Monetary Realism

Understanding The Modern Monetary System…


Negative Interest Rates and the Business Cycle

Screen Shot 2015-03-17 at 6.53.28 AM

Negative Interest Rates and the Business Cycle The major way interest rates impact the business cycle is through stimulating or suppressing real estate. This is pretty clearly what happens if you look at the data in Ed Leamers paper Housing is the Business Cycle. Mr. Leamer says as much: “For long-run growth, residential investment is… Read More

Theory of Constraints and Economic Growth

More and more it seems to me the economy operates under a group of economic constraints, and performs to the level of the “worst” of these constraints. Credit, housing volume, business investment, commercial real estate, Collateral worthiness, consumer demand, business confidence, foreign demand, relative energy prices – the list of possible constraints on current economic… Read More

The Unpleasant Fiscal Arithmetic of Eurozone QE with Risk of Sovereign Defaults

Paul De Grauwe has written about potential fiscal effects from an anticipated ECB quantitative easing (QE) program: The analysis is excellent to a point, but doesn’t go far enough. In fact, there are problems with the methodology and the conclusion. The subject involves complex aspects of Eurozone monetary policy – multiple sovereigns, the prospect… Read More

Why NGDP Targeting Won’t Work in Reality

Congratulations to Scott Sumner on his new career and fund raising for a NGDP futures market. It looks like his dream of NGDP targeting could really come to fruition at some point. That’s a good thing because it means we might actually get to see whether there’s some real world effect behind all the theoretical talk.… Read More