-term trend of price stability. Conversely, if economic productivity increased due to technology, the price level would fall temporarily, which meant the purchasing power of money would go up. This would cause holders of gold jewelry to sell and would increase gold mining efforts, leading eventually to increased gold supply and a restoration of price stability. In both cases, the temporary supply and demand shocks in gold led to changes in behavior that restored long-term price stability. In international trade, these supply and demand factors equilibrated in the same way.

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Once businesses and investors have greater certainty and price stability, they can then take greater risk on new investments. There is enough uncertainty in entrepreneurship without adding inflation, deflation, interest rates and exchange rates to the list of barriers standing in the way of innovation. The U.S. economy as guided by the Fed has seen continual asset bubbles, crashes, panics, booms and busts in the forty years since the United States left gold. It is time to diminish the role of finance and empower the role of commerce. Gold produces the greatest price stability in prices and asset values and therefore provides the best visibility for investors.

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Gallarotti, the leading theorist and economic historian of the classical gold standard period, summarizes this neatly in The Anatomy of an International Monetary Regime: Among that group of nations that eventually gravitated to gold standards in the latter third of the 19th century (i.e., the gold club), abnormal capital movements (i.e., hot money flows) were uncommon, competitive manipulation of exchange rates was rare, international trade showed record growth rates, balance-of-payments problems were few, capital mobility was high (as was mobility of factors and people), few nations that ever adopted gold standards ever suspended convertibility (and of those that did, the most important returned), exchange rates stayed within their respective gold points (i.e., were extremely stable), there were few policy conflicts among nations, speculation was stabilizing (i.e., investment behavior tended to bring currencies back to equilibrium after being displaced), adjustment was quick, liquidity was abundant, public and private confidence in the international monetary system remained high, nations experienced long-term price stability (predictability) at low levels of inflation, long-term trends in industrial production and income growth were favorable and unemployment remained fairly low. This highly positive assessment by Gallarotti is echoed by a study published by the Federal Reserve Bank of St. Louis, which concludes, “Economic performance in the United States and the United Kingdom was superior under the classical gold standard to that of the subsequent period of managed fiduciary money.”

Keeping at It: The Quest for Sound Money and Good Government
by Paul Volcker and Christine Harper
Published 30 Oct 2018

Our experience in the mid-1970s, when weak anti-inflation efforts failed, and again in the early 1980s, when a much more sustained effort was required, were reminders enough of the importance of maintaining price stability once it is restored. Now the environment is quite different. The generation with direct experience of stagflation is passing on. In contrast, over the past thirty years we’ve maintained sufficient price stability to engrain expectations of little or no inflation into our thinking. Factors such as cheap imports from countries like China have helped, but our monetary authorities have clearly recognized the importance of maintaining price stability. There can be little question that those firmly grounded expectations have contributed enormously in allowing the United States to absorb huge budget deficits and a massive injection of official liquidity during and after the 2008 financial crisis without reawakening inflationary forces.

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Within a year or so the inflation rate fell to about 2 percent. The central bank head, Donald Brash, became a kind of traveling salesman. He had a lot of customers. I was reminded of the practical appeal when I read of a colloquy in a July 1996 FOMC meeting about the Federal Reserve’s “price stability” target. Janet Yellen asked then chairman Alan Greenspan: “How do you define price stability?” To me, he gave the only sensible answer: “That state in which expected changes in the general price level do not effectively alter business or household decisions.” Janet persisted: “Could you please put a number on that?” And so Alan’s general principle, to me entirely appropriate, was eventually translated into a number.

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There seemed to be a lot of potential material available. But I had not yet lifted a finger to start. I remember my first visit to my designated faculty advisor, Professor Frank Graham. Unbeknownst to me, he happened to be one of the leading American scholars of international trade and was convinced that price stability was a key objective of public policy. When I told him about my idea and expressed concern that I might run out of time, he responded reassuringly: “Don’t worry, May is a long time off.” “But I’m scheduled for a February graduation.” “Oh! We’d better get started!” For once in my academic life I did.

Rewriting the Rules of the European Economy: An Agenda for Growth and Shared Prosperity
by Joseph E. Stiglitz
Published 28 Jan 2020

By the early 1990s, central bankers settled on solutions involving a strong legal mandate for price stability, independence of the central bank from control by elected officials, and sustained communication to markets that they would keep inflation muted. Thus, the European Central Bank states unequivocally: “The primary objective of the ECB’s monetary policy is to maintain price stability. This is the best contribution monetary policy can make to economic growth and job creation.” The ECB defines price stability as “a year-on-year increase in the Harmonised Index of Consumer Prices (HICP) for the euro area of below 2 percent. In the pursuit of price stability, the ECB aims at maintaining inflation rates below, but close to, 2 percent over the medium term.”1 The belief held that if the central banks played their role in macroeconomic stabilization, especially by muting inflation, then the market could do the rest and ensure high growth and efficient allocation of resources.

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Germany had experienced hyperinflation in the 1920s, and this event cemented a post-1945 political consensus that the new Bundesbank had to ensure price stability above all else. In the eyes of many, hyperinflation was to blame for the weakening of Germany’s embryonic democracy. Yet Hitler and the rise of fascism were born, in an immediate sense, as a result of the high level of unemployment that was part of the global Great Depression of the 1930s—not of Germany’s hyperinflation of the 1920s. But given the consensus on inflation in Germany and some of its northern European allies, any European agreement on a common currency had to be rooted in a commitment to price stability. Moreover, these countries obsessed over fears that fiscal profligacy in southern Europe would somehow lead to EU-wide inflation and demanded the constraints on debt and deficits discussed in Chapter 1.

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What follows are some ideas that might create the flexibility that the ECB and European monetary policy so desperately need: ■ Use the discretion that Maastricht does provide. Price stability at the ECB currently means below but close to 2 percent. But this number is not specified by the Maastricht Treaty; it is an interpretation. Why is it not zero? Why not 3 percent? There is no legal answer to these questions. It is a matter of judgment. Setting a higher inflation target could help close the deep fissures between the European core and periphery. It could also broaden the interpretation still further to state that price stability means inflation “not below 1 per cent and not above 4 per cent,” thus providing more room within which it could exercise discretion

The Accidental Theorist: And Other Dispatches From the Dismal Science
by Paul Krugman
Published 18 Feb 2010

Most economists would agree that high-unemployment economies like Canada suffer from inadequate real wage flexibility; Fortin’s evidence suggests, however, that the cause of that inflexibility lies not in structual, microeconomic problems but in the Bank of Canada’s excessive anti-inflationary zeal. In short, the belief that absolute price stability is a huge blessing, that it brings large benefits with few if any costs, rests not on evidence but on faith. The evidence actually points strongly the other way: The benefits of price stability are elusive, the costs of getting there are large, and zero inflation may not be a good thing even in the long run. Suppose you reject both the miracle cures of the growth sect and the old-time religion of the stable-price sect.

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In the United States, powerful groups on both left and right now propagandize incessantly for the belief that we can grow our problems away; aside from creating the possibility that we will rediscover the joys of stagflation, this campaign seriously weakens our already faltering resolve to put our fiscal house in order. But the bigger risk is probably in Europe, where—despite a far worse employment performance than in the United States—the rhetoric of price stability goes largely unchallenged, and is likely to have growing influence over actual policy. In particular, what will happen if EMU comes to pass? The new European Central Bank will operate under a constitution that honors price stability above all else; more important, it will feel that it must demonstrate itself a worthy successor to the Bundesbank, which means that it will try to implement in practice the kind of policy the Bundesbank follows only in theory.

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To be skeptical about the prospects for rapid growth is, it turns out, to run the risk of being identified with another, equally misguided camp: that which believes that controlling inflation is the only priority of policy, that nothing can be done to fight recession and unemployment. This belief, especially acute among central bankers, is arguably imposing huge, gratuitous economic pain in much of the world; the third piece here, “A Good Word for Inflation,” focuses mainly on Europe and makes the case against a single-minded emphasis on price stability, while the fourth essay argues that monetary passivity accounts for much (not all) of Japan’s economic malaise. Finally, in “Seeking the Rule of the Waves,” I made use of a book review assignment to say some things I always wanted to say about economics, history, and the reasons why the business cycle is surely nowhere near dead.

World Economy Since the Wars: A Personal View
by John Kenneth Galbraith
Published 14 May 1994

But if full employment and full use of capacity is taken as the norm of economic policy, as in modern times it is, then the rate of investment associated with full use of capacity is also normal. A policy which holds production below capacity in the interest of price stability inescapably sacrifices economic growth. IV So long as the use of fiscal policy is in unresolved conflict with other and prior economic goals, it will not be used with effective vigor, at least in peacetime. This conflict and the resulting inutility of fiscal measures are not yet widely conceded by economists. The textbooks still elucidate the use of fiscal measures as a device for ensuring price stability. They concede that we must settle for something less than completely full employment and that this will offer difficulties.

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Nor is it certain that the controls which would serve to arrest the wage-price spiral would have to be comprehensive. It is possible that very limited restraints will serve to reconcile capacity output and price stability. This is an important point to which this essay will return. The prices fixed by controls are already fixed by monopoly or oligopoly power. Here nothing decisive is changed. However, for the moment it is sufficient to note that price and wage control, as a way of reconciling price stability, maximum product and minimum unemployment, is in conflict, no less important if it is ostensible rather than real, with historic attitudes toward production. 3 V A word of summary is now in order.

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Inequality [>] 8. Economic Security [>] 9. The Paramount Position of Production [>] 10. The Imperatives of Consumer Demand [>] 11. The Dependence Effect [>] 12. The Vested Interest in Output [>] 13. The Bill Collector Cometh [>] 14. Inflation [>] 15. The Monetary Illusion [>] 16. Production and Price Stability [>] 17. The Theory of Social Balance [>] 18. The Investment Balance [>] 19. The Transition [>] 20. The Divorce of Production from Security [>] 21. The Redress of Balance [>] 22. The Position of Poverty [>] 23. Labor, Leisure and the New Class [>] 24. On Security and Survival [>] Afterword [>] Index [>] * * * INTRODUCTION TO THE FORTIETH ANNIVERSARY EDITION PUBLISHING A NEW EDITION of a book after forty years one faces a serious question: How much should one change to reflect later thought?

The Deficit Myth: Modern Monetary Theory and the Birth of the People's Economy
by Stephanie Kelton
Published 8 Jun 2020

Or maybe Congress could help fine-tune the economy with better real-time adjustments in government spending and taxation? Recall that the Fed chooses its own definition of full employment. For them, maximum employment is defined as the level of unemployment it believes is necessary to hit its inflation target. In other words, although it’s legally responsible for full employment and price stability, one goal takes clear priority over the other. If it takes eight or ten million unemployed people to stabilize prices, then that is how the Fed defines full employment. It’s counterintuitive to define full employment as a certain level of unemployment. But politically speaking, it is useful for the Fed as it means they get to claim success by defining away the very problem they were tasked to solve.

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A recession that could have been quickly reversed with the right fiscal prescription instead became the longest and most protracted downturn in the post–World War II era. To make sure that never happens again, MMT recommends a shift away from the current reliance on central banks to deliver on the twin goals of full employment and price stability. Inflation and Unemployment: The MMT Approach The economists behind MMT recognize that there are real limits to spending, and that attempting to push beyond those limits can manifest in excessive inflation. However, we believe there are better ways to manage those kinds of inflationary pressures and that it can be done without trapping millions of people in perpetual unemployment.

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It’s also not enough to rely exclusively on Congress to adjust government spending and taxation to fight off inflation once it begins to accelerate. To supplement discretionary fiscal policy (the steering wheel), MMT recommends a federal job guarantee, which creates a nondiscretionary automatic stabilizer that promotes both full employment and price stability. Think of a poorly maintained roadway. You get a smooth ride until you encounter a pothole or a bump in the road. You can try to steer clear of hazards, but at some point, you’re destined to hit one. At that point, you could be in for a rough ride. If you’ve got a vehicle with good shock absorbers, they’ll buffer the impact, and you won’t get jostled around too much.

The Man Who Knew: The Life and Times of Alan Greenspan
by Sebastian Mallaby
Published 10 Oct 2016

“To the extent that there is no trade-off,” Yellen replied, covering her back carefully, “then price stability, literally zero inflation, is good and we should go for it.” This seemed like a dodge. Maybe, if Yellen was still around when the United States next experienced a harsh recession, she would decide that there was actually a trade-off—in which case she might go back to worrying about unemployment rather than just targeting inflation. “Is long-term price stability an appropriate goal of the Federal Reserve System?” Greenspan pressed her. “Mr. Chairman, will you define ‘price stability’ for me?” Yellen parried. “Price stability is that state in which expected changes in the general price level do not effectively alter business or household decisions.”

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More than a year had passed since Black Monday, and the sustained tranquility of the stock market had taught him a lesson: if the imperatives of financial stability and price stability were pulling him in different ways, he could prioritize stable prices, knowing that if markets crashed he had the power to contain the damage. Moreover, the warning of the previous August stuck in his mind: if Wall Street came to believe that he was gun-shy, inflation expectations would rise, and it would take enormous effort to force them back down again. The future central-bank consensus—that price stability trumped other objectives—was not yet entrenched. But it was taking shape beneath the surface.

…

He summoned the entire membership of the Fed’s interest-rate-setting body, the Federal Open Market Committee (FOMC), over to the White House and did his best to frighten them. “The present emergency is the greatest this country has ever faced, including the two World Wars and all the preceding wars,” he menaced. But the central bankers stood their ground. Chairman McCabe objected that military power depended on economic power, and that this required price stability. The administration then tried to beat the central bankers into submission: it issued a public statement claiming that the Fed had pledged to defend the 2.5 percent borrowing-cost ceiling. But the Fed leaders countered by leaking their own account of the meeting, which pointedly excluded any such commitment.

The Price Is Wrong: Why Capitalism Won't Save the Planet
by Brett Christophers
Published 12 Mar 2024

Given that there is no inherent hedge against price risk for renewables, one would expect it to be the case that extrinsic hedging mechanisms have been explored and, to one extent or another, implemented. Furthermore, insofar as financiers’ concern is specifically with price volatility, one would also expect it to be the case that any such mechanisms have been designed specifically to furnish a measure of price stability. That price stability indeed is something that lenders explicitly covet in renewables investments is no less clear than their aversion to volatility. ‘If there isn’t a guaranteed revenue stream that would pay off a significant element of the debt,’ one banker has observed of solar and wind investments, ‘we wouldn’t get involved.’20 ‘It is very clear’, Philip Bazin of Triodos Bank, in his turn, has explained, ‘that without a market stability mechanism, the cost of capital [for renewables] is going to increase.’21 What is the most stable price possible?

…

Indeed, Gross, reflecting on the seminal German case, goes a step further, maintaining that the country’s famous FiT scheme has served less as an electricity market device than as ‘a device for raising capital’.27 And given that financial institutions’ wariness of backing renewables projects that sell into spot markets is rooted specifically in the price volatility of such markets, it is exactly as one would expect that such institutions express a clear preference for instruments of government support that provide price stability over instruments that do not. Feed-in tariffs and the like ‘give you revenue stabilization’, one banker stated, ‘and that’s the key’.28 They are thus the gold standard for investors in renewables. Equally, one of the main reasons why financial hedging instruments like swaps and futures contracts are so significant in a place such as Texas is precisely because the US’s own long-preferred forms of government support for renewables – the ITC and the Production Tax Credit (PTC) – do not confer price stability. This is not to say that such government support has been misguided, still less immaterial.

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Thus it is exactly as one would expect that corporate PPAs have generally been less notable a phenomenon in places where government support schemes for renewables explicitly offer price stabilization than in either, first, places where little meaningful external support of any kind has been available, or, second, those where such support is available but does not actively stabilize output prices. We can briefly consider three example countries, one in each of these three categories, to help make the point. The UK, with its long-standing, price-stabilizing feed-in tariff and then Contracts for Difference schemes (Chapter 6), is an example of a location where corporate PPAs were long relatively marginal, because largely unnecessary.39 It is noteworthy, and readily explicable, that the UK’s corporate PPA market only began to show significant signs of life, principally onshore, when, from 2018, solar and onshore wind were cut off from the main aforementioned government support schemes, which were then reoriented towards offshore wind.

Money and Government: The Past and Future of Economics
by Robert Skidelsky
Published 13 Nov 2018

Secondly, in 1717 Newton, as Master of the Mint, fixed the value of the pound at £3 17s 10½d per standard ounce of 22 carat gold, equivalent to a fine gold price of just under £4 4s 11½d. The Bank was obliged to convert its notes into gold on demand at this price. This remained sterling’s gold price for two hundred years, except for its suspension in the Napoleonic wars. Sound money triumphed, and the record was one of long-run price stability; between 1717 and the First World War, the average annual rate of inflation was just 0.53 per cent. But there were considerable short-run fluctuations; the average magnitude of annual price changes was 4.42 per cent.7 The establishment of the Bank of England and Newton’s rule made it much safer to lend to the state.

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And even Keynes had to emancipate himself from the quantity theory before he felt he could accurately analyse the economic problem to which money gave rise. The key belief of the pre-1914 monetary reformers was that instability in the price level generates not just economic but social instability, by producing unanticipated shifts in the level of activity and distribution of wealth. The aim of economic policy ought therefore to be price stability. This policy prescription rested on the belief that, in a system of fiat money, the central bank has ultimate control over the quantity of money in circulation. If the central bank can control the quantity of money, either directly or indirectly, it has the power to make the price level what it wants it to be.

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Once it came to be accepted as prudent, for social reasons, to use monetary policy to mitigate dislocating economic fluctuations, all the unsettled questions in monetary theory were reopened. Was the money supply exogenous or endogenous? What was the transmission mechanism from money to prices? Was the task of the central bank to control currency or credit? Was it possible to combine price stability with exchange-rate stability? The context of these discussions was the radical volatility of prices, very different from the muted modulations of the previous century: post-war hyperinflation in some countries being followed by price collapses. John Maynard Keynes and Edwin Cannan debated the causes of the wartime and post-war inflations in a re-run of the Currency versus Banking School debates of the early nineteenth century.

Rethinking Capitalism: Economics and Policy for Sustainable and Inclusive Growth
by Michael Jacobs and Mariana Mazzucato
Published 31 Jul 2016

In Bernanke’s view, it was largely due to the introduction of a successful monetary policy framework focused on ensuring price stability.29 In Britain, Chancellor of the Exchequer, and later Prime Minister, Gordon Brown declared that the Labour government (1997–2010) had aimed to avoid returning to the ‘boom and bust’ of previous eras. His confidence stemmed from his early decision to grant operational independence to the Bank of England in the conduct of a monetary policy. In his initial letter to the Bank of England, Brown wrote: ‘price stability is a precondition for high and stable levels of growth and employment, which in turn will create the conditions for price stability on a sustainable basis.’30 But the Great Moderation thesis was blown away by the global financial crisis.

…

Yellen, ‘Monetary policy and financial stability’, presented at the 2014 Michel Camdessus Central Banking Lecture, International Monetary Fund, Washington, DC, http://www.federalreserve.gov/newsevents/speech/yellen20140702a.htm (accessed 4 May 2016). 42 The Federal Reserve is charged with carrying out a dual mandate that includes maximum employment and price stability. This stands in contrast to the ECB, which has a sole mandate to deliver price stability. 43 As Michael Woodford recently put it, ‘I worry that . . . [we] let Congress off the hook a little too easily’: http://www.stlouisfed.org/publications/Connecting-Policy-with-Frontier-Research/Michael-Woodford.cfm (accessed 4 May 2016). 44 Keynes, The General Theory, p. 372. 45 OECD, ‘Focus on top incomes and taxation in OECD countries: was the crisis a game changer?’

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Maintaining that trust is particularly crucial in the case of a nation and a currency that has been, and still is, at the heart of the international financial system.’14 Since the dollar is not backed by any ‘real’ commodity, the entity that controls its quantity must be committed to price stability to ensure that citizens and businesses continue to accept their paper money. Today, having been given greater independence in the overall conduct of monetary policy, most central banks are explicitly committed to the pursuit of price stability as part of their constitutional mandates. Despite what many commentators may believe, central banks do not independently and directly inject money into the economy. Almost all of the money we use today has been created by private banks through their lending.

Money Free and Unfree
by George A. Selgin
Published 14 Jun 2017

To provide considerably greater stability than the present fiat-dollar regime, a revived U.S. gold standard would probably need to be part of a broader international revival.46 RULE-BOUND FIAT STANDARDS Given that the postwar fiat standards managed by discretionary central banks have generally failed to deliver the long-run price stability that was delivered by the gold standard, Finn Kydland and Mark Wynne (2002: 1) ask whether a better fiat regime is possible. They note that the “hard pegs” of dollarization or currency boards have proven successful at delivering more stable nominal environments in countries that have adopted them. But, they naturally ask, “What about the large country, the ‘peggee’? What rule or regime can a large country such as the United States . . . adopt to guarantee long-term price stability?” A well-known and very simple type of monetary rule is a fixed growth path for M2, as advocated by Milton Friedman in the 1960s.

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These stated objectives suggest criteria by which to assess the Fed’s performance, namely, the relative extent of pre– and post–Federal Reserve Act price level changes, pre– and post–Federal Reserve Act output fluctuations and business recessions, and pre– and post–Federal Reserve Act financial crises. For reasons already given, we do not attempt to address the Fed’s success at bank supervision. INFLATION The Fed has failed conspicuously in one respect: far from achieving long-run price stability, it has allowed the purchasing power of the U.S. dollar, which was hardly different on the eve of the Fed’s creation from what it had been at the time of the dollar’s establishment as the official U.S. monetary unit, to fall dramatically. A consumer basket selling for $100 in 1790 cost only slightly more, at $108, than its (admittedly very rough) equivalent in 1913.

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(Board of Governors of the Federal Reserve System 2009) More specifically, as Ben Bernanke (2006: 2) observed in a lecture several years ago, besides reducing the costs of holding money, stable prices allow people to rely on the dollar as a measure of value when making long-term contracts, engaging in long-term planning, or borrowing or lending for long periods. As economist Martin Feldstein has frequently pointed out, price stability also permits tax laws, accounting rules, and the like to be expressed in dollar terms without being subject to distortions arising from fluctuations in the value of money. Feldstein (1997) had, in fact, reckoned the recurring welfare cost of a steady inflation rate of just 2 percent—a cost stemming solely from the adverse effect of inflation on the real net return to saving—at about 1 percent of gross national product (GNP).5 As Bernanke’s remarks suggest, unpredictable changes in the price level have greater costs than predictable changes.

The Curse of Cash
by Kenneth S Rogoff
Published 29 Aug 2016

Munich Personal RePEc Archive (MPRA) Paper 42169, University Library of Munich. ———. 2012b. “New Estimates of U.S. Currency Abroad, the Domestic Money Supply and the Unreported Economy.” Crime, Law and Social Change 57 (3): 239–63. Feldstein, Martin. 1999. “The Costs and Benefits of Going from Low Inflation to Price Stability.” In The Costs and Benefits of Price Stability, ed. Martin Feldstein. Chicago: National Bureau of Economic Research and the University of Chicago Press. ———. 2002. “The Role for Discretionary Fiscal Policy in a Low Interest Rate Environment.” NBER Working Paper Series 9203 (September). Cambridge, MA: National Bureau of Economic Research.

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Available at http://www.fatf-gafi.org. Fischer, Bjorn, Petra Köhler, and Franz Seitz. 2004. “The Demand for Euro Currencies, Past, Present and Future.” European Central Bank Working Paper Series 330 (April). Frankfurt. Fischer, Stanley. 1996. “Why Are Central Banks Pursuing Long-Run Price Stability?” In Achieving Price Stability: A Symposium Sponsored by the Federal Reserve Bank of Kansas City, pp. 7–34. Jackson Hole, WY, August 29–31. Federal Reserve Bank of Kansas City. Fischer, Stanley, Ratna Sahay, and Carlos A. Végh. 2002. “Modern Hyper- and High Inflations.” Journal of Economic Literature 40 (3): 837–80.

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During World War I, US inflation again soared to 19% in 1918.31 And then of course came the double-digit peacetime inflation of the 1970s. Indeed, there have been enough such episodes since the founding of the Federal Reserve Bank in 1913 that prices in the United States have increased thirtyfold.32 So much for the Fed’s mandate to achieve price stability. Still, the United States has had less cumulative inflation than most advanced economies over the same period. We return to the risks of high inflation in chapter 12. FROM GOLD-BACKED TO PURE FIAT PAPER CURRENCY Since its early days in China and the colonial United States, the evolution of paper money has taken other important turns, eventually spreading across the world.

The End of Loser Liberalism: Making Markets Progressive
by Dean Baker
Published 1 Jan 2011

He also acknowledged that there was little harm from moderate rates of inflation, meaning that if the Fed took this gamble and lost, there would be little cost associated with a rate of inflation that was stable, but slightly higher than the Fed’s target. I asked why the Fed shouldn’t take the virtually cost-free risk, and he responded by saying that the Fed is an institution that is committed to price stability. I pointed out that the Fed is also an institution that is committed to full employment, to which he replied that, “No one takes that commitment seriously.” When I suggested that he then also doesn’t need to take the commitment to price stability seriously, he responded, “Yes, I do.” [42] As a separate measure to slow consumption, Volcker also restricted the use of credit cards. At the time, the Fed had the ability to impose this type of credit control, but it does no longer

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As a result, the workers who end up taking the biggest pay cuts in a downturn are those without college degrees and especially those without high school degrees.[18] High unemployment is a class-biased mechanism for fighting inflation. In effect it forces the less-advantaged groups in society to sacrifice to ensure that the more-advantaged can enjoy price stability – and a ready supply of low-cost labor to provide household help or serve them in hotels and restaurants. Weakening unions As another element of this process of upward redistribution, President Reagan took a number of steps to weaken the power of unions. Foremost was weakening the enforcement of labor laws that protect workers’ right to organize.

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The Fed’s banker-friendly organizational structure was not an accident; it was first and foremost intended to serve the banks and only secondarily to serve the larger public. The Fed’s culture is thoroughly intermeshed with the financial industry. While its legal mandate from Congress places an equal priority on the goals of price stability and full employment,[40] the Fed has maintained a much greater commitment to the former goal than the latter. In fact, current Fed Chairman Ben Bernanke has openly committed the Fed to targeting inflation at 2 percent, a policy which implies that the Fed would be willing to tolerate high jobless rates if it were concerned that more expansionary policy would raise the rate of inflation above its target.

Oil Panic and the Global Crisis: Predictions and Myths
by Steven M. Gorelick
Published 9 Dec 2009

High prices served to heighten awareness and fear of the dependence on oil resources residing in what many people view as potentially vulnerable, if not precarious, parts of the world and coming from secretive suppliers who administer cartel economic power. It should not be taken for granted that price stability is, in fact, best for OPEC to make money. Does price stability really maximize its profits? On the contrary, it is easy to imagine a world in which prices rise, plateau, and are then unexpectedly lowered by enhanced OPEC production. Consequently, non-OPEC investments in higher-cost and higher-risk oil exploration and production projects might stall and remain economically stranded as they suddenly become unprofitable.

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In the long run, the wise use of an oil stockpile would provide greater price stability and greater Beyond Panic 219 security. The power of the OPEC cartel could be significantly tempered if most major oil-importing nations also built their own oil stockpiles, creating a de facto cartel consisting of non-OPEC members (perhaps called NOPEC). The US, as the consumer of about one-quarter of the annual global oil supply, is in a strong position to take the lead in countering OPEC reductions in exports and maintaining oil-price stability. Developing a US “economic petroleum reserve,” or national oil bank, would require 5.5 times the amount of oil stored in the SPR and an investment of perhaps $130 to $230 billion in oil purchases.

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The relative political instability and lawlessness of these countries is perhaps an indication that they could not tolerate elimination of the significant income they obtain from oil exports. The point is that one potential unintended consequence of a reduction in oil use is social disintegration of some oil-exporting nations. How do oil price and price stability affect the future of transportation fuels? Consumers like inexpensive gasoline. In the US, the drop in gasoline price in 2009 to its long-term, historical average of $2.25 per gallon was a relief and economic benefit. However, at that price, the development of new, expensive offshore oil sources and alternative liquid fuels is not profitable.

Panderer to Power
by Frederick Sheehan
Published 21 Oct 2009

They seemed to favor 1 percent a month, or 12 percent a year.13 The whole Fed team marketed “price stability” as its sole function. In 2005, St. Louis Federal Reserve Bank President William Poole responded to the question of whether the institution should identify and manage asset price bubbles: “I’m really a hardliner on this. . . . I think it is incompatible with a market economy to have a government agency setting asset prices that are meant to allocate capital.”14 Milton Friedman also lectured from the audience: “The role of the Fed is to preserve price stability. Period. . . . It should not be concerned with the asset markets as such, only as they affect indirectly—somehow—the price stability as a whole.”15 The professor’s argument turns on itself.

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(“But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?”13) There was no mention of manias or crashes. He used the word bubble only to imply that he was not anxious: “We as central bankers need not be concerned if a collapsing financial asset bubble does not threaten to impair the real economy, its production, jobs, and price stability.” 10 FOMC meeting transcript, December 19, 1995, p. 35. 11 Ibid., p. 37. 12 Ibid. 13 Speech available at http://www.federalreserve.gov/boarddocs/speeches/1996/ 19961205.htm. He was speaking in the midst of a stock market bubble, and almost everyone feared it or knew it, including the Federal Reserve.

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The longer a bubble is allowed to inflate, the more it encourages the build-up of other imbalances, such as too much borrowing and investment, which have the power to turn a mild downturn into something nastier.”7 Greenspan’s speech met some resistance, but was generally accepted as gospel. Still, he may have found the Jackson Hole speech was not quite the success he had expected. He launched a two-pronged attack from the podium for the rest of the year. First, an embellishment of his “can’t see a bubble” line. Second, a new emphasis on “price stability.” Speaking to the Economic Club of New York on December 19, 2002, the chairman rationalized his inaction from a different angle: “The evidence of recent years, as well as the events of the late 1920s, casts doubt on the proposition that bubbles can be defused gradually.”8 This contradicted the chairman’s “Gold and Economic Freedom” essay of 1966.

The Shifts and the Shocks: What We've Learned--And Have Still to Learn--From the Financial Crisis
by Martin Wolf
Published 24 Nov 2015

The economic ideology of ‘Ordoliberalismus’, which had a profound influence upon the ‘social market economy’ introduced after the Second World War by Ludwig Erhardt, Germany’s immensely influential economics minister and subsequent chancellor, also gives German attitudes to economic policy special characteristics.21 This is a free-market ideology, which emphasizes constitutional rules, as against discretionary policy.22 It rejected the then highly influential Keynesian idea of discretionary macroeconomic stabilization from its inception, in favour of a central bank dedicated to price stability. While Germans have accepted a welfare state since the nineteenth century, under Erhardt’s influence they have also embraced the idea of market competition. One of the main roles of the state, in their view, is to promote competition. The solution to the Eurozone crisis from the German perspective, then, is to impose these principles throughout the Eurozone.

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As Pettis puts it, ‘Excessive use of the US dollar internationally actually forces up either American debt or American unemployment.’31 Inevitably, the Fed chose debt over unemployment. Indeed, it is mandated to do so, because its task is to sustain the highest level of employment consistent with price stability (or, more precisely, stable and low inflation). Since the US has no exchange-rate policy and has been able to borrow freely in its own currency, and since, in addition, countries that target exchange rates usually do so against the dollar, the Federal Reserve has emerged automatically as the world’s macroeconomic balancer and the US economy as the one within which global balancing takes place.

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First, this new orthodoxy gives enormous discretionary power to bureaucrats in managing the financial system in particular, which is the heart of the supposedly market economy. Second, the new orthodox doctrine does not resolve the confused relationship between the state and the private sector as suppliers of money. On the contrary, it reinforces that confusion. Third, the doctrine assumes that monetary policy can be targeted at price stability, while macroprudential policy is targeted at financial stability. More important, it is assumed that they will not get in each other’s way, with monetary policy sometimes undermining financial stability by encouraging excessive credit creation, and macroprudential policy undermining monetary policy by halting credit creation.

Money: 5,000 Years of Debt and Power
by Michel Aglietta
Published 23 Oct 2018

Hence, independence is a monetary principle integral to sovereignty, and not an operational rule transforming the central bank into some kind of automaton. The foundational texts should invest the central banks with the mission of maintaining price stability. But in all their great wisdom, these texts should hold back from specifying what price stability is. For this would deny the central bank its own capacity for judgement in the face of unforeseeable contexts. Independence is a symbol that works if the central bank can adopt flexible policies to respond equitably to a variety of imbalances, without being suspected of threatening price stability. Central bank independence is by nature a symbolic guarantee, but its practice inserts it deep into the economy.

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This means providing a framework that eliminates all balances outside of a range indicated by the central bank. This framework attaches itself to a renewed monetary doctrine: flexible inflation targeting.7 This means placing monetary policy’s short-term discretionary actions under the constraint of medium-term rules, thus assuring price stability. This stability is defined as a range of viable future inflation rates, within the scope of which the central bank’s actions enjoy the confidence of economic actors. Nonetheless, if central bank independence gives weight to the principle of guaranteeing the unit of account’s statistical value, this cannot be its exclusive concern.

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Various structural factors influenced choices over monetary regulation: the existence or otherwise of developed public debt titles markets; the degree of protection of the banking system, and thus its solidity faced with the risk of insolvency; the predominance of intermediated financing or recourse to capital markets; the extent and tightness of exchange controls; and the explicit regulation of interest rates by the authorities, as well as their implicit regulation by the banking oligopoly. These were nationally separate systems of limited openness. Within these systems, monetary policy was a backup for an economic policy seeking firstly to achieve full employment, and secondly to stabilise the balance of payments. Price stability was only considered in relative terms: for the most open countries it had to be made competitive with inflation in other countries, while for the largest countries – first of all the United States – it was considered in terms of arbitrating between inflation and underemployment. Monetary regulation was divided between two poles, or two regimes that could be combined in different ways.

Limitless: The Federal Reserve Takes on a New Age of Crisis
by Jeanna Smialek
Published 27 Feb 2023

It was under way in earnest while Greenspan was still the chair. He and Janet Yellen, then a member of the Fed’s Board of Governors, sparred collegially over the Fed’s price stability goal at the central bank’s July 1996 meeting, for instance. While Congress had instructed the central bank to stabilize prices, it had become clear that nobody really knew what that meant in practice. “Mr. Chairman, will you define ‘price stability’ for me?” Yellen had asked.[23] “Price stability is that state in which expected changes in the general price level do not effectively alter business or household decisions,” Greenspan replied.

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But because the central bank is only distantly accountable to voters, and because its role in our economy has expanded so much, society needs to pay attention to the Fed’s abilities—and experts, the media, interest groups, and the broader public must keep pressure on lawmakers to appoint and confirm apolitical central bankers. Fed independence has always been important, but it now matters to more than just price stability. If elected officials were to place partisan loyalists on the Fed Board, the unconventional and emergency tools that the central bank used in 2020 to help stabilize markets and the economy could instead be leveraged to quietly circumvent the democratic process. Favored constituencies or even a handful of favored companies could be given cheap credit through the Fed even if it proves too hard to pass funding for those entities through Congress.

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The financial fiefdoms would be coordinated by a public supervising authority in Washington, the Federal Reserve Board, whose members would include five presidential appointees working alongside the comptroller of the currency and the Treasury secretary.[56][*6] The goal of the system was to smooth over seasonal disruptions in money flow both by centralizing reserves and by allowing the Fed banks to support short-term loans backed by agreements between suppliers and producers, called “real bills,”[57] to make sure that sufficient money was available at times when it was in high demand. The newly created Federal Reserve System was not especially powerful at its inception, nor did it have a spelled-out responsibility for either price stability or encouraging employment, which would go on to become its most well-known missions.[58] It was supposed to protect the system against painful panics and keep credit flowing by lending to member banks against good collateral when they needed cash to avoid a crunch. It was also intended to elevate the prominence of the little-used United States dollar in global trade.[59] Its ambitions more or less stopped there.

Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism
by Ha-Joon Chang
Published 26 Dec 2007

But since the rise of neo-liberalism, and its ‘monetarist’ approach to macroeconomics, in the 1980s, the focus of macroeconomic policies has radically changed. The ‘monetarists’ are called as such because they believe that prices rise when too much money is chasing after a given quantity of goods and services. They also argue that price stability (i.e., keeping inflation low) is the foundation of prosperity and, therefore, that monetary discipline (which is required for price stability) should be the paramount goal of macroeconomic policy. When it comes to developing countries, the need for monetary discipline is even more emphasized by the Bad Samaritans. They believe that most developing countries do not have the self-discipline to ‘live within their means’; it is alleged that they print money and borrow as if there were no tomorrow.

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But this populist rhetoric obscures the fact that the policies needed to generate low inflation are likely to reduce the future earnings of most working people by reducing their employment prospects and wage rates. The price of price stability Upon taking power from the apartheid regime in 1994, the new ANC (African National Congress) government of South Africa declared that it would pursue an IMF-style macroeconomic policy. Such a cautious approach was considered necessary if it was not to scare away investors, given its leftwing, revolutionary history. In order to maintain price stability, interest rates were kept high; at their peak in the late 1990s and the early 2000s, the real interest rates were 10–12%.

…

The data are from Singh (1995), Table 8. 12 The details are from F. Alvarez & S. Zeldes (2001), ‘Reducing Inflation in Argentina: Mission Impossible?’ http://www2.gsb.columbia.edu/faculty/szeldes/Cases/Argentina/ 13 Moreover, in the neo-liberal argument, economic stability is wrongly equated with price stability. Price stability is, of course, an important part of overall economic stability, but the stabilities in output and employment are also important. If we define economic stability more broadly, we cannot say that neo-liberal macroeconomic policy has succeeded even in its self-proclaimed goal of achieving economic stability over the past two and a half decades, as output and employment instabilities have actually increased during this period.

Bad Samaritans: The Guilty Secrets of Rich Nations and the Threat to Global Prosperity
by Ha-Joon Chang
Published 4 Jul 2007

But since the rise of neo-liberalism, and its ‘monetarist’ approach to macroeconomics, in the 1980s, the focus of macroeconomic policies has radically changed. The ‘monetarists’ are called as such because they believe that prices rise when too much money is chasing after a given quantity of goods and services. They also argue that price stability (i.e., keeping inflation low) is the foundation of prosperity and, therefore, that monetary discipline (that is required for price stability) should be the paramount goal of macroeconomic policy. When it comes to developing countries, the need for monetary discipline is even more emphasized by the Bad Samaritans. They believe that most developing countries do not have the self-discipline to ‘live within their means’; it is alleged that they print money and borrow as if there were no tomorrow.

…

But this populist rhetoric obscures the fact that the policies needed to generate low inflation are likely to reduce the future earnings of most working people by reducing their employment prospects and wage rates. The price of price stability Upon taking power from the apartheid regime in 1994, the new ANC (African National Congress) government of South Africa declared that it would pursue an IMF-style macroeconomic policy. Such a cautious approach was considered necessary if it was not to scare away investors, given its leftwing, revolutionary history. In order to maintain price stability, interest rates were kept high; at their peak in the late 1990s and the early 2000s, the real interest rates were 10–12%.

…

The data are from Singh (1995), Table 8. 12 The details are from F. Alvarez & S. Zeldes (2001), ‘Reducing Inflation in Argentina: Mission Impossible?’ http://www2.gsb.columbia.edu/faculty/szeldes/Cases/Argentina/ 13 Moreover, in the neo-liberal argument, economic stability is wrongly equated with price stability. Price stability is, of course, an important part of overall economic stability, but the stabilities in output and employment are also important. If we define economic stability more broadly, we cannot say that neo-liberal macroeconomic policy has succeeded even in its self-proclaimed goal of achieving economic stability over the past two and a half decades, as output and employment instabilities have actually increased during this period.

Angrynomics
by Eric Lonergan and Mark Blyth
Published 15 Jun 2020

This, plus a turn in economics to more microeconomic approaches provided the political representatives of capital – Kalecki’s “Powerful Block” – with their new software. We call this set of ideas “neoliberalism”. But to run this new software you had to do more than simply tweak the old hardware. You had to fundamentally reconfigure it once again. The new policy target for v.3.0 was not full employment – for that produced inflation – but “price stability” – that is, guarding against inflation at all costs. Although raising interest rates will crush inflation in the short term, to make this permanent hardware changes were needed that would destroy the ability of the system to generate inflation in the first place. There were four key hardware changes that took place in the 1980s, which took inflation out of the system permanently, restored the value of capital, and in doing so built the world that we grew up in.

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And so, over the course of the 1990s, this hardware modification spread across almost all the machines running the software for v.3.0 as central bank independence, and the rise of the central banker as the most powerful policy-maker in the land, spread across the OECD and beyond.21 The result was a system that was once again similar across those countries that produced common outputs, but those outputs were the complete opposite of v.2.0. Comparing versions 2.0 and 3.0 in a table can clarify this. Capitalism v.2.0 1945–80 Capitalism v.3.0 1980– Policy target: Policy target: Full employment Price stability (low inflation) Policy outcomes: Policy outcomes: Labour’s share of GDP at historic highs Capital’s share of GDP at historic highs Corporate profits low or stagnant Wages low or stagnant Inequality low Inequality high Markets mostly national Markets globalized Trade unions strong Trade unions weak Finance weak and immobile Finance strong and highly mobile Central banks weak and politicized Central banks strong and independent Legislatures strong Legislatures weak MARK: But as you stressed in the previous dialogue, Eric, one of the reasons v.3.0 lasted as long, if not longer, than v.2.0, was the fact that it worked.

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ERIC: In the absence of inflation, it is true that we have a great deal more fiscal and monetary flexibility. MMT economists don’t have a credible explanation of why inflation is dead. Hyman Minsky, their intellectual forefather, was completely wrong about inflation. Ironically, some of their policies might undermine price stability and end up limiting fiscal flexibility as a consequence. As you argued so forcefully in your book Austerity, and which has since become the consensus, aggressive fiscal and monetary stimulus should be used to counter recessions. But when the resources of the economy are fully employed, increasing the role of government requires resources to be taken from somewhere else.

Profiting Without Producing: How Finance Exploits Us All
by Costas Lapavitsas
Published 14 Aug 2013

Haraf and Rose Marie Kushmeider, Washington, DC: American Enterprise Institute For Public Policy and Research, 1988; and Anna Schwartz, ‘Why Financial Stability Depends on Price Stability’, in Money, Prices and the Real Economy, ed. Geoffrey Wood, Northampton: Edward Elgar, 1998. See also Ben Bernanke and Mark Gertler, ‘Monetary Policy and Asset Price Volatility’, Economic Review 4, 1999. 37 Michael Bordo and David Wheelock, ‘Price Stability and Financial Stability: The Historical Record’, The Federal Reserve Bank of St. Louis Review 80:4, 1998, pp. 41–62. Michael Bordo, Michael J. Dueker, and David Wheelock, ‘Aggregate Price Shocks and Financial Instability: A Historical Analysis’, Working Paper 2000–005B, Federal Reserve Bank of St.

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Note that Karl Case and Robert Shiller realized that bubble conditions were in place already by the early 2000s, but expected the situation to stabilize (‘Is There a Bubble in the Housing Market?’, Brookings Papers on Economic Activity 2, 2003). At the BIS, however, William White argued that central bank should ‘lean against the wind’ by raising interest rates when bubbles threatened, even if price stability and growth targets were not compromised (‘Procyclicality in the Financial System’, BIS Working Paper No. 193, 2006; ‘Is Price Stability Enough?’, BIS Working Paper No. 205, 2006). In contrast, Ben Bernanke, who became the head of the US Federal Reserve, argued that credit and asset bubbles should be allowed to follow their course, the authorities intervening aggressively only after the bubble would have burst (‘The Global Saving Glut and the U.S.

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Rather, the malfunctioning of money is partly due to the complex processes linking real accumulation to the monetary circulation, as was discussed in Chapter 4. Inflation is also the outcome of poor performance by capitalist accumulation, rather than being simply the result of faulty monetary processes. Second, the underlying assumption of inflation targeting was that the achievement of price stability would also result in overall financial stability. This view was put across by Anna Schwartz and was adopted generally for much of the period of Great Moderation.36 For Schwartz, financial instability arises primarily from unexpected changes in the rate of inflation. If the central bank focused on keeping inflation low, it would thereby reduce the risk of lending booms (induced by high inflation) and recessions (induced by unexpected deflation or disinflation).

Money Mischief: Episodes in Monetary History
by Milton Friedman
Published 1 Jan 1992

In light of the experience of forty centuries, only the short time perspective of politicians and voters can explain the repeated re-sort to price and wage controls (Schuettinger and Butler 1979). Institutional Reform to Promote Price Stability The repeated ups and downs in the price level have generated a vast literature offering and analyzing proposals for institutional reform designed to promote price stability. My own suggestions have centered on means of assuring that the quantity of money will grow at a relatively constant rate.* Recently, Robert Hetzel has made an ingenious proposal that may be more feasible politically than my own earlier proposals for structural change, yet that promises to be highly effective in restraining the inflationary bias that infects government.

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.* I also hasten to add that this judgment is not intended either to denigrate or to praise the character or the intentions of the various parties in the long-running dispute. The pro-silver group contained silver producers seeking to promote their special interests, inflationists eager to seize any vehicle for that purpose, and sincere bimetallists who desired neither inflation nor deflation but were persuaded that bimetallism was more conducive to price stability than monometallism was. Similarly, the pro-gold group contained producers of gold, deflationists (pilloried by the free-silver forces as Wall Street bankers), and sincere believers that the gold standard was the only satisfactory pillar for a financially stable society. Motives and intentions matter far less than the outcome.

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Holders of standard bonds, but not indexed bonds, would suffer a capital loss. Indeed, all creditors receiving payment in dollars in the future would feel threatened. The ease of associating increases in expected inflation with particular monetary policy actions will encourage creditors to exert a pressure that would counteract political pressures to trade off price stability for short-term output gains. (1991, p. A14) In explaining his proposal, Hetzel notes: The long lag between monetary policy actions and inflation means that it is difficult to associate particular policy actions with the rate of inflation. Changes in expected inflation registered in changes in the difference in yields between standard and indexed bonds would provide an immediate and continuous assessment by the market of the expected effects on inflation of current monetary policy actions (or inactions).

Big Three in Economics: Adam Smith, Karl Marx, and John Maynard Keynes
by Mark Skousen
Published 22 Dec 2006

Fisher, a New Era economist, had a great deal of faith in America's new central bank and expected the Federal Reserve to intervene if a crisis arose. Fisher Is Deceived by Price Stability According to Fisher, the key variable to monitor in the monetary equation was P, the general price level. If prices were relatively stable, there could be no major crisis or depression. Price stabilization was Fisher's principal monetary goal in the 1920s. He also felt that the international gold standard could not achieve price stability on its own. It needed the help of the Federal Reserve, which was established in late 1913 in order to create liquidity and prevent depressions and crises.

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Mark Blaug calls him "one of the greatest and certainly one of the most colorful American economists who has ever lived" (Blaug 1986, 77). Fisher's entire career, both professional and personal, was devoted to the issue of money and credit. He invented the famed Quantity Theory of Money, and created the first price indexes. He became a crusader for many causes, from healthy living to price stability. He wrote over thirty books. He was a wealthy inventor (of today's Rolodex, or card catalog system) who became the Oracle on Wall Street, but was destroyed financially by the 1929-33 stock market crash. Fisher's failure as a monetarist to anticipate the greatest economic collapse in the twentieth century must lie squarely with his incomplete monetary model of the economy, and it was this defective model that led directly to the development of Keynesian economics, the subject of our next chapter.

