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…
About a month ago, a Facebook post drew my attention to an attempt, by Casey Pender of Prague's CEVRO Institute, to test my thesis that free banking contributes to NGDP stability using statistical evidence from Canada, which had a relatively free banking system between 1867, the year of…
In previous installments of this primer I've tried to convince you, first, that monetary policy is ultimately about keeping the available quantity of money from differing substantially, if only temporarily, from the quantity demanded and, second, that doing this boils down in practice to having a money…
The monetary base is the only magnitude that the Fed directly controls. It consists of currency held by the general public (including both Federal Reserve notes and Treasury coin) and the total aggregate reserves of banks and other depositories (whether held in the form of vault cash…
For the past two or more years the question of whether or not (and when) the Fed might “raise interest rates” has been a constant feature in the news. With the FOMC, the Fed's rate setting body, meeting next week, this is especially true at the moment….