Milton Friedman, optimum quantity of money, interest on excess reserves, interest on reserves, monetary base

Fed economists defending interest on reserves have recently called on an unexpected quarter by reviving interest in Milton Friedman’s 1969 essay, “The Optimum Quantity of Money.”[1] As Ben Bernanke and Don Kohn put it, “Before the Fed paid interest on reserves, banks engaged in wasteful and inefficient…

wampum, colonial america, currency competition, thanksgiving, economic history, currency, inflation

(Originally appeared November 27, 2014) Happy Thanksgiving to all of my fellow free bankers out there! Today is our biggest secular national holiday. Not everyone celebrates Christmas or Easter much less other national holidays like Memorial Day or Labor Day, but I don't know anyone who doesn't…

FSOC, Treasury, SIFI, too big to fail, bailouts

On Friday, the Treasury Department released a report on Financial Stability Oversight Council (FSOC) designations. This report could have addressed the problem underlying FSOC’s designation authority: the fact that it makes explicit which financial institutions are “too big to fail,” paving the way for more bailouts of…

bank subsidies, federal reserve, liquidity, interest on reserves, interest on excess reserves

In his recent post exploring the welfare implications of the Fed paying interest on reserves, George Selgin observed that if banks failed to maintain optimal reserves, the problem was either incorrect remuneration of reserves themselves, or the Fed’s mispricing of short-term (intraday or overnight) credit. Regarding the latter,…