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When Somary expressed pessimism about the future of the stock market, Keynes declared firmly, "We will not have any more crashes in our time" (Somary 1986 [ 1960], 146-47). Somary had been trained in Austrian economics at the University of Vienna and knew that the New Era boom was unsustainable. But Keynes, like Irving Fisher, ignored the Austrians and pinned his hopes on the Federal Reserve and price stabilization. In late 1928, Keynes wrote two papers disputing that a "dangerous inflation" was developing on Wall Street, concluding that there was "nothing which can be called inflation yet in sight." Referring to both real estate and stock values in the United States, Keynes added, "I conclude that it would be premature today to assert the existence of over-investment. ...

The Age of Turbulence: Adventures in a New World (Hardback) - Common
by Alan Greenspan
Published 14 Jun 2007

While the Fed had no explicit mandate to focus on the stock market, the effects of the run-up in prices seemed to me a legitimate concern. In quelling inflation, we had established that price stability is central to long-term economic growth. (In fact, one major factor causing stock prices to rise was investors' growing confidence that stability would continue.) Yet the concept of price stability wasn't as self-evident as it seemed. There were probably ten different statistical series on prices you could look at. For most economists, price stability referred to product prices—the cost of a pair of socks or a quart of milk. But what about the prices of incomeearning assets, like stocks or real estate?

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Central bankers over the past several decades have absorbed an important principle: Price stability is the path to maximum sustainable economic *However, America's reputation has been s o m e w h a t diminished by t h e thwarting of high-profile foreign acquisitions—of Unocal, by a Chinese company, in 2 0 0 5 , and of a company that managed U.S. ports, by D u b a i Ports World, in 2 0 0 6 . t G i v e n t h e u p w a r d bias of measured prices, a 1 percent reported rate of price increase probably represents an economy with price stability. 389 More ebooks visit: http://www.ccebook.cn ccebook-orginal english ebooks This file was collected by ccebook.cn form the internet, the author keeps the copyright. 

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But what about the prices of incomeearning assets, like stocks or real estate? What if those prices were to inflate and become unstable? Shouldn't we worry about the price stability of nest eggs and not just the eggs you buy at the grocery store? It wasn't that I wanted to stand up and shout, "The stock market is overvalued and it will lead to no good." I didn't believe that. But I thought it important to put the issue on the table. 175 More ebooks visit: http://www.ccebook.cn ccebook-orginal english ebooks This file was collected by ccebook.cn form the internet, the author keeps the copyright. T H E AGE OF T U R B U L E N C E The concept of irrational exuberance came to me in the bathtub one morning as I was writing a speech.

MegaThreats: Ten Dangerous Trends That Imperil Our Future, and How to Survive Them
by Nouriel Roubini
Published 17 Oct 2022

Because a valid public policy goal is to maintain maximum sustainable employment, Congress charged the Fed with a mandate on top of price stability: keeping a lid on unemployment.8 When inflation and unemployment both worsened during the 1970s, senior officials said wait a moment; very loose monetary policies cause high inflation. We’ve all seen the cost of inflation. Let’s make central banks independent and give them only one key goal: price stability. Stable prices blunt inflation and negative consequences that debase the value of fiat currencies. Chastened by stagflation that proved so hard to defeat, many central banks—but not the Fed—restored the focus on price stability only. They proposed an inflation target that would encourage lending without jeopardizing price levels.

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Yet during the COVID-19 crisis, the direct monetization of fiscal deficits and debts became a de facto norm. The European Central Bank, launched in 1998 with a mandate to maintain price stability, has scrambled to redefine its purpose in an uncharted environment. “Crisis management has taken the central bank well beyond its strict treaty mandate,” the New York Times reported in 2010, when Jean-Claude Trichet was the bank’s president.14 “It has become much more difficult for Mr. Trichet to sum up its role with the mantra, ‘We have only one needle in our compass and that is price stability.’” Indeed, the Times reported that the ECB “has experienced what the US military calls ‘mission creep,’ shouldering responsibility—for lack of any other federal European institution—for stabilizing the eurozone economy and financial system.”

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In this chapter, we’ll look at a more subtle and insidious threat of financial instability and chaos. Instead of throttling back on their experiments and applying due caution, central banks have accelerated mission creep in the last few years. What, exactly, is the role of the Fed and other central banks? Once upon a time, they cared only about price stability. Then they set their sights on growth and unemployment. After the global financial crisis they started to care also about financial stability. Now they have also embraced “average inflation targeting,” using the tools at their disposal to try to reach an average rate of 2 percent over time, thus allowing the target to be overshot on a temporary basis.

Milton Friedman: A Biography
by Lanny Ebenstein
Published 23 Jan 2007

And I have often thought since how fascinating it would have been to stage a debate between Friedman and Keynes.14 Friedman believes that Keynes’s most original contribution to economic theory was his “emphasis on the conflict between the stability of prices and the stability of exchange.”15 Like Keynes, Friedman believes that domestic price stability is more important than international exchange rate stability, though he would like to see both. Indeed, he believes that the surest, and perhaps only, way to achieve stable international exchange rates would be for all nations to have stable domestic price levels. The goals of domestic price stability and international exchange rate stability are thus in the long run not in conflict but in harmony. Friedman feels that a national economy is more stable than Keynesian analysis postulates.

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He made reference to the “inflationary pressure of abnormally high government expenditures”6; only later did he come to emphasize that inflation is always and everywhere a monetary phenomenon. Simons was not, incidentally, a consistent monetarist, if he is considered to have been a monetarist at all. He wrote in 1936 in “Rules versus Authorities in Monetary Policy,” speaking of the goal of price stabilization: “The task is certainly not one to be entrusted to banking authorities, with their limited powers and restricted techniques, as should be abundantly evident from recent experience. Ultimate control over the value of money lies in fiscal practices—in the spending, taxing, and borrowing operations of the central government....

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His two best lifetime friends, George Stigler and Allen Wallis, died in 1991 and 1998 respectively. Friedman’s final position with respect to monetary policy was that it should seek stable aggregate prices. He favored neither inflation nor deflation. He became more optimistic with respect to the possibility of central banks as currently constituted to achieve price stability than he was in the past, believing that will is very important to control inflation. He feared that some decades hence, the world will forget what causes inflation and that all of the old, inaccurate purported causes of inflation (greedy employers, grasping employees, etc.) will return to the fore.

Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism
by George A. Akerlof and Robert J. Shiller
Published 1 Jan 2009

This story should serve as a warning. Too much faith is placed today in natural rate theory. For the past quarter century the United States has had a sensible monetary policy, which carefully balances the twin goals of price stability and full employment. But we are in great fear of ideologues on a future Federal Reserve Board who will take natural rate theory as more than a useful parable, consider it their duty to define price stability as zero inflation, and see no great cost in achieving it. It would take only a handful of believers in this theory—which is only partially right—to bring about the “Great United States Slump.”

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His field was labor economics. He wrote the influential book The Economics of Trade Unions.1 In 1966 he left Chicago for Princeton, and shortly thereafter he began taking on increasing administrative responsibilities. He was eventually tapped by President Gerald Ford to be the director of the Council on Wage and Price Stability. He later returned to Princeton, where he became provost, and finally he served as president of the Alfred P. Sloan Foundation. Shortly before his death, Rees wrote a paper for a conference in honor of his old friend Jacob Mincer, also a distinguished labor economist of the Chicago School. (Rees himself had been honored by a similar conference three years earlier.)

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Therefore to neutralize the 0.75% cost increase to the firms, unemployment must rise by 1.5 percentage points.10 The Long Term If correct, natural rate theory has major consequences for monetary policy. If it is correct, there is little loss from very low inflation targets. Long-term price stability, with an inflation target of zero, can be achieved with no permanent ill consequences. On the average, over a long period of time unemployment will be unaffected by the choice of inflation target. If, on the other hand, natural rate theory is not true, so that there is a long-term trade-off between inflation and unemployment, a zero inflation target is poor economic policy.

Economics Rules: The Rights and Wrongs of the Dismal Science
by Dani Rodrik
Published 12 Oct 2015

This approach, popularized by the economist Steven Levitt, has been used to shed light on diverse social phenomena, ranging from the practices of sumo wrestlers to cheating by public school teachers, using careful empirical analysis and incentive-based reasoning.2 Some critics suggest that this line of work trivializes economics. It eschews the big questions of the field—when do markets work and fail, what makes economies grow, how can full employment and price stability be reconciled, and so on—in favor of mundane, everyday applications. In this book I focus squarely on these bigger questions and how economic models help us answer them. We cannot look to economics for universal explanations or prescriptions that apply regardless of context. The possibilities of social life are too diverse to be squeezed into unique frameworks.

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The inability of today’s self to commit to the desirable pattern of behavior harms the future self. The generic solution to these problems is a strategy of precommitment. In the inflation example, the policy maker might choose to delegate monetary policy to an independent central bank that is tasked with price stability alone or is run by an ultraconservative banker. In the saving example, someone might ask an employer to make automatic deductions to a retirement plan. The paradox in these cases is that reducing one’s freedom of action can make one better off, defying the usual economic dictum that more choice is always better than less.

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What made the “new classical approach,” as it came to be called, a winner—at least in academia—was not its empirical validation. The real-world fit of the model was heavily contested, as was the realism of some of the key ingredients. But shortly after the arrival of the new theory, in the mid-1980s the US economy entered a period of economic growth, full employment, and price stability. The business cycle looked to be conquered in this era of “great moderation.” As a result, the descriptive and predictive realism of the new classical approach seemed, from a practical perspective, not to matter a whole lot. The great appeal of the theory lay in the model itself. The microfoundations, the math, the new techniques, the close links to game theory, econometrics, and other highly regarded fields within economics—all these made the new macroeconomics appear light-years ahead of Keynesian models.

23 Things They Don't Tell You About Capitalism
by Ha-Joon Chang
Published 1 Jan 2010

There have been a huge number of financial crises, including the 2008 global financial crisis, destroying the lives of many through personal indebtedness, bankruptcy and unemployment. An excessive focus on inflation has distracted our attention away from issues of full employment and economic growth. Employment has been made more unstable in the name of ‘labour market flexibility’, destabilizing many people’s lives. Despite the assertion that price stability is the precondition of growth, the policies that were intended to bring lower inflation have produced only anaemic growth since the 1990s, when inflation is supposed to have finally been tamed. That’s where the money is – or is it? In January 1923, French and Belgian troops occupied the Ruhr region of Germany, known for its coal and steel.

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For example, according to a 1999 study for the Joseph Rowntree Foundation, the British social reform charity named after the famous Quaker philanthropist businessman, nearly two-thirds of British workers said they had experienced an increase in the speed or the intensity of work over the preceding five-year period. Last but not least, in many (although not all) rich countries, the welfare state has been cut back since the 1980s, so people feel more insecure, even if the objective probability of job loss is the same. The point is that price stability is only one of the indicators of economic stability. In fact, for most people, it is not even the most important indicator. The most destabilizing events in most people’s lives are things like losing a job (or having it radically redefined) or having their houses repossessed in a financial crisis, and not rising prices, unless they are of a hyperinflationary magnitude (hand on heart, can you really tell the difference between a 4 per cent inflation and a 2 per cent one?).

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The most destabilizing events in most people’s lives are things like losing a job (or having it radically redefined) or having their houses repossessed in a financial crisis, and not rising prices, unless they are of a hyperinflationary magnitude (hand on heart, can you really tell the difference between a 4 per cent inflation and a 2 per cent one?). This is why taming inflation has not quite brought to most people the sense of stability that the anti-inflationary warriors had said it would. Now, the coexistence of price stability (that is, low inflation) and the increase in non-price forms of economic instability, such as more frequent banking crises and greater job insecurity, is not a coincidence. All of them are the results of the same free-market policy package. In the study cited above, Rogoff and Reinhart point out that the share of countries in banking crises is very closely related to the degree of international capital mobility.

The Great Demographic Reversal: Ageing Societies, Waning Inequality, and an Inflation Revival
by Charles Goodhart and Manoj Pradhan
Published 8 Aug 2020

But if the authorities tried to take persistent advantage of that, in order to lower unemployment below the NRU, the result could only be to cause an ever-increasing rate of inflation. This concept, of a vertical long-run Phillips curve, was an important buttress for the subsequent move to Central Bank independence, with a mandate to concentrate on price stability via an inflation target. With such a Phillips curve, Central Bank measures to maintain price stability would not of themselves affect longer-run employment, growth or productivity, which were (in the long term) determined by supply-side factors, not by monetary, short-term demand-side policies.3 Thus, concentration on the control of inflation, via monetary policies, would be of itself beneficial, with no offsetting disadvantages.

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The over-riding concern, when Keynes was writing the General Theory, was to restore and to maintain reasonably full employment, not to control inflation. It is in some ways a measure of the success of Keynesian economics that since World War II, at least until the twenty-first century, the main problem that faced us was to combine reasonably full employment with price stability. Of course, the initial recovery to full employment at the end of the 1930s and early 1940s owed more to rearmament and World War II than to Keynesian economics. But after World War II and into the early 1950s, the initial major concern/expectation was that the advanced economies might fall back into a further bout of stagnation/deflation.

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Globalisation has been checked by populism, just at the time that demographic factors are swinging back to labour’s advantage. Meanwhile, those who extrapolate the recent past into the future, ignoring longer-run forces, are asserting that we will remain in secular stagnation. The slow-moving pendulum is about to swing back again. It may be that, for a year or two, we could combine even lower unemployment with price stability, but that will not last. The message of this chapter is that, not only is the long-run Phillips curve vertical at the NRU (u*), but also the position of u* is continuously and systematically shifting owing to longer-run demographic, political and economic forces. You ignore such trends at your peril.

In FED We Trust: Ben Bernanke's War on the Great Panic
by David Wessel
Published 3 Aug 2009

Some foreign central banks — including the European Central Bank, the Bank of England, and the Bank of Japan — are given one and only one explicit goal: price stability. The Fed, in contrast to most other central bankers, was instructed by Congress in 1977 to aim at both “maximum employment” and “stable prices.” Democrats in Congress warned Bernanke against any unilateral move to alter the Fed’s priorities, an admonition that Bernanke, like Greenspan before him, countered by maintaining that price stability was the road to maximizing employment and economic growth. Bernanke was not the first Fed chairman to consider inflation targets.

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To that end, Bernanke thought the Fed should be more explicit and open about its objectives and thinking than it had been in Greenspan’s time. “The Fed needs an approach that consolidates the gains of the Greenspan years and ensures that those successful policies will continue — even if future Fed chairmen are less skillful or less committed to price stability than Mr. Greenspan has been,” Bernanke wrote long before coming to Washington. He imagined a day when the Fed was so easy to understand and so open about its objectives and current views of the economy that a few words from the chairman at a congressional hearing or after-dinner speech wouldn’t move markets because they wouldn’t provide any new information.

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All Fed officials speak English as a first language; the ECB does business in English, which is a second language for most of its leadership, and then has to translate its decisions into twenty-one other languages. The ECB has the advantage of clarity of mission: its legal mandate is to resist inflation and ensure stable prices. Period. The Fed’s legal mandate is broader and during a crisis more flexible: maximum employment and price stability. Both central banks are designed to be independent. The ECB’s independence is enshrined in a treaty, but it gets frequent, often hostile, public advice from European heads of state and finance ministers about what it should be doing with interest rates and whether it should be trying to talk the euro down to help European exports.

Tower of Basel: The Shadowy History of the Secret Bank That Runs the World
by Adam Lebor
Published 28 May 2013

As the most powerful central bank in Europe, the Bundesbank was extremely influential in the design of the ECB. The Bundesbank ensured that the ECB’s “primary objective,” as the ECB notes on its website, is to “maintain price stability” with inflation rates below 2 percent.11 (The Federal Reserve, in contrast, has a dual mandate of combating unemployment and inflation.) “The Germans take a very narrow view of the proper role of central banks, that it is to do almost exclusively with the preservation of price stability,” said William White. “That comes from their history and experience of hyperinflation.”12 To whom then is the ECB democratically accountable? In effect, nobody.

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There would be sanctions against countries that exceeded a budget deficit threshold (currently three percent). Crucially, the sanctions would apply not just to members of the future Eurozone, but to all European Union member states. The report called for European countries to take substantial steps toward economic convergence, budgetary discipline, and price stability, before moving decisively toward economic and monetary union. However it was unclear how this strict, common financial discipline would be imposed. A common monetary policy, based on a shared currency, demanded a common fiscal policy with shared rules for government taxation and spending, Lamfalussy argued in a memo in January 1989, but there were no plans for this: In short, it would seem to me very strange if we did not insist on the need to make appropriate arrangements that would allow the gradual emergence, and the full operation once the EMU is completed, of a Community-wide macroeconomic fiscal policy which would be the natural complement to the common monetary policy of the Community.15 As Harold James notes, Lamfalussy’s memo was both “apposite and intellectually compelling.”16 It neatly summarized the contradiction of a transnational currency with no transnational fiscal policy—a contradiction that remains unresolved and has both triggered and fueled the Eurozone crisis.

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The Delors Report’s recommendations that the European Union should adopt a single currency and a unified monetary policy were accepted. The momentum toward monetary, economic, and political union was unstoppable. A new bank, the most powerful institution within the ESCB, would be created to define and implement monetary policy. The European Central Bank’s primary task would be to ensure price stability while remaining free of all political pressures. It sounded all too familiar. PART THREE: MELTDOWN CHAPTER FOURTEEN THE SECOND TOWER “European economic unity will come, for its time is here.” — Walther Funk, 19421 The Reichsbank president and BIS director was half right. European economic unity did indeed arrive, but it came sixty years after he predicted.

Unfinished Business
by Tamim Bayoumi

The fear of the German negotiators was that if banking supervision was elevated to the level of the Union then problems in the banking system would also be dealt with by the center. Given the small size of the Commission’s budget, this would likely imply a need for the European Central Bank (ECB) to provide support for troubled banks. Such responsibilities would be a distraction from the bank’s central objective of maintaining price stability and would encourage political lobbying about its decisions. To avoid this risk, Karl Otto Pöhl, President of the Bundesbank, pushed strongly for national supervision in the Delors Committee. By contrast, the British, who were generally the most skeptical of any move toward federation and obtained an opt-out from the single currency, were sympathetic to a Union-wide regulator.

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In addition to rehashing old French concerns that weaker currencies were being forced to adjust even when they were not necessarily the source of any strains, the memorandum added a new twist by arguing that the liberalization of capital markets required a zone with a single currency, managed by a common central bank. The Balladur initiative created confusion in the German government. Hans-Dietrich Genscher, the “febrile” West German Foreign Minister, presented his own memorandum which emphasized the need for an independent European Central Bank pledged to price stability but without the traditional German emphasis on political and economic convergence.20 Finance Minister Stoltenberg responded with a more traditional plan that focused on the need for political union, while the Bundesbank argued that any plans for a future monetary union be channeled through the central banks themselves via the Council of Governors.

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The Committee’s arrangements allowed agreement on two major sticking points in the Economist/Monetarist debate, the relationship of the central bank to political authorities and fiscal policy arrangements. On the former, the crucial moment was the decision by Governor de Larosière to support an independent central bank focused on price stability. Given the importance of this deviation from the typical French policy, he discussed this at a one-on-one meeting with President Mitterrand. According to his own account, he explained that if France wanted agreement with the Germans, we had to accept that monetary policy would be a single policy and that national central banks would be members of a system of central banks where all would have to be independent of governments.

The Alchemists: Three Central Bankers and a World on Fire
by Neil Irwin
Published 4 Apr 2013

At a time when numerous European countries were in what can only be called a depression, the ECB was tightening policy. Asked at his April press conference if the action would increase the stress on the peripheral countries, Trichet was almost dismissive. “I will only say that we are responsible for ensuring price stability for 331 million people, and all the decisions that we have taken since the very beginning of the euro, including today’s, have been designed to deliver price stability to 331 million people.” Sorry, Spain, you’re out of luck. In hindsight, those rate hikes in the spring and summer of 2011 might seem to be among the biggest monetary policy mistakes of the modern age. But when regarded in relation to Trichet’s negotiating strategy, both within the ECB Governing Council and with other European leaders, they look somewhat better.

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This creates a conflict of interest between countries with weak economies and populist governments—read Italy, or Spain, or anyway someone from Europe’s slovenly south—and those with strong economies and a steely-eyed commitment to disciplined economic policy—read Germany. The weak economies want low interest rates, and wouldn’t mind a bit of inflation; but Germany is dead set on maintaining price stability at all cost. Nor can Europe deal with “asymmetric shocks” the way the United States does, by transferring workers from depressed areas to prosperous ones. . . . The result is a ferocious political argument, and perhaps a financial crisis, as markets start to discount the bonds of weaker European governments.

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But by the middle of 2010, fuel prices weren’t the problem. There were now enough jobless workers that few Americans were getting wage increases. And there were so many idle factories and empty office buildings that companies had room to expand without pushing up prices. Fed officials had years earlier agreed that “price stability” means that consumer prices rise around 2 percent a year. In the twelve months ended in June 2010, the consumer price index rose only 1.1 percent, and even less than that when the volatile food and energy categories were excluded. Perhaps more worrisome, investors and other economic decision makers were starting to conclude that very low inflation would be the new normal.

Fed Up: An Insider's Take on Why the Federal Reserve Is Bad for America
by Danielle Dimartino Booth
Published 14 Feb 2017

The District Bank presidents occupy one stratum of the FOMC, with the Board of Governors one layer above. The FOMC’s vice chair, always the president of the New York Fed, is second-in-command. At the peak of the pyramid reigns the Fed chairman. By law—according to the 1977 amendment of the Federal Reserve Act—the FOMC has two mandates: maintain “price stability” and maximize employment. In other words, safeguard what a greenback can buy while employing as much of the population as possible. Its tools are short-term interest rates and the money supply. When I joined the Fed, the mystique was mesmerizing. No other institution in the world had such power, such prestige.

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She described herself as a “non-ideological pragmatist,” and expressed her confidence in the positive contribution that “a predictable, well-executed monetary policy can make to economic growth.” She gave a succinct summary of her views of the Fed’s purpose in 1995, when the Fed was debating proposed legislation that would make price stability the central bank’s sole mandate at the expense of unemployment. “Who would be prepared to believe that the FOMC is single-mindedly going to pursue an inflation target regardless of real economic performance, if not even the Bundesbank is prepared to go that far?” she said, citing the German central bank’s efforts to minimize economic downturns.

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Eastern Standard Time, the Fed issues a press release with ten to twelve sentences explaining any changes it had made to the fed funds rate, who voted for and against the move and why, and a short statement about economic news that led to its decision. Throughout the crisis, it almost always included the promise that “the Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability.” In Dallas, the statement was released at 1 P.M. I would run up the staircase to the break room television so I could watch as a reporter on CNBC read the statement and see how the markets reacted. I was usually the only person watching. As the crisis descended, the FOMC statement release became a highly anticipated moment for financial markets—and the pistol fired at the start of a race.

When the Money Runs Out: The End of Western Affluence
by Stephen D. King
Published 17 Jun 2013

In the second half of the twentieth century, both debtors and creditors could more happily live side-by-side thanks to persistently rising living standards. Rising incomes gave at least some creditors a reasonable return – banks and bondholders both did incredibly well as the inflationary 1970s gave way to the price stability of the 1980s and beyond – while debtors could sleep easily, knowing that higher living standards would easily allow them to pay off their debts, with both interest and little financial pain. Without growth, however, the relationship between creditors and debtors becomes a lot more problematic.

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Germany, thinking ahead to the creation of a new monetary system, wanted its reparations in gold, taking its lead from British developments earlier in the nineteenth century. During the Napoleonic Wars, the value of paper British money had declined rapidly: it was the early nineteenth-century equivalent of abandoning a commitment to price stability and allowing inflation to surge. After the Congress of Vienna, however, Britain moved to a gold standard. By that stage, with war no longer an excuse, holders of government bonds were unwilling to accept the inflationary losses attached to their savings and the City of London was not prepared to tolerate the instability associated with high and variable inflation rates.

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It is also possible, however, to end up with unintentional inflation. Few, for example, thought inflation was likely to accelerate at the end of the 1960s and certainly policy-makers themselves didn't plan an inflationary pick-up, yet that is exactly what transpired: across the developed world, two decades of price stability were followed by the inflationary upheavals of the 1970s. Could inflation return in current conditions? It seems unlikely. Even as central banks have attempted to reinvigorate economies through quantitative easing, inflation has mostly remained relatively well-behaved. Where it has picked up – most obviously in the UK following sterling's devaluation at the end of 2008 – it has been of a very unusual kind: prices have risen but wages have not followed suit.

Where Does Money Come From?: A Guide to the UK Monetary & Banking System
by Josh Ryan-Collins , Tony Greenham , Richard Werner and Andrew Jackson
Published 14 Apr 2012

Cardiff: University of Wales Press. pp. 50-55 38 Ibid. pp. 50-1 quoting from Orsingher, R., (1964). Banks of the World: A History and Analysis. Paris: viii 39 Davies (2002). op .cit. p. 50 40 Innes, A.M., (1913). What is Money? Banking Law and Journal May: 377-408 41 Davies (2002). op. cit., p. 663 42 Wray, L. R., (1998). Understanding Modern Money: The Key to Full Employment and Price Stability, Chapter 3. Cheltenham: Edward Elgar p. 43 43 Grierson, P., (1977). The Origins of Money, London: Athlone Press, pp. 19-21 44 Wikipedia (n.d.) Retrievable from http://en.wikipedia.org/wiki/Wergeld 45 Greirson (1977). op. cit. p. 43 46 Innes (1913). op. cit. 47 Wray (1998). op. cit. Chapter 3 48 Innes (1913). op. cit. p. 398 49 Mosler, W., (2010).

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p=175 and http://www.neweconomics.org/blog/2012/07/05/quantitative-easing-a-wasted-opportunity 26 Peston, R., (n. d.). How Credit Easing Works, BBC News, http://www.bbc.co.uk/news/business-17437484 27 Graeber, D., (2011). Debt: The First 5000 years, Melville House Publishing: Brooklyn, New York 28 Wray, R., (1998). Understanding Modern Money: The Key to full-employment and price stability, Cheltenham: Edward Elgar 29 Innes, A. M., (1913). What is Money, Banking Law Journal (May 1913): 377-08. 30 Carruthers, B. G. and Babb, S., (1996). The Colour of Money and the Nature of Value: Greenbacks and Gold in Postbellum America, American Journal of Sociology, 1010:1556-91 31 Davies, G., (2002).

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International Review of Financial Analysis (In Press). Withers, H., (1909). The Meaning of Money. London: Smith and Elder World Bank, (1993). The East Asian Miracle, Economic Growth and Public Policy. Oxford: Oxford University Press Wray, L. R., (1998). Understanding Modern Money: The Key to Full Employment and Price Stability. Cheltenham: Edward Elgar ABOUT THE AUTHORS Josh Ryan-Collins is a Senior Researcher at nef (the new economics foundation) where he is leading a programme of research on the history and practice of monetary systems. He is studying for a PhD in finance at the University of Southampton. Tony Greenham is Head of Finance and Business at nef.

The Age of Cryptocurrency: How Bitcoin and Digital Money Are Challenging the Global Economic Order
by Paul Vigna and Michael J. Casey
Published 27 Jan 2015

By contrast, the price of gasoline dropped and rose by no more than 12 percent in dollar terms over the same period. Extrapolating from the three-part textbook definition of “money” that we referenced in chapter 2, a currency must exhibit price stability if it is to function properly as a medium of exchange—in addition to proving itself a reliable store of value and an accepted unit of account. It’s hard to suggest that bitcoin now has anywhere near the price stability that’s needed. That’s a direct result of its fluctuation versus other currencies. In an extensive study of bitcoin’s price performance against various other currencies and assets, New York University professor David Yermack concluded that bitcoin is much better viewed as a commodity than as a currency.

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In placing these short-term bets, traders provide much-needed “liquidity” to markets—defined as the degree to which investors can easily find buyers of an asset they want to sell or sellers of one they want to buy. As more traders enter the market, creating more prospective buyers and sellers, liquidity increases and prices stabilize. Ironically, though, it’s the volatility, not price gains, that first draws traders in, since that’s what creates profits. If prices are swinging around, traders can make more money being on either side of the trade. We saw this in the 1970s, when the collapse of the Bretton Woods system sent exchange rates haywire and banks rushed to set up highly profitable foreign-exchange trading desks.

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Gox emerged, this time compelling it to suspend trading for two days on April 11, which then morphed into bigger legal problems. The bitcoin price plunged to $68 on April 16, where it seemed to find a floor, even though a month later the U.S. government froze Mt. Gox’s U.S. bank account in one of the first signs that Washington wanted to regulate this lawless, new digital currency. Throughout the summer, the price stabilized, sort of, oscillating within “only” a range of $65 to $130. Then U.S. law enforcement first arrived on the cryptocurrency scene. In late June 2013, reports emerged that the FBI had seized 11 bitcoins (then worth $800) from a drug dealer in what was seen as an initial “honeypot sting” on Silk Road.

Seven Crashes: The Economic Crises That Shaped Globalization
by Harold James
Published 15 Jan 2023

Japan seemed to suggest that at least some governments could live with permanently elevated, and rising, debt levels. The case for inflation-targeting that Bernanke developed with an economist who had studied the Japanese disaster in great detail, Adam Posen, analyzed price stability and financial stability as highly complementary and mutually consistent objectives, to be pursued within a unified policy framework. Such a framework would encourage “both public and politicians to focus on what monetary policy can do (maintain long-run price stability), rather than on what it cannot do (create permanent increases in output and employment through expansionary policies).” The prices that were relevant were consumer prices, and the doctrine urged the benign neglect of asset prices, so that a housing boom or a stock market surge was not in itself worrying and should not trigger central bank action: “focusing on the traditional goals of monetary policy—the output gap and expected inflation—is the more effective means of avoiding extended swings in asset prices and the resulting damage to the economy.”112 The focus on Japan proved to be of enormous value in dealing with issues that arose for monetary policy after 2008.

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There would be, Brady warned, a resumption of the 1970s, rising inflation, weak economic growth, and rising unemployment.33 A few months later, in March 2012, Brady suggested a Sound Dollar Act, which would require the Federal Reserve to monitor gold and the foreign-exchange value of the U.S. dollar, and end the Fed’s dual mandate, replacing it with the single mandate for price stability. Another prominent fiscal conservative, Tom Coburn (R-Okla.), gave a characteristic indictment of stimulus: “This is about spending money we don’t have for things we don’t need. That’s 80 percent of this bill, spending money we don’t have for things we don’t need that will not stimulate the economy.

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Hot-rolled steel hit $1,176 a ton in February 2021, its highest level in at least thirteen years; prices for other steel products also soared (see Figure 7.1).26 In China, the producer price index surged, and in late April 2021, the Politburo pledged to ensure the supply of goods that were key to maintaining livelihoods and price stability, and also imposed measures to curb house speculation. The People’s Bank of China used targeted measures to increase the supply of key products in order to stabilize prices.27 Figure 7.1. Steel price, 2007–2021: cold-rolled steel sheet and strip index (January 2007 = 100) (Source: St. Louis Federal Reserve FRED data) Raw materials needed for electric vehicle batteries and motors, spanning lithium to rare earths, have also been swept up in the euphoria.

Modernising Money: Why Our Monetary System Is Broken and How It Can Be Fixed
by Andrew Jackson (economist) and Ben Dyson (economist)
Published 15 Nov 2012

Because banks now had more reserves than they required, the need to borrow reserves on the interbank market was greatly diminished. Consequently, the overnight interbank lending rate now closely mirrors the policy rate. Controlling money creation through interest rates Currently, one of the Bank of England’s two core purposes is to maintain price stability, which in practice means keeping inflation at a target level of 2% a year. It does this by manipulating the short term interest rates at which banks lend reserves to each other on the interbank market. In this section we discuss how the central bank attempts to control inflation through interest rates, the transmission mechanisms from interest rates to inflation, and the effectiveness of the interest rate as a tool to limit the growth in money creation by banks.

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Moreover, if savers and borrowers have different consumption patterns then the effect of increasing rates will be to increase the demand for the goods that interest earners buy, pushing up their prices. (Tymoigne, 2009) Fifth, the control of inflation by interest rates can place the two core central bank functions into conflict with each other, namely price stability and financial stability. For example, if asset price inflation is high, then it will take a large increase in the interest rate (above the rate of asset price inflation) in order to stem the rise in credit creation for asset purchase and burst the bubble. This is likely to create strong disruptive effects on the productive economy (possibly bankrupting firms).

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Alternatively, the MCC may lend money to the banks to on-lend into the ‘real’ economy, in which case the decision over where the money is lent will be made, within broad guidelines, by the banks. 7.2 Deciding how much money to create: The Money Creation Committee (MCC) The decision over how much new money to create would be given to an independent body, to be known as the Monetary Creation Committee. As is the case today, the target of monetary policy will be the rate of inflation. However, in line with democratic principles, if Parliament deems targets other than price stability to be more desirable, it will have the ability to change the MCC’s mandate. In deciding the amount of money that would be added or removed from circulation, the MCC would broadly aim to change the growth rate of the money supply in order to keep inflation at around the 2% a year target. Creation of new money by the MCC will increase the amount of spending in the economy.

The Global Minotaur
by Yanis Varoufakis and Paul Mason
Published 4 Jul 2015

Since no one can produce gold at will (with only small amounts being mined every year), this Gold Standard system seemed to guarantee a stable, almost constant, supply of money in each participating country. Despite many hiccups, especially during the First World War, during which it was suspended, the Gold Standard seemed to deliver the intended price stability. Indeed, inflation was kept at bay, even if we now know that this price stability was bought at the cost of lower growth and employment. Then the Crash of 1929 struck at a time when, because of the Gold Standard, governments’ hands were tied. Banks were failing, businesses were collapsing, workers were being laid off in droves, tax takes were falling fast, but the government could not create more money to help either labour or capital weather the storm.

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In a recent BBC interview, Dominique Strauss-Kahn, the IMF’s then managing director, called for a return to Keynes’ original idea as the only solution to the troubles of the post-2008 world economy.3 But what was the nub of the proposal? It was to bring on the benefits of a common currency (trade facilitation and convenience, price stability, predictability in international trading) without suffering the main demerits that come when disparate economies are monetarily bound together. The lost opportunity The problem with currency unions, as Argentina was to discover in the late 1990s and Europe in the aftermath of the Crash of 2008, is the simple fact of life that trade and capital flows can remain systematically unbalanced for decades, if not centuries.

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The missing mechanism Global capitalism cannot be stabilised on the basis of more investment, better gadgets, faster railways, smarter innovations. This is the error of vulgar Keynesians who think that if only the state spent and invested wisely, all would be well. Similarly, global capitalism will not regain its lost poise if central banks focus on price stability, and the task of rebalancing the world economy is left to the magical machinations of supply and demand. This is the even more menacing error of libertarians. The stability of global, but also regional, capitalism requires a global surplus recycling mechanism – a mechanism that markets, however globalised, free and well-functioning they might be, cannot provide.

Crisis and Dollarization in Ecuador: Stability, Growth, and Social Equity
by Paul Ely Beckerman and Andrés Solimano
Published 30 Apr 2002

In this setting, and in one of the more dramatic experiments in recent monetary history, the Ecuadoran government decided, in January of 2000, to adopt, de facto, unilaterally, and apparently without much external consultation, the U.S. dollar as its national currency. This was a “policy of last resort,” an almost desperate move to restore some degree of monetary and price stability in a country that needed an urgent monetary anchor to stabilize expectations, avoid hyperinflation, stop uncontrolled currency depreciation, and enable resumption of normal economic and financial activity. Official dollarization had a political motivation as well. In late 1999, constitutionally elected President Mahuad was facing a sharp plunge in his popularity.

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The processes by which annual budgets are formulated, considered by the Congress, codified into a payments calendar, adjusted over the course of budget exercise for unforeseen events, and finally executed have various shortcomings. These arise in part from the practical difficulty of planning properly in an unstable context; institutional complexities in the planning and implementation phases; and long-standing problems in the processing of information. Once dollarization brings about price stability, the need to alter the budget in mid-year for unanticipated events should diminish. Since the mid-1990s, with World Bank support, the government has been developing and implementing a modern, computerized management information system. The system was officially inaugurated for a core group of public entities in May 2000, and implementation has been proceeding since then.

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Lessons from Panama’s Dollarization Panama adopted the dollar following its independence in 1904.3 Unlike many other Latin American economies, where debilitating cycles of inflation, exchange-rate depreciation, adjustment, and recession have hampered growth and intensified social conflict, Panama has maintained monetary and price stability and steady growth. Panamanian business has never experienced or ever had to cope with the fear of exchange-rate depreciation. In recent years, inflation rates in Panama have actually been below those of the United States. Although Panama has coped with external-debt problems and exogenous shocks, it has avoided traumatic balance-of-payments crises, as well as systemic banking or financial crises.

The Making of Global Capitalism
by Leo Panitch and Sam Gindin
Published 8 Oct 2012

But as unemployment came down to 4 percent in 1999 (its lowest level in three decades), the Fed’s anti-inflation priority was temporarily reasserted, even in a context of price stability, and interest rates were raised six times by the first quarter of 2000. This was undertaken against opposition from a minority on the FOMC who argued that concerns a tight labor market would inevitably lead to inflation were, as the New York Federal Reserve’s William McDonough put it, “a fiction of our own minds,” and that it would be taken as evidence that “what we believe in is not price stability but a differentiation in income distribution that goes against the working people.”14 With the collapse in the NASDAQ high-tech stock index in March 2000, signaling the end of the dot.com bubble and the possibility of a recession, the Fed reversed course again and adopted a very loose monetary policy that continued through 9/11 and the Argentine financial crisis, bringing interest rates down from 6 to 2 percent in the course of 2001.

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More broadly their concerns related to their ambition to replace London as the world’s international financial center.48 But above all Wall Street’s opposition reflected the concern that New Deal–type economists and technicians ensconced in permanent international institutions might have even greater autonomy from them than those in the Federal Reserve and the Treasury (especially since the Treasury clearly wanted the Fund to displace the Bank of International Settlements, which had been created by the bankers themselves).49 Moreover, given the Keynesian provenance of the Fund and the Bank, it was hardly surprising that bankers would be anxious lest full employment rather than price stability might become the priority for governments. Their anxiety about the inflationary implications of full employment was by no means an idle concern, and would indeed prove to be—as Michal Kalecki and Joan Robinson also predicted at the time—the central contradiction of Keynesianism in the postwar era.

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The achievement of near full employment within all the advanced capitalist states spurred the growing militancy of a new generation of workers who drove up wages, challenged managerial prerogatives, and forced a steady increase in social expenditures—all of which not only made it very difficult for capitalist states to resolve international economic imbalances through domestic austerity policies, but generated growing worries about price stability, productivity and profits. Because this was not a zero-sum game, and capital was also strong by virtue of its having been restored to health so effectively, the contradiction became intense amid rising inflation and class conflicts. Moreover, alongside this new balance of class forces in the advanced capitalist countries, the success of postwar decolonization of the old empires, so much encouraged by the new American empire, stoked the rise of economic nationalism in the “Third World” that challenged the international norms for the mutual interstate protection of capitalist property.

Capitalism 4.0: The Birth of a New Economy in the Aftermath of Crisis
by Anatole Kaletsky
Published 22 Jun 2010

If a politician suggested a numerical target for reducing unemployment, he would be committing treason in the war against inflation. A central banker would rather tie himself in verbal knots than admit that policies on interest rates might help create jobs. Today, inflation is the only macroeconomic variable for which governments set public targets. And central bankers focus on the sole objective of price stability in every speech. If central bankers can control inflation, states the official orthodoxy, then jobs, prosperity, and everything else will take care of itself, or more precisely, will be managed satisfactorily by market forces. To the extent that central bankers and finance ministers do care about jobs and economic growth, these concerns now have to be repackaged and disguised as arguments about long-term inflationary prospects.

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Ben Bernanke, in his speech about the Great Moderation in 2004, still felt obliged to pay lip service to the official doctrine that maintaining low inflation had been the key to the Fed’s success in stabilizing employment and economic growth. The truth, however, was that the Fed and other central banks gradually returned to the broad economic philosophies, if not the exact policies, abandoned in the 1970s. These policies were again directed, as they had been in the 1950s and 1960s, to achieving a reasonable balance between price stability, full employment, and steady growth. And for most of the twenty-year period after demand management was reinvented, the central bankers were remarkably successful in walking the tightrope between inflation and unemployment. Their success lasted right up until the autumn of 2008, when the Lehman crisis blew up the tightrope, the safety net, and most of the spectators in the circus tent.

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The single-minded focus on inflation held even though central bankers always understood that the relationship between money and inflation was much more subtle than official slogans proclaimed. With demand management neutered by the predominant monetarist economic doctrine, only one reasonable criterion for judging the success of macroeconomic policy seemed to remain: price stability. All the other goals of macroeconomic management that had dominated democratic politics from the 1930s until the late 1970s—achieving full employment, maximizing output growth, and keeping trade and government budgets in reasonable balance—were relegated by finance ministers and central bankers to their junior colleagues who controlled the ministries responsible for microeconomic issues such as trade policy, industry, and government budgeting.

The Euro: How a Common Currency Threatens the Future of Europe
by Joseph E. Stiglitz and Alex Hyde-White
Published 24 Oct 2016

But if trade-offs exist, the people making them need to be politically accountable. In Europe, the governance is even worse than in the United States. Europe pretended that it could get around the problem of governance by giving the ECB a simple mandate—ensuring price stability (also known as fighting inflation). Inevitably, there are going to be judgments about what price stability means (zero inflation or 2 percent or 4 percent), and in making those judgments policymakers will have to consider the consequences of different targets. If pursuing a 2 percent inflation target versus a 4 percent target were to lead to much slower growth, I doubt that many voters would support that target given the chance.

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Research in economics over the past half-century has shown that not only is there a presumption that markets are not efficient and stable; it has also explained why that is so and what governments can do to improve societal well-being.33 Today, even market fundamentalists (sometimes also referred to as “neoliberals”) admit that there is a need for government intervention to maintain macro-stability—though they typically argue that government interventions should be limited to a rules-based monetary policy focused on price stability—and to ensure property rights and contract enforcement. Otherwise, regulations and restrictions should be stripped away. There was no economic rationale for this conclusion—it flies in the face of a huge body of economic research showing that there is a need for a wider role for government. The world has paid a high price for this devotion to the religion of market fundamentalism/neoliberalism, and now it’s Europe’s turn.

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In this chapter I will describe the structural flaws in the ECB and how these flaws have translated into policy decisions, some of which have worked well, but others of which have weakened the eurozone economy and increased the divides within it. THE INFLATION MANDATE When the ECB was established in 1998 as part of the process that created the euro, it was constructed expressly to limit what it could do. It was given a single, clear mandate: to maintain price stability.2 This is markedly different from the mandate of the US Federal Reserve, which is supposed to not only control inflation but also promote growth and full employment. In the aftermath of the 2008 crisis, the Fed was given a further mandate—maintaining financial stability. It was ironic that this had to be added to the list, for the Federal Reserve was founded in 1913 to protect the integrity of the financial system after the panic of 1907.

Stocks for the Long Run, 4th Edition: The Definitive Guide to Financial Market Returns & Long Term Investment Strategies
by Jeremy J. Siegel
Published 18 Dec 2007

For more information about this title, click here C O N T E N T S Foreword xv Preface xvii Acknowledgments xxi PART 1 THE VERDICT OF HISTORY Chapter 1 Stock and Bond Returns Since 1802 3 “Everybody Ought to Be Rich” 3 Financial Market Returns from 1802 5 The Long-Term Performance of Bonds 7 The End of the Gold Standard and Price Stability 9 Total Real Returns 11 Interpretation of Returns 12 Long-Term Returns 12 Short-Term Returns and Volatility 14 Real Returns on Fixed-Income Assets 14 The Fall in Fixed-Income Returns 15 The Equity Premium 16 Worldwide Equity and Bond Returns: Global Stocks for the Long Run 18 Conclusion: Stocks for the Long Run 20 Appendix 1: Stocks from 1802 to 1870 21 Appendix 2: Arithmetic and Geometric Returns 22 v vi Chapter 2 Risk, Return, and Portfolio Allocation: Why Stocks Are Less Risky Than Bonds in the Long Run 23 Measuring Risk and Return 23 Risk and Holding Period 24 Investor Returns from Market Peaks 27 Standard Measures of Risk 28 Varying Correlation between Stock and Bond Returns 30 Efficient Frontiers 32 Recommended Portfolio Allocations 34 Inflation-Indexed Bonds 35 Conclusion 36 Chapter 3 Stock Indexes: Proxies for the Market 37 Market Averages 37 The Dow Jones Averages 38 Computation of the Dow Index 39 Long-Term Trends in the Dow Jones 40 Beware the Use of Trend Lines to Predict Future Returns 41 Value-Weighted Indexes 42 Standard & Poor’s Index 42 Nasdaq Index 43 Other Stock Indexes: The Center for Research in Security Prices (CRSP) 45 Return Biases in Stock Indexes 46 Appendix: What Happened to the Original 12 Dow Industrials?

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Finally, by 1982, the restrictive monetary policy of Paul Volcker, chairman of the Federal Reserve System since 1979, brought inflation and interest rates down to more moderate levels. One can see that the level of interest rates is closely tied to the level of inflation. Understanding the returns on fixed-income assets therefore requires knowledge of how inflation is determined. THE END OF THE GOLD STANDARD AND PRICE STABILITY Consumer prices in the United States and the United Kingdom over the past 200 years are depicted in Figure 1-3. In each country, the price level at the end of World War II was essentially the same as it was 150 years earlier. But after World War II, the nature of inflation changed dramatically.

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As described in detail in Chapter 11, a gold standard restricts the supply of money and hence the inflation rate. But from the Great Depression through World War II, the world shifted to a paper money standard. Under a paper money standard there is no legal constraint on the issuance of money, so inflation is subject to political as well as economic forces. Price stability depends on the ability of the central banks to limit the growth of the supply of money in order to counteract deficit spending and other inflationary policies implemented by the federal government. The chronic inflation that the United States and other developed economies have experienced since World War II does not mean that the gold standard was superior to the current paper money standard.

The Marginal Revolutionaries: How Austrian Economists Fought the War of Ideas
by Janek Wasserman
Published 23 Sep 2019

Keynes theorized the concepts of money and credit and developed a set of applications that flew in the face of Austrian beliefs. As he stated in a 1928 précis, “It must be admitted that advocates of price stability, amongst whom I number myself, have erred in the past when their words have seemed to indicate price stability as the sole objective of monetary policy. . . . To speak or write in this way is to unduly simplify the problem.” The implications of this statement ran counter to the approach to price stability and self-adjusting monetary policy advocated by Mises, Machlup, and Hayek. It directly counteracted many of the ideas advanced in Hayek’s Monetary Theory.25 As could be expected, when Hayek delivered his LSE lectures and then visited Cambridge, he received a chilly welcome.

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This usually meant popular interventions in the liberal media and behind-the-scenes advocacy work for government agencies and business groups. In articles written between 1931 and 1934 by a quartet of Austrians (Haberler, Hayek, Machlup, and Morgenstern), they argued against protectionism, exchange controls, and credit injections into the economy. They supported austerity in state expenditures and domestic price stability and deflation. A return to the gold standard and pro-trade policies were frequent suggestions. They believed that price flexibility and deregulated markets in production and employment, too, would spur recovery.21 As this brief sampling of activities demonstrates, the early 1930s were a fertile period for members of the Austrian School.

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The planners designed instruments to prevent currencies from drifting from their pegged value, which were enforced by the IMF and IBRD. Tensions arose between the United Kingdom and the United States during negotiations, however. The British favored a system more oriented toward growth and international liquidity; the Americans preferred price stability. The United States ended up dictating most terms, especially with respect to the IMF.73 The Bretton Woods agreement worked reasonably well into the early 1960s, when new concerns surfaced. The United States ran increasing balance of payments deficits, meaning that foreign states and investors held ballooning sums of US debt.

Getting Back to Full Employment: A Better Bargain for Working People
by Dean Baker and Jared Bernstein
Published 14 Nov 2013

As a practical matter, there is probably no central bank that would place a greater priority on its 2.0 percent inflation target than on preventing the collapse of the financial system, but the stated and often legal commitment of central banks across the globe is to this 2.0 percent target. The European Central Bank has this commitment in its charter, and it is the official target for policy of the Bank of England. The Federal Reserve under Ben Bernanke is ostensibly committed to a 2.0 percent inflation target, even though its mandate from Congress requires it to pursue both price stability and high employment.[19] Given the rapid spread of inflation targeting as the basis for central bank policy, it is worth asking where this urge originated. First, note that wealthy countries have generally had inflation rates well above 2.0 percent and still managed to maintain healthy growth rates.

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Quarterly Journal of Economics, Vol. 128, No. 2, pp. 581-622. Doucouliagos, Hristos, and T. D. Stanley. 2009. “Publication Selection Bias in Minimum-Wage Research? A Meta-Regression Analysis.” British Journal of Industrial Relations, Vol. 47, No 2, pp. 406-28. Feldstein, Martin. 1997. “The Costs and Benefits of Going From Low Inflation to Price Stability.” In Christina D. Romer and David H. Romer, eds., Reducing Inflation: Motivation and Strategy (Chicago: University of Chicago Press). http://www.nber.org/chapters/c8883.pdf Fischer, Stanley. 1981. “Towards an Understanding of the Costs of Inflation, 2.” In K. Brunner and A. Meltzer, eds. “The Costs and Consequences of Inflation,” Camegie-Rochester Conference Series on Public Policy, Vol. 15 (Amsterdam: North Holland).

Crashed: How a Decade of Financial Crises Changed the World
by Adam Tooze
Published 31 Jul 2018

You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.”45 Given the association forged in the 1970s between monetarism and inflation fighting, one could easily confuse Bernanke’s promise with a conventional central banker’s commitment to price stability. Indeed, Bernanke was making a commitment to price stability, but what he was promising to prevent was deflation, not inflation. The lesson of the 1930s was that the Fed must act promptly not just to prevent the money supply expanding excessively but also to prevent bank failures from causing it to implode.46 On Bernanke’s watch there would be no deflation.

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The ECB’s constitution provided plenty of safeguards. Its deliberations were shielded from public scrutiny by minimal transparency requirements. To prevent it from being put to work as a vehicle of fiscal policy, it was banned from monetizing newly issued government debt. Unlike the Fed, which had a dual mandate for price stability and maximum employment, the ECB had price stability as its only target. All this made the ECB the most remote of all the modern central banks.26 To call it apolitical would be a misnomer, because it, in fact, entrenched a conservative bias against inflation as the unquestionable doxa of Europe. Nor would it be fair to say that anti-inflation politics were the ECB’s only ambition.

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The losses needed either to be pushed down to the investors all across Europe who had profited from the banks’ unsustainable business models or to be raised to the level of a coordinated European bailout. Extend-and-pretend on a national basis merely turned banking crises into fiscal crises, which widened uncertainty while deflecting attention from the real issue. IV In their defense, legalists at the ECB would argue that the central bank’s mandate gave it only one objective, price stability. They could derive from that an obligation to maintain the functioning of Europe’s financial markets and Europe’s banks. And Trichet would thus justify his interference in Greek and Irish affairs and more to come. What the ECB did not have was a mandate to concern itself with the economic welfare of the eurozone or its member states in any broader sense.

The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse
by Mohamed A. El-Erian
Published 26 Jan 2016

Today, as the central bank of the fifty American states and the territories, and operating under delegated authority from Congress, the Fed has a mission to “provide the nation with a safe, flexible, and stable monetary and financial system.” The ECB became operational in 1999. Working with national central banks that are also part of the Eurosystem, its goal is to maintain price stability, safeguard the common currency, and supervise credit institutions (predominantly banks). To pursue their objectives, all central banks are empowered to manage the country’s currency and money supply with a view to delivering specified macroeconomic objectives—universally, that of low and stable inflation, as well as, in some cases, high employment and economic growth.

…

Their heads were increasingly telling them to stop this experimentation and start “normalizing” policies, but their hearts urged them to do even more, and to look for something new in their bag of tricks. No one that I know of had accurately foreseen the length and depth of this policy dilemma. From day one in the financial crisis, the hope had been that our courageous and responsive central banks would succeed in handing off the baton to high growth, robust job creation, price stability, and financial system soundness—either directly or, more likely, by buying enough time for the private sector to heal and for politicians to enable other policy-making entities to finally step up to their economic governance responsibilities. And with economic prosperity and jobs returning, the world would be able in the medium term to grow out of its debt problems, avoiding the need for disorderly deleveraging, devastating austerity, debt defaults, etc.

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End investors, including pension funds and university endowments, trust their capital to hedge fund managers with the understanding that the latters’ fiduciary responsibility is to pursue profits. Not so for central banks. For them profitable market outcomes are not a destination. It could be part of the journey dedicated to achieving macroeconomic objectives, mostly focused on growth and price stability, but even then, not necessarily so. Of course, there is some limit beyond which it becomes totally unreasonable to divorce highly elevated asset prices from sluggish fundamentals. The closer you get to this limit—and I believe we have gotten quite close—and the more elusive genuine growth is, the greater the risk of a subsequent disruptive collapse in prices that not only rapidly converge down toward levels warranted by fundamentals but also overshoot them.

Unhappy Union: How the Euro Crisis - and Europe - Can Be Fixed
by John Peet , Anton La Guardia and The Economist
Published 15 Feb 2014

The initial system of one vote per council member is to be superseded, most probably during 2015, by an arrangement that will give the executive board six votes, add four votes that rotate among the five biggest euro members and give the rest, no matter how many there are, 11 votes in total (this change creates at least the theoretical possibility that the Bundesbank’s president might not always have a vote on the council). The ECB was modelled on the German Bundesbank but is in many ways even more powerful and independent. Its goal, fixed by the Maastricht treaty, is price stability (close to but below 2%), whereas the Federal Reserve, its American counterpart, is also required to pay attention to employment. Its operational independence in delivering the goal of price stability, which it defines itself, is also guaranteed by the same treaty. Unlike other central banks, it has no single government or finance ministry to interact with and report to, though its president testifies before the European Parliament and attends most meetings of the European Council and often EcoFin and the Eurogroup as well.

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(eds), The Delphic Oracle on Europe, Oxford University Press, 2011 Tsoukalis, L., The Unhappy State of the European Union, Policy Network, March 2014 Van Middelaar, L., The Passage to Europe, Yale University Press, 2013 Appendix 4 How The Economist saw it at the time May 1st–7th 2010 July 10th–16th 2010 November 20th–26th 2010 December 4th–10th 2010 January 15th–21st 2011 March 12th-18th 2011 June 11th-17th 2011 June 25th-July 1st 2011 October 29th-November 4th 2011 November 5th-11th 2011 November 12th-18th 2011 November 26th-December 2nd 2011 February 18th–24th 2012 March 31st–April 6th 2012 May 19th–25th 2012 May 26th-June 1st 2012 July 28th-August 3rd 2012 August 11th-17th 2012 November 17th-23rd 2012 March 23rd-29th 2013 May 25th–31st 2013 September 14th–20th 2013 October 26th-November 1st 2013 January 4th-10th 2014 Index 1974–75 global recession 10 A accession treaties 112 accountability 125–129, 162 Alliance of Liberals and Democrats for Europe (ALDE) 130–131 Alogoskoufis, George 42 Amsterdam treaty 111–112, 193 Anastasiades, Nicos 2, 86–88 Anglo Irish Bank 53 Ansip, Anders 104 Arab spring 145–146 Argentina 5, 50 Armenia 149 Ashton, Catherine 28, 43, 144 Asmussen, Jörg 51, 82 Austria 111, 127 influence 108 interest rates 93 Azerbaijan 149 Aznar, José Maria 17 B Bagehot, Walter 9 bail-in rules 83, 90–91, 165 see also Cyprus bail-outs national approval requirement 127 no-bail-out rule 45, 162, 163–165 Balkans war 143 Bank of Cyprus 86–87 Bank of England 47, 157 bank recapitalisation 58–59, 74–77, 84 Bankia 72 banking sector characteristics 35 banking supervision see financial supervision banking union 23, 74–75, 77, 83–85, 90–92, 106, 165, 195 see also deposit guarantees; financial supervision Barnier, Michel 41, 138 Barroso, José Manuel early days of crisis 41 European Commission 97, 98, 141, 172 Greece 3, 78 Italy 63 Batista, Paulo Nogueira 46 Belarus 149 Belgium 17, 100, 127 Berlusconi, Silvio euro currency view 151 Italy’s failure to reform 59, 60, 62–63 People of Freedom party (PdL) 107 resignation 64 Black Wednesday 16–17 Blair, Tony 28, 112 BNP Paribas 40 Bolkestein directive 137 bond yields 37, 38, 61, 70, 89 bond spreads 37, 42, 70, 80, 88 Bootle, Roger 1 Bowles, Sharon 98, 129 Brandt, Willy 10 Bretton Woods 9–10 Brown, Gordon 24, 41, 48, 102, 112, 144 Bruegel think-tank 35, 74, 163, 166 budget deficits Maastricht ceiling 15 timescales for meeting targets 88–89 see also stability and growth pact budgets annual, European 21, 27, 118 central 13, 168–170 federal 164, 168 fiscal capacity 84 Bulgaria 108, 113, 124, 126, 147 Bundesbank 16, 23, 157 C Cameron, David 14, 17, 64–65, 117–119, 132, 140 Cannes G20 summit (2011) 62–64 Capital Economics 1 Cassis de Dijon judgment 21 Catalonia 178 CEBS (Committee of European Banking Supervisors) 35 central banks, national 22–23 Centre for European Policy Studies 34 Centre for European Reform 34 CFSP (Common Foreign and Security Policy) 142, 144 China 33, 139, 167 Chirac, Jacques 18, 23, 100, 127 Christofias, Demetris 86 Churchill, Winston 7, 115, 161 Clark, Christopher 178 climate change 135–136 Clinton, Hillary 144 Cockfield, Arthur 13 Committee of European Banking Supervisors (CEBS) 35 Committee of Permanent Representatives (COREPER) 20 Committee of Regions 21 common fisheries policy 100, 138 Common Foreign and Security Policy (CFSP) 142, 144 community method 19, 21–22 Competitiveness Pact see Euro Plus Pact complacency pre-crisis 36–37 Constâncio, Vítor 34 constitution proposals 26–27 convergence criteria 14–16, 41, 112, 193 COREPER (Committee of Permanent Representatives) 20 COSAC (Conference of Community and European Affairs Committees of Parliaments of the European Union) 133 Council of Ministers 20, 121, 130 Council of the European Union see Council of Ministers Court of Auditors 21 Court of First Instance 21 Crafts, Nicholas 9 credit ratings (countries) 69, 77–78, 108 Crimea 150 Croatia 113, 143, 147 current-account (im)balances 25, 31, 88–89, 167–168 customs union, German 9 Cyprus accession 147 bail-out 2, 85–88 entry to euro 112 finances pre-crisis 30 Cyprus Popular Bank (Laiki) 86–88 Czech Republic 113, 118 D Dayton agreement 143 de Gaulle, Charles 9, 22, 96 de Larosière, Jacques 41, 74 Deauville meeting between Sarkozy and Merkel 51–52, 102 debt mutualisation 74, 103, 166–167 defence and security 8, 143, 145 deflation 92 Delors, Jacques 11, 37, 97 Delpla, Jacques 167 democratic accountability 125–129, 162 democratic deficit 121, 129–132, 162–163, 171–172 Denmark European participation 112 justice and home affairs (JHA) 111, 139 ministerial accountability 133 opt-outs 139 referendums 16, 27, 132 shadowing of euro 113 single currency opt-out 110, 115 UK sympathies 119 deposit guarantees 5, 40–41, 74, 77, 91 Deutschmark 10, 12, 16 devaluation, internal 31, 65–66 Dexia 72 Dijsselbloem, Jeroen 24, 87 double majority voting 20, 114 Draghi, Mario 156 appointment as ECB president 23, 68 crisis-management team 2 demand for fiscal compact 64 Long Term Refinancing Operations (LTRO) 68–70 outright monetary transactions (OMT) 78–81 pressure on Berlusconi 59 “whatever it takes” London speech 79 Duisenberg, Wim 23 E e-commerce 137 east–west divide 108 ECB (European Central Bank) bond-buying 47–49, 59–60 crisis-management planning 2, 4 delays 156 European System of Central Banks 22 liquidity provision 40–42, 68–70 outright monetary transactions (OMT) 79–81, 164, 175–176 role and function 22–24, 39–40, 170–171 supervision 6, 99, 175, 195 troika membership 160–161 EcoFin meetings 20, 114 Economic and Financial Committee 20 economic and monetary union (EMU) 11, 112 Economic and Social Committee 21 economic imbalances 30–34 The Economist on ECB responsibilities 15 fictitious memorandum to Angela Merkel 1 ECSC (European Coal and Steel Community) 7–8 EEAS (European External Action Service) 142, 144 EEC (European Economic Community) 8 EFSF (European Financial Stability Facility) 26, 48, 55, 60–61, 81, 194 see also ESM (European Stability Mechanism) EFSM (European Financial Stabilisation Mechanism) 48 Eiffel group 120, 129, 164 elections, European 121, 129–130 Elysée treaty 100 emissions-trading scheme (ETS) 135–136 EMS (European Monetary System) creation of 11 exchange-rate mechanism 16 membership 15 EMU (economic and monetary union) 11, 112 EMU@10 36 energy policies 136 enhanced co-operation 111 enlargement 33, 146–147 environment summits 135 Erdogan, Recep Tayyip 148 ESM (European Stability Mechanism) 194 establishment 26, 55, 80–81 operations 58, 75, 76, 91 Estonia 65, 108 ETS (emissions-trading scheme) 135–136 EU 2020 strategy 137 euro break-up contingency plans 2–3 convergence criteria 14–16, 41, 112, 193 crash danger 47–48 introduction of 4, 18 notes and coins 18 special circumstances 3–4 euro crisis effect on world influence 143–146 errors 155–161 focus of attention 135–141 Euro Plus Pact 55, 195 euro zone 4 economic dangers 175–178 increasing significance of institutions 113–114, 120 performance compared with US 154–155 political dangers 175–178 political integration 125 trust 173 Eurobonds 54, 59, 74, 166–167 Eurogroup of finance ministers 24, 114 European Banking Authority 114, 195 European Central Bank (ECB) bond-buying 47–49, 59–60 crisis-management planning 2, 4 delays 156 European System of Central Banks 22 liquidity provision 40–42, 68–70 outright monetary transactions (OMT) 79–81, 164, 175–176 role and function 22–24, 39–40, 170–171 supervision 6, 99, 175, 195 troika membership 160–161 European Coal and Steel Community (ECSC) 7–8 European Commission commissioners 19, 172 errors 160 future direction 171–172 influence and power 96–97, 99, 119, 125 intrusiveness 127, 140–141 organisation 19 presidency 131, 144 proposals for economic governance 50 European Community 12 European Council 20, 98–99 European Court of Human Rights 21 European Court of Justice 21 European Defence Community 8 European Economic Community (EEC) 8 European External Action Service (EEAS) 142, 144 European Financial Stabilisation Mechanism (EFSM) 48 European Financial Stability Facility (EFSF) 26, 48, 55, 60–61, 81, 194 see also European Stability Mechanism (ESM) European Financial Stability Mechanism 26 see also European Stability Mechanism (ESM) European Investment Bank 21 European Monetary Institute 22 European Monetary System (EMS) creation of 11 exchange-rate mechanism 16 membership 15 European Parliament 20–21, 97–98, 99, 100, 119, 121, 129–132, 171 European People’s Party 117, 127, 130–131 European Political Co-operation 142 European semester 25, 195 European Stability Mechanism (ESM) 194 establishment 26, 55, 80–81 operations 58, 75, 76, 91 European Systemic Risk Board 41 European Union driving forces for monetary union 12–13 expansion 26 historical background 7–12 treaty making 26–28 world influence 140, 142–150 European Union Act (2011) 117, 132 Eurosceptics 13, 123 Finns Party 124 Jobbik 125 League of Catholic Families 125 National Front 124 Party of Freedom (PdL) 124 UK Independence Party (UKIP) 118, 125, 140 excessive deficit procedure 24, 88–89, 194, 195 exchange-rate systems 3, 9–11 exchange rates 164 F Farage, Nigel 98, 118 Federal Deposit Insurance Corporation (FDIC) 77 Federal Reserve (US) 23, 47, 48, 157 federalism 19, 110, 116, 161–165, 168–170, 177–178 financial integration 35–36 financial supervision 195 ECB 6, 99, 175, 195 Jacques de Larosière proposals 41 national 23, 35 single supervisor 76–77, 83–84, 90 Finland accession 26, 111 Finns Party 124 influence 108 ministerial accountability 133 fiscal capacity 84 fiscal compact treaty 25–26, 64–65, 118, 194–195 fiscal policy, focus on 30–31 Five Star Movement 124, 126 fixed exchange-rate systems 3, 9–10 Foot, Michael 116 forecasts, growth 92 foreign policy 142–143 Fouchet plan 22 France credit rating 69, 103 current-account balance 168 EMS exchange-rate mechanism 16 excessive deficit procedure 89 GDP growth 32 and Greece 44 influence 100–104, 142–143 Maastricht deal 12, 16 public debt 159 public opinion of EU 123, 124 single currency views 16–17 unemployment 159 veto of UK entry 115 vote to block European Defence Community 8 freedoms of movement 8, 13 G Gaulle, Charles de 9, 22, 96 Gazprom 136 GDP growth 32 Georgia 149 Germany 2013 elections 90, 106, 125 bond yields 37, 89 Bundesbank 16, 23, 157 constitutional (Karlsruhe) court 45, 95, 128, 158 credit rating 69, 77–78 crisis management errors 155–156 current-account surplus 89, 105, 167–168 demands post Greek bail-out 50–51 economic strengths and weaknesses 14 GDP growth 32 and Greece 44 influence 100–106 Maastricht deal 12, 15–16 national control and accountability 128, 133 parliamentary seats 100 political parties 93, 125 public debt 159 public opinion of EU 123 unemployment 159 unification 16 Zollverein 9 Giscard d’Estaing, Valéry 11, 18, 26, 100 Glienicker group 163, 170 gold standard 9–10 Golden Dawn 124 government spending (worldwide) 4 governments, insolvency of 50 great moderation 31 Greece 2012 election 73, 126 bail-out deal 45–47, 56–58, 65–67, 70, 158 bond yields 37, 61–62 current-account balance 168 debt crisis 42–45 euro membership 18, 112, 115 finances post bail-out 93–94 finances pre-crisis 30, 71 GDP growth 32 potential euro exit 1–5, 81–83 public debt 159, 166 public opinion of EU and euro 113, 123, 124 referendum on bail-out 2, 61–62 unemployment 159 Gros, Daniel 34 H Hague, William 151 Haider, Jörg 127 Hamilton, Alexander 162, 167 Heath, Edward 10, 116 Heisbourg, François 104 Hollande, François 73–74, 89, 103–104, 127 proposed reforms 177 Hungary 41, 113, 126, 147 Hypo Real Estate 41 I Iceland 53, 147 ideological differences 114–115 IKB Deutsche Industriebank 40 immigration 139–140, 146, 147 impossible trinity 13 inter-governmentalism 96, 128, 174 interest rates 93, 164 internal devaluation 31, 65–66 International Monetary Fund (IMF) banking union 74 crisis-management planning 2, 4–5 Cyprus 86–87 errors 160–161 euro zone support 48 Greece 44–46, 56–57, 66, 83, 93–95, 160 Latvia 65 rainy-day funds 169–170 special drawing rights (SDR) 63 Iraq 143 Ireland 89, 110 bail-out 53–54, 56, 57, 89 bank crises 40, 71 bond yields 37, 47, 53, 61, 89 current-account balance 168 finances pre-crisis 30 GDP growth 32 influence 107 opt-outs 111, 139 public debt 159, 166 public opinion of EU 123 referendums 27, 28, 132 unemployment 159 Italy 2013 elections 107, 124, 126 bond yields 37, 61, 89 convergence criteria 17 current-account balance 168 danger of collapse 59 EMS exchange-rate mechanism 16 excessive deficit procedure 89 GDP growth 32 influence 100, 104, 107 interest rates 93 public debt 159, 166 public opinion of EU 123 single currency views 17 unemployment 159 J Jenkins, Roy 11 Jobbik 125 Juncker, Jean-Claude 98, 104, 177 candidate for Commission Presidency 131 EU 2005 budget crisis 28 Eurobonds 54 Eurogroup president 24 justice and home affairs (JHA) 139 K Karamanlis, Kostas 42 Karlsruhe constitutional court 45, 95, 128, 158 Kauder, Volker 105 Kerry, John 144 Kohl, Helmut 12, 18, 100 L labour markets 14, 33–34 Lagarde, Christine 51, 58, 62, 92 Laiki 86–88 Lamers, Karl 111 Lamont, Norman 17 Larosière, Jacques de 41, 74 Latin Monetary Union 9 Latvia 41, 65, 67, 88, 108 Lawson, Nigel 16 League of Catholic Families 125 legislative path 21–22 Lehman Brothers, ECB reaction to collapse 4 Letta, Enrico 107–108 Libya 143, 145 Lipsky, John 57 Lisbon treaty 28, 45, 194 foreign policy 142 institutions 20, 131 justice and home affairs (JHA) 139 subsidiarity 133 voting 20, 114 Lithuania 88, 113, 153 Long Term Refinancing Operations (LTRO) 68–70, 72 Luxembourg 77–78, 100, 108, 169 Luxembourg compromise 97 M Maastricht treaty 11–12, 15, 22, 142, 193 opt-outs and referendums 16, 110–111 MacDougall report (1977) 13, 169 Major, John 12, 111, 116 Malta 100, 112 Maroni, Roberto 34 Mayer, Thomas 1 McCreevy, Charlie 41 MEPs 20–21, 130 Merkel, Angela 2013 re-election 90 banking union 74–77 Cannes G20 summit (2011) 63–64 crisis response 40–41, 44 European constitution 28 fictitious memorandum to 1 future direction 178 power and influence 89, 102–106, 153 Sarkozy collaboration 60, 61–62, 102–103 support for Cyprus 86 support for Greece 5, 45, 49–52, 81–82 support for UK 118–119 union method 22, 128 voter support 125 Messina conference 8, 115 migration 139–140, 146, 147 Miliband, David 144 Mitterrand, François 11, 12, 18, 100 Mody, Ashoka 163 Moldova 149 Monnet, Jean 8, 152 Montebourg, Arnaud 104 Montenegro 147 Monti, Mario 64 influence 70, 75–76, 107 A New Strategy for the Single Market (2010) 137–138 Morocco 146 Morrison, Herbert 8 Morsi, Muhammad 145 Moscovici, Pierre 75 multi-annual financial framework 21, 27, 118 Mundell, Robert 12–13 mutualisation of debt 74, 103, 166–167 N national budgets 89, 125 National Front 124 NATO defence spending targets 145 European security 8 membership 110 Netherlands credit rating 77–78 excessive deficit procedure 89 influence 100, 108 ministerial accountability 133 UK sympathies 119 Nice treaty 194 no-bail-out rule 45, 162, 163–165 north–south divide 33–34, 108 Northern Rock 40 notes and coins 18 Nouy, Danièle 90 Nuland, Victoria 149 O Obama, Barack 63 official sector involvement (OSI) 83 OMT (outright monetary transactions) 79–81, 164, 175–176 Germany’s constitutional court judgment 95, 128 optimal currency-area theory 12–13, 14–15 Orban, Viktor 126 Osborne, George 117, 119 OSI (official sector involvement) 83 outright monetary transactions (OMT) 79–81, 164, 175–176 Germany’s constitutional court judgment 95, 128 P Pact for the Euro see Euro Plus Pact Papaconstantinou, George 43 Papademos, Lucas 64 Papandreou, George 56, 60 election 43 Greek referendum 61–62 resignation 2, 64 Party of Freedom 124 Poland 109, 113 Policy Exchange 1 political parties 124–125, 139–140 political union 10, 12, 133–134 Pompidou, Georges 10 Poos, Jacques 143 Portugal 110 bail-out 54, 57, 89–90 bond yields 37, 47, 53, 61, 89 public opinion of EU and euro 113 power, balance of 99–101 price stability goal of ECB 23 private-sector involvement (PSI) in debt restructuring 51–52 Prodi, Romano 17, 25, 97 Progressive Alliance of Socialists and Democrats (S&D) 130–131 public debt 15, 158–159 see also sovereign debt public opinion of EU and euro 121–124 Putin, Vladimir 149–150 Q qualified-majority voting 13, 20, 99, 121 negative qualified-majority voting 25, 195 quantitative easing (QE) 47, 15 R Rajoy, Mariano 70, 75–76, 127 recapitalisation, bank 58–59, 74–77, 84 redenomination 3–4, 153–154, 175 Reding, Viviane 139 referendums 27, 28, 121–122, 132 REFIT initiative 172 Regling, Klaus 26 Renzi, Matteo 107–108 rescue fund see European Stability Mechanism (ESM) resolution mechanism 90–91, 165, 195 single resolution mechanism (SRM) 195 single supervisory mechanism (SSM) 195 Romania 41, 108, 113, 124, 126, 147 Rome treaty 8, 97, 110, 193 Rösler, Philipp 78 Rueff, Jacques 9 Rumsfeld, Donald 143 Russia, influence on Ukraine 149–150 Rutte, Mark 77 S Samaras, Antonis 2, 78, 82, 93–94 Santer, Jacques 97 Sarkozy, Nicolas crisis response 40–41, 44 economic governance 49–50 European constitution 28 LTROs and the Sarkozy trade 69 Merkel collaboration 51–52, 60, 61–62, 102–103 Schäuble, Wolfgang 62, 75, 84, 90–91, 106, 111, 154 Schengen Agreement 110, 111–112 Schmidt, Helmut 11, 100 Schröder, Gerhard 18, 101, 127 Schulz, Martin 131 Schuman Day 8 Schuman, Robert 7–8 Scotland 112, 178 SDR (special drawing rights) 63 Securities Market Programme (SMP) 48, 79 services directive 34 Shafik, Nemat 65 Sikorski, Radek 109 Simitis, Costas 18 Simms, Brendan 179 single currency benefits 152 club within a club 112 driving forces 12–14 importance of 113 vision for 9 see also euro Single European Act 13, 193 single market 4, 137–138, 174–175 Sinn, Hans-Werner 101 six-pack 25, 50, 195 Slovakia 112 adoption of euro 41 influence 108 Slovenia 88–89, 112 influence 108 SMP (Securities Market Programme) 48, 79 snake in the tunnel 10 Solana, Javier 142 sovereign debt 165–166 see also public debt Spain 110 bail-out 70–73, 89 bank recapitalisation 84 bond yields 37, 89 CDS premiums 72 current-account balance 168 danger of collapse 59 excessive deficit procedure 89 finances pre-crisis 30 GDP growth 32 influence 107 public debt 159 public opinion of EU 123, 124 single currency views 17 unemployment 159 special drawing rights (SDR) 63 stability and growth pact 18, 24, 29, 50–51, 127, 194 Stark, Jürgen 59, 106 Steinbrück, Peer 43 Strauss-Kahn, Dominique 24, 44, 57 stress tests, bank 72, 175 subsidiarity 133, 141 Sweden 109, 111, 112 euro opt-out 18, 115 UK sympathies 119 Syria 145 Syriza 124 T Target II 157 Thatcher, Margaret 27, 110, 116 third energy package 136 Tilford, Simon 34 Tindemans, Leo 111 trade policy 138 Transatlantic Trade and Investment Partnership (TTIP) 138–139 treaty making and change 26–27, 173–174 Treaty of Amsterdam 111–112, 193 Treaty of Lisbon 28, 45, 194 foreign policy 142 institutions 20, 131 justice and home affairs (JHA) 139 subsidiarity 133 voting 20, 114 Treaty of Nice 194 Treaty of Rome 8, 97, 110, 193 Treaty on European Union (Maastricht treaty) 11–12, 15, 22, 142, 193 opt-outs and referendums 16, 110–111 Treaty on Stability, Co-ordination and Governance (TSCG) see fiscal compact treaty Tremonti, Giulio 54, 60 Trichet, Jean-Claude 151, 156 bond-buying 47–48, 52–53 crisis-management planning 2 early warnings 39–40 ECB president 23 IMF 44 Italy 59 True Finns 124 Turkey 132, 147, 148 Tusk, Donald 109, 114 two-pack 25, 89, 195 U UK Independence Party (UKIP) 118, 125, 140 Ukraine 149–150, 179–180 unemployment 158–159, 170 union method 19, 22 United Kingdom current-account balance 168 economic strengths and weaknesses 14 EMS exchange-rate mechanism 16 euro crisis reaction 117–118 euro membership 112 European budget contribution 27–28 European involvement 8, 10, 12, 115–119 future status 174–175 influence 100–101, 106, 109, 142–143 initial application to join EEC 9 opt-outs 110–111, 139 public opinion of EU 123 single currency views 17 United Left party 124 United States abandonment of gold standard 10 federalism model 177 foreign policy 143 performance compared with euro zone 154–155 Urpilainen, Jutta 77 V Van Gend en Loos v Nederlandse Administratie der Belastingen (1963) 21 Van Rompuy, Herman 98 crisis-management planning 3 Cyprus 87 European Council presidency 20, 28 Italy 63 roadmap for integration 74–75, 84, 173 support for Greece 43–45 Venizelos, Evangelos 57, 62 Verhofstadt, Guy 131 Véron, Nicolas 35 Vilnius summit 149 von Weizsäcker, Jakob 166 W Waigel, Theo 17–18 Wall Street flash crash 47 Weber, Axel 49, 56, 106 Weidmann, Jens 40, 80, 82 Weizsäcker, Jakob von 166 Werner report (1971) 10 Wilson, Harold 116 Wolfson Prize 1 World Bank 33 World Trade Organisation 138–139 Y Yanukovych, Viktor 149 Z Zapatero, José Luis Rodríguez 59, 62 Zollverein 9 PublicAffairs is a publishing house founded in 1997.

What Would the Great Economists Do?: How Twelve Brilliant Minds Would Solve Today's Biggest Problems
by Linda Yueh
Published 4 Jun 2018

His ‘commodity dollar’ would encourage the public to think about the purchasing power of a dollar when it came to setting prices and writing contracts. Fisher’s idea was in direct contrast to the gold standard, the de facto economic policy of the day. The gold standard required the dollar to be exchangeable for a fixed quantity of gold, but it had not always been successful at achieving price stability. His concept of the commodity dollar required a dollar to be fixed in value against a group of commodities (goods), and its gold content adjusted to maintain its purchasing power. He had observed that, between 1873 and 1896, the dollar’s value increased as American prices fell. Fisher argued that this led to a prolonged depression as the supply of money was determined by the amount of gold, so the money supply was growing at a slower pace than was needed for the number of transactions necessary to maintain growth in the economy.

…

However, in calling for the abandonment of the gold standard, Fisher had placed himself at odds with the consensus of political and business opinion. Those who opposed Fisher’s idea at least saw the logic, but did not believe it would be easy or practical to implement. They were also worried about undermining confidence in the operation of the gold standard, which already had been exposed as a fallible system of price stability. Tinkering with the gold standard was not a preferred option. Any admission that it was not perfect, or that the value of the dollar might require adjustment, was considered subversive and liable to undermine confidence in both the operation of the system and the value of the dollar. After failing to convince President Woodrow Wilson of the merits of his plan, Fisher believed that he had to garner public opinion.

…

In other words, if the central bank is always there to bail a bank out, then a bank has less of an incentive to act prudently. Regulation can reduce this risk. In this respect, he would have welcomed the new macroprudential regulatory powers given to central banks after the 2008 financial crisis to target financial stability alongside their existing mandate of price stability. Fisher’s final years The years 1933 to 1939 saw a period of frantic effort by Fisher to solve the country’s problems and his own financial doldrums. He failed at both. The country wasn’t following his recommendations, his own assets would never recover their value and his debts would never go away.

The Great Economists: How Their Ideas Can Help Us Today
by Linda Yueh
Published 15 Mar 2018

His ‘commodity dollar’ would encourage the public to think about the purchasing power of a dollar when it came to setting prices and writing contracts. Fisher’s idea was in direct contrast to the gold standard, the de facto economic policy of the day. The gold standard required the dollar to be exchangeable for a fixed quantity of gold, but it had not always been successful at achieving price stability. His concept of the commodity dollar required a dollar to be fixed in value against a group of commodities (goods), and its gold content adjusted to maintain its purchasing power. He had observed that, between 1873 and 1896, the dollar’s value increased as American prices fell. Fisher argued that this led to a prolonged depression as the supply of money was determined by the amount of gold, so the money supply was growing at a slower pace than was needed for the number of transactions necessary to maintain growth in the economy.

…

However, in calling for the abandonment of the gold standard, Fisher had placed himself at odds with the consensus of political and business opinion. Those who opposed Fisher’s idea at least saw the logic, but did not believe it would be easy or practical to implement. They were also worried about undermining confidence in the operation of the gold standard, which already had been exposed as a fallible system of price stability. Tinkering with the gold standard was not a preferred option. Any admission that it was not perfect, or that the value of the dollar might require adjustment, was considered subversive and liable to undermine confidence in both the operation of the system and the value of the dollar. After failing to convince President Woodrow Wilson of the merits of his plan, Fisher believed that he had to garner public opinion.

…

In other words, if the central bank is always there to bail a bank out, then a bank has less of an incentive to act prudently. Regulation can reduce this risk. In this respect, he would have welcomed the new macroprudential regulatory powers given to central banks after the 2008 financial crisis to target financial stability alongside their existing mandate of price stability. Fisher’s final years The years 1933 to 1939 saw a period of frantic effort by Fisher to solve the country’s problems and his own financial doldrums. He failed at both. The country wasn’t following his recommendations, his own assets would never recover their value and his debts would never go away.

Samuelson Friedman: The Battle Over the Free Market
by Nicholas Wapshott
Published 2 Aug 2021

What should be avoided, he declared, were “unpredictable and erratic changes of direction in prices” which were “as disturbing to economic growth as to economic stability.” And that “past experience,” which he failed to elaborate upon, “suggests that something like a 3 to 5 per cent per year increase in the stock of money is required for long-term price stability,”43 though how he came to arrive at such precise figures he also omitted to explain. How could a steady 3 to 5 percent increase in prices be achieved? As he had already argued, the time delay between attempting to alter the quantity of money in an economy and the resulting effect on prices was at best guesswork.

…

He agreed that “pressures to increase the money supply to serve some presumed short-term objective are a basic source of inflationary pressure,” and that “excessive monetary expansion is a sufficient condition for inflation,” and “no important inflation can be sustained without money rising substantially faster than real income [i.e., incomes adjusted for inflation].” He agreed that “there is always some rate of monetary growth (perhaps zero) that will in principle achieve price stability. But still, I don’t think we can draw much comfort from those principles as a full explanation of where we are and a guide as to how to proceed.” He took as an example the acceleration in inflation since the 1960s. The rise in prices in the 1970s, for instance, was driven by “the oil situation, some crop failures, the spread of unions into some new areas, and shortages in particular industries that ran up against capacity pressures before the economy as a whole reached full employment.”

…

The rise in prices in the 1970s, for instance, was driven by “the oil situation, some crop failures, the spread of unions into some new areas, and shortages in particular industries that ran up against capacity pressures before the economy as a whole reached full employment.” Rather than invoke monetary changes to explain the persistent high inflation, “we have to ask ourselves about the nature of the economic, social, and political forces and attitudes that seem to have aggravated the difficulties of reconciling full employment with price stability.” Then came a warning. For central bankers to strictly limit the money supply according to some automatic formula, as Friedman advocated, might end up as an affront to democracy. Central banks could always resist inflationary pressures by simply refusing to provide enough funds to finance them, but such an approach would conflict with the goals of economic growth and full employment that were important national goals.

The Left Case Against the EU
by Costas Lapavitsas
Published 17 Dec 2018

There is nothing ‘natural’ or ‘spontaneous’ about the emergence of the euro in the contemporary international markets, and that is a source of both strength and weakness. To act as a world reserve currency the euro has had to gain global acceptability and credibility from scratch, and its institutional mechanisms were designed partly with this purpose in mind. The ECB and the Eurosystem were created with the express aim of ensuring price stability, which is necessary for the euro to act as a reserve of value. The global acceptability of the euro, on the other hand, encouraged the imposition of fiscal rigidity among member states, including the Growth and Stability Pact. The second aspect determining Germany’s conditional hegemony is that the euro was created in a period of rapid financialization of advanced economies, including leading countries such as Germany and France, and peripheral countries such as Portugal and Greece.

…

Furthermore, there has been a growing involvement of households and individuals with the private financial sector to borrow for housing and consumption, but also to manage pensions, insurance, and other assets. The EMU has served the interests of large European multinationals and financial institutions under conditions of advancing financialization. Price stability and control over inflation is a sine qua non for lenders and for financial capital. A homogeneous internal market for borrowing supported by liquidity generated by a powerful central bank was necessary for European banks to spread their operations globally. Fiscal discipline is typically required by lenders and by banks alike to protect their loan advances.

The Death of Money: The Coming Collapse of the International Monetary System
by James Rickards
Published 7 Apr 2014

At the heart of monetary union is the European Central Bank (ECB), envisioned in the 1992 Maastricht Treaty and legally formed in 1998 pursuant to the Treaty of Amsterdam. The ECB issues the euro, which is a single currency for the eighteen nations that are Eurozone members. The ECB conducts monetary policy with a single mandate to maintain price stability in the Eurozone. It also trades in foreign exchange markets as needed to affect the euro’s value relative to other currencies. The ECB manages the foreign exchange reserves of the eighteen national central banks in the Eurozone and operates a payments platform among those banks called TARGET2.

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Once the panic phase of a financially induced depression is over, the greatest impediment to capital investment is uncertainty about policy regimes related to matters such as taxes, health care, regulation, and other costs of doing business. Both the United States and the EU suffer from regime uncertainty. The Berlin Consensus is designed to remove as much uncertainty as possible by providing for price stability, sound money, fiscal responsibility, and uniformity across Europe on important regulatory matters. In turn, a positive business climate becomes a magnet for capital not just from local entrepreneurs and executives but also from abroad. This points to an emerging driver of EU growth harnessed to the Berlin Consensus—Chinese capital.

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The debate over gold versus fiat money is really a debate between entrepreneurs and rentiers. A new gold standard has many possible designs and would be effective, depending on the design chosen and the conditions under which it was launched. The classical gold standard, from 1870 to 1914, was hugely successful and was associated with a period of price stability, high real growth, and great invention. In contrast, the gold exchange standard, from 1922 to 1939, was a failure and a contributing factor in the Great Depression. The dollar gold standard, from 1944 to 1971, was a middling success for two decades before it came undone due to a lack of commitment by its principal sponsor, the United States.

Grave New World: The End of Globalization, the Return of History
by Stephen D. King
Published 22 May 2017

As Reagan put it – in a more memorable way than Hayek ever managed – ‘The nine most terrifying words in the English language are “I’m from the government and I’m here to help”.’5 Even then, the early years were touch and go: in 1981, Ronald Reagan sacked around 13,000 American air traffic controllers who went on strike in violation of the terms of their contracts, while even in her second term in office Margaret Thatcher was engaged in a ferocious battle with Britain’s coal miners. By the late 1980s, however, Reagan and Thatcher had won: the private sector had triumphed – at least philosophically – over the public sector, markets had succeeded where central planning had failed, macroeconomic policy was aimed at price stability, not full employment, and economic growth was to be achieved through ‘supply-side’ reform, not Keynesian-style demand management. Importantly, following Thatcher’s lead with her very early decision to abolish exchange controls, capital markets were to be subject to the discipline provided by international investors.

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There was growing nervousness among the finance ministers regarding their ability to put on a united front: in particular, an uptick in inflationary pressures suggested that it would not be easy for Germany and Japan to keep interest rates low enough to encourage investors to move out of yen and DM into US dollars. Nevertheless, a deal was struck, and for a while the dollar stabilized. It wasn’t to last. Over the summer, as the effects on inflation of the earlier collapse in oil prices began to fade, the German Bundesbank became increasingly trigger-happy. Eventually, the high priests of German price stability decided to tweak interest rates a little higher. Madness then ensued. Baker had a public row with the German minister of finance, Gerhard Stoltenberg. With the US trade deficit still widening, the US dollar plunged. Within a few weeks, the US stock market had collapsed. For a short while, it appeared the game was up for international policy coordination.

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The communiqué published at the end of the summit was full of confidence: We are undertaking an unprecedented and concerted fiscal expansion … We are committed to deliver the scale of sustained fiscal effort necessary to restore growth … Interest rates have been cut aggressively in most countries, and our central banks have pledged to maintain expansionary policies for as long as needed and to use the full range of monetary policy instruments, including unconventional instruments, consistent with price stability … We have provided significant and comprehensive support to our banking systems … We are committed to take all necessary actions to restore the normal flow of credit through the financial system … Taken together, these actions will constitute the largest fiscal and monetary stimulus … in modern times … We are confident that the actions we have agreed today, and our unshakeable commitment to work together to restore growth and jobs, while preserving long-term fiscal sustainability, will accelerate the return to trend growth.

Barometer of Fear: An Insider's Account of Rogue Trading and the Greatest Banking Scandal in History
by Alexis Stenfors
Published 14 May 2017

When the Federal Reserve realised that the interest rate cuts announced during the autumn were not filtering through to the money markets, it introduced the Term Auction Facility (TAF), an arrangement whereby US-based banks could borrow from the Federal Reserve without using the discount window. Similar market movements were observed in other currencies, with central banks across the developed world resorting to comparable measures. Central banks found themselves in a difficult position as the symmetry of the monetary transmission mechanism had broken down. Price stability through inflation targeting had gradually become more important than financial stability as a central bank goal. However, the former goal no longer applied. Having become more transparent themselves, central banks now had to rely on information and signals provided by the banks and the markets.

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In other words, LIBOR had become a key variable that was used in assessing the effectiveness of central bank policy in dealing with the financial crisis.31 If LIBOR reacted promptly to what central banks did, the policy measure was deemed successful. If it didn’t, the measure was seen as misplaced or insufficient. Some central banks went even further, making LIBOR a strategic policy tool in itself. Since January 2000, the monetary policy strategy of the Swiss National Bank has consisted of three elements: ‘a definition of price stability, a medium-term inflation forecast and – at operational level – a target range for a reference interest rate, the three-month Swiss franc LIBOR’.32 Norges Bank, the central bank of Norway, publicly announces its projected monetary policy rate and also the future three-month Norwegian krone risk premiums, based on the three-month NIBOR.33 All of this might seem like a paradox, considering that the Eurodollar market was created in order to avoid the jurisdiction of the central banks.

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INDEX ABN Amro Bank, 59 Accenture, ‘rogue trading’ definition, 249 Accept, Breaker album, 110–11 ACI (Association Cambiste Internationale/Forex), 174, 181; ‘Dealing Certificates’, 216; Model Code, 227 actual funding rates, public knowledge, 97 Adoboli, Kweku, 250 Agius, Marcus, 77, 284 Almunia, Joaquín, 221 American Psycho, 239–40, 250 Aragon, 25 arbitarge, 31; opportunities, 27 Aros, 25 Asian financial crisis 1997, 260 ATM queues, image of, 109 average opinions, expectation of, 102 Bäckström, Urban, 117 Bailey, Andrew, 280 ‘banging the close’, 209 Bank of America, 2, 11, 153, 164, 188, 191, 223; Merrill Lynch rescue/takeover, 49, 67, 161–3, 193; rescue of, 10 Bank of England, 38, 55, 222; Exchange Joint Standing Committee, 179; inflation target, 39 Bank of Japan, 33, 81, 175–6 Bank of Tokyo-Mitsubishi, 153, 223 banking, competitive deregulation, 114; incentive structures literature, 252; post 2008 reforms, 254; risk taking essence, 281; staff ‘cost centres’, 95; see also, central banks; financial markets; money markets banks: access to money indicators, 96; cash hoarding, 45; change attempts post-scandals, 283; credit departments, 253; derivatives main users, 121; Eurodollar market made, 117, 125; fines, 236; LIBOR hiding, 105; LIBOR perceptions, 79; LIBOR quotes, 99; markets abuse, 14; profit maximizing, 80; public trust need, 284; reputational damage, 168; ‘special’ sector, 173; risk management systems, 46 Banque pour l’Europe du Nord, 113 Barclays Bank, 59, 98, 105, 153, 192–3, 210, 220, 223; Capital securities unit, 98; interest rate derivatives traders, 77; 2012 fines, 76; US dollar LIBOR trial, 139 Basel Accord 1988, 137; perverse effect, 138 BBA, banking lobby, 180, 183; BBAIRS creation, 118; big banks dominated, 107; -LIBOR trademark, 181 Bear Stearns, 49, 105, 272 ‘beating the market’, 267 Becker, Gary, 254 behavioural finance, study of, 196, 200–1, 255; ‘disruption effect’ concept, 258 benchmarks: financial instruments, 122; manipulation of, 14; manipulation criminalised, 282 Berlin Radio Show, 111 bid-offer spreads, 42–3, 62, 112, 132, 139, 146, 219, 223, 228–9; collusive practices, 223; FX market, 192; prices tight, 201; round figures, 218; secretly agreed, 220 BIS (Bank for International Settlements), 130 blame, individualised, 236; shifting, 68 Bloomberg, 50, 86, 88, 98, 151, 195, 283; indicative prices, 62 BNP Paribas, 193, 223; investment funds freeze redemptions, 50 Böll, Heinrich, 235 bonds selling, 21; trading desks, 215 bonuses, 164, 273; curbing partial solution, 280; stricter rules on, 280 ‘book’, traders, 26 Borough Market, London, 7, 101, 245 borrowing rates, low-balling, 99 bribes, forms of, 91 brokers, 143; best guess, 88; false information transmission, 89; role of, 141; traders pressure on, 90; -traders relation, 86–7, 89; use of, 132 Buffett, Warren, 15, 251 bulls/bears, early experiences formed, 31 Bush, George W., 45 buy and sell orders, 208 ‘call-outs’, 24; symptom assessing, 25 ‘Can do More’, 144 Canada: dollar, 33; Foreign Exchange Committee, 179 Canary Wharf, London, 6 Cantor Fitzgerald, London office, 264 capital controls, abolishment, 133 Carr Futures, World Trade Centre office, 264 cash markets, importance loss, 139 cash squeezes, year-end, 44 cash-settled derivatives; benchmark need, 122–3; made market, 133 cassettes, history of, 110–11 CDOs (collateralised debt obligations), 11 central bank, 151; -banks unique relationship, 173; foreign exchange interventions, 233; inflation rate target, 70; LIBOR key variable, 53, 151; LIBOR use, 152; money pumping, 50; power, 174; power overestimated, 49, 54; price stability goal, 51; repos, 175; tips, 176; transparency, 40, 166–7; unexpected interest rate moves, 41; weakening of, 114 Channel 4 News, 11 Chase Manhattan, 131 Chemical Bank (JPMorgan Chase), 30 CIBOR (Copenhagen Interbank Offered Rate), 28, 78–9 Citibank, 29, 30, 58, 101, 153, 155, 182, 188, 193, 220, 223; benchmark manipulation fine, 160; ‘Scandi’ desk, 33; Tokyo dealing room, 196 CME (Chicago Mercantile Exchange), 123, 1288; Eurodollar futures, 126 collateral types, central banks lowering, 50 competition law, UK and EU, 222 complex structured products, valuation inability, 50 compliance departments banks, 253; post-scandals increase, 283 Cooke, Mr Justice, 282 copycat behaviour, market making, 202–3 Cosmopolis, 250 counterparties, confirmations, 18 Countrywide, 49 CPI, Inflation index, 149 credit: default swap market, 99; officers, 95; rating agencies, 96; risk, 137; risk measure for, 55 Crédit Agricole Indosuez, 37, 44, 58–9, 134, 155 Crédit Suisse, 153, 193, 221, 223; First Boston, 127 creditworthiness: ‘image problem’, 51; judgments on, 225; signals, 98, 99 cross-currency basis swap, LIBOR-indexed, 62 CRSs, 129 Darin, Roger, 115 dealing relationships, informal reciprocal, 227 dealing rooms, internal monitoring increase, 283 deceptive behaviour, LIBOR banks, 105; quotes post-crisis pressure, 106 Del Missier, Jerry, 77 Den Danske bank, 178 derivatives, ‘abstract’, 123–4; benchmark use, 150; borrowing and lending idea, 138; concrete type, 121; growing market, 79; interest rates, 30; LIBOR-indexed, 28, 71, 80, 104, 129; new instruments, 18; textbook explanation, 119–20; trade tickets, 141’usefulness’ of, 131 derivatives market: benchmark need, 119; LIBOR importance, 37; Scandanavia, 27 Deutsche Bank, 153, 193, 223; LIBOR controls deceptions, 183; LIBOR fine, 83 Diamond, Bob, 77 Dillon Read, 49 ‘discount windows’ lowering, 50 ‘dishonesty’, 249 Donohue, Craig, 128 dot-com bubble, 104 downgrades, credit rating agencies, 96 Dresdner Bank, 17, 155, 197 Duffy, Terry, 128 Easton Ellis, Bret, American Psycho, 236 economic data releases, examples of, 38 efficient market hypothesis, 195, 200–1; unrealistic assumption, 196 ‘emerging markets’, trading desks, 37 ERM (European Exchange Rate Mechanism) crisis, 31–2 Ermotti, Sergio, 213 EURIBOR (Euro Interbank Offered Rate), 14, 76–8, 126, 130; derivatives, 145; new unpredictability, 62; pre-Euro, 148 euro, the: Eurozone crisis, 109; launch of, 36 eurocurrency market, 113; central bank weakening, 111; deregulated, 114; Eurodollars, see below; fast growth of, 112; LIBOR derivatives replaced, 134 Eurodollar market, 113, 133, 152; advantages, 112; banks made, 117, 125; contracts standard maturity dates, 126; financial deregulation prompt, 116; futures, see below; gradual reduction of, 136; history of, 111; LIBOR rate making, 117, 129; rapid growth of, 115 Eurodollar futures, 125, 128, 265; bets on, 146; rationale for, 129; success of, 127 Euromoney, 135 European Banking Federation, 180 European Central Bank (ECB), 50, 109, 145 European Commission, 221 Euroyen LIBOR futures contract, 127 ‘Events’ central bank meetings, 40 excessive lending, inflationary fears, 114 exclusivity, self-perception, 269 expectations, games of, 103; overpriced stock, 104 ‘expert judgments’, banks LIBOR quotes, 278 Fama, Eugene, 195 ‘fat fingers’ errors, 253 FBI, USA, 192–3 FCA (Financial Conduct Authority), 183–4, 188, 219, 282; Fair and Effective Markets Review, 222; prohibited individuals list, 285 fear, rumours of, 266 Federal Reserve, see USA FIBOR (Frankfurt Interbank Offered Rate), 19, 127 financial crisis, Asia 1997, 36 financial crisis 2007–8; decent culture erosion explanation, 279; familiar analysis of, 114; financial market illuminating, 275; -LIBOR implications, 52, 111; money markets freeze, 109 financial markets: cartels, 222; deregulation 115–16; instruments liquidity, 43; misconceptions, 236; self-regulated, 113, 171; see also, money markets Finers Stephens Innocent, 3 Finland: USSR collapse impact, 20; USSR Winter War, 65 ‘firm policy’, interbank spread choosing, 229 fixed exchange rates, sustainability, 32 flat switch, 92–5 flow traders, 143 Forex, 1995 exam, 223; reciprocity endorsed, 227 FRAs (forward rate agreements), 28, 75, 91, 129–30; growth of, 148 Friday dress policy, 135 FSA (Financial Services Authority), UK, 1–2, 67, 77, 98, 105, 124, 163, 180, 243; prohibition orders, 4; suspension, 5 ‘Full Amount’ call, weakness indicator, 143 funding costs:, averages, 104; LIBOR signalling, 97; -market liquidity relation, 44 futures contracts: agricultural, 120; cash-settled, 125; transparent exchanges, 63 FX (foreign exchange) market, 172, 196, 245; bank price influence, 212; big banks domination/market concentration, 193, 195, 210, 212, 223, 234; ‘clear the decks’, 210; ‘community’, 190; ethical problem, 213; global banks 2014 fines, 188; interbank spread survey, 228; interest rate markets joining, 31; Japanese banks borrowing, 33; London ‘banging the close’; 209; non-public information grey zone, 224; order books, 7; reciprocity, 224; scale of significance, 126, 192, 232; spot market desk, 214, 217; standardised norms, 194; swap market, see below; ‘The Cartel’, 220; traders, see below; turnover scale, 212 FX swap market, 134, 137, 145, 146; interest rate speculation, 133; Japanese traders, 34; lower credit risk, 137, 144; 9/11 trading, 265; spot-prices, 31, 227 FX traders, 191; club mentality, 269; desks, 30; respect among, 269; secret code us, 219; ‘techniques’, 204; varied backgrounds, 216 Gelboim, Ellen, 153 gentlemen’s agreements, 141 ‘getting married to your position’, trading attitude, 257–8 global merchandise exports, growth, 112 Goldman Sachs, 49, 140, 193, 223, 272 Goodhart, Charles, 173 Greece, 2015 ATM queues, 109 Greenspan, Alan, 15, 51, 173–4 Greenwald, Bruce, 225 guilt, feelings of, 78, 169, 243, 259 Häyhä, Simo (‘White Death’), 65 ‘Hambros’, 194 Harley, Dean, 231 Hayes, Tom, 8, 13, 72, 92–3, 115, 238; prison sentence, 12 HBOS, 183 headhunters, 160 HELIBOR (Helsinki Interbank Offered Rate), 28 Hester, Stephen, 284 Hintz, Brad, 10 HSBC, bank, 27, 153, 155, 188, 193, 208, 213, 223; FCA fine, 219; FX trading, 116, 187; Group Management Training College, 187; Stockholm, 31 Hull, John, 150 Hunger Games series, 255 Hyogo Bank default, 33 ICAP, 86, 101, 175; LIBOR fine, 85 ICMA (International Capital Market Association), 174 IKB bank, 50; rollover problems, 49 illiquidity, temporary, 43 Indonesia, financial crisis, 36 Industrial Bank of Japan, 34 ‘industry’, financial, 154–5 information: LIBOR delays problem, 49, 54; big banks superior, 210 instincts, 226 interbank money market, 38; central bank influence, 39; efficiency estimate change, 109; lending fall, 111; LIBOR, see below interest rate(s): benchmarks, 14; central banks forecasts, 166; changes impact of, 38; derivatives, 17, 174; hedging, 128; movement, 42; short-term, 28, 133; swaps sizes, 142 International Code of Conduct and Practice for the, 216 International Monetary Market (IMM), 72; contracts conventions, 126; LIBOR fixings, 73–4 investment banks, risk takers, 272 Ireland, Financial Regulator, 4, 168, 281 IRS, interest rate swap, 129–30; short-term, 140 ISDA (International Swaps and Derivatives Association), 174; fix, 14 Japan: bank sector/system: crisis, 47, 81; dollars difficulty period, 34; fear premium, 36; Financial Services Agency, 101; FX market concentration, 193; FX ‘premium’, 35–6; safe perception change, 33; unique derivatives market, 36; yen market, 8, 45 JP Morgan/JP Morgan Chase, 92, 105, 153, 178, 188, 192–3, 220–3 Kahneman, Daniel, 255 Kerviel, Jérôme, 250 Keynes, J.M., General Theory of Employment, 102 Kipling, Rudyard, 127 KLIBOR (Kuala Lumpur), 37 Knight, Angela, 107 Lapavitsas, Costas, 6–7 layering, 204 Leeson, Nick, 250 ‘legacy issues’, 236 Lehman Brothers, 2, 10, 48–9, 59, 105, 162, 272; bankruptcy filing, 160; collapse of aftermath, 96 Lewis, Ken, 164 LIBOR, 19, 28, 76–7, 104, 127, 130, 147, 209, 234, 265; anti-competitive process, 186; banking lobby regulated, 180–1; ‘barometer of fear’, 96; benchmark significance, 192, 225; central banks perfection assumption, 49; controls deception, 184; crisis-induced ‘stickiness’, 106; crucial price, 13; daily individual quotes, 97; derivatives, see below; ‘Eurodollar futures’ origin, 126; FCA regulated, 282; ‘fear’ index, 15; fixing panels, see below; future direction of, 38; inaccuracy possibilities, 74; interbank money market gauge, 39; jurisdiction issue, 115; manipulation, 7, 12, 14, 78; manipulation impossibility assumption, 81; market-determined perception, 88, 149; mechanism, 104; minute change importance, 73; new unpredictability, 62; 1980s invention, 111; objective process ‘evidence’, 148; perception of, 119; players as referees, 80; post 2007 interest, 53; pre-2013 unregulated, 118; predicting difficulty, 70; regulatory oversight lack, 179; retail credit impact, 277; sanctioned secrecy, 181–2; savings and borrowings dominance, 107; scandal breaking, 81; state measure use, 151; three-months, 71; ‘too big to fail’, 279; use of limited post-scandal, 278 LIBOR derivatives market, 8, 45, 137–8, 232; autonomous development of, 111; banks made, 125; ‘community’, 190; -FX connected, 189; imaginary money market, 148; increased abstraction of, 144–6 LIBOR panel banks, 74–5, 79, 98, 118, 172, 282; -LIBOR implications, 52 big banks dominated, 173, 179–80; fixing process, 75; membership criteria, 184–5; punishment idea, 108; post-scandal membership, 186 LIBOR scandal, 77, 152, 167, 245; correctness attempts, 277; post- definition unchanged, 278; breaking of, 81; Wall Street Journal on, 238 LIBOR-OIS spread(s), 51, 54–5, 99, 151 LIFFE, 126–7 liquidity: and credit crunch 2008, 2; credit issues, 45; informal norms need, 284; provision ‘duty’ 229; risk, 42–3, 55, 70 Lloyds Bank, 153, 183; LIBOR fine, 83 long/short positions, 26 Lukes, Steven, 186 makers, price, 24 Malaysia, financial crisis, 36 Mankell, Henning, 235 ‘marked to market’ trading books, 62 market, the financial: ‘colour’ 202; ‘conventions’, 228–33; ‘courtroom’, 171; interbank spread choosing ‘image’, 229; liquidity risk, 42–3; making, see below; perfections of, 15; relationships dependent, 225–6; risks limits management failure, 281 market makers/making, 24, 72, 117, 201, 206, 217, 226–7, 257; ‘ability’, 185; cash-settled derivatives, 133; failure to manage, 281; NIBOR IRS, 132; profession of, 200; two-way price quoting, 228; visibility of, 202 Martin Brokers, 85 Mathew, Jonathan, 139 McAdams, Richard, 231 McDermott, Tracey, 282 Meitan Tradition, 100, 175 Merita Bank, 56 Merrill Lynch, 2–3, 8–9, 12, 46, 49, 59–60, 62, 64, 69, 92–3, 96, 140, 153, 155, 160–1, 164, 188, 272, 285; Bank of America takeover, 67; bonuses, 10, 162–3; financial centre, 48; International Bank Limited Dublin, 4; mismarking, 68; risk taking encouraged, 281; silence rule, 242 Midland Montagu (Midland Bank Stockholm Branch), 20, 22–3, 27, 29; Stockholm, 22, 29 ‘Millenium bug’ fears, LIBOR impact, 44 mismarking, 9 mistakes, fear of, 26 Mollenkamp, Carrick, 98 ‘monetary transmission mechanism’, 39 money market(s): decentralised, 224; freeze, 110; international basis, 112; ‘risk premium’, 42; stable illusion-making, 106; -state link, 224 Moody’s, 96 morals, 66; morality, 69 Morgan Stanley, 49, 193, 223, 272 mortgage bonds, 21 NASDAQ stock exchange, transparency, 220 New York 2001 attacks, 263 New York Times, 4, 9, 11, 163, 241, 243 NIBOR (Norwegian Interbank Offered Rate), 28, 72, 130–1; fixing dates, 76; inaccurate fixing, 74; IRS market, 132; new unpredictability, 62; one month IRS market, 136 nicknames, use of, 25–6 Nordbanken, nationalised, 27 Nordic bank branches, 30 Norges Bank, NIBOR use, 152 Norinchukin Bank, 153 Northern Rock, Newcastle queues, 109 Norway, banking system, 131 ‘objective’ fact, LIBOR, 149 ‘off-balance-sheet’, trading, 137–8 official interest rate, predicting, 38 OIS (overnight index swap), 51; see also LIBOR-OIS one month IRS market, 136 OPEC (Organization of the Petroleum Exporting Countries), US dollar surpluses, 113 options desk, FX, 214 ‘over-the-counter’ trades, 63 derivatives, 129, 134; interest rate options, 130; markets, 227 Philippines, financial crisis, 37 Philips, cassette launch, 111 PIBOR (Paris Interbank Offered Rate), 19, 127 post scandals, reforms, 282 price(s), as interactions, 200; brokers indications role, 87; ‘resolution hypothesis’, 218 primary dealers, 175, 178 privacy, individual rights to, 167 Rabobank, LIBOR fine, 83, 153, 282 RBC, bank, 223 RBS, bank, 92, 153, 185, 188, 192, 220–1, 223, 284; LIBOR scandal fine, 83 reciprocity: -and trust, 226, 284; informal agreements, 228 regret, fear of, 258 regulatory arbitrage: Eurodollar market prompting, 118; platform for, 114 ‘reputation’, 185 respect, among traders, 267 Reuters, 19, 79, 151; Dealing, 41, 195, 260; Dealing 2000–2, 29, 34, 194; indicative prices, 62; screen price, 53 risk, 135; buzz of, 261–2; limits breaking, 274; ‘loss aversion’, 255; managers, 253; organizational limits, 250; pressures for, 63 risk taking: addictive, 262; enjoyment of, 260; fear control, 263; increase, 73; individualistic, 262; reward anticipation, 254; reward interpretation, 259; supervision need, 253 risk takers, 270; respect among, 268–9 Robert, Alain, 260 ‘rogue traders’, 1, 237; ‘bad apples’ narrative, 237, 240, 246, 279; fame, 252; fascination with, 246; losses, 259; ranking list, 250; risk list, 251; scandals, 258; stigma, 247 rogue trading, 274; definitions, 249; labelling, 248; risk link, 250 Royal Bank of Canada, 153 RP Martins, 153 rules of the game, loyalty to, 25 ‘run-throughs’, 87–9, 226–7 Russia, financial crisis, 36 Ryan, Ian, 3, 9, 68 Sanford C.

Big Debt Crises
by Ray Dalio
Published 9 Sep 2018

Throughout the month, policy makers repeatedly alluded to concerns for both economic growth and price stability. Bernanke called rising oil prices unwelcome, and Paulson emphasized that they would be “a real headwind” for the economy. With respect to the exchange rate, Bernanke emphasized that the Fed would “carefully monitor” its implications for inflation and inflation expectations, while Paulson even suggested that he “would never take intervention off the table.”28 The pickup in inflationary pressures prompted a shift of the Fed’s priorities from preventing debt and economic risks to growth and toward assuring price stability. As early as June 4, Bernanke noted that further interest-rate cuts were unlikely due to concerns over inflation, and suggested that the current policy rate was sufficient to promote moderate growth.29 A few days later Bernanke gave a speech noting that the rising commodity prices and the dollar’s depressed value posed a challenge for anchoring long-term inflation.

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It was at this time that conflicts both within countries and between countries intensified, sowing the seeds of populism, authoritarianism, nationalism, and militarism that at first led to economic warfare and then military warfare in Europe in September 1939 and with Japan in December 1941. Second Half of 1932: Further Contractions and the Election of FDR By the summer, the big stimulation and relief to banks appeared to be helping. The downward spiral began to moderate, asset prices stabilized, and production actually increased in certain areas of the economy, like autos. From May through June, commodities, stocks, and bonds all bottomed. Markets for both stocks and bonds improved during the second half of the year. In August and September, the Dow Jones Industrial Average rallied to a peak of 80, almost double its July low.

…

Simultaneously oil prices continued to climb (hitting $130 in late May) and the dollar continued to fall. These moves added to the Fed’s dilemma, as it would have to balance keeping its policy accommodative to ward off an economic contraction and a further deterioration in financial conditions with concerns over price stability. The minutes of the Fed’s April meeting reflected this, with the committee acknowledging “the difficulty of gauging the appropriate stance of policy in current circumstances.” Two members even expressed “substantial concerns about the prospects for inflation” and warned that “another reduction in the funds rate…could prove costly over the long run.”

The European Union
by John Pinder and Simon Usherwood
Published 1 Jan 2001

The six members of the ECB’s Executive Board, together with the governors of the other central banks, comprise the Governing Council of the ECB; and none of these banks, nor any member of their decision-making organs, is to take instructions from any other body. The ‘primary objective’ of the ESCB is ‘to maintain price stability’ though, subject to that overriding requirement, it is also to support the Union’s ‘general economic policies’. The ECB has the sole right to authorize the issue of notes, and to approve the quantity of coins issued by the states’ mints. In response to German preference, the single currency was named the euro, rather than the French-sounding ecu.

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European Central Bank (ECB): Responsible for monetary policy for the Eurozone. Based in Frankfurt, the ECB is run by an Executive Board. Its members and the governors of central banks in the Eurozone comprise ECB’s Governing Council. ECB and central banks together form the European System of Central Banks (ESCB), whose primary objective is to maintain price stability. None of these participants may take instructions from any other body. European Coal and Steel Community (ECSC): Launched by the Schuman Declaration of 9 May 1950, placing coal and steel sectors of six states (Belgium, France, Germany, Italy, Luxembourg, Netherlands) under a system of common governance.

The Globalization Paradox: Democracy and the Future of the World Economy
by Dani Rodrik
Published 23 Dec 2010

The institutional embodiment of multilateralism in trade during the fifty years subsequent to the Bretton Woods Conference was the GATT. The GATT was only part of what was originally meant to be a more ambitious organization, the International Trade Organization (ITO). The proposed ITO included agreements on commodity price stabilization, international antitrust, and fair labor standards, but it floundered in domestic U.S. politics. The Congress worried that it encroached too much on domestic prerogatives. Even though the GATT was not constituted formally as a full-fledged organization like the IMF or the World Bank, it was managed by a small secretariat in Geneva.

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Once markets’ dynamics became intertwined with domestic politics, there was no hope that a world of smoothly functioning, self-equilibrating finance would lie within reach. Keynes identified another, more fundamental problem. Unfettered capital flows undermined not only financial stability but also macroeconomic equilibrium—full employment and price stability. The idea that the macroeconomy would self-adjust, without help from domestic fiscal and monetary policies, had been buried by the experience of the Great Depression and the chaos of the 1930s. Even in periods of relative calm, the combination of fixed exchange rates with capital mobility enslaved a country’s economic management to other countries’ monetary policies.

…

Deep integration with the world economy would solve Argentina’s short-and long-term problems. This was the Washington Consensus taken to an extreme, and it turned out to be right about the short term, but not the long term. Cavallo’s strategy worked wonders on the binding constraint of the moment. The Convertibility Law eliminated hyperinflation and restored price stability practically overnight. It generated credibility and confidence—at least for a while—and led to large capital inflows. Investment, exports, and incomes all rose rapidly. As we saw in chapter Six, Argentina became a poster child for multilateral organizations and globalization enthusiasts in the mid-1990s, even though policies like the Convertibility Law had clearly not been part of the Washington Consensus.

The Scandal of Money
by George Gilder
Published 23 Feb 2016

These tolls and fees are burdens on global trade and economic growth paid by the production sector of the economy to the financial sector. But it is the sum of all these activities—hedging, speculation, and derivatives—that accounts for the oceanic span of liquid and available currency services. As Friedman taught us, currency speculation can assure price stability. Speculation, in his view, could be destabilizing only if the speculators lost money. But money losers would eventually exit the market, leaving the profitable speculators (like those ten big U.S. banks full of computers and specialists) in charge, accurately arbitraging among the currencies and smoothing out the divergences.

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“E-Commerce Speeds Up, Hits Record High Share of Retail Sales,” MarketWatch (blog), August 15, 2014, http://blogs.marketwatch.com/capitolreport/2014/08/15/e-commerce-speeds-up-hits-record-high-share-of-retail-sales/. 3.Susan Vranica, “The Secret about On-Line Ad Traffic, One-Third is Bogus,” Wall Street Journal, March 23, 2014, http://www.wsj.com/articles/SB10001424052702304026304579453253860786362. 4.Nick Szabo, “Macroscale Replicator,” October 19, 1995. 5.Szabo’s blog, Unenumerated, is published online by Forbes.com. All the quotations here are from the Unenumerated archive. 6.Richard Vigilante, personal communication. CHAPTER 8: WHERE “HAYEKS” GO WRONG 1.Ferdinando M. Ametrano, “Hayek Money: The Cryptocurrency Price Stability Solution,” Social Science Research Network, revised July 5, 2015, http://ssrn.com/abstract=2425270, 54. Ametrano’s paper was shortlisted as a finalist for the Blockchain Awards, category Visionary Academic Paper, at the Bitcoin Foundation Conference 2014, but it lost to Nakamoto’s original breakthrough paper. 2.Ibid., 5–6. 3.Ibid., 10. 4.Ibid., 20; and Friedrich A.

India's Long Road
by Vijay Joshi
Published 21 Feb 2017

The targeting is very poor and the leakages are huge. The subsidy for rice and wheat is enormous and amounts to 1 per cent of GDP. As explained in Chapters 8 and 10, it would be far cheaper and more effective to give poor people cash or vouchers to buy food at market prices, with government intervention restricted to running a price stabilization scheme. NATIONAL GAIN FROM UNWINDING SUBSIDIES The above account covers only some of the most conspicuous subsidies but there are plenty of others, even if they do not figure explicitly in the budget. Elimination of all dysfunctional subsidies deserves to be a prime component of an intelligent reform agenda.

…

Even so, demand management, on its own, will not achieve low inflation in India today (or at least not without intolerable cost). There are two systemic supply-​side factors that create an inflationary bias. Firstly, there is the nature of state intervention in the food market. Such intervention is not necessarily a bad thing. In an economy that is subject to volatile swings in agricultural production, a price-​stabilization scheme run by the government makes good sense. A responsible government may also quite rightly [ 142 ] Stability and Inclusion 143 wish to protect the poorest people against food destitution. How would these tasks be organized in a rational system? The government would assure farmers a ‘procurement price’ (in other words a price at it which it stands ready to buy food from them) that is equal to an average of market prices expected to rule in good and bad years, thereby shielding them from price instability.

…

It is hard to resist the conclusion that the TPDS is ripe for abolition if a more efficient substitute could be found; and this leads to the thought that the objective of ensuring food security would be better achieved by making cash transfers to people, which they could use to buy food in the market. The state could continue with price stabilization via buffer stocks but it could get out of the business of distribution, in which the private sector has a comparative advantage. Up to two-​thirds of government spending on food subsidies could thus be saved and used for other socially desirable purposes. The second pillar of the social protection framework is the Mahatma Gandhi Rural Employment Guarantee Scheme (NREGS), initiated by an Act in 2006 and rolled out across the country by 2008.10 It guarantees, S a f e t y N e t s a n d S o ci a l P r o t e c t i o n [ 203 ] 204 as a legislated right, up to 100 days of employment a year to any rural household at a specified minimum wage indexed to the cost of living.

Lords of Finance: The Bankers Who Broke the World
by Liaquat Ahamed
Published 22 Jan 2009

Despite their role as national institutions determining credit policy for their entire countries, in 1914 most central banks were still privately owned. They therefore occupied a strange hybrid zone, accountable primarily to their directors, who were mainly bankers, paying dividends to their shareholders, but given extraordinary powers for entirely nonprofit purposes. Unlike today, however, when central banks are required by law to promote price stability and full employment, in 1914 the single most important, indeed overriding, objective of these institutions was to preserve the value of the currency. At the time, all major currencies were on the gold standard, which tied a currency in value to a very specific quantity of gold. The pound sterling, for example, was defined as equivalent to 113 grains of pure gold, a grain being a unit of weight notionally equal to that of a typical grain taken from the middle of an ear of wheat.

…

“I have a great respect for his ability and the freshness and versatility of his mind, but I am much afraid of some of his more erratic ideas, which impressed me as being the product of a vivid imagination without very much practical experience.” The hidden irony was that every one of Keynes’s main recommendations—that the link between gold balances and the creation of credit be severed, that the automatic mechanism of the gold standard be replaced with a system of managed money, that credit policy be geared toward domestic price stability—corresponded precisely to the policies Strong had instituted in the United States. During the war, the flow of gold into the United States had pushed up prices by 60 percent. When the fighting ended, but turmoil in Europe continued and the gold still kept arriving, Strong decided that it was time to abandon the conventional rules of the gold standard and insulate the U.S. economy from the flood of bullion.

…

Led by Strong, the Fed had undertaken a totally new responsibility—that of promoting internal economic stability. It was Strong more than anyone else who invented the modern central banker. When we watch Ben Bernanke or, before him, Alan Greenspan or Jean-Claude Trichet or Mervyn King describe how they are seeking to strike the right balance between economic growth and price stability, it is the ghost of Benjamin Strong who hovers above him. It all sounds quite prosaically obvious now, but in 1922 it was a radical departure from more than two hundred years of central banking history. Strong’s policy of offsetting the impact of gold inflows on domestic credit conditions meant that as bullion came into the United States, it was, in effect, withdrawn from circulation.

Austerity: The History of a Dangerous Idea
by Mark Blyth
Published 24 Apr 2013

No one was buying “the price is always right/state bad and market good” story when prices had been shown to be wrong by a few orders of magnitude and the state was bailing out the market. Furthermore, neoclassical policy was entirely focused on avoiding one problem, inflation, and providing one outcome, stable prices. It seemed to have very little to say about a world in which deflation was now the worry, and price stabilization meant raising, not lowering, inflation expectations. Helping such ideas along was the fact that, as Henry Farrell and John Quiggin put it, “There was a significant Keynesian party hidden in the academy,” and it found unexpected allies.7 Neoclassical economists and fellow travelers who were publicly reassessing their own beliefs during the crisis, such as Martin Feldstein and Richard Posner, joined prominent Keynesian economists such as Paul Krugman and Joseph Stiglitz in the campaign for stimulus, lending Keynesian ideas a new prestige.

…

But if politicians cannot, in the language that this literature spawned, “credibly commit” to a given policy, both voters and market agents will discount government policies and attempt to offset their effects, which will lead to greater economic instability and uncertainty. Kydland and Prescott argued that the key to solving this problem was for the central bank to be made independent from politicians and, in the manner of the Bundesbank, to be mandated to pay attention only to price stability. Critical here were a set of institutional reforms designed to shield the central bank from public scrutiny and central bankers from public recall or redress, while ensuring that these bankers are more conservative than the median voter to further protect the institution from populist demands.

…

Meanwhile taxation was structured in such a way that it stimulated investment.39 These reforms were in turn coupled to a policy of centralizing labor market institutions and promoting the increasing concentration of business to ensure trust and cooperation over wages among labor market partners.40 Taken together, these initiatives facilitated an expansionary policy that worked through the supply side of the economy as well as the demand side, while taking the price-stability concerns of business seriously. As Swedish economist Rudolph Meidner said of economic policy in this period, the objective was to “maintain the market economy, to counter short-sighted fluctuations through anti-cyclical policies, and to neutralize its negative effects through fiscal policies.

The Einstein of Money: The Life and Timeless Financial Wisdom of Benjamin Graham
by Joe Carlen
Published 14 Apr 2012

As Graham recalls of his initial flash of inspiration (ca. 1921) regarding this matter, “A better standard, I felt, was to give a designated bundle or ‘market basket’ of basic raw materials a monetary status equivalent to that which had always been accorded to gold.”12 Specifically, Graham advocated for a “commodity-unit” currency representing a basket of twenty-three commonly used commodities13—“the former 23 gr. of gold in the dollar are to be replaced by 23 small quantities of different basic raw materials.”14 In this manner, some of the stability enjoyed by gold producers during the 1920–1921 Depression could be experienced by those who supply/produce what Graham describes as the “tangible, basic goods that we use and need, in their proper relative amounts.”15 This would be a monetary system that would provide greater stability to the prices of basic foodstuffs (wheat, sugar, etc.), textiles (e.g., cotton), metals (e.g., copper), and other vital tangible elements of American production and consumption, such as rubber. In other words, just as gold had enjoyed greater stability by being the constituent element of the monetary unit (the dollar), by being elevated to constituent elements of the dollar, the price stability of the primary inputs of production would be enhanced considerably. The improved stability of these primary “inputs” would, in Graham's view, then ripple throughout the economy, leading to greater overall stability in pricing, production, consumption, profitability, and employment. During downturns, the government would purchase a reserve of this basket of goods (on an established proportional basis set by the government) from its suppliers to absorb excess capacity.

…

These are some of the reasons why it is somewhat surprising that, of the two economists, it was Hayek, of the less interventionist Austrian school, who gave Graham “strong support of the plan in its international application.”70 In fact, Hayek wrote a full-length article endorsing the plan titled “A Commodity Reserve Currency,”71 which was published in the June–September 1943 issue of the Economic Journal. As for Keynes, his support was more equivocal, as he considered rising prices to be more conducive to full employment than Graham's objective of price stabilization. Nonetheless, he did recognize the merit of other aspects of Graham's plans. As Keynes wrote in a personal letter to Graham, “On the use of buffer stocks as a means of stabilizing short-term commodity prices, you and I are ardent crusaders on the same side.”72 According to Kahn and Milne, “Ben exchanged a number of letters with John Maynard Keynes on this and other economic topics.”73 Whatever one's opinion of his plan may be, it is a testament to his extraordinary intellect and writing skills that Graham, with no formal economic training, could conceive, develop, and present his plan in such a way as to elicit considered (and, on balance, positive) responses from two of the greatest economists of the era (and, indeed, of modern history).

…

P., 102 Morningstar, 166 Munger, Charlie, 54, 135, 138, 246, 252 Murray, Roger, 256 mutual funds, 94 names, “Americanization” of, 17 National Presto Industries, 306 National Transit, 148 “nature versus nurture,” 21 negative (inefficient) information volatility, 167 Newburger, Alfred, 76, 103 Newburger, Bob, 103 Newburger, Henderson, and Loeb, 76, 98, 103, 108 Newburger, Samuel, 104 “New Deal,” 184, 209 Newman, Douglas, 143 Newman, Jerry, 136, 143, 149 Newman, Mickey, 240 Newman and Graham LP, 234 New School for Social Research, 185 New York Institute of Finance, 36, 50, 156, 244 New York State Guard, 109 New York State War Finance Committee, 195 New York Stock Exchange, origins of, 102 Nippon Club in Manhattan, 113 Nomura, 258 “nonethnic” names, 100 Northern Pipe Line Company, 145–47 option warrants, 288 Orthodox Judaism, 18 over-the-counter houses, 149 overvaluation, 81 owner orientation, 134 panic selling, 172 Parikh, Parag, 173–74 partnerships vs. corporations, 183 “passive” investors, 84 Pat Dorsey/Sanibel Captiva, 257 Pennsylvania Savold, 116 performance, long-term, 52 Perlmeter, Stan, 253 Plymouth Cordage, 150 positive (efficient) information volatility, 167 Poulet, David, 259 Powers, Barnard, 116 price and value, divergence between, 129 price fluctuations, 171 price stabilization, 216 price-to-earnings ratio (P/E), 149 “price trending” methods, 107 price volatility, 45 principal, safety of, 36, 51 principles of corporate valuation, 159 property values, 96 qualitative and quantitative factors, distinction between, 81 qualitative factors, 54 quantitative analysis, 98 quantitative diagnostics, 96 Quirt, John, 292 Ranson, David, 217 Rea, James, 305 Rea-Graham fund, 305 reasoning, 38 Reiter, Charlotte, 236, 272–73, 295 “research and analysis,” 106 revenue-generating enterprise, 131 risk, minimizing, 49–51 Robert Hagstrom/Legg Mason Capital Management, 257 Roberts, Scott & Co., Inc., 305 Rockefeller, John D., 146 Rockefeller Foundation, 146–48 Roll, Richard W., 314 Roosevelt, Franklin Delano, 150–51, 184, 207, 293 Ross, Nikki, 137, 175 Ruane, Bill, 156, 230, 244 Ruane & Cunniff, 248 Rubel, David, 141 Russo, Mark, 259 Russo, Tom, 55 Safron, Edythe (Kenner), 198, 299 Sanders, Henry, 195 S&P 500, 93–94 Sarnat, Bernard, 20, 74–75, 183, 230 Sarnat, Gerry, 267 Sarnat, Rhoda, 20, 67, 266–67 Schaffer Cullen Capital Management, 257 Schloss, Edwin, 245 Schloss, Walter, 134–35, 244 Schroeder, Alice, 228–29 Schwartz, Anna, 205–206 screening tools, online, 92–93 screens for bond selection, 89–92 for defensive investors, 85–87 for enterprising investors, 87–89 Sears, Steven, 174 securities, 36 security analysis, system of, 38 security analysts, 40, 98 security-selection principles, 223 self-education, 58 selloff, 127 Semper Vic Partners LP, 259 Sequoia Fund, 50, 248–49 Seth Klarman/Baupost Group, 257 Sherman Anti-Trust Act, 145 Sherry (Siamese cat), 193–94 Sherry II (Siamese cat), 194 Sherry Netherland Hotel, 193 “shorting,” defined, 141–42 silent partner, 131 “sitting shiva,” 25 Skirball, Jack, 268 Slade, Helen, 195 Smith, Adam, 257–58, 292 Smith Barney, 232 Social Security, 293 Sonkin, Paul, 242 speculation, unsound, 51 “speculative enthusiasm,” 125 speculative investments, 130 Standard Oil (John D.

Not Working: Where Have All the Good Jobs Gone?
by David G. Blanchflower
Published 12 Apr 2021

Without a clear guide to the objective of monetary policy, and a credible commitment to meeting it, any rise in inflation might become a self-fulfilling and generalised increase in prices and wages. And surely the lesson of the past fifty years is that, when inflation becomes embedded, the cost of getting it back down again is a prolonged period of sluggish output and high unemployment. Price stability—returning inflation to the target—is a precondition for sustained growth, not an alternative. Price stability was not a precondition for anything, let alone sustained growth. It turns out targeting inflation meant too many policymakers failed to spot the biggest recession in a generation. Since then we have continued to have a growth problem and a “too little” inflation problem.

…

There are obviously a number of deep factors driving the labor productivity puzzle, but we have to accept that real wages and labor productivity are closely linked. In addition, the labor share has been remarkably stable in this period. The nominal part of the wage story is presumably connected to the attainment of price stability. We simply do not expect price inflation to hit 10 percent anymore, and this may partly explain why a pay norm seems to have been anchored around 2 percent for several years around the world. In reality, the high level of labor market slack and the weakness of worker bargaining power are keeping pay and price inflation down.

…

Janet Yellen in a speech in September 2017 raised the possibility that, indeed, the natural rate has fallen and perhaps by a lot: Some key assumptions underlying the baseline outlook could be wrong in ways that imply that inflation will remain low for longer than currently projected. For example, labor market conditions may not be as tight as they appear to be, and thus they may exert less upward pressure on inflation than anticipated. The unemployment rate consistent with long-run price stability at any time is not known with certainty; we can only estimate it. The median of the longer-run unemployment rate projections submitted by FOMC participants last week is around 4–1/2 percent. But the long-run sustainable unemployment rate can drift over time because of demographic changes and other factors, some of which can be difficult to quantify—or even identify—in real time.

An Extraordinary Time: The End of the Postwar Boom and the Return of the Ordinary Economy
by Marc Levinson
Published 31 Jul 2016

Two weeks later, after a single face-to-face meeting between Carter and Volcker in the Oval Office and a lightning-fast Senate confirmation, the chairman’s office was filled with the smoke of Volcker’s cheap A&C Grenadier cigars. Not particularly at home in economic matters, Carter was unfamiliar with Volcker’s views in detail. Like every political leader everywhere, the president favored bringing down inflation, but he shared the widespread hope that if the Fed proceeded gradually, it might be able to achieve price stability without putting people out of work—and without endangering the president’s chances of re-election in 1980. The fact that the Fed had tried this approach for more than a decade, without success, did not alter the president’s opinion. Volcker had no such illusions. In a book published in 1978, he had warned of “limits on the ability of demand management to keep the economy at a steady full employment path,” an oblique way of saying that bringing down inflation would cost jobs.

…

High duties and taxes on coffee, tea, and cocoa beans, in some cases exceeding 60 percent of the value of the product, exemplified the barriers to tropical products; see Appendix, Table D. 20. For an economic discussion of such schemes, see David M. G. Newbery and Joseph E. Stiglitz, The Theory of Commodity Price Stabilization (Oxford: Oxford University Press, 1981), and David G. Gill et al., “Access to Supplies and Resources: Commodity Agreements,” American Society of International Law, Proceedings of the Annual Meeting 71 (1977): 129–144. 21. United Nations Conference on Trade and Development, The History of UNCTAD 1964–1984 (New York: UNCTAD, 1985), 56–58. 22.

…

See First National City Bank Clean Air Act, 62 Club of Rome, 57 Coase, Ronald, 107 Cold War, 40–41 collective rationality, 32, 34 Commission on Industrial Competitiveness, 236 Committee for Economic Development, 26 Committee on Banking Regulations and Supervisory Practices, 93 commodity prices: stabilization of, 42–43 commonality: among developing countries, 41 communism, 63 Communist Bloc. See Soviet Bloc communist economies of 1970s: in Soviet Union, 161–162 Communist Party, in France, 201, 203, 204–205, 206, 210. See also political parties computers, 58, 64, 93, 117, 123, 264, 265, 266 concerted action (government and nongovernmental cooperation), 32–34 Congo, 44 conservatism: move to the right and, 10, 155–178 conservative economic policy, 179–182; discretion and, 180; employment and, 179, 180, 182; inflation and, 180–182; rules matter and, 179–180; of Thatcher, Margaret, 182–197.

A Failure of Capitalism: The Crisis of '08 and the Descent Into Depression
by Richard A. Posner
Published 30 Apr 2009

At this writing, the federal government, in a desperate effort to speed the recovery, has spent or committed to spend (I include the stimulus package now wending its way through Congress, as it seems certain to be enacted) $7.2 trillion ($5.2 trillion by the Federal Reserve, $2 trillion by the Treasury Department), and has guaranteed another $2 trillion in loans and deposits. We are facing the certainty of a huge increase in the national debt and the possibility of a future inflation rate so high that, as in the early 1980s, the Federal Reserve will have to engineer a severe recession (by effecting a sudden sharp increase in interest rates) in order to restore price stability. Such a recession would be an aftershock, and hence a cost, of the present crisis. The aftershock would be all the greater if at the same time that interest rates were rising the government was raising taxes in order to trim an astronomical national debt. And suppose that to reduce the pain of a post-depression recession the Federal Reserve restarted the boom-and-bust cycle by forcing down interest rates.

…

Had the Federal Reserve caused interest rates to rise, this would have accelerated the bursting of the housing bubble—and then, since no one could be certain that it was a bubble, Congress and the Administration would have been blamed for the fall in home values and the increase in defaults and foreclosures. As long as the Federal Reserve adjusts interest rates just to maintain price stability and avert or soften recessions—raising interest rates to cool economic activity when inflation threatens and lowering them to stimulate economic activity when recession threatens—its actions are relatively uncontroversial and its political independence is therefore unchallenged. If in addition it tried to prick asset bubbles, as by curtailing bank lending when housing prices soar, it would raise political hackles.

The Ascent of Money: A Financial History of the World
by Niall Ferguson
Published 13 Nov 2007

What made Argentina’s inflation so unmanageable was not war, but the constellation of social forces: the oligarchs, the caudillos, the producers’ interest groups and the trade unions - not forgetting the impoverished underclass or descamizados (literally the shirtless). To put it simply, there was no significant group with an interest in price stability. Owners of capital were attracted to deficits and devaluation; sellers of labour grew accustomed to a wage-price spiral. The gradual shift from financing government deficits domestically to financing them externally meant that bondholding was out-sourced. 64 It is against this background that the failure of successive plans for Argentine currency stabilization must be understood.

…

In perhaps the most important work of American economic history ever published, Milton Friedman and Anna Schwartz argued that it was the Federal Reserve System that bore the primary responsibility for turning the crisis of 1929 into a Great Depression.84 They did not blame the Fed for the bubble itself, arguing that with Benjamin Strong at the Federal Reserve Bank of New York a reasonable balance had been struck between the international obligation of the United States to maintain the restored gold standard and its domestic obligation to maintain price stability. By sterilizing the large gold inflows to the United States (preventing them for generating monetary expansion), the Fed may indeed have prevented the bubble from growing even larger. The New York Fed also responded effectively to the October 1929 panic by conducting large-scale (and unauthorized) open market operations (buying bonds from the financial sector) to inject liquidity into the market.

…

While American home purchasers in the mid seventies anticipated an inflation rate of at least 12 per cent by 1980, mortgage lenders were offering thirty-year fixed-rate loans at 9 per cent or less.35 For a time, lenders were effectively paying people to borrow their money. Meanwhile, property prices roughly trebled between 1963 and 1979, while consumer prices rose by a factor of just 2.5. But there was a sting in the tail. The same governments that avowed their faith in the ‘property-owning democracy’ also turned out to believe in price stability, or at least lower inflation. Achieving that meant higher interest rates. The unintended consequence was one of the most spectacular booms and busts in the history of the property market. From S&L to Subprime Take a drive along Interstate 30 from Dallas, Texas, and you cannot fail to notice mile after mile of half-built houses and condominiums.

A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing (Eleventh Edition)
by Burton G. Malkiel
Published 5 Jan 2015

Indeed, a subtitle for this book might well have been The Get Rich Slowly but Surely Book. Remember, just to stay even, your investments have to produce a rate of return equal to inflation. Inflation in the United States and throughout most of the developed world fell to 2 percent or below in the early 2000s, and some analysts believe that relative price stability will continue indefinitely. They suggest that inflation is the exception rather than the rule and that historical periods of rapid technological progress and peacetime economies were periods of stable or even falling prices. It may well be that little or no inflation will occur during the decades ahead, but I believe investors should not dismiss the possibility that inflation will accelerate again at some time in the future.

…

There are at least grains of truth in Bierman’s arguments, and economists today often blame the severity of the 1930s depression on the Federal Reserve for allowing the money supply to decline sharply. Nevertheless, history teaches us that very sharp increases in stock prices are seldom followed by a gradual return to relative price stability. Even if prosperity had continued into the 1930s, stock prices could never have sustained their advance of the late 1920s. In addition, the anomalous behavior of closed-end investment company shares (which I will cover in chapter 15) provides clinching evidence of wide-scale stock-market irrationality during the 1920s.

…

Standard & Poor’s 500, 179, 181 see also specific funds Nagel, Stefan, 250 NASDAQ, 80–81, 82, 109, 128, 254 National Cash Register, 48, 53 national income changes, as element in systematic risk, 224 National Student Marketing (NSM), 67–68, 69 “naughties,” 344, 411 New Economy, 241, 249 accounting fraud in, 93–95 Internet-driven, 79–97, 104–5 New Economy stocks, 172, 177 New England Patriots, 148 new investment technology, 26, 31, 189–228 alpha in, 219 beta in, see beta CAPM in, see capital-asset pricing model MPT in, see modern portfolio theory risk in, 190 new issues, 257, 318 caution with, 75 of Internet stocks, 84–87 of 1959–62, 57–59 of 1980s, 70–75 Newsweek, 57 Newton, Isaac, 47 New Yorker, 88 New York Post, 89 New York State Teachers Association, 384 New York Stock Exchange (NYSE), 56, 109, 144, 151, 397 Babson Break in, 51–52 speculation in, 48–55 New York Times, 91, 393 Nifty Fifty, 36, 68–70 NINJA loans, 101 Nobel Prize, 35, 183, 197, 209 No-Brainer Step, 379, 380–82 NO-DOC loans, 101 no-equity loans, 100 Non-Random Walk Down Wall Street, A (Lo and MacKinlay), 139 Nortel Networks, 83, 90, 161, 166 NSM, see National Student Marketing NTT Corporation, 76 nucleus theory of growth, 64 NYSE, see New York Stock Exchange odd-lot theory, 149 Odean, Terrance, 93, 234, 246, 256 O’Higgins, Michael, 150 Once in Golconda (Brooks), 49 “one-decision” stocks, 69 online brokers, Internet bubble aided by, 91–92 online investment advisers, 408 OPEC, 337 open-end funds, 402 operating expenses, 402 option premiums, 39 O’Shaughnessy, James, 150 Outlook (S&P), 393 overconfidence, 231, 232–35 overtrading, 234, 255–56 PalmPilot, 83 Paternot, Stephen, 86 P/BV ratios, see price-to-book value ratios P/E effect, 263 P/E multiples, see price-earnings multiples pension funds, 167, 182, 184, 303–4 P/E ratios, see price-earnings multiples performance, 65–68 of buy-and-hold strategy, 158 of common stocks (1970s), 340 of concept stocks, 65–68 of mutual funds, 66, 174–82, 398–400 vs. future results in mutual funds, 399, 401 Performance Systems, 68, 69 Personal Digital Assistants (PDAs), 83 Peters, Thomas J., 233 Pets.com, 84 Philadelphia 76ers, 145 Phillips, Don, 400 Phoenix, University of, 169 Pittsburgh Steelers, 148 Polaroid, 68, 69, 161 Ponzi schemes: Internet investment as, 80, 242 of Madoff, 258–59 ZZZZ Best as, 74 portfolio management, 66, 160–61, 164, 170, 174–84, 261, 349–50, 351, 361–62, 366–67, 389, 398 see also “smart beta” Portfolio Selection (Markowitz), 197 portfolio theory, see modern portfolio theory positive feedback loops, 80 Pound, John, 253 PowerShares, 270, 281 Prechter, Robert, 151–52 present value, 32, 125n price-dividend multiples, 330, 340, 341, 343 price-earnings (P/E) multiples, 57, 64, 65, 126, 264, 274, 336, 344, 346–47, 394–95 of blue-chip stocks, 68 crash in (1970s), 340 cyclically adjusted (CAPE), 347, 387 of growth stocks, 121–23, 130–33, 406 of high-tech stocks, 81 inflation of, 64 performance and, 263, 396 see also performance, of common stocks (1970s); performance, of concept stocks Priceline.com, 83 price stability, 54 price-to-book value (P/BV) ratios, of stocks, 264, 270, 274 price-volume systems, 143–44 Price Waterhouse, 153 Princeton University, 161 probability judgments, 233–34, 238 Producers, The, 166 product asset valuation, 72 professional investors: limitations of, 162–63 profit-maximizing behavior, as argument against technical analysis, 116–17 profits, 339 in inflation, 339 measurement of, 339 profit-sharing plans, 304 Prohibition, 52 property taxes, 314 prospect theory, 243–45 prospectuses, warnings on, 59 PSI Net, 90 psychological factors in stock valuation, see castle-in-the-air theory; technical analysis Puckle Machine Company, 45 Puerto Rico, 404 purchasing power, effects of inflation on, 28–29, 125n, 307, 315 Purdue University, 82 Quandt, Richard, 140 quant, defined, 221n Quinn, Jane Bryant, 91 Qwest, 166 Radio Corporation of America (RCA), 48, 53 railroad industry, 91, 96 RAND Corporation, 197 Randell, Cortes W., 66–68 random events, forecasting influenced by, 164–65, 176 random walk: defined, 26–28, 139, 140 difficult acceptance of, 145–46 fundamental conclusion of, 154 summarized, 35–36 random-walk theory, 105–6, 266–67 assumptions of, 190, 229, 230 fundamental analysis and, 182–84 guide for, 291 and housing bubble, 105–6 index funds and, 379–80 role of arbitrage in, 248–49 semi-strong form of EMH, 26, 182–84 strong (broad) form of EMH, 26, 182–84 technical analysis and, 137–41, 154–57 weak (narrow) form of EMH, 26, 140, 183 Raptor, 94 rate of return: after inflation, 338 for bonds, 194–96, 307, 315–21, 342–43, 344, 345 in CAPM, 213–19 for common stocks, 194–96, 307 compounded, 351 diversification and, 198–200 expected, see expected rate of return future events and, 30, 343–48 high, for bearing greater risk, 194–96, 212–13, 350, 408 investment objectives and, 306–13 negative, 196 for real estate, 313 rebalancing to, 360 risk-free, 215–18 “small caps” vs.

Financial Fiasco: How America's Infatuation With Homeownership and Easy Money Created the Economic Crisis
by Johan Norberg
Published 14 Sep 2009

But this was not enough for the Fed, and the market players were clamoring for more to cope with the downturn. Basically, this desire to help the economy squares well with the task that the Fed has been given by Congress. Unlike most other central banks in the world, the Fed has a duty not only to maintain price stability but also to ensure that the unemployment rate is as low as possible and that long-term interest rates are low. This has made many European politicians view the Fed as a model. What's more, there was concern at the Fed that prices would start falling. One Fed governor who was an expert on the Great Depression, Ben Bernanke, convinced Greenspan and their colleagues that the country was at risk of entering a deflationary spiral as it had in the 1930s and as Japan had done in the 1990s.

…

In his description of that "free-bank system," Per Hortlund points out that during the 70 years of its existence, not a single billissuing bank failed, no bill owner lost a krona, and no bank had to shut its windows even for a single day-a "world record for bank stability."" The Swiss economist Peter Bernholz tells us that "a study of about 30 currencies shows that there has not been a single case of a currency freely manipulated by its government or central bank since 1700 that enjoyed price stability for at least 30 years running."" If we chop down the jungle of government support, protection, and requirements, investors and savers will be left to their own devices. That is tough. But thinking for yourself should be tough, because the intellectual exercise it provides will train skills that have lain dormant.

Global Governance and Financial Crises
by Meghnad Desai and Yahia Said
Published 12 Nov 2003

On the one hand, the principle of mutual assistance founded at Bretton Woods has run its course economically and politically. Developed countries have opted out as far as macroeconomic adjustment is concerned. If any principle of co-responsibility takes grounds, it comes from compatible views of price stability in the system of independent central banks. But price stability does not preclude financial imbalances stemming from the vicious circle of credit over-expansion and speculative asset price appreciation. On the other hand, the whole institutional machinery that drives the Fund’s operations is still shaped according to the original philosophy.

10% Less Democracy: Why You Should Trust Elites a Little More and the Masses a Little Less
by Garett Jones
Published 4 Feb 2020

They start by looking for ways to cure disease, then for ways to prevent disease, and may end their quest by searching for the best public health programs to encourage vaccinations or to create safer tap water. The search for deep causes, root causes, may take us in unexpected directions. Governments across rich countries have had widely differing rules about how to run monetary policy: gold standards, pegged exchange rates, vague promises of “price stability,” and many others. And they have different kinds of bureaucracies implementing those policies. Some are about as detached from democracy as an appointed judge, while others work directly for the nation’s prime minister and can be fired at any moment. Once monetary economists started looking into what kinds of government rules and government bureaucracies predicted economic success and which predicted economic tragedy, they found a repeated pattern: the more “independent” the nation’s central bank was from the political process, the better things typically turned out.

…

They summarize political independence: Whether or not its governor and the board are appointed by the government, the length of their appointments [longer is more independent], whether government representatives sit on the board of the bank [a bad sign], whether government approval for monetary policy decisions is required [another bad sign] and whether the “price stability” objective is explicitly and prominently part of the central bank statute [a good sign—a sign of focus].³ Economic independence is different: it measures whether the central bank is permitted to say “No!” to the government. After all, many nations have been ruined by governments that forced the central bank to lend the government money on easy terms, setting off inflationary and even hyperinflationary spirals.

The Invisible Hands: Top Hedge Fund Traders on Bubbles, Crashes, and Real Money
by Steven Drobny
Published 18 Mar 2010

One of the more significant questions facing all investors is whether a three-decade tail wind for risk assets—due to falling inflation and declining interest rates—could be over, now that the main economic blocks (United States, Europe, Japan) have no inflation and near-zero interest rates. Fiscal deficits, increasing public sector debts, private sector deleveraging, and populist and protectionist politics around the globe all point to increased volatility and a move away from “price stability.” Still, real money accounts have an overwhelming proportion of their portfolio in equity and equity-like investments. The status quo for real money management is no longer tenable. It is not acceptable to obscure losses and volatility behind benchmarks, long-term time horizons, or relative performance numbers.

…

Quantitative easing is the budgetization of monetary policy—essentially printing money—and the examination of global central bank balance sheets confirms that it is global in scope and massive in scale. We all know that (1) money is ultimately a confidence trick, so policy credibility is very important; and (2) inflation unequivocally erodes savings and capital in the long term, which is one of the main reasons that price stability became such a focal point the past two decades and one of the standards for judging convergence. The credibility and store of value anchors to fiat money are being questioned because the forces known to erode a currency’s purchasing power and confidence are being enacted on such a large scale globally.

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For example, the National Bank Act in Switzerland formalized the Swiss National Bank’s (SNB) independence and mandate in the constitution only in 2003, which is frankly like yesterday in the big picture. You could argue that inflation targeting has worked as planned, but that it also led to the crisis of 2008. Because people thought that price stability was here forever, they started levering up, and asset prices exploded. An example where alpha may result from policy change going forward is central banks moving away from inflation targeting, whereby they perhaps target inflation and credit growth. That would generate volatility and change how risk premia are valued.

Pivotal Decade: How the United States Traded Factories for Finance in the Seventies
by Judith Stein
Published 30 Apr 2010

That promise made the second choice, eliminating the difference by September 30, 1981, attractive. Foreign policy obligations would be fulfilled if the deed was done by 1981, late by only one year. The domestic inflation watchers in the government—Schultze, OMB director James McIntrye, and Alfred Kahn, chair of the Council on Wage and Price Stability—opted for either 1981 or 1985. Those who wanted to encourage investment in energy advocated immediate decontrol. Treasury secretary Blumenthal urged complete decontrol on June 1, 1979, the first date possible according to the 1975 law.29 Schlesinger and most of the president’s foreign policy advisers agreed.

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Because inflation was not the result of wage increases but of rising prices in key sectors—energy, food, housing, and health care—Marshall argued that limiting wages and prices was not the best way to reduce inflation.45 He was overruled by Schultze.46 The president’s policy was aimed at “the major unions,” which “have to be brought back into line with the rest of the economy,” according to Barry Bosworth, director of the Council on Wage and Price Stability (CWPS), the monitoring agency.47 So the weight of any government wage and price controls fell on the industrial sector, already burdened by energy costs and foreign competition.48 Industrial labor was in the crosshairs of the government’s inflation policy. AFL-CIO head George Meany was incensed.

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Business Council Business Roundtable Butler, Landon Butz, Earl Buy American Act Byrd, Robert Caddell, Patrick Calhoun, Michael Califano, Joseph Callaghan, James Canada “Capitol Compact,” Carey, Hugh Carswell, Harrold Carter, Jimmy; auto industry emergency Democratic primaries economic policies energy policy foreign policy and foreign trade industrial policy Iran and labor interests political rise presidential campaigns Castro, Fidel Caterpillar Tractor Center for Political Reform CEO earnings Cheney, Richard Chiles, Lawton China Chirac, Jacques Chisholm, Shirley Chrysler Church, Frank cities, depopulation of Civil Rights Act civil rights movement Clark, Dick Clean Air Act Clifford, Clark Clinton, Bill economic policies education policy and foreign trade governorship health care plan presidential campaign scandals Commission on International Trade and Investment Policy Commodity Futures Modernization Act Common Cause Common Situs Picketing Bill Communism Comprehensive Employment Training Act (CETA) Conable, Barber Congressional Black Caucus Connally, John Continental Oil Contract with America “Contract with America,” Cooper, Richard Cooper-Church Amendment corporate scandals Cost of Living Council Council of Economic Advisers (CEA) Council on International Economic Policy (CIEP) Council on Wage and Price Stability (CWPS) Cox, Archibald C. Cranston, Alan Cuba Culver, John Cuomo, Mario dairy industry, U.S. Daley, Richard Darman, Richard Davignon, Étienne Davis, Rennie Deere & Company Deering-Milliken Dees, Morris Defense Logistics Agency Democratic Leadership Council (DLC) Democratic National Committee (DNC) détente, U.S.

Beyond the Random Walk: A Guide to Stock Market Anomalies and Low Risk Investing
by Vijay Singal
Published 15 Jun 2004

For example, it is not possible to short-sell initial public offerings (IPOs) for a few days after the issue because shares are not available to borrow. The mispricing, if any, may persist for a few days, until short selling becomes possible. Again in the case of IPOs, the underwriters engage in price stabilization activities that can, in some cases, keep the price at an inflated level for almost a month. A case in point is the spin-off of Palm by 3Com. 3Com sold a fraction of Palm as an IPO in March 2000 but retained 95 percent of its shares. At that time it announced that it would spin off the remaining shares to 3Com shareholders at the rate of 1.5 Palm shares for every 3Com share.

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Strategic IPO Underpricing, Information Momentum, and Lockup Expiration Selling. Journal of Financial Economics 66, 105–37. Allen, Franklin and Gerald R. Faulhaber. 1989. Signaling by Underpricing in the IPO Market. Journal of Financial Economics 23(2), 303–24. Asquith, Daniel, Jonathan D. Jones, and Robert Kieschnick. 1998. Evidence on Price Stabilization and Underpricing in Early IPO Returns. Journal of Finance 53(5), 1759–73. Beatty, Randolph P., and Jay R. Ritter. 1986. Investment Banking, Reputation, and the Underpricing of Initial Public Offerings. Journal of Financial Economics 15(1– 2), 213–32. Booth, James R., and Lena Chua. 1996. Ownership Dispersion, Costly Information, and IPO Underpricing.

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It is believed that the drift occurs because informed traders break up their orders and spread them over several days to hide their superior information. References for Further Reading Affleck-Graves, John, Shantaram Hegde, and Robert E. Miller. 1996. Conditional Price Trends in the Aftermarket for Initial Public Offerings. Financial Management 25(4), 25–40. Asquith, Daniel, Jonathan D. Jones, and Robert Kieschnick. 1998. Evidence on Price Stabilization and Underpricing in Early IPO Returns. Journal of Finance 53(5), 1759–73. Bradley, D., B. Jordan, and J. Ritter, J. 2003. The Quiet Period Goes out with a Bang. Journal of Finance 58(1), 1–36. Busaba, Walid Y., and Chun Chang. 2002. Bookbuilding vs. Fixed Price Revisited: The Effect of Aftermarket Trading.

Making Globalization Work
by Joseph E. Stiglitz
Published 16 Sep 2006

These policies focused on minimizing the role of government, emphasizing privatization (selling off government enterprises to the private sector), trade and capital market liberalization (eliminating trade barriers and impediments to the free flow of capital), and deregulation (eliminating regulations on the conduct of business). Government had a role in maintaining macro-stability, but the attention was on price stability rather than on output stability, employment, or growth. There was a large set of dos and don’ts: do privatize everything, from factories to social security; don’t have the government involved in promoting particular industries; do strengthen property rights; don’t be corrupt. Minimizing government meant lowering taxes—but keeping budgets in balance.

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If the provinces of China were treated as separate countries—and with populations sometimes in excess of 50 million, they are far larger than most countries around the world—then most of the fastest-growing countries in the world would be in China.6 Importantly, these governments made sure that the benefits of growth did not go just to a few, but were widely shared.7 They focused not only on price stability but on real stability, ensuring that new jobs were created in pace with new entrants to the labor force. Poverty fell dramatically—in Indonesia, for example, the poverty rate (at the $1-a-day standard) fell from 28 percent to 8 percent between 1987 and 20028—while health and life expectancy improved and literacy became close to universal.

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As high inflation broke out in many of the countries, the Washington Consensus’s focus on fighting inflation made sense. Their governments had not been working well for them, and the appeal of the Washington Consensus—minimizing the role of government—was understandable. As countries like Argentina adopted the Washington Consensus policies, praise was heaped upon them. When price stability was restored and growth resumed, the World Bank and the IMF claimed credit for the success; the case for the Washington Consensus had been made. But, as it turned out, the growth was not sustainable. It was based on heavy borrowing from abroad and on privatizations which sold off national assets to foreigners—the proceeds from which were not invested.

Efficiently Inefficient: How Smart Money Invests and Market Prices Are Determined
by Lasse Heje Pedersen
Published 12 Apr 2015

Between 2:45:13 and 2:45:27, HFTs traded over 27,000 contracts, which accounted for about 49 percent of the total trading volume, while buying only about 200 additional contracts net.9 CFTC and SEC continues: At 2:45:28 p.m., trading on the E-Mini was paused for five seconds when the Chicago Mercantile Exchange (“CME”) Stop Logic Functionality was triggered in order to prevent a cascade of further price declines. In that short period of time, sell-side pressure in the E-Mini was partly alleviated and buy-side interest increased. When trading resumed at 2:45:33 p.m., prices stabilized and shortly thereafter, the E-Mini began to recover. When the price of the S&P 500 neared the bottom, its liquidity dried up in the sense that the depth in limit order book almost completely vanished. Furthermore, the liquidity crisis in the S&P 500 spilled over to many other markets, partly because traders were arbitraging the relative mispricings that arose due to the falling S&P 500.

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Will it implement unconventional monetary policies, such as lending facilities or quantitative easing (i.e., buying long-term bonds) or increase the strength of such programs (e.g., buying more bonds per month or “tapering” such a purchase program)? To answer these questions, macro traders seek to understand each central bank’s objectives and policy constraints and to analyze the same economic data as the central bank. Central bank objectives differ across countries. In the United States, the Federal Reserve has a “dual mandate” of price stability and maximum employment. This dual mandate can be summarized by saying that the Fed sets the nominal interest rate Rf approximately according to the Taylor rule (Taylor 1993): where the output gap is the “percentage deviation of real GDP from its target,” meaning whether output is above or below its potential.

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The Taylor rule is only an approximation of the actual behavior of the Fed, and several other parameter choices and extensions have been suggested, though none perfectly match the Fed’s actual choices. For instance, macro economists have noted that the Fed often acts with a certain amount of inertia, preferring to raise interest rates only gradually. Other central banks, such as the European Central Bank (ECB), have a single objective of price stability, that is, to keep inflation relatively constant (often around 2%). Countries with a pegged exchange rate must also use their monetary policy to achieve the exchange-rate objective, raising interest rates when the currency is falling in value and lowering interest rates when it is rising. Increasingly, central banks also have a financial stability goal.

Shutdown: How COVID Shook the World's Economy
by Adam Tooze
Published 15 Nov 2021

The defensive answer from the central banks was that they would off-load the bonds as soon as they could do so without disturbing the market and driving up interest rates. At that point, the market maker argument converged with the second basic justification for their actions—the original argument for QE. They were buying debt to massage the interest rate, and they were entitled to do that because their basic task was to ensure price stability, which in 2020 meant that the economy must be prevented from sliding into deflation. Avoiding deflation meant stimulating demand by all means. For the central bank, that meant holding interest rates down. Once again it came down to financial markets. As far as anyone could figure out, QE worked by driving government bond prices up and yields down.65 Lower interest rates helped to encourage borrowing for investment and consumption.

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How would the divergent expectations of the markets and the central bank play out then? 68 If the bond markets believed that the central bank was there to monetize the government deficit, but as prices picked up, the central bank actually withdrew support—as would be indicated by a mandate of price stability, not support of government funding—would interest rates surge? Were these the makings of a shock to come? History suggested that there was reason to worry. In the summer of 2013 Ben Bernanke had rocked bond markets by merely suggesting that the Fed might be thinking about reducing the scale of its third wave of QE.69 In a humiliating climbdown, the Fed had been forced to retreat, but not before the “taper tantrum” had reverberated around the world.

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Those calmed nerves in the north of Europe and bought enough political cover to enable the ECB to engage in bond buying as and when necessary.8 By way of justification for its interventions, the ECB offered a variety of pretexts, most commonly the need to guard against a threat to the integrity of the euro area that would put in jeopardy its ability to pursue its primary mandate, which was price stability. The ECB was a central bank with one foot in the 1990s and the other in the twenty-first century. It was a makeshift. It was tested at moments of political tension, as in 2015, when a left-wing Greek government came close to the brink of default, and as in 2018, when a self-proclaimed populist government in Italy challenged the patience of the North.

Stake Hodler Capitalism: Blockchain and DeFi
by Amr Hazem Wahba Metwaly
Published 21 Mar 2021

The main features of Bitcoin backed cryptocurrency are: • Bitcoin's fixed value is provided by another cryptocurrency or cryptocurrency portfolio. • Binding is done on the chain through smart contracts. • Fixed Bitcoin distribution is regulated within the chain through smart contracts. • Achieve price stability by introducing additional means and incentives as well as collateral. This type of filing coin's technical implementation is more complex and versatile than fiat-based filing lines, increasing the risk of exploitation due to the smart contract code's errors (bugs). Because modems operate in chains, they are not subject to third-party regulations that create decentralized solutions.

How Capitalism Saved America: The Untold History of Our Country, From the Pilgrims to the Present
by Thomas J. Dilorenzo
Published 9 Aug 2004

And in fact the studies show more than just a correlation; they explain why a higher degree of economic freedom (that is, a more capitalistic society) causes more prosperity. The seven components of the Fraser Institute’s index (which are virtually identical to those of the Wall Street Journal/Heritage Foundation index) are size of government, extent of government control of markets, degree of price stability, freedom to use foreign currencies, protection of property rights, freedom of international trade, and freedom of capital markets. The overall size of government as a percentage of an economy is important because every dollar that government spends must necessarily come from the private sector.

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Why do they throw all that money away by holding prices down? And why are they incapable of stopping oil prices from falling? (During the 2000 presidential election vice presidential candidate Dick Cheney appeared on Meet the Press to say that oil and gas prices were too low and that some kind of government “price stabilization program” was needed. At the time, he had just left his position as a top oil industry executive.) The obvious answer to these questions is that the oil companies do not have the price-fixing powers that the mainstream media—and anticapitalist intellectuals—ascribe to them. Nevertheless, regulation has become a reality in the energy industry.

Rethinking Money: How New Currencies Turn Scarcity Into Prosperity
by Bernard Lietaer and Jacqui Dunne
Published 4 Feb 2013

A governor of the Bank of England (a private company at that time) was being questioned by the British Parliament: “Can you please inform us about how much gold there is at the Bank of England?” “In ample sufficiency, Sir.” “Can you be more precise?” “No, Sir.” 5. L. Randall Wray, Understanding Modern Money: The Key to Full Employment and Price Stability (Cheltenham, England: Edward Elgar, 1998), viii–ix. 6. Steven D. Levitt and Stephen J. Dubner, Freakonomics: A Rogue Economist Explores the Hidden Side of Everything (New York: William Morrow, 2005), 15. 7. Eric Beinhocker, The Origins of Wealth: Evolution, Complexity and the Radical Remaking of Economics (Boston: Harvard Business School Press, 2006).

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“Public Attitude towards Climate Change: Findings from a Multi- Country Poll.” World Development Report 1020: Development and Climate Change. http://siteresources.worldbank.org /INTWDR2010 /Resources/Background-report.pdf. Wray, L. Randall. Understanding Modern Money: The Key to Full Employment and Price Stability. Cheltenham, England: Edward Elgar Publishing, 1998. Yeats, William Butler. The Collected Poems of W. B. Yeats. London: Wordsworth Editions, 1994. Yee, Lee Chyen, and Jim, Clare. “Foxconn to Rely More on Robots; Could Use 1 Million in 3 Years. Reuters News Agency, August 1, 2011. http://www .reuters.com /article/2011/08/01/us-foxconn-robots-idUST RE77016 B20110801.

Inflated: How Money and Debt Built the American Dream
by R. Christopher Whalen
Published 7 Dec 2010

Even in those uncertain days, there was plenty of comment about federal deficits, but soon the policy focus would swing back to inflation. The Fed under Chairman Martin consistently maintained support for price stability. This task was made easier by the election of President Dwight Eisenhower in 1952 and the fact that inflation moderated during his two terms in office. As Hertzel concluded: “Under Chairman Martin, the Fed’s overriding goals became price stability and macroeconomic stability.”11 There were also new calls for greater federal involvement in areas such as housing. In 1950, for example, the Truman Administration explicitly focused on housing as a key area of private investment, but with federal guarantees for the debt used to finance home purchases.

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In fact the relentless rate squeeze by the Fed and a lot of positively coincidental and mostly external trends broke the inflation in the United States, but did not really instill fiscal sobriety. But Paul Volcker broke the momentum of inflation and also took sufficient demand out of the economy to give the crucial impression of price stability. The underlying rate of inflation, represented by internal prices in the United States and the value of the dollar, remained high enough so that, in real terms, the cost of energy and particularly oil dropped for almost two decades to the end of the twentieth century. While the dollar rallied sharply from 1980 through 1985 because of the towering interest rate regime imposed by Volcker and the resulting rebound in U.S. standing with global investors, the overall trend continued to be one of steady inflation of the dollar and decreased purchasing power for U.S. consumers—except in the case of oil.

Paper Money Collapse: The Folly of Elastic Money and the Coming Monetary Breakdown
by Detlev S. Schlichter
Published 21 Sep 2011

Even in our model economy of only seven goods and services plus the monetary asset, it will now be extremely difficult for the money producer to inject precisely enough money to keep the agreed-upon statistical average stable or, as is more common today, to keep it advancing at a steady pace of, say, 2 percent per annum. In a modern economy with millions of goods and services and ongoing changes in preferences and in economic conditions, initiated by innovation and entrepreneurial activity, the task is even more difficult. Defenders of paper money and price stabilization will argue that the money producer can still identify certain trends in such variables as economic growth and wealth and, therefore, in money demand. If only the money producer forecasts these trends correctly, he stands a good chance of achieving stability over the medium to long term. Most inflation-targeting central banks today allow for a certain amount of near-term volatility around their aimed-at inflation rate, anyway.

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See also money, paper money individualism industrial commodities Industrial Revolution inelastic money inelastic, elastic versus inflation commodity money and paper money and inflationary meltdown inflationism international policy coordination and interest interest rates rising international capital flows international market exchange International Monetary Fund (IMF) interventionism investing investment activity J Jackson, Andrew Jacobson Schwartz, Anna Jefferson, Thomas Jevons, William Stanley Jin Dynasty K Keynes, John Maynard Keynesianism Keynesians L laissez-faire Law, John Lehman Brothers lender of last resort lending activity, money as enhancer liquidity, tightening loan market, money injection via Long Term Capital Management M macroeconomics political appeal of problems with Malthus, Robert market economy Marx, Karl Massachusetts, paper money and medium of exchange money as multiple supply meltdown, inflationary Menger, Carl Mill, James Ming Dynasty misallocation of capital Mises, Ludwig von Monetarism monetary base monetary crisis theory Monetary History of the United States monetary intervention monetary policy Monetary Regimes and Inflation monetary stability, price level and monetization, of debt of government debt money as enhancer of lending activity bank versus individual ownership demand for evolution of functions of nationalization of origin of ownership of purpose of money balances money creation money demand money supply without wealth demand versus money injections even and nontransparent even, instant, and transparent price stability and uneven and nontransparent via loan market money production cost other goods versus money supply controlling expanding money demand without relative prices and N Napoleonic Wars NASDAQ nationalization, credit and money Neoclassical School of Economics New Deal Nixon, Richard M.

Inventing the Future: Postcapitalism and a World Without Work
by Nick Srnicek and Alex Williams
Published 1 Oct 2015

Carbon markets required years to be built;12 volatility markets exist in large part as a function of abstract financial models;13 and even the most basic markets require intricate design.14 Under neoliberalism, the state therefore takes on a significant role in creating ‘natural’ markets. The state also has an important role in sustaining these markets – neoliberalism demands that the state defend property rights, enforce contracts, impose anti-trust laws, repress social dissent and maintain price stability at all costs. This latter demand, in particular, has greatly expanded in the wake of the 2008 crisis into the full-spectrum management of monetary issues through central banks. We therefore make a grave mistake if we think the neoliberal state is intended simply to step back from markets. The unprecedented interventions by central banks into financial markets are symptomatic not of the neoliberal state’s collapse, but of its central function: to create and sustain markets at all costs.15 Yet it has been an arduous and winding path from neoliberalism’s origins to the present, in which its ideas hold sway over those injecting trillions of dollars into the market.

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Numerous members of what would become Thatcher’s administration passed through the IEA during the 1960s and 1970s.40 The outcome of the IEA’s efforts was not only to subtly transform the economic discourse in Britain, but also to naturalise two particular policies: the necessity of attacking trade union power, and the imperative of monetary stability. The former would purportedly let markets freely adapt to changing economic circumstances, while the latter would provide the basic price stability needed for a healthy capitalist economy. In the United States, too, think tanks and academic research groups were built to push for a broadly neoliberal agenda, the Heritage Foundation and the Hoover Institute being two of the most notable.41 The MIPR aimed to redefine political common sense by writing books on neoliberal economics that were intended for a popular audience, some of which eventually sold over 500,000 copies.

Broken Markets: How High Frequency Trading and Predatory Practices on Wall Street Are Destroying Investor Confidence and Your Portfolio
by Sal Arnuk and Joseph Saluzzi
Published 21 May 2012

The frenzy continued until “At 2:45:28 p.m., trading on the E-Mini was paused for five seconds when the Chicago Mercantile Exchange (CME) Stop Logic Functionality was triggered in order to prevent a cascade of further price declines. In that short period of time, sell-side pressure in the E-Mini was partly alleviated and buy-side interest increased. When trading resumed at 2:45:33 p.m., prices stabilized and shortly thereafter, the E-Mini began to recover, followed by the SPY.” After this trading pause in the futures market, the final report said, firms had “time to react and verify the integrity of their data and systems, buy-side and sell-side interest returned and an orderly price discovery process began to function.”

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Some estimates are that these traders enter anywhere from several hundred to one million orders for every 100 trades they actually execute. This has significantly raised the bar for all firms on Wall Street to invest in computers, storage, and routing to handle all the message traffic. 3. NYSE specialists no longer provide price stability. With the advent NYSE Hybrid, specialist market share has dropped from 80% to 25%. With specialists out of the way, the floodgates have been opened to high frequency traders who find it easier to make money with more liquid listed shares. 4. Volatility has skyrocketed. The markets’ average daily price swing year to date is approximately 4% versus 1% last year.

Rethinking the Economics of Land and Housing
by Josh Ryan-Collins , Toby Lloyd and Laurie Macfarlane
Published 28 Feb 2017

Moreover, prices, and especially wages, respond slowly to changes in supply and demand, resulting in periodic shortages and surpluses, especially of labour. Keynes asserted that free markets have no self-balancing mechanisms to counter this and achieve full employment, and therefore justified government intervention through public policies that aim to achieve full employment and price stability. Keynes’ ideas became widely accepted after the Second World War and provided the main inspiration for economic policy makers in Western industrialised countries. However, Keynesian economics began to fall out of favour in the 1970s as many economies experienced slow economic growth, high unemployment and rising inflation, a phenomenon which is often referred to as stagflation.

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‘Increasing Investment in Affordable Housing: Towards a Level Playing Field for Affordable Housing’. Capital Economics, 3 April. Chang, Ha-Joon. 2007. Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism. New York: Bloomsbury. Cheshire, Paul. 2009. ‘Urban Containment, Housing Affordability and Price Stability-Irreconcilable Goals’. Cheshire, Paul. 2011. House of Commons CLG Select Committee, 10 October. Cheshire, Paul C. 2013. ‘Land Market Regulation: Market versus Policy Failures’. Journal of Property Research 30 (3): 170–88. Cheshire, Paul. 2014. ‘Turning Houses into Gold: The Failure of British Planning’.

Straight Talk on Trade: Ideas for a Sane World Economy
by Dani Rodrik
Published 8 Oct 2017

Political scientists talk about “democratic delegation”—the idea that a sovereign might want to tie its hands (through international commitments or delegation to autonomous agencies) in order to achieve better outcomes. The delegation of monetary policy to an independent central bank is the archetypal example: in the service of price stability, daily management of monetary policy is insulated from politics. However, even if selective limitations on sovereignty may enhance democratic performance, there is no guarantee that all limitations implied by market integration would do so. In domestic politics, delegation is carefully calibrated and restricted to a few areas where the issues tend to be highly technical and partisan differences are not large.

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The linchpin of Argentina’s economic strategy after 1991 was the convertibility law, which legally anchored the peso to the US dollar at a one-to-one exchange rate and prohibited restrictions on capital flows. Argentine economy minister Domingo Cavallo had envisioned the convertibility law as both a harness and an engine for the economy. The strategy worked well initially by bringing much-needed price stability. But, by the end of the decade, the Argentine nightmare had returned with a vengeance. The Asian financial crisis and the Brazilian devaluation in early 1999 left the Argentinean peso looking decidedly overvalued. Doubts about Argentina’s ability to service its external debt multiplied, confidence collapsed, and before too long, Argentina’s creditworthiness slid below that of some African countries.

High-Frequency Trading
by David Easley , Marcos López de Prado and Maureen O'Hara
Published 28 Sep 2013

There is definite empirical evidence of the path dependency of the price trajectory; a black swan event may be triggered at any time due to microstructure effects that are not linked to fundamental factors. Organised trading venues are exploring ways to prevent microstructure effects distorting price action, though without reaching a satisfactory solution so far. This chapter proposes a new method to achieve price stability. We suggest that the queuing system of limit order books rewards market participants by offering competitive two-way prices; model simulations presented here indicate that this might well enhance market stability. THE CURRENCY MARKET This section describes the currency market from a high-frequency trading (HFT) perspective.

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Market-making strategies are designed to offer temporary liquidity to the market by posting bid and ask prices with the expectation of earning the bid and ask spread to compensate for losses from adverse price moves. In some trading venues, these types of strategies are incentivised with rebate schemes or reduced transactions fees. We shall explain later (see pp. 80ff) how such incentives can be used to make price discovery more robust and contribute to price stability. Statistical arbitrage strategies are a class of strategies that take advantage of deviations from statistically significant market relationships. These relationships can, for example, be market patterns that have been observed to occur with some reasonable likelihood. Mean reversion strategies assume that the price movement does not persist in one direction and will eventually revert and bounce back.

The Economists' Hour: How the False Prophets of Free Markets Fractured Our Society
by Binyamin Appelbaum
Published 4 Sep 2019

William Miller, who sometimes laughed so hard at his own jokes that he couldn’t get to the punch line, and who passionately expressed a determination to stimulate job creation, particularly for minorities.32 Democrats also sought to write Keynesian economics more firmly into law by passing the Humphrey-Hawkins Full Employment Act in 1978, which enshrined “full employment” and “reasonable price stability” as the goals of fiscal and monetary policy. For proponents of activist economics, it seemed like a second sunrise, and they confidently predicted an economic revival. Instead it was the final act of the Keynesian era. Inflation rose inexorably during Carter’s first two years. Then the Iranian revolution sparked a second oil crisis and prices rose faster.

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Germany and France had similar inflation in the late 1980s, but interest rates remained significantly higher on French government debt. The head of the Bundesbank, Karl Otto Pöhl, told one of New Zealand’s scouting parties that the explanation was simple: “Savers don’t yet know whether they can trust those French bastards.”91 In December 1989, New Zealand passed a law making price stability the sole responsibility of its central bank, sweeping away a 1964 law that, characteristically for its time, had instructed the central bank to pursue a laundry list of goals including economic growth, employment, social welfare, and trade promotion. The man picked to lead New Zealand’s experiment was an economist named Don Brash, who ran one of the nation’s largest banks and then one of its largest trade groups, the Kiwifruit Authority.92 His job description was simple: deliver inflation between 0 percent and 2 percent.

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The man picked to lead New Zealand’s experiment was an economist named Don Brash, who ran one of the nation’s largest banks and then one of its largest trade groups, the Kiwifruit Authority.92 His job description was simple: deliver inflation between 0 percent and 2 percent. If he failed, he could be fired.93 Brash was a believer in price stability. After reading Milton and Rose Friedman’s 1980 book, Free to Choose, which he described as “enormously influential” in shaping his views, he had invited the Friedmans to visit New Zealand for a speaking tour and escorted them around the country.94 In his new role, Brash made his own speaking tour, appearing before any group willing to listen.

How an Economy Grows and Why It Crashes
by Peter D. Schiff and Andrew J. Schiff
Published 2 May 2010

It was thought that such movements could hold prices steady through good times and bad. Even if such a mission were a good idea to begin with, it’s easy to see that the Fed has utterly failed in accomplishing it. Over the past 100 years, the dollar has lost more than 95 percent of its value. So much for price stability! The truth is that the Fed now exists for the sole purpose of providing the inflation necessary to allow the government to spend more than it collects in taxes. During the Depression, President Roosevelt decided to devalue the dollar against gold. In order to pull this off, the government had to control the entire gold market, and for a time the government made it illegal to own gold coins.

How the City Really Works: The Definitive Guide to Money and Investing in London's Square Mile
by Alexander Davidson
Published 1 Apr 2008

The Bank of England Act 1998, transferred responsibility for authorising the banks and supervision of the banking system from the Bank of England to the Financial Services Authority (FSA), a new single statutory regulator for the financial services industry. The Bank has retained responsibility for the stability of the banking system. Role today The Bank is responsible for the overall stability of the UK financial markets, and maintaining price stability. It also manages the UK’s gold and currency reserves on behalf of HM Treasury. The Bank can intervene in the money markets and, in accordance with government policy, occasionally in the foreign exchange market. It also oversees payment and settlement services under the Settlement Finality Directive adopted in May 1998.

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By this move, which meant independence for the central bank, the Labour Government answered concerns that government had a political agenda and so should not be given responsibility for setting interest rates and addressing inflation. Inflation targeting The chancellor, acting for the Treasury, defines price stability and sets the annual inflation target, and the Bank has the task of keeping inflation at the target set by the government. Its tool is the power to change the repo rate. This is the short-term rate at which the Bank of England lends to banks for repurchase agreements. It is for practical purposes synonymous with the term base rate.

The Future of Money
by Bernard Lietaer
Published 28 Apr 2013

The Arab scholar Ibn Khaldun claimed that 'God created the two precious metals, gold and silver, to serve as a measure of all commodities.. .' Without further need for intervention by any religious institution, gold and silver remained symbolically associated respectively with the sun and moon. For centuries, their prices stabilized mysteriously in a fixed ratio of 1/13.5, astrologically determined to reflect the heavenly cycles. These two metals remained divinely ordained currencies after the astrological justification was long forgotten. There are many people who, to this day, claim that 'real' money would be a return to the gold standard.

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Each government participating in the EMU is giving the levers of control over the euro money supply to the European Central Bank. The ECB will by definition be less responsive to the requirements of any one country's unemployment situation. 2. The Maastricht Treaty gives the ECB a single objective: to ensure price stability. Full employment is specifically not one of its official priorities. 3. Finally, the only other traditional tool available - the fiscal one has similarly been put under severe constraints. The maximum limit of 3% of government deficit financing is supposed to be a permanent one and most governments are adopting the euro with their spending at or dose to this straitjacket target limit.

The Bitcoin Standard: The Decentralized Alternative to Central Banking
by Saifedean Ammous
Published 23 Mar 2018

In the case of government money, on the other hand, the money supply increases through the expansion of the supply by the central bank and commercial banks, and contracts through deflationary recessions and bankruptcies, while the demand for money can vary even more unpredictably depending on people's expectations of the value of the money and the policies of the central bank. This highly volatile combination results in government money being unpredictable in value over the long term. Central banks' mission of ensuring price stability has them constantly managing the supply of money through their various tools to ensure price stability, making many major currencies appear less volatile in the short run compared to gold. But in the long run, the constant increase in the supply of government money compared to gold's steady and slow increase makes gold's value more predictable.

Evidence-Based Technical Analysis: Applying the Scientific Method and Statistical Inference to Trading Signals
by David Aronson
Published 1 Nov 2006

One story that has been making the rounds since the 1950s is as follows: “The Ten Commandments contain 297 words. The Declaration of Independence has 300 words, Lincoln’s Gettysburg Address has 266 words, but a directive from the government’s Office of Price Stabilization to regulate the price of cabbage contains 26,911 words.” The truth is the Office of Price Stability never made such a directive. Nevertheless, the tale had such appeal, it remained alive despite the agency’s efforts to convince the public it was false. Even the dissolution of the Office of Price Stability did not stop the story. It was merely modified so that the directive was described as a “federal directive.”64 The story would not die because of its irony and the plausibility of long-winded bureaucrats.

Stress Test: Reflections on Financial Crises
by Timothy F. Geithner
Published 11 May 2014

“If we spent a million dollars a day every day since the birth of Christ, we wouldn’t get to $1 trillion,” said Congressman Darrell Issa, the top Republican on the House government oversight committee. “And we’re likely to lose far more than that.” But we didn’t. Our outcomes were not in line with the experience of other nations, in past crises or this crisis. They were much better. By that summer, we had not only averted a depression, our economy had started growing again. House prices stabilized. Credit markets thawed. And our emergency investments would literally pay off for taxpayers. Most Americans still believe we threw away billions or even trillions of their hard-earned dollars to bail out greedy banks. In fact, the financial system repaid all our assistance, and U.S. taxpayers have turned a profit from our crisis response, including our investments in all five of those financial bombs.

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THE TRAJECTORY of the economy continued to improve for the rest of 2009, which is to say it shed jobs less rapidly—down to about two hundred thousand a month for September and October, averaging less than one hundred thousand a month in November and December. The economy actually began growing again in the summer, and expanded at an impressive 3.9 percent clip in the fourth quarter. Home prices stabilized. In December, Bank of America and Wells Fargo fully repaid their TARP funds, and even Citigroup paid us back most of what they owed; by year’s end, we had recouped about two-thirds of the federal outlays for bank rescues. I was finally confident that the U.S. portion of the financial crisis was over.

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The most important thing we did to stop the slide, other than our efforts to arrest the broader economic and financial free fall, was to stabilize Fannie and Freddie so that mortgage credit could keep flowing at a time when private capital was fleeing the sector. Even with unemployment rising and defaults increasing, home prices stabilized in mid-2009, and gradually began to rise in the following years. The end of the real estate slump helped avoid further damage to the typical family’s largest source of wealth and savings, and was critical to restoring the economy to growth. It wouldn’t have happened without our $400 billion lifeline for Fannie and Freddie.

Termites of the State: Why Complexity Leads to Inequality
by Vito Tanzi
Published 28 Dec 2017

It had been important in allowing the large increase in military spending to fight World War II and later to counter the Soviet challenge. In the years after World War II, the US Federal Reserve Bank had been instructed, by the Full Employment Act of Congress of 1948, to promote, as one of its objectives, “maximum employment, production, and purchasing power,” while paying attention to price stability. Because by 1948 public spending in the United States had collapsed to 11.6 percent of GDP, there was great concern among Keynesian economists that the Great Depression would return. The confidence that some economists have in the existence of the aforementioned two “free lunches” in today’s economies has made it possible to call for large increases in public spending both in the United States and in European countries, in the belief that these increases can be achieved at almost zero costs, while producing great benefits by injecting needed demand in economies facing “great stagnation.”

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The important goals, besides the stabilization of national income at full employment, were the elimination or reduction of economic risks for citizens; some 50 Termites of the State redistribution of income, in order to achieve a more equitable income distribution; and the maintenance of growth and price stability. These goals were to be achieved with the recently discovered Keynesian countercyclical policies, with the help of new social programs, and with progressive tax systems, while allowing the economies to continue working as significantly free market economies. Some of the political wishes, such as those mentioned in the Beveridge Report of 1942 and in Roosevelt’s fireside chat of 1944, became government promises, and the promises were slowly transformed into concrete policies that created “entitlements” or “bills of rights” for citizens.

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Over the years, several authors, including Buchanan, Alesina, von Hagen, Poterba, Tabellini, and Persson, have argued that political arrangements such as fiscal federalism and fiscal decentralization; proportional or nonproportional representation by political parties in parliaments; the frequency of elections; the choice of presidential versus nonpresidential types of governments; the role and power of the ministry of finance compared to those of spending ministries; the rules that apply to the budgetary process – for example, whether it starts with top-down macroeconomic constraints, which reflect a collective view on priorities, or whether it allows a bottom-up process, by which pressures for spending are determined through the political influence of different ministers – whether parliaments can modify the content of budgetary proposals or whether they must vote on the whole budget; whether the central bank is truly independent; whether its mandate relates only to the maintenance of price stability or involves other objectives, such as employment, financial stability, assistance in the financing of governments, and so on – all of these arrangements have a significant impact on fiscal and macroeconomic outcomes. Various situations have been modeled, often using strong assumptions and sophisticated game theories, and have also been subjected to empirical testing (see, inter alia, Tabellini and Persson, 2000; Poterba and von Hagen, 1999).

Slouching Towards Utopia: An Economic History of the Twentieth Century
by J. Bradford Delong
Published 6 Apr 2020

He and his economist peers, who had recently all obtained their graduate degrees and started their first jobs, “were acutely aware of the timing of this turn of the tide,… and almost immediately found our graduate school education incapable of explaining the evolution of the economy.”18 Economic advisers to both Johnson and, before him, President John F. Kennedy had argued that a substantial reduction in unemployment could be achieved with only a moderate increase in inflation. But expectations of inflation became “unanchored.” Prices and wages were not set to an expectation of price stability, or even to a slow upward creep in inflation, but rather to last year’s inflation, which had become the new normal. Over the four years from 1965 to 1969, the Federal Reserve accommodated President Johnson’s desire to reduce unemployment by expanding the money supply, to keep interest rates low, and then Vietnam War spending unbalanced by higher taxes overheated the economy further.

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This, in turn, encouraged workers to be insufficiently differential, and to demand too-high wages, spurring inflation, which kept profits too low to justify investment. And since it promised to reward even those who had not pleased previous employers with jobs, it undermined public virtue. The government and Federal Reserve needed to impose discipline by focusing on price stability, the right-wingers insisted, and then let the unemployment rate go wherever it needed to go. Government couldn’t be a “nanny state” offering everybody a bottle when they cried. Monetary policy needed to be turned over to strongly anti-inflationary policy makers—as Jimmy Carter had already done, half- or unwittingly, in turning the Federal Reserve over to Paul Volcker.

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Barrie Wigmore and Peter Temin, “The End of One Big Deflation,” MIT Department of Economics working paper 503, 1988, https://dspace.mit.edu/bitstream/handle/1721.1/63586/endofonebigdefla00temi.pdf; Thomas Sargent, “Stopping Moderate Inflations: The Methods of Poincaré and Thatcher,” Federal Reserve Bank of Minneapolis, working paper W, May 1981, JSTOR, www.jstor.org/stable/10.2307/community.28111603; Laurence Ball, “The Genesis of Inflation and the Costs of Disinflation,” Journal of Money, Credit and Banking 23, no. 3, Part 2: Price Stability (August 1991): 439–452. 17. Laurence Ball, “What Determines the Sacrifice Ratio?,” in Monetary Policy, ed. N. Gregory Mankiw, Chicago: University of Chicago Press, 1994, 155–194. 18. Martin Feldstein, “The Dollar and the Trade Deficit in the 1980s: A Personal View,” National Bureau of Economic Research (NBER) working paper 4325, issue date April 1993, available at NBER, www.nber.org/system/files/working_papers/w4325/w4325.pdf. 19.

A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing
by Burton G. Malkiel
Published 10 Jan 2011

Indeed, a subtitle for this book might well have been The Get Rich Slowly but Surely Book. Remember, just to stay even, your investments have to produce a rate of return equal to inflation. Inflation in the United States and throughout most of the developed world fell to the 2 percent level in the early 2000s, and some analysts believe that relative price stability will continue indefinitely. They suggest that inflation is the exception rather than the rule and that historical periods of rapid technological progress and peacetime economies were periods of stable or even falling prices. It may well be that little or no inflation will occur during the first decades of the twenty-first century, but I believe investors should not dismiss the possibility that inflation will accelerate again at some time in the future.

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There are at least grains of truth in Bierman’s arguments, and economists today often blame the severity of the 1930s depression on the Federal Reserve for allowing the money supply to decline sharply. Nevertheless, history teaches us that very sharp increases in stock prices are seldom followed by a gradual return to relative price stability. Even if prosperity had continued into the 1930s, stock prices could never have sustained their advance of the late 1920s. In addition, the anomalous behavior of closed-end investment company shares (which I will cover in chapter 15) provides clinching evidence of wide-scale stock-market irrationality during the 1920s.

Free to Choose: A Personal Statement
by Milton Friedman and Rose D. Friedman
Published 2 Jan 1980

For example, in one massive building in Washington some government employees are working full-time trying to devise and implement plans to spend our money to discourage us from smoking cigarettes. In another massive building, perhaps miles away from the first, other employees, equally dedicated, equally hard-working, are working full-time spending our money to subsidize farmers to grow tobacco. In one building the Council on Wage and Price Stability is working overtime trying to persuade, pressure, hornswoggle businessmen to hold down prices and workers to restrain their wage demands. In another building some subordinate agencies in the Department of Agriculture are administering programs to keep up, or raise, the prices of sugar, cotton, and numerous other agricultural products.

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Anyone who has been subjected to a thorough customs inspection on returning from a trip abroad, had his tax returns audited by the Internal Revenue Service, been subject to inspection by an official of OSHA or any of a large number of federal agencies, had occasion to appeal to the bureaucracy for a ruling or a permit, or had to defend a higher price or wage before the Council on Wage and Price Stability is aware of how far we have come from a rule of law. The government official is supposed to be our servant. When you sit across the desk from a representative of the Internal Revenue Service who is auditing your tax return, which one of you is the master and which the servant? Or to use a different illustration.

The New Trading for a Living: Psychology, Discipline, Trading Tools and Systems, Risk Control, Trade Management
by Alexander Elder
Published 28 Sep 2014

The lower tops reflect a gradual weakening of the uptrend with the passage of time. In order to count as a divergence, MACD-Histogram has to cross and recross its zero line. Bearish divergences occur in uptrends—they identify market tops. A classical bearish divergence occurs when prices reach a new high and then pull back, with an oscillator dropping below its zero line. Prices stabilize and rally to a higher high, but an oscillator reaches a lower peak than it did on a previous rally. Such bearish divergences usually lead to sharp breaks. A bearish divergence shows that bulls are running out of steam, prices are rising out of inertia, and bears are ready to take control. Valid divergences are clearly visible—they seem to jump at you from the charts.

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In the heady atmosphere of a bull market, Ford seemed to have a shot at recapturing its $30 high. I saw a false downside breakout coupled with a bullish divergence and bought. I then grimly held through the bear market. 2011—Ford spiked above its monthly channel, which was narrower at that time, tracing a kangaroo tail, while monthly MACD weakened. I took profits. 2011—as monthly prices stabilized in their value zone, I repurchased my position. Fundamental analysis can help you find a stock that may be worth buying. Use technical analysis to time your entries and exits. Be prepared to buy and sell more than once during a major uptrend. Swing Trading While major trends and trading ranges can last for years, all are punctuated by short-term upswings and downswings.

The Intelligent Investor (Collins Business Essentials)
by Benjamin Graham and Jason Zweig
Published 1 Jan 1949

One is by the broad division of their portfolio; they are “balanced funds” if they have a significant (generally about one-third) component of bonds, or “stock-funds” if their holdings are nearly all common stocks. (There are some other varieties here, such as “bond funds,” “hedge funds,” “letter-stock funds,” etc.)* Another is by their objectives, as their primary aim is for income, price stability, or capital appreciation (“growth”). Another distinction is by their method of sale. “Load funds” add a selling charge (generally about 9% of asset value on minimum purchases) to the value before charge.1 Others, known as “no-load” funds, make no such charge; the managements are content with the usual investment-counsel fees for handling the capital.

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The market record of the public-utility indexes—condensed in Table 14-6, along with those of other groups—indicates that there have been ample possibilities of profit in these investments in the past. While the rise has not been as great as in the industrial index, the individual utilities have shown more price stability in most periods than have other groups.* It is striking to observe in this table that the relative price/earnings ratios of the industrials and the utilities have changed places during the past two decades. These reversals will have more meaning for the active than for the passive investor. But they suggest that even defensive portfolios should be changed from time to time, especially if the securities purchased have an apparently excessive advance and can be replaced by issues much more reasonably priced.

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Finally we should comment on the much poorer showing made by our lists as a whole as compared with the price record of the S & P composite. The latter is weighted by the size of each enterprise, whereas our tests are based on taking one share of each company. Evidently the larger emphasis given to giant enterprises by the S & P method made a significant difference in the results, and points up once again their greater price stability as compared with “run-of-the-mine” companies. Bargain Issues, or Net-Current-Asset Stocks In the tests discussed above we did not include the results of buying 30 issues at a price less than their net-current-asset value. The reason was that only a handful, at most, of such issues would have been found in the Stock Guide at the end of 1968.

The Social Life of Money
by Nigel Dodd
Published 14 May 2014

A real Ponzi scheme takes fraud; Bitcoin, by contrast, seems more like a collective delusion.”36 Viewed simply as a currency, Bitcoin’s biggest pitfall is likely to be price deflation (and, in extremis, hyperdeflation), not inflation. This would be the conclusion reached about Bitcoin from the perspective of modern monetary theory, as discussed in Chapter 3. As the blogger “Lord Keynes” notes, “without relative price stability and an elastic supply, Bitcoins are not a viable monetary unit for any large capitalist system.”37 Although almost every monetary scholar would agree with the point about price stability, those of a more “Austrian” persuasion—not to mention the designers of Bitcoin themselves—would disagree about elastic supply: the Bitcoin software is designed to avoid such elasticity, which is regarded as a weakness of the fiat monetary system.

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In its practical design, however, the Eurozone was made to conform as far as possible to the classical view of money reflected in Schumpeter’s remarks as quoted above: namely, as a thing that operates purely on the basis of rational self-interest. For example, the European Central Bank was directed to focus on the purely technical question of price stability, free from cultural or political considerations. The ideal of a one-size-fits-all monetary policy applicable to all member states seemed entirely in keeping with this sanitized view of money as a culturally neutral landscape. If the euro was implicitly culturalist in its aspirations, then, it was dogmatically Mengerian in its design.

State-Building: Governance and World Order in the 21st Century
by Francis Fukuyama
Published 7 Apr 2004

There is another respect in which good governance and democracy are not so easily separated. A good state institution is one that transparently and efficiently serves the needs of its clients—the citizens of the state. In areas like monetary policy, the goals of policy are relatively straightforward (that is price stability) and can be met by relatively detached tech- the missing dimensions of stateness 27 nocrats. Hence central banks are constructed in ways that deliberately shield them from short-term democratic political pressure. In other sectors like primary and secondary education, the quality of the public agency’s output greatly depends on the feedback it receives from the ultimate consumers of government services.

Competition Demystified
by Bruce C. Greenwald
Published 31 Aug 2016

Though it may take some time, this lesson to the aggressive rival is likely to curb its tendency to offer discounts in the future. Any selective response designed to keep better customers while letting the marginal ones escape will have similar effects. An industry whose firms are equipped to meet price cutting with selective responses should enjoy greater price stability than industries where firms cannot be selective. The other side of the coin is that selectivity can be an offensive tool as well, and companies that can poach their rivals’ best customers are going to do so, and thus encourage price competition. Selectivity can take a second form. Companies responding to aggressive price behavior should pick their spots.

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If the competitor responds, it, and not the incumbent, bears the disproportionate costs of the price war. Indeed, it may even be worthwhile to introduce—or threaten to introduce—a new product into a competitor’s market solely for the purpose of letting the competitor know how painful price wars can be. What should be kept in mind is that attacking rivals is a tactic whose goal is to restore price stability and enhance industry cooperation, not an end in itself. Like many things of value, cooperative arrangements are easier to break than to mend. The second component of a tactical adjustment in a prisoner’s dilemma situation, signaling for a joint return to higher prices, is difficult to accomplish.

Utopia or Bust: A Guide to the Present Crisis
by Benjamin Kunkel
Published 11 Mar 2014

Thus the generation-long ascendancy of financial capital has expressed itself in a preference for a monetarist or Friedmanite definition of full employment, one in which the dangers of inflation have been oversold at the expense of the unemployed, wage-earners, and industry too. Even now, in what is if anything a deflationary climate, an unreasoning fear of inflation dominates public debate. In 1978, Congress made it an explicit purpose of the Federal Reserve to promote full employment, as well as price stability. (The European Central Bank, by contrast, is tasked only with stabilizing prices.) The goal of full employment is inscribed in our financial system. It should now become a political demand with which to counter efforts by the Obama administration and congressional Republicans to fight mass unemployment by means of tax credits for employers.

Slowdown: The End of the Great Acceleration―and Why It’s Good for the Planet, the Economy, and Our Lives
by Danny Dorling and Kirsten McClure
Published 18 May 2020

For instance, a sudden housing price acceleration such as the one that occurred in the early 1970s is now extremely unlikely. All prices were rising rapidly then: not just housing, but wages as well. In contrast, housing price falls in the near future would not be remarkable given the general direction of the long-term trends and the falls in both the 1990s and the last decade. The long-term trend is toward price stability, back toward negligible quarterly change. How on earth is it possible, given how much housing prices have risen in recent decades, to say that the rise is slowing? Well, there are at least two ways to look at this. First, in 2017, 2018, and 2019, the U.K. housing market clearly slowed down, however it is graphed.

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Before we return to the subject of house prices, consider something a little different—gold. In figure 52 the gold price timeline has not been adjusted for inflation, and so the price appears to rise and rise. But each period of increase is always abruptly brought to a halt by a crash, followed normally by a period of price stability for a few years when the price appears to oscillate around a fixed point, before it again begins to climb upward. Today that oscillatory point in the global price of gold is around $1,250 an ounce. The price of gold is interesting because gold is seen as a safe haven, a little like property.

Stocks for the Long Run 5/E: the Definitive Guide to Financial Market Returns & Long-Term Investment Strategies
by Jeremy Siegel
Published 7 Jan 2014

That is because the gold standard restricts the supply of money and hence the inflation rate. But from the Great Depression through World War ii, the world shifted to a paper money standard. Under a paper money standard there is no legal constraint on the issuance of money, so inflation is subject to political as well as economic forces. Price stability depends on the desire of central banks to limit the growth of the supply of money in order to counteract deficit spending and other inflationary forces that result from government spending and regulation.9 The chronic inflation that the United States and other developed economies have experienced since World War ii does not mean that the gold standard was superior to the current paper money standard.

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The United States temporarily suspended the gold standard during the Civil War, but it returned to the standard after the war ended.6 The adherence to the gold standard is the reason why the world experienced no overall inflation during the nineteenth and early twentieth centuries. But overall price stability was not achieved without cost. Since the money in circulation had to equal the quantity of gold held by the government, the central bank essentially relinquished control over monetary conditions. This meant that the central bank was unable to provide additional money during economic or financial crises.

The New Enclosure: The Appropriation of Public Land in Neoliberal Britain
by Brett Christophers
Published 6 Nov 2018

Notes Index List of Figures 1.1UK net worth by type, 2016 (£ billion) (Source: Office for National Statistics) 1.2UK net worth by type, 1995–2016 (Source: Office for National Statistics) 2.1References to ‘surplus land’ and ‘surplus property’ in UK Parliament, by decade (Source: Hansard) 2.2Approximate shares of British landownership by area, late 1970s (Source: Author) 4.1Current public-land disclosure initiatives (England and Wales, except otherwise stated) (Source: Author) 5.1Net annual sales of Forestry Commission land, 1982–2015 (Source: Forestry Commission) 5.2Estimated public landownership in contemporary Britain by area (thousand hectares) (Source: Author) 5.3Capacity of disposed land vs. unimplemented permissions (Source: Local Government Association; National Audit Office) 5.4UK real land and house price indices, 1892–2008 (Source: P. Cheshire, ‘Urban Containment, Housing Affordability and Price Stability – Irreconcilable Goals’, SERC Policy Paper 4, 2009, p. 9, at eprints.lse.ac.uk) 5.5UK annual housing rental payments, 1985–2015 (Source: Office for National Statistics) 5.6UK real estate sector: gross value added by sub-category, 2005 and 2014 (Source: Office for National Statistics) 5.7UK private non-financial corporations: operating surplus, 1998–2014 (Source: Office for National Statistics) List of Abbreviations ASI Adam Smith Institute BLP Berwin Leighton Paisner BRB British Railways Board BTC British Transport Commission CABE Commission for Architecture and the Built Environment CPS Centre for Policy Studies CLT Community land trust DCLG Department for Communities and Local Government DEFRA Department for Environment, Food & Rural Affairs DHSS Department of Health and Social Security EFA Education Funding Agency FTE Full-time employee GLA Greater London Authority GLC Greater London Council GPA Government Property Agency GPU Government Property Unit GVA Gross value added HCA Homes and Communities Agency HDV Haringey Development Vehicle IEA Institute of Economic Affairs IFRS International Financial Reporting Standards IPPR Institute for Public Policy Research LCC London City Council LGA Local Government Association LSA Land Settlement Association MoD Ministry of Defence MoJ Ministry of Justice NAO National Audit Office NEF New Economics Foundation NHS National Health Service OFT Office of Fair Trading OGC Office of Government Commerce ONS Office for National Statistics PACE Property Advisers to the Civil Estate PLI Public Land Initiative PRS Property Repayment Services PSA Property Services Agency PSC People with Significant Control register RBS Royal Bank of Scotland RIFW Regeneration Investment Fund for Wales RLA Redundant Lands and Accommodation Acknowledgements My first and most important thanks are to my family: Agneta, Elliot, Oliver and Emilia.

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Extreme volatility in land prices, needless to say, does not make for smooth economic planning and management. As the IPPR researchers observed, volatility in land and housing markets is ‘intimately connected to instability in the economy as a whole’.3 Figure 5.4 UK real land and house price indices, 1892-2008 Source: P. Cheshire, ‘Urban Containment, Housing Affordability and Price Stability – Irreconcilable Goals’, SERC Policy Paper 4, 2009, p. 9, at eprints.lse.ac.uk The second, connected, phenomenon reflecting and transmitting inefficiencies in the land market is clearly unproductive allocations of land – ‘misallocations’, one might call them. Research carried out in 2012 for the mayor of London by the development analysts Molior, for instance, found that, in London, nearly half of unimplemented residential planning permissions were in the hands of ‘non-builders’ (‘firms that we cannot see building a scheme themselves’, such as investment companies and the like), and that the latter controlled 55 per cent of the planning pipeline.4 Such speculative holding can be described as many things, but ‘highest and best use’ of the land is obviously not one of them.

Unsustainable Inequalities: Social Justice and the Environment
by Lucas Chancel
Published 15 Jan 2020

The observed reduction of inequalities, far from being automatic, was largely an accidental consequence of the two world wars (which destroyed many of the factories and much of the industrial equipment owned by the rentier class), the Great Depression (which unleashed a wave of bankruptcies that substantially reduced, and sometimes wiped out, the capital of the richest), and of inflation (which ate away at the value of inherited and accumulated wealth, reaching record heights between 1915 and 1950 after a century of almost uninterrupted price stability).27 The decline, and then the stagnation, of inequality was also a consequence of the exceptional political circumstances of the postwar period, a historic moment of consensus regarding the need for social cohesion and solidarity after the terrible agonies that had torn apart European society.

Britannia Unchained: Global Lessons for Growth and Prosperity
by Kwasi Kwarteng , Priti Patel , Dominic Raab , Chris Skidmore and Elizabeth Truss
Published 12 Sep 2012

In the wake of the crash of the housing bubble, banks were being bailed out all over much of the Western world – everywhere, that is, but Canada. 34 Britannia Unchained None of the major Canadian banks failed. Canada didn’t suffer a housing bubble or dangerous build-up of personal debt. In the years running up to the financial crisis, it ran a minor trade surplus. Indeed, it is hard to think of a more glowing report than the IMF gave in 2009: ‘Through 2007, Canada experienced strong growth, price stability, fiscal and current account surpluses, historically low unemployment, and financial stability.’ The reason for this success? The IMF credited ‘strong fiscal discipline, sound and credible monetary policy, and robust financial supervision and regulation’. Even Canada’s stimulus package was praised for being ‘appropriately sized … prudently based … [and] with sizeable infrastructure spending and permanent tax cuts … weighted toward items that are most effective in stimulating demand’.86 So why did Canada prove so resilient to the worldwide downturn?

Firefighting
by Ben S. Bernanke , Timothy F. Geithner and Henry M. Paulson, Jr.
Published 16 Apr 2019

Congress was never enthusiastic about a dramatically more powerful housing strategy, and Tim and most of those in the Obama administration also believed that additional dollars spent on unemployment benefits, infrastructure projects, payroll tax cuts, and aid to states would have more economic bang for the buck—while raising fewer dilemmas about fairness—than a new wave of programs aimed narrowly at home owners. Solving the economic crisis was a necessary condition for solving the housing crisis, while the reverse was not necessarily true. In the end, a long and steady economic recovery might be the most successful housing program. Home prices stabilized after the Great Recession ended, gradually eliminating trillions of dollars of negative equity, lifting millions of underwater home owners above water. The better economy made almost everything better. U.S. annual auto sales had plunged to 10 million in 2009, but they were back up to pre-crisis levels of 17 million by 2015.

Cryptoeconomics: Fundamental Principles of Bitcoin
by Eric Voskuil , James Chiang and Amir Taaki
Published 28 Feb 2020

Yet in monetizing a waste resource, the overall marketable energy supply is increased without an increase in its production cost. And demand for the otherwise marketable energy supply in mining is decreased. This implies a reduced market energy price. A corresponding expansion of production generally may result from a reduced market energy price. This price stability [338] is a general characteristic of all products. As such a consequent reduction in overall energy consumption from byproduct mining cannot be assumed , invalidating the theory. However, an overall increase in wealth is implied by greater production at the same cost or same production at lower cost.

Eurowhiteness: Culture, Empire and Race in the European Project
by Hans Kundnani
Published 16 Aug 2023

Quinn Slobodian, Globalists. The End of Empire and the Birth of Neoliberalism (Cambridge, MA.: Harvard University Press, 2018), p. 194. 47.Article 3.3 of the treaty stated: “The Union shall establish an internal market. It shall work for the sustainable development of Europe based on balanced economic growth and price stability, a highly competitive social market economy, aiming at full employment and social progress, and a high level of protection and improvement of the quality of the environment. It shall promote scientific and technological advance.” 48.On the emergence of the welfare state in Europe, see Judt, Postwar, pp. 72–77. 49.Gøsta Esping-Andersen, The Three Worlds of Welfare Capitalism (Princeton: Princeton University Press, 1990). 50.Jan-Werner Müller, Contesting Democracy.

The Right to Earn a Living: Economic Freedom and the Law
by Timothy Sandefur
Published 16 Aug 2010

The government cannot confiscate any of my produced raisins for the benefit of their program.”101 But the Department of Agriculture fined Horne more than $1,000 per day for each violation of its orders, and when Horne and his wife were found guilty, they were penalized $275,000 for selling their raisin crop as they chose. There is virtually no empirical or theoretical justification for the “price stabilization” rationale behind agricultural adjustment laws.102 In fact, research shows that such schemes have “conveyed few longterm benefits to the industry” and “reduced . . . long-run grower returns” on investment.103 Consumers pay the price, but even the alleged beneficiaries—family farms—do not really benefit much.

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Mahon, 258–59 Pepsi company, job security rules, 233–34 permanent and aggregate interests of the community, 91, 93 Perry, Arthur Latham, 118 Petition of Right, 21 Planned Commercial Zones, 161–62 Populist Era corporations and monopolies during, 39–44 economic freedom argument, 123 Munn and, 102 Postal Reorganization Act of 1970, 57, 58 post–Civil War America. see Populist Era Postrel, Virginia, 206 Pound, Roscoe, xiv–xv, 12, 104, 107–8, 118–19 Powell, Thomas Reed, 11 Powers, Kim, 152 Powers v. Harris, 152–55, 159, 162, 188, 289 predatory pricing schemes, 179–82 price stabilization schemes. see agricultural adjustment programs privacy rights, 282 private agreements monopoly-like, 22–23 see also contracts; specific types of agreements privileges, corporate, 28, 29, 31, 33–35 Privileges and Immunities: A Reference Guide to the United States Constitution (David S. Bogen), 288 privileges and immunities clause, 4 Corfield and, 40–41 dormancy, 43–44 overruling, revival, reversal of, 287–92 right to make and enforce contracts, 288–89 Slaughterhouse and, 41–44 states’ rights and, 40–41 productive work, 3 professions barriers to entry, 63, 141 licensing, 23, 63, 99–100, 145–56 restricted entry, 22, 23 restricting or eliminating competition, 289–90 unskillfulness, 23 Progressive Era, xiv–xv, 44–50 eminent domain and, 32 misconceptions about, 47–49 regulation of business and economy, 13, 15, 123–27, 136–37 Supreme Court, 15, 279. see also specific justices 371 Index Progressivism agenda, ideology, and philosophy, 11, 12–13, 44–50, 279–81 assault on economic liberty, 11–16, 44–50, 279–81, 290, 292 changing American political philosophy, 44–50 criticism of and attack on Lochner, 107–10, 121 doctrines, 279–81 economic freedom argument, 123–27 free speech and, 191–92 majority over individuality, 11, 44–45, 109–10, 121, 279, 292. see also collective decisionmaking notion of individual freedom, 116–17 pro-government presumption, xiii–xiv, 11–13, 44–50 rational basis test and, 125–27 rights as permissions, 95, 109, 116–17, 279, 282–83 socialist nature of, 46, 123–27 visionary zeal to do gooders, 13, 46 Prohibition, legacy of, 183–84 property corporate, 34 regulation as secondary to, 272–73 property redistribution government redistributive programs, 283 Progressivism and, 13 property rights, xvii, 24–25 of criminals, 259 givings theory and, 272–74 land-use regulation, 160. see also zoning laws, protectionism and Locke on, 273 ownership as separate from right to use, 257 partial property rights in other people, 290–91 Rehnquist and Roberts Courts, 277–78 right of use of property or land, 257, 271 see also regulatory takings Property Rights from Magna Carta to the Fourteenth Amendment (Bernard Siegan), 283 Prosser, William, 76 protection of the public. see public interest or public welfare protection of unenumerated rights, 93–94 372 protectionism, xvi, 141–44, 173–74 agricultural adjustment programs, 164–70, 174 barriers to entry, 141 contracts clause and, 154 dormant commerce clause and, 153–54 franchise acts and, 170–73, 174 as legitimate state interest, 289 licensing laws, 145–59, 174 necessity of new business and certificates of necessity, 143–44 public choice theory and, 289–90 tariffs, 141 taxi industry example, xi–xiii, xiv, xv, xvi, 143–44, 286 zoning laws, 159–63, 174 public choice theory, 289–90 public contracts, 69–73 public interest or public welfare contracts clause, 75–81 Liebmann and, 142–43 Munn and Nebbia and, 101, 125–27. see also rational basis test Powers and, 152–55, 159, 162, 289 seizure of property. see eminent domain doctrine; regulatory takings public nuisance, xvii Blackmun on, 240 common or public right definition, 241 reasonable and lawful conduct, 243–45 reasonableness and unreasonableness, 240–41, 242 regulatory takings and, 258 tort law abuse, 239–45 public policy, manipulation of contracts and, 214, 215, 220–24 public use, synonymous with public benefit, 255 Pumpelly v.

European Spring: Why Our Economies and Politics Are in a Mess - and How to Put Them Right
by Philippe Legrain
Published 22 Apr 2014

Focusing exclusively on keeping inflation (too) low has come at the expense of financial stability and living standards, while privileging creditors over debtors. At the very least, then, the ECB needs a broader mandate that takes account of both asset-price and consumer-price inflation, financial and price stability, as well as growth and employment. It also needs to be more accountable to democratic authorities – the European Parliament as well as a committee of national parliamentarians. There also needs to be more cooperation between elected fiscal authorities and unelected monetary ones. Closer coordination would ensure better economic outcomes, while the ECB ought to take account of the views of elected governments.

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, Vox.eu, 20 December 2011 http://www.voxeu.org/article/global-savings-glut-or-global-banking-glut 41 High-Level Expert Group on Reforming the Structure of the EU Banking Sector, chaired by Erkki Liikanen, 2 October 2012 http://ec.europa.eu/internal_market/bank/docs/highlevel_expert_group/report_en.pdf Table A1.2: total number and assets of monetary financial institutions by country (March 2012) 42 OECD, Debt of financial corporations, as a percentage of GDP, DBTS12GDP 43 OECD, Household debt as a share of gross disposable income, DBTS14_S15GDI In the UK it rose from 112.39 per cent in 2000 to 174.15 per cent in 2007, that is by a factor of 1.55; in the Netherlands it rose from 163.72 per cent in 2000 to 242.37 per cent, that is by a factor of 1.48. 44 See Nationwide House Price Index, http://www.nationwide.co.uk/hpi/historical.htm and http://www.cotizalia.com/cache/2008/07/03/46_europa_preocupa_mucho_ajuste_inmobiliario_espana.html 45 Philippe Legrain, Aftershock: Reshaping the World Economy After the Crisis, Little, Brown: 2010 46 Nouriel Roubini with Stephen Mihm, Crisis Economics: A Crash Course in the Future of Finance, Allen Lane: 2010 47 Charles Kindleberger, Manias, Panics and Crashes, Wiley: 1978 48 Philippe Legrain, Open World: the Truth about Globalisation, Abacus: 2002 49 Financial markets were deemed efficient in the sense that prices set by the market were “right” since they were determined by rational investors acting on all available information and mistakes were rapidly corrected by other profit-seeking investors. 50 As Bill White has observed, in the 1980s the fight against high inflation was justified on the grounds that it was ‘necessary’ for macroeconomic stability. Then, somehow, it morphed into the belief that price stability was ‘sufficient’ for such stability. 51 For example, gross capital flows both within the eurozone and into and out of it nearly tripled between 2002 and 2007. Source: Philip Lane, "Capital Flows in the Euro Area", European Economy, Economic Papers 497, April 2013. Capital flows in and out of Britain also soared. 52 See Hélène Rey’s excellent “Dilemma not Trilemma: The Global Financial Cycle and Monetary Policy Independence”, paper presented at Jackson Hole, August 2013. http://www.kansascityfed.org/publicat/sympos/2013/2103Rey.pdf 53 For example, in the Mais Lecture at Cass Business School on 11 May 2006, Trichet said: "It is sometimes argued that the convergence in euro area government bond spreads which was seen in the run-up to Monetary Union is evidence that the process of financial integration may be detrimental to the functioning of market discipline, the latter being the influence exerted by markets on governments by pricing different risks of default.

Wealth and Poverty: A New Edition for the Twenty-First Century
by George Gilder
Published 30 Apr 1981

Since government will usually be able to influence the prices of luxuries more than of necessities, with a given money supply controls will always tend to raise the prices of necessities dominant in the budgets of the poor. This effect was evident under both the Nixon and Carter efforts for price stabilization. In general the most important effect of the government attempt to shield itself and its clients from uncertainty and risk is to place the entire system in peril. It becomes at once too rigid and too soft to react resourcefully to the new shocks and sudden challenges that are inevitable in a dangerous world.

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Parkinson’s Corollary partial equilibrium fallacy Patterson, Orlando Paul, Rand Paul, Ron Paul, Saint Paulson, John Peace of Utrecht Peirce, Charles pensions perfect competition perks Perry, George Peterson, Pete Peugeot Citroen Phelps-Brown, Sir Henry photography Piore, Michael Planet of the Apes (film) planning sector Podhoretz, Norman Poland Polanyi, Michael Poles political philosophy politicians politics egalitarianism in as insurance leadership in marketplace of of persecution Polyconomics Population Bomb populism Portuguese Posner, Richard post-industrial age Post Office Department postwar baby boom generation potlatching poverty and the poor belief in wealth as cause of capitalism as cause of male misconceptions of Third World welfare programs and See also War on Poverty; Welfare Pratt, Larry prejudice, racial and ethnic. See also Discrimination price-level theory price pyramid price stabilization primary sector jobs Prince Charles printing, innovations in private enterprise. See Capitalism; Entrepreneurs and entrepreneurship producing power purchasing power and productivity decline in in government growth in insurance small business x-efficiency in product-liability suits professional schools Progress and Poverty (Henry George) progressive taxation promotion barriers property taxes Proposition 13, 49, 200-20 1 Protection, business demands for Protestants, white.

The End of Cheap China: Economic and Cultural Trends That Will Disrupt the World
by Shaun Rein
Published 27 Mar 2012

These wrongheaded policies, he said, just caused more investors to flee the greenback and switch their investment portfolios to commodities or foreign markets, where there were greater possibilities to receive higher returns, and which further increased Bob’s input prices. He did not see commodity prices stabilizing in the near future until the greenback regained its strength and the debt situation in the eurozone stabilized. Breaking it down further, Bob showed how an appreciating renminbi cut into his company’s profits. If salaries, rents, and commodity prices went up at a conservative 10 percent a year, and the renminbi appreciated 5 percent annually, that meant his overall costs would rise 15 percent a year.

The Coffee Book: Anatomy of an Industry From Crop to the Last Drop
by Gregory Dicum and Nina Luttinger
Published 1 Jan 1999

When the time arrives, that price is locked in, regardless of what is happening in the market. In this way, large buyers can use the futures market to “hedge” their purchases. Hedging means taking a futures position opposite to their actual purchasing, so, no matter what happens in the market, they will both win and lose, and thereby obtain price stability. Because the coffee supply can be so drastically altered by weather, the ability to absorb future risk in this way is an important component of a smoothly running market. In July, during the Brazilian winter, coffee traders worldwide monitor the weather there much more closely than the weather in their own backyards.

Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School
by Andrew Hallam
Published 1 Nov 2011

During a slowdown for building-material suppliers, Fastenal’s shares in late 2010 should have been priced a lot lower than they were five years ago when the U.S. housing market was in its full-bubbled boom. But Fastenal’s shares haven’t struggled nearly as much as the company’s counterparts. Figure 9.1 reveals that (as of January 2011) they were priced higher than they were five years previous at the height of the building boom. Figure 9.1 Fastenal’s Debt-Free Balance Sheet Gives Price Stability During Recession Source: Yahoo! Finance12 Some investors like to look at businesses’ debt-to-equity ratio. In others words, how much debt does a company have relative to assets? That’s fair enough. But I’ve always preferred choosing businesses (preferably) with no debt at all. It’s especially wise to give ourselves a margin of safety when it comes to company debt.

Strange Rebels: 1979 and the Birth of the 21st Century
by Christian Caryl
Published 30 Oct 2012

The budget accordingly provided for a sharp rise in value-added tax, which now rose to 15 percent. This point also gave Thatcher cause for nervousness. As she was perfectly aware, the hike in VAT would add several percentage points to retail prices, thus contributing to inflationary pressures. This was not the only factor that looked likely to undermine price stability. In its final months the Callaghan government had agreed on substantial pay hikes for public-sector unions, and during her campaign Thatcher had agreed to respect her predecessor’s pledges. Just as expected, inflation rose. The consumer price index jumped from 11 percent in the summer to 20 percent by the end of 1979.

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It was Milton Friedman who had declared—with bracing but controversial clarity—that “inflation is always and everywhere a monetary phenomenon.” In the view of Friedman and other monetarists, the notion that governments could tame inflation by demand-side methods, like tinkering with wage and price controls, was utterly illusory. The acolytes of monetarism insisted instead that government’s task was to ensure price stability by restraining the supply of money in circulation—or, to use the more populist formulation, to slow down the rate at which government printing presses were turning out banknotes. Thatcher’s team was not breaking entirely new ground here. Key members of the Callaghan government’s economic team—above all his own chancellor, Denis Healey—had already accepted the basic monetarist premise.

End This Depression Now!
by Paul Krugman
Published 30 Apr 2012

But the Germans hate, hate, hate the idea of inflation, thanks to memories of the great inflation of the early 1920s. (Curiously, there is much less memory of the deflationary policies of the early 1930s, which are what actually set the stage for the rise of you-know-who. More in chapter 11.) And perhaps more directly relevant, the ECB’s mandate calls on it to maintain price stability—period. It’s an open question how binding that mandate really is, and I suspect that the ECB could find a way to rationalize moderate inflation despite what the charter says. But the mind-set is certainly one in which inflation is considered a great evil, no matter what the consequences of a low-inflation policy may be.

Exploring Everyday Things with R and Ruby
by Sau Sheong Chang
Published 27 Jun 2012

Price and demand Second, while the price fluctuates with the demand, it actually decreases over time until it stabilizes at a price between $5 and $5.50. Notice this corresponds with the cost of creating goods, which we set at $5 at the beginning of the simulation. The logic in the Producer class’s produce method prevents the price from ever dropping below the cost. This is the reason why the price stabilizes at around $5. But why does the price drop at all? This is due to the market economy again. Remember that the consumer always buys the cheapest goods first. This means the producer with the higher prices will have unsold goods, which in turn forces the prices to go down. The end results are that the average price goes down until it nears the cost of producing the goods.

Bitcoin: The Future of Money?
by Dominic Frisby
Published 1 Nov 2014

Rather we look to a fiat standard like the US dollar and we convert the value of the Bitcoin to actually price goods and services. The argument people tend to use is that, well, it’s still a small economy, if it got really large people would price things with it. ‘The other problem is that I don’t think there’s ever going to be price stability with Bitcoin. ‘First, there are a lot of innovative pressures. There’s tons of competition, there’s over 300 altcoins and there’s always new technology being invented. So that does have a very significant effect on the price of Bitcoin. ‘Second, we have rapid demand changes. Suddenly there are loads of buyers, everyone wants to get into Bitcoin, then just as suddenly they don’t.

The Rise of the Quants: Marschak, Sharpe, Black, Scholes and Merton
by Colin Read
Published 16 Jul 2012

While we see that four scholars worked independently to develop the link between the mean return and the variance of a security and its market price, we will forever associate this new methodology of the Capital Asset Pricing Model (CAPM) with the great mind William Sharpe. 4 A Roadmap to Resolve the Big Questions 5 However, while Sharpe’s insights helped us better understand how an individual security is priced, the greatest need for the rapid pricing of securities was in the derivatives market. This new financial market, once the sleepy domain of farmers and food processors concerned about price stability for the future delivery of agricultural commodities, now represents an annual market value that rivals the combined size of the world’s economies. There is now a much greater volume of trading in these derivatives, in commodities futures and in options markets, in credit default swaps and mortgage-backed securities, in foreign exchange futures and bond futures than in the traditional market for corporate securities.

The Age of Illusions: How America Squandered Its Cold War Victory
by Andrew J. Bacevich
Published 7 Jan 2020

Key initiatives included a massive $787 billion stimulus bill that Obama signed into law within a month of becoming president, a bailout package for the auto industry, a bit of tax relief for members of the working class, and reduction of the prime interest rate to essentially zero percent. Overall, this package of initiatives worked—sort of. Housing prices stabilized, unemployment eased, and stock indices began to recover. Yet this success was hardly without drawbacks. Among them: several years in which the federal deficit exceeded a trillion dollars. During the Bush administration, the national debt had more than doubled to over $11 trillion. During the Obama-engineered recovery, it broke through the $20 trillion barrier.30 Justified as necessary to restore economic health, these mushrooming deficits suggested that federal authorities had once and for all abandoned even the pretense of minimal fiscal discipline.

Reaganland: America's Right Turn 1976-1980
by Rick Perlstein
Published 17 Aug 2020

A partial answer, however, was for Americans to make do with less. So he would “oppose any further reductions in federal income taxes.” He implored “all employers in this country to limit total wage increase to a maximum of 7 percent per year.” He announced the formation of a new Council on Wage and Price Stability, or COWPS, to establish voluntary price guidelines for businesses to follow. He insisted that “whether our efforts are successful will finally depend on you as much as me.” He concluded, “Reducing the deficit will require difficult and unpleasant decisions. We must face a time of national austerity.

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It felt like the bill was coming due for a generation of economic boom times that had secretly been built on a foundation of death. * * * ALFRED KAHN, THE CORNELL UNIVERSITY economics professor the president appointed as his new anti-inflation “czar,” announced to a conference of retailers that unless business adhered to his forthcoming Council on Wage and Price Stability guidelines, “we will have a deep, deep depression.” The stock market, which had just enjoyed its first gains after a month of plunging values, suffered a near panic. One Oregon newspaper illustrated a feature about the speech with 1930s-era photographs of an emaciated farmer puffing out the empty pockets of his overalls, an unemployment line, and a Civilian Conservation Corps work camp.

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A dozen black leaders told the president they might be “unable to contain the urban unrest that would follow that decision.” Alfred Kahn admitted to another group of black leaders that reducing budget deficits was an “inefficient” way to fight inflation—but “until you show me there is a better way, I have no choice.” He implored them to help promote compliance with his Council on Wage and Price Stability guidelines, pleading, “We cannot hope to devote the additional resources you and I would like to rebuilding our cities, to resuming our progress to four percent unemployment, and to provide decent medical care to everybody in this country until we somehow restore the balance between what we want and what we can afford,” he said.

Extreme Money: Masters of the Universe and the Cult of Risk
by Satyajit Das
Published 14 Oct 2011

Like Elvis, who claimed in his line of work that knowledge of music was not strictly necessary, Greenspan did not need to know much about economics.16 In oracular pronouncements, Greenspan excelled at “lacquering a slate of ignorance with a thin coating of knowledge.”17 At a July 1996 meeting, discussing the target rate of inflation, Governor Janet Yellen argued for 2 percent. Greenspan waffled about price stability. Asked to define the term, Greenspan said that it was “the state in which expected changes in price level do not effectively alter business or household decisions.” Pressed further, Greenspan expressed preference for zero inflation, correctly measured. The consensus was for 2 percent incorrectly measured.

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Ben Bernanke “The economic outlook” (5 May 2005), Testimony to the Joint Economic Committee, US Congress. 6. “Savings versus liquidity” (11 August 2005) The Economist. 7. Robin Harding “Bernanke says foreign investors fuelled crisis” (18 February 2011) Financial Times. 8. Fisher, Irving “The debt-deflation theory of great depressions” (1933) Econometrica: 337–57. 9. William White “Is price stability enough?” (April 2006) Bank of International Settlements. 10. Gillian Tett of the Financial Times coined the phrase; see Gillian Tett “Should Atlas still shrug?” (15 January 2007) Financial Times. 11. The phrase “new liquidity factory” was coined by Mohamed El-Erian. 12. Total outstanding volumes of derivative contracts are greater, around $600 trillion (see Chapter 14).

The Ministry for the Future: A Novel
by Kim Stanley Robinson
Published 5 Oct 2020

Thousand-euro suits: Mary did not fail to let her Irish disdain for such peacockery show. She could convey that disdain with a look while still being ostensibly polite, but of course it didn’t help in terms of getting her what she wanted. She saw very clearly that the European Central Bank was entirely focused on price stability and increasing its power in the world to carry out that task. If they were asked to adjust the interest rate half a point to save the world, they wouldn’t do it. Outside their purview. The People’s Bank of China on the other hand was a state-owned operation that held the most assets of any central bank on Earth, approaching four trillion US dollars; and although they were independent compared to most Chinese divisions of government, they were still ruled by the State Council.

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Anyone who wanted a job could get one from the government, “the employer of last resort,” and all these public workers were to be paid a living wage, which would have the effect of raising the private wage floor also to that level, in order to remain competitive for workers. MMT also reiterated Keynes’s point that governments did not experience debt like individuals did, because governments made money in the first place, and could create new money without automatically causing inflation; the quantitative easing (QE) after the 2008 crash demonstrated this price stability despite major infusions of new money. So MMT recommended robust stimulus spending in the form of carbon quantitative easing (CQE) as well as a job guarantee. Both were to be directed to the effort to decarbonize civilization and to get in a sustainable balance with the biosphere, humanity’s one and only support system.

The Inner Lives of Markets: How People Shape Them—And They Shape Us
by Tim Sullivan
Published 6 Jun 2016

They settled on an initial money supply of ten million shares and allowed bidders to squirrel away their currency to make a single big purchase, which was of particular value to the smaller food banks. One unexpected consequence of becoming a market designer was that Prendergast found himself playing the role of central banker. Central bankers manage money supply, and they do so in large part to keep prices steady. Price stability was also a major concern of small food banks: since they made relatively infrequent purchases, historical prices provided them with guidance on how much to bid. For the Federal Reserve (the United States’s central bank), this involves too many complications to enumerate here—from figuring out how many one hundred dollar bills in circulation are hiding under Russian mobsters’ floorboards to estimating the rate at which bills flow through the economy to assessing investors’ beliefs about future money supply (which may make them spend, or stuff more bills in mattresses), and so on and so forth.

Gaza in Crisis: Reflections on Israel's War Against the Palestinians
by Ilan Pappé , Noam Chomsky and Frank Barat
Published 9 Nov 2010

The pro-oil lobby in America lost its impact when, in 1973, the Arab oil-producing states declared their famous embargo. But when it transpired that this step was not, as declared, meant to assist the Palestinians but rather to bring up oil prices, the embargo became a fleeting episode. After all, such aggressive tactics in the world of business are the bread and butter of the capitalist system. And when prices stabilized, to the satisfaction of all concerned, the oil-producing Arab states began formulating a definite pro-American policy. The lesson was clear: American administrations found they could ensure oil flow from Saudi Arabia and, at the same time, categorically reject any sensible peace proposals made by the Saudi crown for solving the Arab-Israeli conflict.

Wars, Guns, and Votes: Democracy in Dangerous Places
by Paul Collier
Published 9 Feb 2010

The ensuing economic crisis was partly met by borrowing: by 1993 debt had accumulated to $15 billion. Even with this massive borrowing, average incomes duly collapsed by around a third. Poverty soared. The politics compounded these economic problems. The tax on cocoa had been disguised as a price stabilization scheme: the price was guaranteed, but at a level that had been below the world price. As world cocoa prices fell to levels nobody had anticipated, the price guarantee duly kicked in: the cocoa-producing immigrants were being subsidized instead of taxed! To keep the political deal in place the civil service continued to expand, exacerbating the collapse of the private economy.

Borrow: The American Way of Debt
by Louis Hyman
Published 24 Jan 2012

By the early 1970s, only twelve states still had fair-trade laws on the books.6 In 1975, President Gerald Ford finally ended the forty-year experiment in manufacturer-controlled pricing with the Consumer Goods Pricing Act, “enabling,” as he wrote in his signing statement, which sounds oddly like an advertisement, “consumers in all 50 States to shop for the best products at the lowest possible prices.”7 There was not a clean end to the fair-trade laws, but there was a clear rise in free-market pricing in the 1950s and 1960s that allowed discounters to take advantage of lower manufacturing costs. Without price stability, manufacturers had to look for other ways to cut costs—such as manufacturing overseas—to maintain profitability. Even with such movements, manufacturing profits took a hit, which in turn made other forms of investment, such as finance, more appealing. The discount store grew so fast not only because of its prices but because of the way it changed how Americans shopped.

Who Needs the Fed?: What Taylor Swift, Uber, and Robots Tell Us About Money, Credit, and Why We Should Abolish America's Central Bank
by John Tamny
Published 30 Apr 2016

The answer lies in the basic truth that the dollar, whether fixed to gold or floating, is always and everywhere a “ruler”—a measure of value. Bartley, Brookes, and Reagan made basically the same point: that the price of oil in dollars tends to revert to one-tenth, one-twelfth, or one-fifteenth of an ounce of gold. This is important because, as Forbes noted in 2006, during the last period of dollar-price stability, whereby the greenback was defined as 1/35th of an ounce of gold, the price of oil hardly fluctuated. With gold stable in dollars, so was the price of oil stable in dollars. Indeed, monetary economist Nathan Lewis has pointed out that from 1982 to 2000, “the dollar’s value was crudely stable vs. gold around $350/ oz.”17 What is interesting about the period he describes, one in which the global economy boomed, is that there were no notable advances in oil-extraction techniques.

Hubris: Why Economists Failed to Predict the Crisis and How to Avoid the Next One
by Meghnad Desai
Published 15 Feb 2015

Myrdal distinguished between ex ante calculations of rates of return, which were made under uncertainty, and ex post, when one could be sure of what had happened. Entrepreneurs invest on the basis of an expected or ex ante rate of return; what they realize is the actual or ex post rate of return. The gap between the two drives the economy. Myrdal made the radical suggestion that Wicksell’s notion of price stability as the sine qua non of a monetary equilibrium was inapplicable to a dynamic economy. In such an economy, inventions constantly improved productivity and raised the natural rate of interest. This meant that the task of the banking system was constantly to adjust the market rate to keep up with it.

The Long Good Buy: Analysing Cycles in Markets
by Peter Oppenheimer
Published 3 May 2020

Despite the huge changes in economic conditions and technology over the past three decades, and occasional financial and economic crises, there has been a tendency for similar patterns to repeat themselves in financial markets, and for cycles to emerge, albeit in slightly different forms. In a 2019 paper, authors Filardo, Lombardi and Raczo noted that, over the past 120 years, the US has gone through the Gold Standard period, when inflation was low, and the 1970s, when inflation was high and volatile, and that over this long historical period the price stability credentials of central banks has shifted and fiscal and regulatory policies have varied considerably, but that ‘through all of this, the financial cycle dynamics have remained a constant feature of the economy’.4 It is these cycles, and the factors that drive them, that this book explores. Its purpose is to show that, despite significant changes in circumstances and environments, there still appear to be repeated patterns of performance and behaviour in economies and financial markets over time.

Fully Automated Luxury Communism
by Aaron Bastani
Published 10 Jun 2019

Another might be intellectual property rights applied to certain technologies used for mining, perhaps in the process of converting ice to fuel, creating scarcity there instead. Finally, and perhaps most sensibly, one could foresee the adoption of predatory pricing for commodities mined off-world, with the price of each fixed marginally below the cost of operating the cheapest terrestrial mines. This would serve to keep drills turned off on Earth while maintaining price stability and guaranteeing huge profits for mining companies. It isn’t hard to imagine how this might be justified by big business and the political establishment, with off-world mining companies presenting themselves as custodians of the future. ‘We have learned our lesson as a species,’ they might say, internalising seemingly progressive arguments from the green movement.

Fed Up!: Success, Excess and Crisis Through the Eyes of a Hedge Fund Macro Trader
by Colin Lancaster
Published 3 May 2021

“The Fed expands its balance sheet by creating more currency, by printing money ex nihilo, literally out of nothing. The Fed takes this new money created out of thin air and goes to the open market to buy stuff. This is the mechanism by which the Fed expands its balance sheet.” We turn the page. “In theory, the Fed has three key goals. The first is price stability. This is a fancy way of saying it needs to keep an eye on inflation. Inflation is like the oatmeal for Goldilocks: you don’t want it too hot or too cold. Inflation around 2% is just right. After the disastrous experience of Germany in the 1930s, and in the USA in the ’70s, this became the top priority.

Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present
by Jeff Madrick
Published 11 Jun 2012

Schultze might have advised outright wage and price controls, but the failure of Nixon’s ill-conceived program made that politically impossible. Instead, the Carter advisers proposed a voluntary system of wage and price restraints for business and labor starting in April 1977. Barry Bosworth was put in charge of the Council on Wage and Price Stability, the commission that had been formed earlier under Nixon, which would administer the new voluntary restraints. By the time the program went into effect in the spring, Carter backtracked on his stimulus proposal. The economy, he thought, seemed to be reviving, as retail sales strengthened in April and inflation rose slightly for a couple of months.

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(CCC), 16.1, 16.2 commercial paper, 1.1, 1.2, 1.3, 1.4, 16.1, 17.1, 19.1, 19.2, 19.3, 19.4 commissions and fees, 2.1, 4.1, 4.2, 4.3, 4.4, 5.1, 6.1, 6.2, 6.3, 13.1, 13.2, 13.3, 13.4, 15.1, 15.2, 15.3, 16.1, 16.2, 16.3, 16.4, 16.5, 17.1, 17.2, 17.3, 17.4, 18.1, 18.2, 18.3, 19.1, 19.2 Commodities Futures Trading Commission (CFTC), 14.1, 14.2, 17.1 communism, prl.1, prl.2, prl.3, prl.4, 3.1, 4.1, 7.1, 7.2, 7.3, 7.4, 7.5 Community Reinvestment Act (CRA; 1977) competition, 1.1, 2.1, 2.2, 8.1, 12.1 Comprehensive Employment and Training Act (CETA; 1973) computers, 1.1, 4.1, 6.1, 8.1, 8.2, 8.3, 12.1, 13.1, 14.1, 14.2, 14.3, 14.4, 14.5, 15.1, 17.1, 17.2, 17.3, 18.1, 18.2, 19.1, 19.2 conflicts of interest, 1.1, 1.2, 4.1, 13.1, 17.1, 19.1 conforming mortgages, 18.1, 18.2, 18.3 conglomerates, 4.1, 4.2, 4.3, 13.1, 15.1, 16.1, 16.2, 16.3 Congress, U.S., 1.1, 3.1, 3.2, 4.1, 6.1, 6.2, 6.3, 8.1, 9.1, 9.2, 9.3, 10.1, 11.1, 11.2, 13.1, 13.2, 14.1, 14.2, 14.3, 14.4, 14.5, 15.1, 15.2, 15.3, 16.1, 16.2, 16.3, 17.1, 17.2, 17.3, 17.4, 18.1, 18.2, 18.3, 18.4, 18.5, 19.1, 19.2 Connally, John, 3.1, 3.2 Conrad, Kent Conscience of a Conservative, The (Goldwater), prl.1 conservatism, itr.1, prl.1, prl.2, 2.1, 2.2, 2.3, 2.4, 2.5, 2.6, 2.7, 2.8, 7.1, 7.2, 10.1, 11.1 consumer prices, 2.1, 2.2, 3.1, 3.2, 3.3, 3.4, 3.5, 3.6, 3.7, 6.1, 8.1, 9.1, 11.1, 11.2 Consumer Product Safety Commission, prl.1, 3.1, 11.1 consumer protection, itr.1, prl.1, 2.1, 3.1, 11.1, 14.1, 19.1, 19.2 consumer spending, 2.1, 2.2, 3.1, 3.2, 6.1, 14.1, 19.1 Continental Illinois, 6.1, 11.1 Control Data Cornwall Capital, 15.1, 19.1 Corrigan, Gerald Council of Economic Advisers (CEA), 2.1, 2.2, 3.1, 3.2, 3.3, 3.4, 3.5, 3.6, 3.7, 7.1, 9.1, 14.1 Council on Wage and Price Stability Countrywide Financial Services, 14.1, 18.1, 18.2, 18.3, 19.1, 19.2, 19.3 Courtright, Hernando Cox, Christopher Cox Communications, 12.1, 12.2, 12.3 credit cards, 1.1, 11.1, 16.1, 16.2, 16.3, 17.1, 18.1, 18.2 credit default swaps (CDSs), 19.1, 19.2, 19.3, 19.4 credit markets, 1.1, 1.2, 2.1, 6.1, 11.1, 12.1, 14.1, 14.2, 15.1, 15.2, 17.1, 18.1, 19.1, 19.2, 19.3, 19.4, 19.5, 19.6 credit ratings, 6.1, 6.2, 12.1, 16.1, 17.1, 17.2, 17.3, 17.4, 19.1, 19.2, 19.3, 19.4, 19.5 Credit Suisse First Boston, 17.1, 17.2 crisis of 2008, x, 6.1, 12.1, 12.2, 14.1, 14.2, 14.3, 19.1, 19.2, 19.3 crop failures, 3.1, 3.2, 9.1, 9.2, 9.3 Curie, Marie, 2.1, 19.1 currencies, 1.1, 1.2, 1.3, 2.1, 2.2, 2.3, 3.1, 3.2, 3.3, 6.1, 6.2, 6.3, 6.4, 11.1, 14.1, 15.1, 15.2, 15.3, 15.4, 15.5, 15.6, 15.7, 15.8, 15.9, 17.1; see also dollar, U.S.

Reminiscences of a Stock Operator
by Edwin Lefèvre and William J. O'Neil
Published 14 May 1923

From time to time somebody would ask about it and one or another insider—members of the original underwriting syndicate—would say that the company’s earnings were better than expected and the prospects more than encouraging. This was true enough and very good as far as it went, but not exactly thrilling. The speculative appeal was absent, and from the investor’s point of view the price stability and dividend permanency of the stock were not yet demonstrated. It was a stock that never behaved sensationally. It was so gentlemanly that no corroborative rise ever followed the insiders’ eminently truthful reports. On the other hand, neither did the price decline. 21.2 In most of Reminiscences, Lefevre depicts Livermore in his role as a trader.

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That would have made them short to the extent of 25 per cent of the total amount offered for subscription to the public, and that, of course, would have enabled them to support the stock when necessary and at no cost to themselves. Without any effort on their part they would have been in the strong strategic position that I always try to find myself in when I am manipulating a stock. They could have kept the price from sagging, thereby inspiring confidence in the new stock’s price stability and in the underwriting syndicate back of it. They should have remembered that their work was not over when they sold the stock offered to the public. That was only a part of what they had to market. They thought they had been very successful, but it was not long before the consequences of their two capital blunders became apparent.

The Essays of Warren Buffett: Lessons for Corporate America
by Warren E. Buffett and Lawrence A. Cunningham
Published 2 Jan 1997

Your joy at our conclusion that lower rates benefit a number of our operating businesses and investees should be severely tempered, however, by another of our convictions: scheduled 1988 tax rates, both individual and corporate, seem totally unrealistic to us. These rates will very likely bestow a fiscal problem on Washington that will prove incompatible with price stability. We believe, there- 202 CARDOZO LAW REVIEW [Vol. 19:1 fore, that ultimately-within, say, five years-either higher tax rates or higher inflation rates are almost certain to materialize. And it would not surprise us to see both. • Corporate capital gains tax rates have been increased from 28% to 34%, effective in 1987.

Meltdown: How Greed and Corruption Shattered Our Financial System and How We Can Recover
by Katrina Vanden Heuvel and William Greider
Published 9 Jan 2009

And now we learn from Bob Woodward’s new book, excerpted recently in the Washington Post, that Fed chair Alan Greenspan persuaded Bill Clinton to drop the modest public investment agenda he campaigned on in favor of hair-shirt deficit-cutting. Who is this Fed, and can anything be done about it? To financiers’ eyes, the economy has just got too strong for comfort. Though current inflation rates are about as low as any we’ve seen in the past thirty years, there’s profound worry among bankers and Fedsters that this relative price stability is about to end. Such price hawks are convinced that the U.S. economy cannot grow at a rate faster than 2.5 to 3.0 percent a year—quite slow by historical standards—without lapsing into a sickly inflation. If unemployment gets too low, meaning much below current levels, then workers might develop an attitude problem, and the twenty-year decline in real hourly wages might be reversed, however briefly.

Before Babylon, Beyond Bitcoin: From Money That We Understand to Money That Understands Us (Perspectives)
by David Birch
Published 14 Jun 2017

I used to think that this was true but I don’t any more. The ‘Internet of things’ and always-on connectivity have eroded the cost differential between the two. He went on to say that there would not be a universal currency for a long time. There is a big advantage to separate currencies providing price stability in different parts of the world. I don’t think there will be a universal currency ever. It doesn’t make sense in economic terms, let alone in technological or social or political or business terms. He further said that corporations would not issue their own private currency. I’m not so sure about this.

The Vanishing Middle Class: Prejudice and Power in a Dual Economy
by Peter Temin
Published 17 Mar 2017

The combination of changing prices and large amounts of money seeking a safe home led to demands to deregulate the financial system that stimulated a general push for deregulation and affected policy decisions in the following decades.5 The Fed did not know how to contain the price shocks of the 1970s, and “stagflation”—both inflation and unemployment—was the result. President Carter tried to end this monetary chaos by appointing Alfred Kahn to head the Council on Wage and Price Stability and promote deregulation and then, under pressure, Paul Volcker to chair the Federal Reserve System and rein in inflation. Kahn, banned from using the term “recession,” famously said, “Let’s call our condition a banana.” Volcker dramatically raised interest rates sharply and slowed the growth of money.

Green Economics: An Introduction to Theory, Policy and Practice
by Molly Scott Cato
Published 16 Dec 2008

He also suggests informal cooperation between poorer countries dependent on commodities to earn foreign exchange to increase their market power: For example, in May 2005 a new government in Ecuador (which exports more bananas than any other country) signed a decree to regulate the volume of bananas leaving the country. Two months later, Malaysia and Indonesia announced a bilateral plan to cooperate on the palm oil, rubber, cocoa, timber and other markets in order to ensure price stability and eliminate the undercutting of their position by others … On the world tea market, discussions have been reported involving all four leading tea producers, China, India, Kenya and Sri Lanka.19 This may be considered ‘unfair trade’ as it represents effective cartels in the markets for different commodities but it is a response to the unfairness of the negotiations in those very markets, which have for centuries been dominated by the rich Western nations to the detriment of the South.

Let them eat junk: how capitalism creates hunger and obesity
by Robert Albritton
Published 31 Mar 2009

For example, capitalism managed to relate to the southern US slave economy quite effectively in the first half of the nineteenth century. In contrast, the great depression wreaked havoc with the American system of family farms, and it was only very significant state intervention carried out by President Roosevelt in the 1930s that re-established a degree of price stability at levels which enabled some farming families to survive. After World War II, with the enormous upswing of the mechanization and chemicalization of agriculture, and with enormous state support, the American food system became increasingly capitalist at every step of food provision from field to table.

The Financial Crisis and the Free Market Cure: Why Pure Capitalism Is the World Economy's Only Hope
by John A. Allison
Published 20 Sep 2012

In the short term, the Federal Reserve can be important in controlling liquidity risk. Healthy banks can borrow cash from the Federal Reserve, using their sound assets (typically government bonds) as collateral. This cash inflow can be used to meet depositors’ demands. In the long term, however, the existence of the Fed magnifies risk. The Fed has the dual goals of price stability and low unemployment. As previously described, the Fed often overexpands the money supply to eliminate natural market corrections, and this effectively provides a major incentive for banks to take more risk. The Fed reduces short-term liquidity risk at the expense of increasing credit risk. There is an interesting contrast between the early years of the Great Depression and the recent financial crisis.

Capitalism: Money, Morals and Markets
by John Plender
Published 27 Jul 2015

That might be true, but given that the banks had run down their capital to a negligible sliver, the assumption was both heroic and irrelevant. A growing discussion is taking place, too, about the case for leaning against the wind – that is, raising interest rates more than would be necessary to maintain price stability in the short and medium term in order to curb a dangerous increase in banks’ risk appetite or to dampen overheating asset prices. As for waving sticks and spitting into the wind, the points show a realistic appreciation of the difficulty of influencing markets. This is a salutary warning for central bankers in the aftermath of the crisis, since they are now committed to macro-prudential policymaking, which entails imposing counter-cyclical increases and decreases in banks’ capital buffers, as well as other forms of intervention such as quantitative controls on lending.

The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies
by Erik Brynjolfsson and Andrew McAfee
Published 20 Jan 2014

The first mobile phones bought and sold in the developing world were capable of little more than voice calls and text messages, yet even these simple devices could make a significant difference. Between 1997 and 2001 the economist Robert Jensen studied a set of coastal villages in Kerala, India, where fishing was the main industry.10 Jensen gathered data both before and after mobile phone service was introduced, and the changes he documented are remarkable. Fish prices stabilized immediately after phones were introduced, and even though these prices dropped on average, fishermen’s profits actually increased because they were able to eliminate the waste that occurred when they took their fish to markets that already had enough supply for the day. The overall economic well-being of both buyers and sellers improved, and Jensen was able to tie these gains directly to the phones themselves.

The Age of Stagnation: Why Perpetual Growth Is Unattainable and the Global Economy Is in Peril
by Satyajit Das
Published 9 Feb 2016

Care should be taken in interpreting the estimates as they are the latest available but not necessarily from the same year. 3 See “Top 10 Tax Dodgers,” Time, http://content.time.com/time/specials/packages/article/0,28804,1891335_1891333_1891317,00.html. 4 Branko Milanović, “Global Income Inequality by the Numbers: In History and Now: An Overview,” World Bank Policy Research Working Paper 6259, November 2012. http://elibrary.worldbank.org/doi/pdf/10.1596/1813-9450-6259. 5 “Full Transcript of the Mitt Romney Secret Video,” Mother Jones, 19 September 2012. www.motherjones.com/politics/2012/09/full-transcript-mitt-romney-secret-video. 6 Ben S. Bernanke, “What the Fed Did and Why: Supporting the Recovery and Sustaining Price Stability,” Washington Post, 4 November 2010. www.washingtonpost.com/wp-dyn/content/article/2010/11/03/AR2010110307372.html. 7 The term “human shields” was suggested by Steve Randy Waldman, “Some Thoughts on QE,” 2 November 2014. www.interfluidity.com/v2/5773.html. 8 See United Kingdom's Budget 2012: Thirtieth Report of Session 2010–12, vol. 1, p. 26; oral evidence to the Treasury select committee, Bank of England February 2012 Inflation Report, HC (2010–12) 1867, Q 84. 9 Oscar Wilde, The Soul of Man under Socialism, 1891. www.gutenberg.org/files/1017/1017-h/1017-h.htm. 10 George Orwell, “Marrakech,” in Essays, Everyman's Library (1939) 2002, pp. 121–22. 11 Chrystia Freeland, Sale of the Century: Russia's Wild Ride from Communism to Capitalism, Crown Business, 2000, p. 14. 12 George Orwell, “Rudyard Kipling,” in Essays, Everyman's Library (1942) 2002, p. 400. 13 The term “economic apartheid” was first suggested by Simon Kuper, “Economic Apartheid, Just Less Black and White,” Financial Times, 25 April 2014. 14 David Cameron, “The Big Society,” Sixth Annual Hugo Young Memorial Lecture, London, 10 November 2009. www.theguardian.com/politics/video/2009/nov/10/david-cameron-hugo-young-lecture. 15 Thomas Gray, “Elegy Written in a Country Churchyard,” in Arthur Quiller-Couch (ed.), The Oxford Book of English Verse: 1250–1900, Oxford University Press (1751) 1919. www.bartleby.com/101/453.html. 16 Robert Shrimsley, “The Nine Stages of the Piketty Bubble,” Financial Times, 30 April 2014. 17 Pope Francis, “Evangelii Gaudium,” 24 November 2013. http://w2.vatican.va/content/francesco/en/apost_exhortations/documents/papa-francesco_esortazione-ap_20131124_evangelii-gaudium.html. 18 See Benedict Mander and John Paul Rathbone, “Chile: Limits to Growth,” Financial Times, 1 July 2014. 9.

Netflixed: The Epic Battle for America's Eyeballs
by Gina Keating
Published 10 Oct 2012

Redstone, who had overpaid for Blockbuster and was still taking a lashing for it in the financial press, was thrilled, but he still wanted to pull Viacom’s money out of the chain before the cable companies’ new gambit—video on demand—started to erode its market share. The plan was to spin off 20 percent of Viacom’s Blockbuster stake in 1999 to make a market in the stock, and to sell off the rest when the share price stabilized. Viacom sent Antioco and Blockbuster’s new chief financial officer, Larry Zine, who had served as Antioco’s number two at Circle K, on a road show to present the plan to investors. Zine was a slight and quiet man, and he became fast friends with Antioco when the two men worked to bring Circle K out of bankruptcy.

Ayn Rand and the World She Made
by Anne C. Heller
Published 27 Oct 2009

Alan Greenspan and Martin Anderson, later a member of the Nixon administration and an advisor to Ronald Reagan, occasionally added their views on economic issues, including a defense of the gold standard by Greenspan that, in combination with his lifelong admiration for Rand, came back to haunt him when he was named chairman of the Council of Economic Advisers under Gerald Ford and chairman of the Federal Reserve Board under Ronald Reagan. (Nixon had divorced the dollar from the gold standard in 1971, completing a separation begun by FDR.) He never lost his respect for gold. “I have always harbored a nostalgia for the gold standard’s inherent price stability,” he wrote in his 2007 memoir, The Age of Turbulence. Other scholarly young Rand devotees, including Peikoff, Hessen, Reisman, and Barbara Branden, contributed essays on problems in philosophy and history, book reviews, and commentary on current events. There were few or no outside contributors.

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composing essays was child’s play: Harry Binswanger, “Recollections of Ayn Rand.” clarity and logic: MYWAR, p. 297. warns against defining national emergencies too broadly: Ayn Rand, “The Ethics of Emergencies,” TON, February 1963; reprinted in TVOS, p. 49. “for the gold standard’s inherent price stability”: The Age of Turbulence, p. 481. she endorsed Goldwater: TON, October 1963 and March, July, September, and October 1964. helped to found the club and magazine: Author interview with JKT, May 21, 2004. famous Goldwater rally: This took place on May 12, 1964. “It made his points in his voice”: Unpublished taped interview with Barbara Weiss, conducted by BB, September 25, 1983.

Pump Six and Other Stories
by Paolo Bacigalupi
Published 15 Sep 2010

That he would send money and food back to his blighted land that now existed only in his mind, in his dreams, and in half-awake hallucinations of deserts, red and black saris, of women in dust, and their black hands and silver bangles, and their hunger, so many of the last memories of hunger. He had fantasized that he would smuggle Gita back across the shining sea, and bring her close to the accountants who calculated calorie burn quotas for the world. Close to the calories, as she had said, once so long ago. Close to the men who balanced price stability against margins of error and protectively managed energy markets against a flood of food. Close to those small gods with more power than Kali to destroy the world. But she was dead by now, whether through starvation or disease, and he was sure of it. And wasn't that why Shriram had come to him?

Brexit, No Exit: Why in the End Britain Won't Leave Europe
by Denis MacShane
Published 14 Jul 2017

There was permanent tension between Paris and Berlin over the exchange-rate value of the French franc and Deutschmark, all well told in David Marsh’s books on European central banking and the problems of the euro. In the 1980s inflation was still strong – running at about 10 per cent in France (13.6 per cent in 1980). Today there is price stability in France at around 1.5 per cent, though some economists believe that to be too low. Low interest rates mean France saves between €30 and €60 billion a year in debt payment. Between 1986 and 1992 the difference in borrowing costs – the spread, in technical jargon – between Germany and Italy was 5.1 per cent.

Economists and the Powerful
by Norbert Haring , Norbert H. Ring and Niall Douglas
Published 30 Sep 2012

The main difference, of course, is that the proceeds of money printing by agents of the government go to the government and the proceeds of money creation by banks go to the banks (Fisher 1936/2009). Economists acted as key allies of the bankers. They let the ideas of Fisher and Simons fade into oblivion and spent all their effort devising strategies to keep central banks from printing “too much” money while almost completely ignoring the dangers of money creation by banks for price stability and financial stability. The less money central banks create, the more leeway there is for private banks to create money. With the public finances of many industrial countries ruined by the need to bail out banks and the economy, governments are overdue in reclaiming the power to control the amount of money in circulation and to reduce net taxation using the profits from creating that money.

Servant Economy: Where America's Elite Is Sending the Middle Class
by Jeff Faux
Published 16 May 2012

In a full-employment economy with a healthy industrial sector, workers whose wages are rising can afford to pay high prices for services and pay rising taxes. But with the offshoring of the high-productivity sectors, the source of rising wages shrinks. Add the ideological resistance to tax increases and the undercutting of the bargaining position of labor, and you have a formula for wage stagnation. Add in economic policies that favor price stability over full employment and you have a formula for wage decline. Still, Pollyanna will not be suppressed. Like Alan Blinder, the few pundits who have looked toward the personal service future tell us to cheer up. “The people of the future will be richer than the people of today,” writes Matthew Yglesias.

The Price of Everything: And the Hidden Logic of Value
by Eduardo Porter
Published 4 Jan 2011

The price of a slave in South Carolina rose from about $110.37 in 1720 to about $307.54 in 1800. But that increase barely matched the rate of inflation. In real terms, slave prices remained flat. But, as economists point out, the price of slaves should represent the stream of profits that farmers expected from their labor. Price stability thus suggests that this expected stream did not grow very much. Substitute illegal immigrants for slaves, and similar patterns emerge in the United States today. For decades American farmers have relied on cheap immigrant labor to tend their crops. In 1986, they pressed to pass the Immigration Reform and Control Act, which legalized nearly 3 million illegal immigrants.

Why It's Still Kicking Off Everywhere: The New Global Revolutions
by Paul Mason
Published 30 Sep 2013

In 1848, inflation correlated closely with revolt: the higher the cost of bread, the more revolutionary the outcome. In 2011, Tunisia, Yemen and Lebanon experienced price hikes which, in 1848, would have been prompted expectations of violent revolution; Egypt, Jordan and Palestine, meanwhile, were off the scale. Saudi Arabia stood exactly where England had stood as Europe raged 150 years ago: with food price stability and minimal unrest.21 Commodity price inflation, as all global agencies agree, hammers the poor. It turns the ‘acceptable’ poverty of $2 a day into utter destitution. And the problem is that it has become endemic. Every economic recovery now sparks a commodity boom, mainly because of structural factors which currency manipulation by rich countries only exacerbates: population growth, rising demand in India and China, resource scarcity and the impact of climate change.

Six Degrees: Our Future on a Hotter Planet
by Mark Lynas
Published 1 Apr 2008

As aid agencies frequently complain, the issue is poverty, not just drought. But if one thing is certain, it is that famines are more likely in a world with less food to go round overall. With increasing competition over diminishing harvests, prices will soar on world markets during lean years. Food price stability in the two-degree world will depend on northern land areas being opened up to new crops rapidly enough to replace yield losses in hotter, drier areas to the south. With assiduous planning and adaptation, the world need not tip into serious food deficit. However, if the temperature rises past two degrees, preventing mass starvation will be increasingly difficult, as future chapters will show.

Better, Stronger, Faster: The Myth of American Decline . . . And the Rise of a New Economy
by Daniel Gross
Published 7 May 2012

While prices continued to fall, inventory came down, from 4.04 million in July 2007 to 2.38 million in December 2011. That constituted a 6.2-month supply at the prevailing sales rate.1 These levels aren’t healthy by a long shot, but they’re much closer to healthy and represent a vast improvement. Price stability and appreciation don’t just stop the pain; they add to wealth and improve banks’ balance sheets. Keep in mind that this improvement has come in the absence of any serious change in government policy. There will come a day when housing isn’t a drag. In fact, that day may be here. In the third and fourth quarters of 2011 residential investment contributed 0.03 and 0.25 percentage points to the rate of economic growth, respectively.

The Seventh Sense: Power, Fortune, and Survival in the Age of Networks
by Joshua Cooper Ramo
Published 16 May 2016

In a speech in 2014, Larry Summers, the former Treasury secretary and perhaps America’s most pedigreed economist, summed up the problem this way: “I think it is fair to say that six years ago, macroeconomics was primarily about the use of monetary policy to reduce the already small amplitude of fluctuations about a given trend, while maintaining price stability.” In other words, the main preoccupation of figures like Bernanke and Summers and Yellen was trying to keep lemonade prices within a manageable bound. But by 2014, that had changed. “Today, we wish for the problem of minimizing fluctuations around a satisfactory trend,” Summers said. His real concern, he vouchsafed in that speech, was that the system had undergone what is known as hysteresis: a term for a moment when something breaks and can never be put back together again.

Zero-Sum Future: American Power in an Age of Anxiety
by Gideon Rachman
Published 1 Feb 2011

In 2009, Christopher DeMuth, head of the American Enterprise Institute, a leading conservative think tank in Washington, identified the restraint of domestic spending as one of four key elements of Reaganism: the others were tax cuts, “stable money” (low inflation), and deregulation.7 Indeed, Reagan’s deregulation of price in the oil and gas industry on his first day in office was just the start. On the same day he imposed a hiring freeze on all federal agencies. The following day he abolished the Council on Wage and Price Stability.8 The deregulatory impulse was also controversially extended to environmental legislation and to the financial sector.9 The new president also quickly took on the unions. In the summer of 1981, about seven months into his first term, Reagan clashed with air-traffic controllers in a dispute that hugely disrupted air travel across the country.

Rebooting India: Realizing a Billion Aspirations
by Nandan Nilekani
Published 4 Feb 2016

Good intentions, bad outcomes The subsidy economy operates under a set of distorted rules that bear little relation to the rough-and-tumble world of the open market. In an open market, the scarcity of a particular commodity is signalled by a price rise and the market usually responds accordingly. Faced with an increase in onion prices, a housewife might simply choose to buy fewer onions or none at all until the prices stabilize. If fertilizers are expensive, farmers will use them sparingly. In the closed, artificial system created by subsidies, these market forces are no longer in effect, with harsh consequences. Let’s look at fertilizers first. Subsidies keep prices low, and farmers use them lavishly; according to World Bank data, India’s usage of fertilizers outstrips that of the US.10 This is a massive environmental problem, because fertilizer overuse—that of urea in particular—has the paradoxical effect of reducing soil quality and decreasing crop yields.

Secrets of Sand Hill Road: Venture Capital and How to Get It
by Scott Kupor
Published 3 Jun 2019

We started this section by talking about liquidity being one of the reasons to go public, but so far we’ve said nothing about liquidity. For investors, liquidity is still a ways off, since they are generally required to execute a lockup agreement that restricts their ability to sell stock for the first six months post-IPO. The reason for this is price stabilization as well; we worry that if the VCs (or founders and executives who own a lot of stock) dump all their stock immediately, it could have a big impact on the trading price. Even once the lockup expires, VCs may still be restricted depending on whether they remain on the board of directors (and might be subject to the company’s trading policy, which restricts the time intervals during which officers and directors can trade) or on how much stock they own (there are sometimes volume limitations associated with large holders).

Basic Economics
by Thomas Sowell
Published 1 Jan 2000

However, bonds had a negative rate of return in real terms during the succeeding decades of the 1940s, 1950s, 1960s and 1970s, while stocks had positive rates of return during that era. In other words, money invested in bonds during those inflationary decades would not buy as much when these bonds were cashed in as when the bonds were bought, even though larger sums of money were received in the end. With the restoration of price stability in the last two decades of the twentieth century, both stocks and bonds had positive rates of real returns.{483} But, during the first decade of the twenty-first century, all that changed, as the New York Times reported: If you invested $100,000 on Jan. 1, 2000, in the Vanguard index fund that tracks the Standard & Poor’s 500, you would have ended up with $89,072 by mid-December of 2009.

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The sharpest rate of increase in the price of gold in one year was 135 percent in 1979—and the sharpest fall in the price of gold was 32 percent just two years later.{575} Existing or expected inflation usually leads to rising prices of gold, as people seek to shelter their wealth from the government’s silent confiscations by inflation. But long periods of prosperity with price stability are likely to see the price of gold fall, as people move their wealth out of gold and into other financial assets that earn interest or dividends and can therefore increase their wealth. When the economic crises of the late 1970s and early 1980s passed, and were followed by a long period of steady growth and low inflation, the price of gold fell over the years from about $800 an ounce to about $250 an ounce by 1999.

Stigum's Money Market, 4E
by Marcia Stigum and Anthony Crescenzi
Published 9 Feb 2007

As theorists now realize, expanding money and bank credit without limit during an upswing and permitting them to contract without limit during a downswing, far from encouraging stable growth, would amplify fluctuations in income and output. In particular, unlimited money creation during a boom would fuel any inflationary fires and other excesses that developed. Today, the Fed sees its major policy job as pursuing a countercyclical monetary policy. Specifically, it attempts to promote full employment and price stability by limiting the growth of bank intermediation when the economy expands too vigorously and by encouraging it when the economy slips into recession. To achieve these objectives, a stable predictive relationship between inflation and economic growth, often referred to as a Phillips curve, is necessary, according to many models.2 Controlling the Level of Bank Intermediation The Fed has the ability to control the level of bank intermediation—the amount of bank lending and money creating—through several tools, although its main tool is its open market operations.

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IMPLEMENTING MONETARY POLICY The primary policy tool available to the Fed is open market operations, the ability to create bank reserves in any desired quantity by monetizing some portion of the national debt.1 The Fed could in theory monetize anything—scrap metal to soybeans—but it has stuck largely to Treasury IOUs because there has never been any shortage of them; also, they are highly liquid so the Fed can sell them with as much ease as it buys them. In formulating policy, the first question the Fed faces is what macroeconomic targets to pursue. There are various possibilities: full employment, price stability, or a “correct” exchange value for the dollar. The achievement of all 1 See Chapter 2 for an explanation of debt monetization and a primer on how the Fed creates and destroys bank reserves. these targets is desirable. However, since the Fed has only one powerful string to its bow—the ability to control bank reserves and thereby money creation by the private banking system—and given the fact that the Fed now targets interest rates rather than reserve levels, the Fed must conduct its open market operations in a way that strikes the right balance first and foremost via the appropriate target rate.

…

In hindsight, it is striking to think that despite all these factors, inflation fears were strong enough to push the yield on the 30-year bond to over 8%. It hasn’t even come close to that in recent years, averaging about 4.95% over the five years ending in September 2006. When the Fed began its fight against inflation, it was fighting fears that were not its own. As Federal Reserve Chairman Alan Greenspan once said, price stability exists only when “the expected rate of change of the general level of prices ceases to be a factor in individual and business decision-making.” Other Fed officials have expressed similar thoughts. Thus, even though the 1994 inflation threat did not appear to be as great as investors feared, it nonetheless was affecting the way individuals and investors behaved.

The End of Growth: Adapting to Our New Economic Reality
by Richard Heinberg
Published 1 Jun 2011

Yet the industry had been counting on those projects to maintain a steady stream of liquid fuels a few years out, so worries about a future supply crunch began to make headlines.31 It is the financial returns on their activities that motivate oil companies to make the major investments necessary to find and produce oil. There is a long time lag between investment and return, and so price stability is a necessary condition for further investment. Here was a conundrum: low prices killed future supply, while high prices killed immediate demand. Only if oil’s price stayed reliably within a narrow — and narrowing — “Goldilocks” band could serious problems be avoided. Prices had to stay not too high, not too low — just right — in order to avert economic mayhem.32 The gravity of the situation was patently clear.

Fault Lines: How Hidden Fractures Still Threaten the World Economy
by Raghuram Rajan
Published 24 May 2010

And in the opaque language that he had perfected, he came as close as a central banker can to saying he thought stocks were overvalued: But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade? … We as central bankers need not be concerned if a collapsing financial asset bubble does not threaten to impair the real economy, its production, jobs, and price stability…. But we should not underestimate or become complacent about the complexity of the interactions of asset markets and the economy. Thus, evaluating shifts in balance sheets generally, and in asset prices particularly, must be an integral part of the development of monetary policy.17 In his autobiography, Greenspan admits wondering whether the market would understand what he was getting at.18 It did—and ignored him!

The Irrational Economist: Making Decisions in a Dangerous World
by Erwann Michel-Kerjan and Paul Slovic
Published 5 Jan 2010

Professor Viscusi is widely regarded as one of the world’s leading authorities on cost-benefit analysis, and his estimates of the value of risks to life and health are currently used throughout the federal government. He has served as a consultant to the U.S. Office of Management and Budget, the Environmental Protection Agency, the Occupational Safety and Health Administration, the Federal Aviation Administration, and the U.S. Department of Justice. He was deputy director of the Council on Wage and Price Stability in the Carter administration. He also served on the Science Advisory Board of the U.S. Environmental Protection Agency for seven years and is currently on the EPA Homeland Security Committee. Professor Viscusi is the founding editor of the Journal of Risk and Uncertainty, now housed at Vanderbilt.

The Road to Ruin: The Global Elites' Secret Plan for the Next Financial Crisis
by James Rickards
Published 15 Nov 2016

Today economists such as Paul Krugman and Joseph Stiglitz, using invalid equilibrium models (the economy is not an equilibrium system), propose more deficit spending by deeply indebted countries for indefinite periods to stimulate demand, as if someone with four televisions buying a fifth is the way forward. This is folly. Monetarists are no better. Milton Friedman’s insight was that maximum real growth with price stability is achieved by slow, steady growth in the money supply. Friedman wanted money supply to rise to meet potential growth—a variation of the Irish toast, “May the road rise to meet your feet.” Friedman’s adopted formulation, MV = PQ (originally from Fisher and his predecessors), says that money (M) times velocity (V) equals nominal GDP (consisting of real GDP [Q], adjusted for changes in the price level [P]).

13 Bankers: The Wall Street Takeover and the Next Financial Meltdown
by Simon Johnson and James Kwak
Published 29 Mar 2010

The underlying theory, set out in Greenspan’s famous 1996 “irrational exuberance” speech, was that the Fed should not attempt to head off bubbles, but instead should focus on helping the economy recover when those bubbles popped: “[H]ow do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade? … We as central bankers need not be concerned if a collapsing financial asset bubble does not threaten to impair the real economy, its production, jobs, and price stability.”36 This position was an endorsement of the Efficient Markets Hypothesis and the idea that the Fed should not attempt to determine if prices are accurate, but should leave that function to the markets. Wall Street appreciated Greenspan’s monetary policy, because it meant that he would not raise interest rates preemptively to choke off a boom (unless that boom was also creating higher inflation).

Paper Promises
by Philip Coggan
Published 1 Dec 2011

But they did become responsible for safeguarding the internal value of the currency, via inflation targets. The first formal adoption of an inflation target was by New Zealand, and other central banks followed suit. (In the US, the Federal Reserve targets no particular inflation rate but has a mandate to ensure price stability.) POLICY IN A WORLD OF FLOATING RATES The era of floating exchange rates, ushered in by the collapse of the Bretton Woods system, brought a whole new challenge for the global economy. In one sense, it was a relief. Governments did not have to devote time and resources to defending a particular currency level.

The End of Doom: Environmental Renewal in the Twenty-First Century
by Ronald Bailey
Published 20 Jul 2015

A tax avoids the messy and contentious process of allocating allowances to countries internationally and among companies domestically. For example, nations could negotiate a much more transparent treaty than the Kyoto Protocol and establish a system of globally harmonized domestic carbon taxes. Harmonized taxes offer relative price stability, and taxes on carbon emissions can be raised gradually and predictably over time so that governments, industries, and consumers can all see what the price of carbon-based fuels will be over future decades and can make investment and purchase decisions accordingly. Nordhaus further argues that carbon markets are “much more susceptible to corruption” than are tax schemes.

Capital Ideas Evolving
by Peter L. Bernstein
Published 3 May 2007

Kurz fails to emphasize that volatility—large upward or downward moves—requires general agreement among investors about the future, so that sellers have difficulty finding buyers willing to take their offers near the most recent price and buyers have difficulty finding sellers willing to make offers near the most recent price. Stability in prices necessitates disagreements in outlook between buyers and sellers. Volatility in the underlying fundamentals, such as earnings, dividends, and interest rates, is “exogenous volatility,” or volatility occurring outside the marketplace. Endogenous volatility is what Shiller is talking about when he refers to excess volatility.

California Burning: The Fall of Pacific Gas and Electric--And What It Means for America's Power Grid
by Katherine Blunt
Published 29 Aug 2022

And the expensive contracts stemming from the 1978 law were still on the books. So the utilities lobbied hard to continue recouping those costs, arguing that they needed the money to survive. * * * In truth, Steve Peace wasn’t totally comfortable with the idea of deregulation when it came time to implement it. He recognized the risk in trading price stability for price volatility in the provision of a critical service. But he had been assigned the task because he had the mind for it. He was committed to achieving the objective in a way that protected residential customers from major price swings and created a transparent market for trading power. He held the first hearing on July 11, 1996, and then another in early August.

Trillion Dollar Triage: How Jay Powell and the Fed Battled a President and a Pandemic---And Prevented Economic Disaster
by Nick Timiraos
Published 1 Mar 2022

“Ambiguity has its uses, but mostly in noncooperative games like poker,” Bernanke told his colleagues in 2003. “Monetary policy is a cooperative game. The whole point is to get financial markets to do some of our work for us.”3 Bernanke expanded his practice of “information as monetary tool” by becoming more specific about the Fed’s intentions for achieving its goal of price stability. Before becoming chair, Bernanke had urged the Fed to consider setting an explicit target, but he didn’t get far with Greenspan. He made that his goal after becoming chair, and arrived there in several steps over the course of five years. By 2009, once the fed-funds rate had been lowered below even 2003 levels, Bernanke believed even more strongly that setting an official target would be desirable to assure the public that the Fed was committed to making sure inflation wouldn’t be too high or too low—again, to avoid the paralyzing problem of deflation.

What's Next?: Unconventional Wisdom on the Future of the World Economy
by David Hale and Lyric Hughes Hale
Published 23 May 2011

No individual bank was responsible for the monetary excesses of that period or can be blamed for the subsequent collapses in asset prices. It would be wrong for bankers and their regulators to set capital ratios to anticipate such violent asset price movements. To summarize, US commercial banks appear to have significantly more capital now than at the end of 2008. Assuming that American house prices stabilize or continue rising, the US banking system is far from being bust. If regulators attempt to impose further large increases in capital requirements, the banking industry and its customers would be right to resist. Contrary to the impression given by the media, a good case can be made that the crisis in the United States—the country that is supposed to have been the main culprit for the disaster—has been institution specific rather than general and systemic.

Hard Times: The Divisive Toll of the Economic Slump
by Tom Clark and Anthony Heath
Published 23 Jun 2014

When recession hit the US at the start of the 1980s, the immediate impulse was, on balance, for collectivism in social policy. That is not how we remember things, partly because after the inflationary 1970s came a period of conservative ascendency in macroeconomics – high interest rates and consequent unemployment came to be regarded as an acceptable levy to pay for price stability, a big break from the post-war years. We remember the early 1980s as a right-wing time, too, because a deeply conservative president, Ronald Reagan, went on to secure re-election in the economic upswing. But a question that was repeatedly asked in the General Social Survey (GSS) – recorded in the graph opposite – shows that the proportion of Americans who supported redistributing (by taxing the wealthy and assisting the poor) rose from 43% in 1980 to 49% in 1984.

Planet Ponzi
by Mitch Feierstein
Published 2 Feb 2012

You’d want to cover your manipulation in plenty of complicated talk about statistics, but the talk wouldn’t signify a string bean. The second thing you’d want to do is to start churning out new dollar bills. You’d print like crazy. You wouldn’t talk about trashing the currency, of course; you’d talk about price stability, about quantitative easing, about Operation Twist and bringing down the long end of the yield curve. Ideally, too, you’d have someone in charge who really believed in the value of what he was doing, someone who didn’t really live in the real world. Maybe a professor of something. A guy who had studied a period of history from eighty years ago and who’s been yearning all his life to save the world using techniques which might or might not have worked back then, but which certainly don’t make sense in the present day.

Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money
by Nathaniel Popper
Published 18 May 2015

Regardless of what the Lemon board wanted to do, Wences said, “I would advise you to invest as much money as you can stomach losing.” He told O’Brien to buy coins at Mt. Gox, but to move the coins off Mt. Gox as soon as the order went through. “It is either going to be worth zero or worth five thousand times what it is today.” IN THE DAYS that followed, Mt. Gox reopened for business and the price stabilized around $100. But many believed that the recent price crash proved the flaws in the whole concept. Felix Salmon, a financial columnist at Reuters, wrote a widely circulated article pointing out that the volatile price of Bitcoin made it nearly impossible to use for its most basic purpose, as currency.

The End of Power: From Boardrooms to Battlefields and Churches to States, Why Being in Charge Isn’t What It Used to Be
by Moises Naim
Published 5 Mar 2013

New York Times columnist and author Thomas Friedman calls the constraints imposed by these players “the Golden Straitjacket”: To fit into the Golden Straitjacket a country must either adopt, or be seen as moving toward, the following golden rules: making the private sector the primary engine of its economic growth, maintaining a low rate of inflation and price stability, shrinking the size of its state bureaucracy, maintaining as close to a balanced budget as possible, if not a surplus, eliminating and lowering tariffs on imported goods, removing restrictions on foreign investment, getting rid of quotas and domestic monopolies, increasing exports, privatizing state-owned industries and utilities, deregulating capital markets, making its currency convertible, opening its industries, stock and bond markets to direct foreign ownership and investment, deregulating its economy to promote as much domestic competition as possible, eliminating government corruption, subsidies and kickbacks as much as possible, opening its banking and telecommunications systems to private ownership and competition and allowing its citizens to choose from an array of competing pension options and foreign-run pension and mutual funds.

The Blockchain Alternative: Rethinking Macroeconomic Policy and Economic Theory
by Kariappa Bheemaiah
Published 26 Feb 2017

Furthermore, owing to profit maximization efforts of private actors, purely private monetary systems were also susceptible to hyperinflationary episodes much like state-issued money. The conclusion was that a purely private monetary system would not provide the socially optimum quantity of money. Second, when the authors modified their model to simulate the coexistence of both private and government fiat , the price stability of both private and government monies could only be attained if the government maintained a constant supply of its money. In the real world, a government would need to indulge in expansionary and contradictory policies in order to react to market and political changes. As a result, the government would be obliged to deviate from this practice of maintaining a constant supply, which makes the coexistence of private and government monies an unstable means of exchange.

Arguing With Zombies: Economics, Politics, and the Fight for a Better Future
by Paul Krugman
Published 28 Jan 2020

Ideally, we should have been able to get all the relevant parties in a room and say, look, this inflation has to stop; you workers, reduce your wage demands, you businesses, cancel your price increases, and for our part, we agree to stop printing money so the whole thing is over. That way, you’d get price stability without the recession. And in some small, cohesive countries that is more or less what happened. (Check out the Israeli stabilization of 1985.) But America wasn’t like that, and the decision was made to do it the hard, brutal way. This was not a policy triumph! It was, in a way, a confession of despair.

The Code of Capital: How the Law Creates Wealth and Inequality
by Katharina Pistor
Published 27 May 2019

Recent data suggest an upward trend in pensioners filing for personal bankruptcy in the United States, which has been attributed to the costs of health care. See Tara Siegel Bernard, “Too Little, Too Late: Bankruptcy Booms among Older Americans,” New York Times, August 5, 2018, available online at www.nytimes.com (last accessed August 8, 2018). 72. Some central banks, the Fed among them, operate under the dual mandate of price stability and full employment. See Sec. 2.a. of the Federal Reserve Act, available online at https://www.federalreserve.gov/aboutthefed/section2a.htm. 73. For a useful overview of the scope of regulatory reforms in the United States, see Viral V. Acharya et al., Regulating Wall Street: The Dodd-Frank Act and the New Architecture of Global Finance (Hoboken, NJ: Wiley, 2011).

Toward Rational Exuberance: The Evolution of the Modern Stock Market
by B. Mark Smith
Published 1 Jan 2001

Greenspan’s new interpretation was unveiled in 1999; he said then that the market represented the sum total of the “judgments of millions of investors, many of whom are highly knowledgeable about the prospects for the specific companies that make up our broad stock market indexes.”22 He concluded that the Federal Reserve should let investors set stock values; it is not the function of the central bank to do it for them. According to The Wall Street Journal, Greenspan was one of the first economists to suspect that private sector productivity was surging, taking note of rapidly increasing investment in capital equipment and rising profit margins at a time of relative price stability. He has therefore become much more receptive to the “new paradigm” idea that rapidly accelerating earnings growth may justify higher P/E ratios. Similarly, Greenspan is now apparently more receptive to the argument that stocks are not actually as risky as they have appeared to be (or actually were) in the past.

Trading Risk: Enhanced Profitability Through Risk Control
by Kenneth L. Grant
Published 1 Sep 2004

However, I caution you against overdoing it in this regard; it is easy to fall into deep analytical traps using technical analysis that are not at all guaranteed to enhance your portfolio management skills on any level. My best advice is to start slowly, understanding the areas of historical price stability for the securities you are trading, and to have some sort of game plan when pricing patterns violate these equilibrium levels. Measures of volatility, correlation, VaR, technical analysis, and scenario analysis can all be useful in helping you determine and manage the specific levels of exposure in your account.

Seasteading: How Floating Nations Will Restore the Environment, Enrich the Poor, Cure the Sick, and Liberate Humanity From Politicians
by Joe Quirk and Patri Friedman
Published 21 Mar 2017

In 2011 the Bahamas Electricity Corporation signed an agreement with Ocean Thermal Energy Corporation to construct two OTEC plants. “In general, in the markets we are in, the cost of OTEC energy is comparable to fossil fuel,” said Ted in a follow-up interview with colleague Jess Philips. “But OTEC can beat fossil fuels on guaranteed price stability. With OTEC the cost of fuel is free because the ‘fuel’ in this case is ocean water. So the price doesn’t increase or decrease over time . . . The price of fossil fuel is continuously increasing and decreasing so it is difficult to compare the costs. You have all these wild gyrations, which create instability.

Money Men: A Hot Startup, a Billion Dollar Fraud, a Fight for the Truth
by Dan McCrum
Published 15 Jun 2022

Yet EY was bound by client confidentiality and legally unable to resign. Thomas Eichelmann, so media-savvy when it suited him, remained silent. The board eventually acted in May, by taking away Braun’s megaphone; it gave the responsibility for company communications to Alexander von Knoop. Wirecard’s share price stabilized at around €90 as investors, analysts and regulators all waited for the verdict of Ernst & Young. Some of those threw their hands up; the analyst at one French broker, Kepler Cheuvreux, had been honest enough in print to say that his initial favourable reaction to the special audit was published without reading the German report.

Gusher of Lies: The Dangerous Delusions of Energy Independence
by Robert Bryce
Published 16 Mar 2011

Available: http://www.eia.doe.gov/emeu/cabs/Saudia_Arabia/Oil.html. 50 GUSHER OF LIES countries, including Venezuela, have agitated for higher prices, the Saudis have generally sought to stabilize global oil prices at levels that are good for both consumers and producers. This fact was made clear by Saudi oil minister Ali al-Naimi in 2006 during a speech in Washington, when he said: Energy security cannot be maintained when prices are at extremes— too low or too high. Truly sustainable energy security for consumers and producers requires three conditions—price stability, supply and demand reliability, and affordability. These are the three pillars of sustainable energy security. Affordability applies to both consumers and producers. If producers are forced to sell their energy resources at a low price, they eventually cannot afford to make the capital investments required to maximize long-term capacity.

Machine, Platform, Crowd: Harnessing Our Digital Future
by Andrew McAfee and Erik Brynjolfsson
Published 26 Jun 2017

Next, a group of participants—the more the better—are invited into the market and encouraged to start trading the securities with each other. Those who think that inflation will be greater than 3% will be willing to pay more for the security than those who think it will be less than that. If the price stabilizes at $0.70, a reasonable interpretation is that the market as a whole believes that there’s a 70% chance that inflation will average more than 3% for the quarter (or that the movie will make between $50 million and $100 million, or that so-and-so will become president in 2020). Finally, when the event actually occurs—in this case, when the quarter ends and average inflation can be calculated—the market maker pays out to all of the people holding the right securities.

Naked Economics: Undressing the Dismal Science (Fully Revised and Updated)
by Charles Wheelan
Published 18 Apr 2010

Robert Mundell, winner of the 1999 Nobel Prize in Economics, has argued that bungled monetary policy in the 1920s and 1930s caused chronic deflation that destabilized the world. He has argued, “Had the price of gold been raised in the late 1920s, or, alternatively, had the major central banks pursued policies of price stability instead of adhering to the gold standard, there would have been no Great Depression, no Nazi revolution, and no World War II.”1 The job would not appear to be that complicated. If the Fed can make the economy grow faster by lowering interest rates, then presumably lower interest rates are always better.

The People vs. Democracy: Why Our Freedom Is in Danger and How to Save It
by Yascha Mounk
Published 15 Feb 2018

Jahrbuch für Wirtschaftsgeschichte/Economic History Yearbook 39, no. 1 (1998): 59–84; and Alexander Ebner, “The Intellectual Foundations of the Social Market Economy: Theory, Policy, and Implications for European Integration,” Journal of Economic Studies 33, no. 3 (2006): 206–223. 42. Alessi, “Germany’s Central Bank.” However, as Wade Jacoby points out, while the Bundesbank was set up with the primary goal of focusing on price stability, the treaty that set up the European Central Bank also envisioned that it would pursue many other goals, including “social peace” (personal communication). 43. The technical reason for this is rather more complicated, and includes the market’s anticipation of likely future inflation. See R. J.

The Prize: The Epic Quest for Oil, Money & Power
by Daniel Yergin
Published 23 Dec 2008

As a further result of the program, prices were higher in the United States than they would have been without the protection. Moreover, the quotas put the prorationing systems in Texas and the other states back into a position where they could stabilize domestic prices. Indeed, domestically, the ten-year period following the introduction of the mandatory quotas was reminiscent of the price stability that followed the full implementation of prorationing in the 1930s. The average price of oil at the wellhead in the United States in 1959 was $2.90 a barrel; a decade later, in 1968, it was $2.94—stable, certainly, and also 60 to 70 percent above Middle Eastern crude in East Coast markets. In contrast, by closing off the American market, the mandatory controls resulted in lower prices outside the United States.

…

The picture of the future world that thus emerged was a projection of the then-current circumstances: Growing economies would continue to call upon growing volumes of oil. Economic progress in developing countries would add to the demand. The future effects of conservation were discounted. The stage would be set for a repetition of 1973. Ahmed Zaki Yamani, the leading proponent of a Long-Term Strategy for OPEC, began to depart from his customary advocacy of price stability and instead argued for regular, small increases in the price that would encourage conservation and development of alternative sources. This, he said, was much preferable to and less destabilizing than the wrenching increase in price that had become the common expectation. "From our own studies and from all the reliable studies I have read," he said in June of 1978, "there are very strong indications that there will be a shortage of supply of oil sometime around the mid-1980s if not before. ...

…

But, he added, "I happen to believe, and always have, that a strong domestic U.S. industry is in the national security interests, vital interests of this country." Bush was clearly saying that market forces had gone too far. And he was quickly and embarrassingly disavowed by the Reagan White House, whose spokesman declared, "The way to address price stability is to let the free market work." The White House pointedly said that Bush would stress to King Fahd that market forces, not politicians, should determine price levels. Bush's first stop was in Riyadh, where he dedicated the new United States embassy building. At a dinner with several ministers, including Yamani, the talk, of course, dealt in part with oil, and Bush commented that, if prices remained too low, pressure would build in the United States Congress for a tariff, and it would become increasingly difficult to resist that pressure.

Money and Power: How Goldman Sachs Came to Rule the World
by William D. Cohan
Published 11 Apr 2011

After that, I could walk around town telling people that I had just been talking to the President today and, while it would mean nothing substantively, it would have meaning in Washington. That’s just the way this city works.” As the Carter administration was nearing its end, Rubin got a payoff of sorts in the form of a job offer at the White House to head up the Council on Wage and Price Stability, which was part of the effort to bring inflation under control. Rubin explored the opportunity. “Few notions were more appealing to me than seeing the world from inside the White House,” he wrote. He went down to Washington, met with the relevant people, but decided against taking the job. “I was left with the impression that that job wasn’t positioned to work, in terms of either staffing and authority within the administration or its conceptual approach,” he continued.

…

Gerald Corzine, Joanne Dougherty, 14.1, 14.2 Corzine, Jon, 12.1, 12.2, 13.1, 14.1, 15.1, 17.1, 18.1 background of double role of early mistakes at Goldman Sachs of as Friedman’s successor, 14.1, 14.2, 14.3 goals and aspirations of health problems of loyalty to LTCM deal and, 16.1, 16.2, 16.3, 16.4, 16.5 Maxwell lawsuit and mergers desired by, 16.1, 16.2 and move to go public, 14.1, 15.1, 15.2, 15.3, 15.4, 16.1, 16.2, 16.3, 16.4, 16.5, 17.1 1994 losses and, 14.1, 14.2, 14.3, 15.1, 15.2, 15.3, 16.1 “palace coup” against, 16.1, 17.1, 17.2 Paulson’s relationship with, 14.1, 14.2, 15.1, 16.1, 16.2, 16.3, 16.4, 16.5, 16.6, 16.7, 16.8, 17.1 positive thinking of, 15.1, 15.2 Coster, F. Donald cough syrup Coulson, Frank Council of Foreign Relations Council on Wage and Price Stability Countrywide, 18.1, 18.2, 18.3, 22.1 Coyne, Herbert, 9.1, 9.2 Coyne, Marty Cramer, James, prl.1, 10.1, 17.1, 24.1, 24.2 C. R. Anthony, 7.1, 7.2 credit-card receivables, 18.1, 18.2 credit-default swaps (CDSs), 18.1, 18.2, 19.1, 19.2, 20.1, 20.2, 20.3, 21.1, 21.2, 23.1, 23.2, 23.3 Credit Suisse Group, 12.1, 20.1 credit support agreement Credit Support Annex CS-1, 11.1, 11.2, 11.3, 11.4, 11.5, 11.6, 11.7 Cuckney, John Cullman family Cunningham, Bill Cunningham, Jeffrey Cunningham, Mary Curran, Paul, 11.1, 11.2 currencies, 16.1, 16.2 see also specific currencies Daily Mirror, 14.1 Daily Word, 5.1 Dauphinot, Clarence Davies, Gavyn Davies, Joseph Davilman, Andrew, 21.1, 23.1 Davis, Charles “Chuck” Davis Polk & Wardell Day, H.

Life Inc.: How the World Became a Corporation and How to Take It Back
by Douglas Rushkoff
Published 1 Jun 2009

Thanks to the way the federal government promoted home ownership, suburbanites learned to become more racist as a means of financial survival. It wasn’t enough just to turn races against one another for the sake of a housing market tilted toward real-estate speculators. The very design of the neighborhood had to incorporate this bias toward segregation and isolation for the sake of price stability. These practices were fully institutionalized by 1934, when the Federal Housing Administration was set up, ostensibly to jump-start the construction industry and put people back to work. The sole strategy of the FHA, however, was to insure long-term mortgages: a bank would still make the loan, but the FHA would back it up if the borrower defaulted—much as the Fed is now insuring the “liquidity” of failing predatory mortgage lenders.

How Markets Fail: The Logic of Economic Calamities
by John Cassidy
Published 10 Nov 2009

In an ideal world, Ben Bernanke would give a speech acknowledging the Fed’s failures and blunders in which he was complicit, and pledge to return the Fed to its traditional role, which a former Fed chairman, William McChesney Martin, famously defined as “taking away the punch bowl just when the party gets going.” This is unlikely to happen, and change may have to be imposed on the Fed policymakers. At the moment, their so-called dual mandate is to ensure “maximum sustainable employment and price stability.” Morgan Stanley’s Stephen Roach has suggested that Congress alter the Fed’s mandate to include the preservation of financial stability. The addition of a third mandate would mesh with the Fed’s new regulatory role as the primary monitor of systemic risk, and it also would force the central bank’s governors and staff to think more critically about the financial system and its role in the broader economy.

Year 501
by Noam Chomsky
Published 19 Jan 2016

Real per capita GNP is three-fourths what it was in 1980, and foreign debt absorbs 30 percent of export earnings. As a reward for this economic miracle, the IMF, Interamerican Development Bank, and the G-7 Paris Club offered Bolivia extensive financial assistance, including secret payments to government ministers. The miracle that is so admired is that prices stabilized and exports are booming. About two-thirds of export earnings are now derived from coca production and trade, Burke estimates. The drug money explains the stabilization of currency and price levels, he concludes. About 80 percent of the $3 billion in annual drug profits is spent and banked abroad, mainly in the US, providing a lift to the US economy as well.

Virtual Competition
by Ariel Ezrachi and Maurice E. Stucke
Published 30 Nov 2016

Thus, we start to see the shape of a traditional hub-and-spoke conspiracy, where each retailer provides the hub with data and pricing authority, knowing that its rivals are doing the same. The vendor’s pricing algorithm does, in fact, use the market information it collects from each retailer in determining the optimal prices for each retailer’s products. Prices stabilize as a result, and the retailers’ and algorithm vendor’s profits increase. Each competitor might have independent business justifications for electronically 50 The Collusion Scenarios sending its data to a third-party pricing vendor. But the competitors also recognize that doing so collectively will likely increase prices and their profits.

The Meat Racket: The Secret Takeover of America's Food Business
by Christopher Leonard
Published 18 Feb 2014

The idea was to keep prices high enough to throw the middle class a lifeline and iron out the volatility of the market. Critics of the plan said it would lead to a dangerous level of government control over the economy, but they were answered with a simple response: The laws were temporary. They were emergency actions that would be repealed once farm prices stabilized. In Arkansas, the new edicts all but wiped out the cotton farmers who scratched a living from the Ozark soil, creating a willing crop of farmers to build chicken coops and buy chicks on contract from John Tyson. It wasn’t the first gift that John Tyson would get from government intervention.

The Streets Were Paved With Gold
by Ken Auletta
Published 14 Jul 1980

The state reports 5,000 New Yorkers are illegally drawing unemployment insurance—$400,000 a week—while basking in Florida’s sunshine. Ten percent of all National Student Loans to New York State residents—$55 million—have not been repaid. In March 1978, coal miners received a three-year 39 percent wage and benefit hike. The Teamsters Union reflexively demanded the same. According to the White House Council on Wage and Price Stability, since 1950 doctors’ fees multiplied 80 percent faster than inflation, and in 1977 zoomed 9.3 percent, or 50 percent more than consumer prices. The pay of Edgar Griffiths, head of RCA, jumped 26 percent in 1977, to $475,000. Chairman David Rockefeller, according to a 1976 Chase prospectus, was compensated $279,168 annually (exclusive of his dividend payments) and was eligible for a $125,904 annual pension upon retirement.

Ayn Rand Cult
by Jeff Walker
Published 30 Dec 1998

Greenspan’s first several months at the helm were rough ones, for Greenspan and for the financial world at large. In his last speech to Congress on July 21, 1987, outgoing Fed chief Volcker suggested that no more than modest credit tightening was required. But right from the get-go, Greenspan determined to have 1950s-style price stability. Aides to Reagan were afraid Greenspan would out-Volcker Volcker. Even though he compared the 1980s to the 1920s, Greenspan “began in earnest to tighten the money supply, which caused the market crash in October,” says neo-Objectivist financial advisor Jim O’Donnell of the USA Financial Group.

The Next Shift: The Fall of Industry and the Rise of Health Care in Rust Belt America
by Gabriel Winant
Published 23 Mar 2021

Steel bargaining therefore spilled over from economic conflict and into politics.21 The federal government involved itself with steel industry bargaining and pricing throughout the postwar period. Agreements between labor and management in steel were worked out in the Oval Office. Famously, the Truman administration attempted to nationalize the industry in 1952 to maintain wartime wage and price stability. In 1956, despite an avowed hostility to politicized collective bargaining, President Eisenhower helped broker an end to an industry-wide strike and was angered by the subsequent inevitable price increase. He issued repeated warnings in public, including in his State of the Union address, about steel prices.

A First-Class Catastrophe: The Road to Black Monday, the Worst Day in Wall Street History
by Diana B. Henriques
Published 18 Sep 2017

But the specialists’ performance from the final hours of Black Monday and through the trading day on Tuesday was far more uneven. According to the Brady Report, “a substantial number” of specialists had not met their obligation to be “a significant force in counterbalancing market trends.” The report did concede that “[t]he limited nature of the specialists’ contribution to price stability may have been due to the exhaustion of their purchasing power following attempts to stabilize markets” on the morning of Black Monday. “our markets performed flawlessly during the crash”: Melamed, Escape to the Futures, p. 373. Melamed actually called the phrase “the Merc’s party line.” “it’s in nobody’s interest to be throwing hand grenades”: James Sterngold, “Exchanges Seek Ways to Heal Split,” New York Times, November 7, 1987, p. 37.

Crisis Economics: A Crash Course in the Future of Finance
by Nouriel Roubini and Stephen Mihm
Published 10 May 2010

Except for parts of central and eastern Europe, emerging markets lacked the leverage in the financial and household sectors that became the Achilles’ heel of many advanced economies. Moreover, having endured financial crises in recent decades, these countries cleaned up their financial systems, followed sound fiscal policies, and insulated central banks from political pressure so that they might better provide price stability. These strengths and lessons learned enabled the emerging economies to weather the crisis well. They implemented effective monetary and fiscal policies to restore demand and growth, setting themselves up for a quick recovery. In fact, most of them will grow at a healthy clip, should they stick with the market-oriented reforms and policies adopted before the crisis.

Post Wall: Rebuilding the World After 1989
by Kristina Spohr
Published 23 Sep 2019

Formal economic and monetary union would be a way to harness the strength of the German currency and economy and to defuse what the French called the ‘atom bomb’[41] of the Deutschmark. Genscher, reflecting the economic liberalism of his FDP, welcomed the EMU idea, whereas reservations were expressed by CDU finance minister Gerhard Stoltenberg and other advocates of price stability, low inflation and the social market economy. Kohl initially inclined to Stoltenberg but then backed Genscher and Delors in setting up the so-called Delors Committee at the Hanover EC Council of June 1988.[42] This committee of ‘wise men’, chaired by the Commission president himself, was charged with sketching out possible paths to monetary union.

…

It set out three conditions for moving towards economic and monetary union: full and irreversible convertibility of currencies, free movement of capital, and irrevocably fixed exchange rates. They were unanimously accepted at the Madrid EC Council in June 1989. Even the Bundesbank considered this an ‘optimal’ outcome – initially preserving the system of national central banks, firmly committing to price stability and rejecting the idea of introducing a single currency before the three conditions had been achieved.[45] There was, however, one serious caveat. Pöhl emphatically repudiated the idea of a European Central Bank (ECB). He deplored any transfer of monetary sovereignty away from the Bundesbank, historically regarded by most West Germans as the guarantor of the strong Deutschmark and thus of the country’s post-war prosperity.

Wall Street: How It Works And for Whom
by Doug Henwood
Published 30 Aug 1998

The reverse is also true, which is why the long and deep recession of the early 1980s — much longer and deeper than policymakers had tolerated in the 1970s — "broke the back" of inflation, as the cliche runs. It also broke more than a few workers, but to Wall Street, that was mere collateral damage in a holy war for price stability. Liberals and populists often search for potential allies among industrialists, reasoning that even if financial interests suffer in a boom, firms that trade in real, rather than fictitious, products would thrive when growth is strong. In general, industrialists are less than sympathetic to these arguments.

The Best Business Writing 2013
by Dean Starkman
Published 1 Jan 2013

On the mountainous Gargano peninsula in Italy’s rustic southeast, he was struck by locals’ use of gettoni, or tokens, in pay phones—because the value of lira coins was falling so fast that phone booths couldn’t keep pace. By his late teens, Mr. Weidmann said recently, he had “inhaled” the Bundesbank view: Central banks exist to defend a currency against politicians’ cravings for easy money. Germany’s obsession with price stability is often said to stem from 1920s hyperinflation under the Weimar Republic. But for modern Germany’s economic elite, it is rooted in a more recent experience: the postwar success of West Germany. In Germans’ collective memory, the Bundesbank’s refusal to make politicians’ life easy by printing money was critical.

Why We Can't Afford the Rich
by Andrew Sayer
Published 6 Nov 2014

Not surprisingly, powerful rentier interests lean on governments to prioritise limiting inflation. Of course, since borrowers are also consumers, unless their incomes keep abreast of inflation, they lose out from inflation on the prices of consumer goods. The neoliberal governments of the 1980s and 1990s covertly supported rentiers by publicly supporting consumers’ interests in price stability. But there’s one kind of inflation that rentiers love: asset inflation; this is neoliberalism’s dirty secret. It redistributes wealth from those who lack assets and have to rely on earned income to those who have them and can use them to get unearned income. Value-skimming Rent, interest, profit from production and capital gains from asset inflation are not the only sources of unearned income.

Endless Money: The Moral Hazards of Socialism
by William Baker and Addison Wiggin
Published 2 Nov 2009

Such credit was non-inflationary, and it also benefitted commerce through the substitution of a less bulky medium of exchange.3 The Gold Standard What in fact is the classical notion of a gold standard, and how well did we adhere to that ideal? The classical gold standard holds considerable appeal because it produced an extraordinary interlude of per capita income growth and price stability in the 19th century. However, the gold standard has been honored more in the breach than the observance historically, even in that hallowed time. Under a classical gold standard countries hold stocks of gold in reserve, and they are ready to see these exported to settle up surpluses of paper foreign currency that gets accumulated through trade imbalances.

Terms of Service: Social Media and the Price of Constant Connection
by Jacob Silverman
Published 17 Mar 2015

August 10, 2013, 11:34 a.m. Tweet (@fake_train). 14 2013 revenue: Google Investor Relations. “2014 Financial Tables.” investor.google.com/financial/tables.html. 14 2012 revenue: Tim Peterson. “Google Finally Crosses $50 Billion Annual Revenue Mark: Company Begins to Reverse CPC Declines, Mobile Pricing Stabilizing.” Adweek. Jan. 22, 2013. adweek.com/news/technology/google-finally-crosses-50-billion-annual-revenue-mark-146710. 14 Google+ signups: Jon Brodkin. “Google Doubles Plus Membership with Brute-Force Signup Process.” ArsTechnica. Jan. 22, 2012. arstechnica.com/gadgets/2012/01/google-doubles-plus-membership-with-brute-force-signup-process. 14 Search results: Sean Gallagher.

The Default Line: The Inside Story of People, Banks and Entire Nations on the Edge
by Faisal Islam
Published 28 Aug 2013

After that meeting in December 2011, I asked him why he did not simply do what was standard practice in London and Washington and ‘print money’ by buying government debt on a massive scale? ‘We have a treaty,’ he replied, ‘and the treaty states what our primary mandate is, namely to maintain price stability. Also, the treaty prohibits monetary financing. I am old enough to remember that, when this treaty was written in the early 1990s, some of the countries around that table were actually doing what you suggest doing now, namely some of the central banks of these countries were financing the government expenditure of their governments through money creation, and the consequences were there for all of us to see.

Second World: Empires and Influence in the New Global Order
by Parag Khanna
Published 4 Mar 2008

Its first decade of independence was marred by stasis, with successive protest votes resulting in the return of the exiled king as prime minister. Unable to maintain Cold War levels of industrialization without Soviet subsidies, Bulgaria experienced what one analyst called “de-development,” in which the “East became the South.” Only through the EU’s preaccession process did the situation begin to turn around. Wages rose and price stability resulted from pegging the currency to the euro. See Rossen Vassilev, “De-Development Problems in Bulgaria,” East European Quarterly, September 22, 2003. 6. According to two experts on the Balkan wars, the Contact Group formed to settle the festering conflict “was reminiscent of nineteenth-century Great Power politics.

The Power of Gold: The History of an Obsession
by Peter L. Bernstein
Published 1 Jan 2000

They therefore recommended that the central bank continue to hold nearly half of its total gold stock and that "the separated portion of gold is to be sold in small steps."27 Despite this bow to potential popular anxieties, the entire spirit of the report rests in its unquestioning confidence that the forecasting and managerial skills of the directors and staff of the central bank would perform a better job than obeisance to the gold stock in "the priority of maintaining price stability." This view was by no means revolutionary doctrine in 1997-on the contrary, it represented mainstream thinking. Nevertheless, this was the Swiss, not the British or the Americans or some minor-league country. The Swiss were legendary in their attachment to gold and in their aversion to holding currencies of countries whose devotion to the constant struggle to keep inflation in check was less passionate than theirs.

More: The 10,000-Year Rise of the World Economy
by Philip Coggan
Published 6 Feb 2020

The ECB was a compromise between the French, who wanted a single currency to tie a reunited Germany into the EU, and the Germans, who worried that the single currency would require them to bail out other profligate governments. To reassure the Germans, the bank’s headquarters were in Frankfurt and its main target was price stability. It was specifically prohibited from bailing out member governments. The first signs that central banks might not have all the answers came in Japan. More than four decades of rapid economic growth came to an abrupt end as the 1980s drew to a close. When the bubble started to pop in 1990, the Bank of Japan (BoJ) was relatively slow to react.

The Cigarette: A Political History
by Sarah Milov
Published 1 Oct 2019

But whatever suspicions some New Dealers harbored about the “old enemies of peace—business and financial monopoly”—had given way during the Second World War to a productive collaboration between business and government—productive in two senses of the term: the American economy had embarked upon a period of unparalleled growth, and the regulatory apparatus of the postwar decades tended to embrace the prerogatives of producers above all.98 Most postwar regulation of major industries was accommodating rather than adversarial. The government facilitated price stability and expansion of service while minimizing competition.99 The mixed economy of the postwar decades had its roots in the economic philosophy and institutions of the New Deal. Indeed, the agencies responsible for overseeing the key industries of the 1950s and 1960s were established during the 1930s.

The-General-Theory-of-Employment-Interest-and-Money
by John Maynard Keynes
Published 13 Jul 2018

Keynes price-instability due to change cannot affect the actions of entrepreneurs, but merely directs a de facto windfall of wealth into the laps of the lucky ones (mutatis mutandis when the supposed change is in the other direction). This fact has, I think, been overlooked in some contemporary discussions of a practical policy aimed at stabilising prices. It is true that in a society liable to change such a policy cannot be perfectly successful. But it does not follow that every small temporary departure from price stability necessarily sets up a cumulative disequilibrium. III We have shown that when effective demand is deficient there is under-­ employment of labour in the sense that there are men unemployed who would be willing to work at less than the existing real wage. Consequently, as effective demand increases, employment increases, though at a real wage equal to or less than the existing one, until a point comes at which there is no surplus of labour available at the then existing real wage; i.e. no more men (or hours of labour) available unless money-wages rise (from this point onwards) faster than prices.

Capitalism in America: A History
by Adrian Wooldridge and Alan Greenspan
Published 15 Oct 2018

By the mid-1920s, 80 percent of all the world’s cars were located in the United States: America boasted a motorcar for every 5.3 people compared with one car for every 44 people in England and France. A car that cost the average worker the equivalent of nearly two years’ wages before the First World War could be purchased for about three months’ earnings by the mid-1920s. Thereafter the price stabilized, but quality continued to improve: you got more car for your buck (and more ways of financing the bucks you needed to buy your car). The automobile industry revolutionized the distribution of wealth. In 1924, Henry and Edsel Ford ranked second and third in a federal government list of top taxpayers (Rockefeller was still number one), and Mrs.

Good Economics for Hard Times: Better Answers to Our Biggest Problems
by Abhijit V. Banerjee and Esther Duflo
Published 12 Nov 2019

Since the catch varied quite a bit from day to day, there were a lot of wasted fish at some beaches, while at the same time there were often disappointed customers at others. This is a stark example of misallocation. When cell phone connectivity became available, fishermen started to call ahead to decide where to land; they would go where there were lots of customers waiting and not a lot of boats. As a result, waste essentially vanished, prices stabilized, and both customers and sellers were better off.92 This first story spawned a second one. The main tool of trade for a fisherman is his boat, and good boats last much longer than bad boats. The technology of making a fishing boat is always the same, but some craftsmen are much better at it than others.

In Pursuit of the Perfect Portfolio: The Stories, Voices, and Key Insights of the Pioneers Who Shaped the Way We Invest
by Andrew W. Lo and Stephen R. Foerster
Published 16 Aug 2021

Shiller’s friend Jeremy Siegel happened to find a 1959 Fortune magazine quotation in which Greenspan refers to the “over-exuberance” in the financial community, and it’s most likely that Greenspan came up with the phrase on his own.37 According to Greenspan, “The concept of irrational exuberance came to me in the bathtub one morning as I was writing a speech.”38 Whoever coined the phrase, the “irrational exuberance” speech was, for Greenspan, the perfect opportunity to speak up about the value of assets. Price stability was relevant not only for product prices such as clothing and food but also financial assets—not only for actual eggs but also for nest eggs. The price of income-earning equities and real estate mattered, and if those asset prices were inflated or unstable, then it was a matter of significant concern for the economy.

The Rise and Fall of the Neoliberal Order: America and the World in the Free Market Era
by Gary Gerstle
Published 14 Oct 2022

Car companies shuttered forty assembly plants and 1,500 dealerships and laid off more than 700,000 autoworkers.29 The federal government saved Chrysler Corporation, the country’s third largest car manufacturing company, with a 1979–1980 bailout package worth $1.5 billion. Part of the auto industry’s crisis stemmed from Americans delaying purchases of new cars until oil prices stabilized. But another part signaled something far more ominous: Many consumers had decided to shift from American gas guzzlers to Japanese gas misers. By 1980, Japan and other foreign car manufacturers had cornered more than 25 percent of the US market. In that year, Japan actually sold more of its cars in the United States than it did at home.

Rewired: The Post-Cyberpunk Anthology
by James Patrick Kelly and John Kessel
Published 30 Sep 2007

That he would send money and food back to his blighted land that now existed only in his mind, in his dreams, and in half-awake hallucinations of deserts, red and black saris, of women in dust, and their black hands and silver bangles, and their hunger, so many of the last memories of hunger. He had fantasized that he would smuggle Gita back across the shining sea, and bring her close to the accountants who calculated calorie burn quotas for the world. Close to the calories, as she had said, once so long ago. Close to the men who balanced price stability against margins of error and protectively managed energy markets against a flood of food. Close to those small gods with more power than Kali to destroy the world. But she was dead by now, whether through starvation or disease, and he was sure of it. And wasn’t that why Shriram had come to him?

Why Nations Fail: The Origins of Power, Prosperity, and Poverty
by Daron Acemoglu and James Robinson
Published 20 Mar 2012

It even took in the Soviet Union’s own leaders, such as Nikita Khrushchev, who famously boasted in a speech to Western diplomats in 1956 that “we will bury you [the West].” As late as 1977, a leading academic textbook by an English economist argued that Soviet-style economies were superior to capitalist ones in terms of economic growth, providing full employment and price stability and even in producing people with altruistic motivation. Poor old Western capitalism did better only at providing political freedom. Indeed, the most widely used university textbook in economics, written by Nobel Prize–winner Paul Samuelson, repeatedly predicted the coming economic dominance of the Soviet Union.

Oil: Money, Politics, and Power in the 21st Century
by Tom Bower
Published 1 Jan 2009

Exxon’s rivals were less assured in court battles, and similarly lacked its confidence in their ability to cope with unpredicted price changes. In January 1997, fearing losses as oil prices unexpectedly fell, the industry dismissed some engineers, abandoned plans to recruit and train graduates, and canceled orders for new rigs. But in the spring prices stabilized, and fears of disaster evaporated. The oil companies began recruiting, paying bonuses and preparing for expansion. Some even forecast a boom. Over 1,000 oilmen crowded into the Hyatt Regency in New Orleans in early March 1997 to place bids for exploration leases in the Gulf of Mexico. In the electric atmosphere, everyone wanted to play, and the US government pocketed $824 million, 58 percent more than the previous year.

Trade Your Way to Financial Freedom
by van K. Tharp
Published 1 Jan 1998

Our current Federal Reserve Governor, Ben Bernanke, made the following remarks to the National Economists Club in November 2002: The second bulwark against deflation in the United States . . . is the Federal Reserve System itself. The Congress has given the Fed the responsibility of preserving price stability (among other objectives), which most definitely implies avoiding deflation as well as inflation. I am confident that the Fed would take whatever means necessary to prevent significant deflation in the United States and, moreover, that the U.S. central bank, in cooperation with other parts of the government as needed, has sufficient policy instruments to ensure that any deflation that might occur would be both mild and brief.

The Price of Inequality: How Today's Divided Society Endangers Our Future
by Joseph E. Stiglitz
Published 10 Jun 2012

Paying interest on excess balances should help to establish a lower bound on the federal funds rate by lessening the incentive for institutions to trade balances in the market at rates much below the rate paid on excess balances. Paying interest on excess balances will permit the Federal Reserve to provide sufficient liquidity to support financial stability while implementing the monetary policy that is appropriate in light of the System’s macroeconomic objectives of maximum employment and price stability.” See http://www.federalreserve.gov/monetarypolicy/ior_faqs.htm#4 (accessed March 5, 2012). The price tag for the Fed’s 0.25 percent interest rate paid on the current amount of excess reserves deposited with Reserve Banks—about $1.5 trillion—is likely almost $4 billion dollars a year. See, for excess reserves amount, the website of the Federal Reserve Bank of St.

Superintelligence: Paths, Dangers, Strategies
by Nick Bostrom
Published 3 Jun 2014

At some point, the high-frequency traders started withdrawing from the market, drying up liquidity while prices continued to fall. At 2:45 p.m., trading on the E-Mini was halted by an automatic circuit breaker, the exchange’s stop logic functionality. When trading was restarted, a mere five seconds later, prices stabilized and soon began to recover most of the losses. But for a while, at the trough of the crisis, a trillion dollars had been wiped off the market, and spillover effects had led to a substantial number of trades in individual securities being executed at “absurd” prices, such as one cent or 100,000 dollars.

The Discovery of France
by Graham Robb
Published 1 Jan 2007

All the travellers spontaneously placed themselves at the side of the prettiest petitioner, to the vexation of the others, who were still trying to carry off those who lagged behind; but the former, like a good shepherdess, took care to keep them from her flock and successfully led it in its entirety to the Auberge du Léopard. The innkeeper might also be the postmaster, wood merchant, tobacconist and mayor. Despite these monopolies, prices stabilized remarkably quickly throughout the country, to the irritation of French travellers whose money was worth much less than pounds or dollars. Victor Hugo defined the innkeeper’s duties in Les Misérables: ‘bleed the man, fleece the woman, skin the child’; ‘know how much wear and tear a shadow causes the mirror and fix a rate for it.’

The Rise and Fall of Nations: Forces of Change in the Post-Crisis World
by Ruchir Sharma
Published 5 Jun 2016

This is the confidence Brash inspired. This success story quickly spread in central banking circles. Canada was next to adopt an inflation targeting strategy, in 1991, followed by Sweden and Britain. Many of the central banks chose a 2 percent target to allow for some flexibility even though genuine price stability would imply zero inflation. Citigroup estimates that fifty-eight countries (including the Eurozone members as one country) accounting for 92 percent of global GDP now have some sort of an inflation target. The qualification “some sort” is meant to cover banks like the U.S. Federal Reserve, which has a dual mandate to target both stable prices and maximum employment.

The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order
by Benn Steil
Published 14 May 2013

He found their lack of interest in exchange problems curious, particularly the little-Englander notion that “when the price of sterling changed in terms of other currencies, it was the other currencies that moved and not sterling.”39 Ruling Labour Party figures, such as Hugh Dalton and George Lansbury, similarly expressed no interest in fixing exchange rates, and were strongly opposed to any return to the gold-exchange standard. They shared Roosevelt’s belief that domestic price stabilization was far more important to economic recovery. Among economists, London School of Economics professors Lionel Robbins and T. E. Gregory took a very different position, advocating Britain’s return to gold “as soon as possible” at a rate of about $4.80 to the pound. The risk of not doing so, they believed, was a further decline in trade, a collapse of the sterling bloc owing to falling confidence in the currency, and a continued wave of beggar-thy-neighbor devaluations around the world.

A Generation of Sociopaths: How the Baby Boomers Betrayed America
by Bruce Cannon Gibney
Published 7 Mar 2017

And that outlook was sociopathic. Monetary Manipulation and Generational Expropriation Stuck in the middle of this freewheeling disaster is the Federal Reserve, which sets monetary policy for the nation. Since 1977, it has been the unhappy duty of the Fed both to promote growth and ensure price stability (the “dual mandate”), while also serving as an important bank regulator.25 These goals often conflict, given that the Fed can overstimulate the economy by tolerating high inflation or allowing greater leverage. Reconciling these contradictions takes effort, subtlety, and character. However, as the Boomers took over Washington and the Fed, sociopathic thinking elided any contradictions in the dual (or triple) mandate.

Manias, Panics and Crashes: A History of Financial Crises, Sixth Edition
by Kindleberger, Charles P. and Robert Z., Aliber
Published 9 Aug 2011

See C.E.B. Borio, N. Kennedy, and S.D. Prowse, ‘Exploring Aggregate Price Formation across Countries: Measurement, Determinants and Monetary-Policy Implications’, BIS Economic Papers, no. 40 (Spring 1994), p. 46: ‘It has been widely accepted that the primary goal of monetary policy should be price stability.’ 27. See Armen A. Alchian and Benjamin Klein, ‘On a Correct Measure of Inflation’, Journal of Money, Credit and Banking, vol. 5, no. 1 (February 1973), pp. 172–91. 7 Bernie Madoff: Frauds, Swindles, and the Credit Cycle 1. See Norman C. Miller, The Great Salad Oil Swindle (New York: Coward, McCann, 1965). 2.

Alpha Trader
by Brent Donnelly
Published 11 May 2021

Bad news hits that threatens the narrative. The story is crowded and early entrants think maybe the story is over so they take some profits. There is a meaningful pullback in price. This pullback shakes off the weaker and more recent buyers but those that believe in the narrative appear on the bid and the price stabilizes. Slowly, the importance of the bad news dissipates and price climbs back towards the highs. Stage 5: The final hype wave. As price breaks through and makes new highs, the narrative often goes into overdrive. Longs are emboldened by the price action and a strong feeling of FOMO comes over anyone that is not participating.

A Culture of Growth: The Origins of the Modern Economy
by Joel Mokyr
Published 8 Jan 2016

While he was, in Rowe’s terms, more “developmental” than Sima, there is little in his writings that suggests a Baconian belief in the progressive powers of useful knowledge (Rowe, 2001, p. 287). It is indeed striking that his discussion on “accumulation” includes almost nothing on an expansion of new productive assets and techniques, and it is instead wholly focused on the topic of price stabilization through granaries. 16 Even an author like Jack Goody, who goes out of his way to condemn “essentialist” interpretations of Chinese history, writes that “characteristic of the cultural history of China has been a constant looking back to the Confucian classics, to ‘Antiquity,’ providing a continuous point of reference for both conservatives and reformers” (Goody, 2009, p. 238). 17 Bray also notes (1984, p. 70) that Xu’s detailed program of reforming agricultural administration was never put into practice. 18 Darnton (1979) has estimated that in total, d’Alembert and Diderot’s Encyclopédie sold about 25,000 copies.

The Brussels Effect: How the European Union Rules the World
by Anu Bradford
Published 14 Sep 2020

These differences often lead to more stringent regulations emanating from the EU.82 EU policy makers’ preference for stringent regulation reflects their commitment to a social market economy and sustainable development. Article 3 of the Lisbon Treaty, which lists the objectives of the European Union, declares the following: The Union shall establish an internal market. It shall work for the sustainable development of Europe based on balanced economic growth and price stability, a highly competitive social market economy, aiming at full employment and social progress, and a high level of protection and improvement of the quality of the environment. It shall promote scientific and technological advance. The references to “sustainable development,” “balanced economic growth,” “social market economy,” “full employment and social progress,” together with a “high level of protection and improvement of the quality of the environment” are illustrative of European values, which envision a prominent role for the government as a steward of regulated market outcomes.

When China Rules the World: The End of the Western World and the Rise of the Middle Kingdom
by Martin Jacques
Published 12 Nov 2009

The mandate of Heaven meant that the state felt obliged to intervene in ecological and economic questions and also in ensuring the livelihood of the people. A striking example was the way the Qing during the eighteenth century managed granary reserves in order to ensure that the local laws of supply and demand worked in a reasonably acceptable fashion and produced relative price stability, a practice which dated back much earlier to the Yuan dynasty (1271-1368) and even before.53 The state also took on responsibility for what were, by the standards of the time, huge infrastructural projects, such as the maintenance of the Yellow River in order to prevent flooding, and the construction of the Grand Canal, which was completed at the beginning of the seventh century.54 In each of these respects, the Chinese state was very different from European states in that it assumed functions that the latter were only to regard as legitimate areas of concern many centuries later.

Money Changes Everything: How Finance Made Civilization Possible
by William N. Goetzmann
Published 11 Apr 2016

Its organizational structure provided a solution to the basic question of what a governing bureaucracy should look like and what checks and balances were needed to incentivize and oversee government officials. It even specified an active financial role for the government. The Zhouli is charged with some of the activities described in the Guanzi—including price stabilization. It is also the oldest Chinese text to describe government credit. In the Zhouli, the government served as lender, not borrower. The treasury ministry was authorized to extend short-term loans to ordinary subjects to cover emergency costs, such as those for funerals. The implication of the Zhouli is that the government, not private moneylenders, should be making loans.

The Crisis of Crowding: Quant Copycats, Ugly Models, and the New Crash Normal
by Ludwig B. Chincarini
Published 29 Jul 2012

A country with a very volatile exchange rate before joining the Euro must have an active and unstable monetary policy, which makes it too dissimilar. Too-high interest rates mean a country is not ready to be managed by a central bank with a much lower interest-rate target. TABLE 18.1 Member Requirements Source: ECB. 1. Price Stability An average annual inflation rate not exceeding 1.5% of the three best performing states. 2. Budget Control A budget deficit of less than 3% of GDP and a total public debt less than 60% of GDP. 3. Exchange Rate Control No severe tensions due to currency movements prior to entrance. 4. Similar Interest Rates An average nominal long-term interest rate not exceeding more than 2% of those of the three best performing members.

What Went Wrong: How the 1% Hijacked the American Middle Class . . . And What Other Countries Got Right
by George R. Tyler
Published 15 Jul 2013

Milton Friedman and the Chicago School The late Milton Friedman is rightfully considered one of America’s leading monetary economists. Drawing on Irving Fisher’s influential work, University of Chicago economists Friedman and Anna Schwartz popularized the role of money in creating and establishing price stability as an important precondition for economic growth. Their 1963 book, A Monetary History of the United States 1867–1960, is considered a seminal work of economics, even though Friedman’s monetarism theory was hopeless as a practical guide to action.31 But Friedman didn’t stop with economic theory.

The Power Law: Venture Capital and the Making of the New Future
by Sebastian Mallaby
Published 1 Feb 2022

Until relatively recently, economists explained why some geographies grow wealthier than others by examining country-level differences: successful nations benefit from sound rule of law, stable prices, educated people, and so on. Lately, however, the more pressing question is why some regions within countries leave other regions so far behind as innovation hubs and generators of prosperity. It has long been obvious that one area can outperform others, as Silicon Valley has done; but the rule of law and price stability cannot explain why the Valley is more innovative than Montana or Michigan.[39] To understand the Valley’s secret, we need to update Ronald Coase’s framework: we must study venture-capital networks as deeply as we study markets and corporations. In a world of intensifying geoeconomic competition, the countries with the most creative innovation hubs are likely to be the most prosperous and ultimately the most powerful.

Debt: The First 5,000 Years
by David Graeber
Published 1 Jan 2010

Cambridge: Cambridge University Press. Wordie, J. R. 1983. “The Chronology of English Enclosure, 1500-1914.” Economic History Review, 2nd ser. 26:483-505. Wray, L. Randall. 1990. Money and Credit in Capitalist Economies. Aldershot: Edward Elgar. _____. 1998. Understanding Modern Money: the key to full employment and price stability. Edward Elgar: Cheltenham. _____. 1999. “An Irreverent Overview of the History of Money from the Beginning of the Beginning to the Present.” Journal of Post Keynesian Economics. 21 (4): 679-687 _____. 2000. Credit and State Theories of Money. Cheltenham: Edward Elgar. Wright, David P. 2009.

Hard Landing
by Thomas Petzinger and Thomas Petzinger Jr.
Published 1 Jan 1995

When Lyndon Johnson laid down a 3.5 percent limit on wage increases throughout the United States, the IAM struck five airlines for 39 days and walked away with a 5.5 percent wage increase. The IAM made a mockery of President Nixon’s wage and price freeze. When Jimmy Carter’s wage “guidelines” became law, an IAM settlement at Eureka Vacuum Company was declared illegal by the Council on Wage and Price Stability. Charlie Bryan’s zeal for that tradition was evident the instant he assumed office. The outgoing district president, in a gracious newsletter offering congratulations to Bryan, added a sincere if awkwardly written farewell: “Mr. Frank Borman, whom I have the utmost respect for, was the company official, in my opinion, that did the most for Eastern Air Lines in the 31 years I have had an employee-employer relationship.”

Liberalism at Large: The World According to the Economist
by Alex Zevin
Published 12 Nov 2019

Without this political cover, every decision to ease or restrict credit could be questioned by industrialists and merchants wanting easy money, on the one hand, or attacked as ‘monetary dictatorship’ from wage earners, on the other.46 The Economist was more frightened than Keynes about shining any light on the ‘grandmother of Threadneedle Street’, but it must be recalled that far from undermining the authority of the Bank of England or the Treasury, Keynes’s plan called for giving both more discretion to manage the economy for the sake of price stability. As a result, he could still in 1923 describe the Economist, in the Nation and Athenaeum, as a ‘gentle critic’ and ‘really with us on the main issue’.47 That began to change only when Churchill announced his intention to return to gold at the pre-war parity of $4.86 on 28 April 1925 – a move Keynes attacked in the Evening Standard, and then in The Economic Consequences of Mr.

Expected Returns: An Investor's Guide to Harvesting Market Rewards
by Antti Ilmanen
Published 4 Apr 2011

If we recognize that inflation expectations in the 1970s and 1980s evolved amidst almost unprecedented structural uncertainty (the end of Bretton Woods, oil shocks, and other wrenching changes), rational learning models may be relevant. In a regime shift context, people may have adjusted too slowly to the probability of being in a high-inflation or low-inflation regime. • A few decades earlier, price stability was the long-run norm (zero inflation expectations and little persistence in annual inflation rates); by the 1970s, the level of and uncertainty regarding inflation were rising and so was its persistence; the inflation rate (as opposed to the price level) became close to a random walk. Only with hindsight do we know that all these aspects (inflation level, uncertainty, persistence) peaked around 1981 and that the Great Disinflation ensued.

Roller-Coaster: Europe, 1950-2017
by Ian Kershaw
Published 29 Aug 2018

The German Finance Minister, Theo Waigel, remarked with satisfaction in December 1991 that the treaty on Economic and Monetary Union ‘bears the German hallmark. Our stability policy has become the Leitmotif for the future European monetary order.’ A European Central Bank – it eventually came into being in June 1998 – would supervise monetary policy and oversee price stability. Countries preparing to enter the single currency had to meet ‘convergence criteria’ and join an exchange-rate mechanism (ERM) to hold currencies steady and interlinked. Government debt was not to exceed 60 per cent, annual deficits were to be no more than 3 per cent of gross domestic product.

The Deluge: The Great War, America and the Remaking of the Global Order, 1916-1931
by Adam Tooze
Published 13 Nov 2014

There was great fear that Germany’s precariously balanced political system would not withstand the kind of mass unemployment the British and American governments were inflicting on their populations. In any case, the reparations crisis of the spring of 1921 undid this temporary stabilization. After months of price stabilization, inflation resumed in June of that year and surged to double-digit figures in August. Nationalist economic opinion now insisted that excessive levels of reparations made any thought of stabilization absurd. France’s real intention was to ‘Ottomanize’ Germany, to reduce it to the kind of international debt-slavery used to subordinate the bankrupt Chinese and Ottoman empires.

The Story of Work: A New History of Humankind
by Jan Lucassen
Published 26 Jul 2021

Von Reden 2007, 81 (60 per cent of the population in a large stretch of Middle Egypt were cultivators; 40 per cent were part-time farmers). 19. Von Reden 2007, 148. 20. Von Reden 2007, 138 (quotations), 147–8. Faced with the dramatic fall in wages and income in the longer term (Scheidel 2010, 453; cf. Brewer 2007, 144) Von Reden 2010, ch. 6 emphasizes the price stability and a high degree of internal market integration in the 3rd century BCE in contrast to more intense fluctuations of prices in the 2nd (Ibid., 154). 21. Rowlandson 2001; Harper 2015; Erdkamp 2015. 22. Rathbone 1991; cf. Bagnall 1993. 23. Launaro 2015, 177. 24. Witzel 2006, 460–2. 25. Thapar 2002; Chakrabarti 2006 (at the same time there was also unfree labour). 26.

The Atlantic and Its Enemies: A History of the Cold War
by Norman Stone
Published 15 Feb 2010

Wage rises and unemployment were related, with only one variable, import costs (as in the Korean War). In England, welfare benefits stopped wages from falling too low, and so demand for goods was kept up; government must surely maintain that demand to the point at which unemployment would never rise above 2.5 per cent. That way, there would be price stability, and men such as Alan Walters, wanting to make complicated calculations as to how much credit there was in the system were simply wasting time. The Phillips Curve dominated academic economics (or ‘discourse’). If anything went wrong, ran a further assumption, then price controls could be used - after all, they had been so used during the war, and operated, even by J.

The Power Makers
by Maury Klein
Published 26 May 2008

Thomson also thought the use of 1,000 volts as the standard for executions too low, and he harbored a low opinion of Westinghouse. “The methods of the Westinghouse people are, as we know, of the most unfair and undignified character,” he declared, “and it would redound to our credit, I think, to let them keep to such methods.”35 March brought more good news to Edison when the French corner in copper collapsed and the price stabilized. The following month witnessed the birth of Edison General Electric, which relieved the inventor of his immediate cash strains. In May the public learned that Westinghouse dynamos would be used by the state prisons for the first execution. The victim would be William Kemmler, who had been convicted on May 10 of brutally murdering his wife— who was not really his wife—with an axe.

The Rough Guide to Wales
by Rough Guides
Published 24 Mar 2010

NEURIN "EVAN THE POSTWAR ,ABOUR GOVERNMENT INSTITUTED THE .ATIONAL (EALTH 3ERVICE DRAMATICALLY IMPROVING HEALTH CARE IN 7ALES AND THE REST OF "RITAIN AND PROVIDING MUCH IMPROVED COUNCIL HOUSING 4HE NATIONALIZED COAL INDUSTRY NOW EMPLOYING LESS THAN HALF THE NUMBER OF TWENTY YEARS BEFORE WAS STILL THE MOST IMPORTANT EMPLOYER AT NATIONALIZATION BUT A GRADUAL PROCESS OF CLOSING INEFlCIENT MINES SAW THE NUMBER OF PITS DROP FROM  IN  TO  IN  AND JUST ONE IN  3ADLY THE SAME COMMIT MENT WASNT DIRECTED AT CLEANING UP THE SCARS OF OVER A CENTURY OF MINING UNTIL AFTER  WHEN ONE OF SOUTH 7ALES MOST TRAGIC ACCIDENTS LEFT A SCHOOL AND  CHILDREN BURIED UNDER A SLAG HEAP AT !BERFAN SEE P  )N THE RURAL AREAS THE PRICE STABILIZATION THAT FOLLOWED THE  !GRICULTURE !CT BROUGHT SOME RELIEF TO lNANCIALLY PRECARIOUS HILL FARMERS WHO WERE GIVEN FURTHER PROTECTION WITH THE FORMATION OF THE &ARMERS 5NION OF 7ALES IN  ! MORE CONTROVERSIAL lLLIP CAME FROM THE SITING OF AN ALUMINIUM SMELTER AND TWO NUCLEAR POWER STATIONS IN NORTH 7ALES DUBIOUS BENElTS SOON ERODED BY THE CLOSURE OF MUCH OF THE RURAL RAIL SYSTEM FOLLOWING THE "EECHING 2EPORT IN  $ESPITE THE SWITCH TO LIGHT MANUFACTURING AND THE IMPROVED AGRICULTURAL METHODS UNEMPLOYMENT IN 7ALES ROSE TO TWICE THE 5+ AVERAGE AND WOMEN CONTINUED TO BE GREATLY UNDER REPRESENTED !

The London Compendium
by Ed Glinert
Published 30 Jun 2004

It is the fellows that put out the paper and then break that do the mischief.’ By the mid nineteenth century the Bank had a monopoly on issuing notes, and the 1844 Bank Charter Act ensured that the Bank’s capital of £14 million was backed by gold coin or bullion, an arrangement that led to a long period of price stability. During this time the coinage was linked to the gold standard, but this was suspended during the First World War, and reintroduced only in 1925 after impassioned campaigning by the governor, Montagu Norman, although not with the full approval of the Chancellor of the Exchequer, Winston Churchill, who complained: ‘I’m lost and reduced to groping.’

Conspiracy of Fools: A True Story
by Kurt Eichenwald
Published 14 Mar 2005

Roberts and his staff had pored through financial statements, and what they found wasn’t pretty. Cash flow in particular was a problem. Roberts had found two billion dollars in collateral posted by California traders that Enron had counted as cash from operations in 2000—money that was beginning to flow out of the door as energy prices stabilized. Then there were those related-party transactions. Enron was doing business with funds managed by a senior officer—a huge red flag. No Wall Street analyst seemed to know the details. But Roberts thought it was clear that a lot of questionable transactions had been conducted with these funds, all to manage and boost Enron’s earnings.

The Rise and Fall of the Great Powers: Economic Change and Military Conflict From 1500 to 2000
by Paul Kennedy
Published 15 Jan 1989

That itself would double China’s GNP in less than ten years (a 10 percent rate would do the same in a mere seven years), yet for a number of reasons economic experts seem to feel that such a target can be achieved. In the first place, China’s rate of savings and investment has been consistently in excess of 30 percent of GNP since 1970, and while that in turn brings problems (it reduces the proportion available for consumption, which is compensated for by price stability and income equality, which in turn get in the way of entrepreneur ship), it also means that there are large funds available for productive investment. Secondly, there are huge opportunities for cost savings: China has been among the most profligate and extravagant countries in its consumption of energy (which caused declines in its quite considerable oil stocks), but its post-1978 energy reforms have substantially reduced the costs of one of industry’s main “inputs” and thus freed money for investments elsewhere—or consumption.37 Moreover, only now is China beginning to shake off the consequences of the Cultural Revolution.

Andrew Carnegie
by David Nasaw
Published 15 Nov 2007

He and his partners had not created the conditions for the boom in railroad construction that made them so miraculously wealthy in the early 1880s. But they rode the boom as expertly and more effortlessly than they had the depression that preceded it. Receipts, which had languished through the mid-1870s, pyramided as steel prices stabilized, while production costs decreased with the addition of new labor-saving machinery. Profits at the Carnegie companies exploded from half a million dollars in 1879 to over $2 million in 1882, tracking rather precisely the increase in new track laid.6 As E. T. grew in size and profits, Tom Carnegie and Harry Phipps found themselves devoting more time to the steel concern and much less to the Lucy furnaces and the Union Iron Mills.