Fractional Reserve Banking And "Fraud"

Although I like the title of my banking primer “Fractional Reserve Banking and its Discontents,” the problem is that I need to deal with some really loopy theories.

The economist Robert Solow provided us with a very good quote regarding the dilemma of such discussions.

Suppose someone sits down where you are sitting right now and announces to me that he is Napoleon Bonaparte. The last thing I want to do with him is to get involved in a technical discussion of cavalry tactics at the Battle of Austerlitz. If I do that, I'm getting tacitly drawn into the game that he is Napoleon Bonaparte. 

Is Money Supply Growth The True Definition Of Inflation?

One of the more unusual diversions in the discussion of inflation is the argument made by Austrian economists that inflation is defined as growth in the money supply. I outline the reasons for my disagreement in this article.

(Note: This is an unedited draft from a manuscript that discusses inflation.)

The New Gold

The recent rise of Bitcoin (BTC) has brought a new wave of triumphalist propaganda across the internet, along with annoyed responses by critics. My view is that BTC is a speculative trading vehicle without any economic significance, and I prefer to look at markets from a value perspective. As such, I see little value in discussing it. However, in addition to wishful thinking from BTC backers, critics of BTC are also falling prey to the assuming that what ought to happen will happen. Although things could go south for the crypto-currency, it is not that deep an insight to argue that BTC has carved out a niche as the new gold -- with certain advantages for speculators.

Natural Rate Versus Neutral Rate: Austrian Perspective

The terms natural rate of interest and neutral rate of interest are often used interchangeably. In this article, I comment on how Richard W. Garrison distinguishes the terms, and how this fits in with the Austrian Business Cycle Theory (ABCT).

Book Review: The Road To Ruin

James Rickards recently published The Road to Ruin: The Global Elites' Secret Plan for the Next Financial Crisis. His argument is that the risks of a financial crisis is building (possibly hitting in 2018), and that the financial system will be locked down as a result. (He argues that you need to buy gold to hedge against this.) The book is awkward, but has some interesting features. He describes various pop mathematics techniques for economic and financial analysis, although the book does not provide enough details to be able to evaluate them. James Rickards joined the LTCM hedge fund in 1994, and provides an insider's take on its collapse. He is also nostalgic for the economic framework of the 1950s, which parallels the views of a lot of post-Keynesians; the issue is that he is fixated on the gold peg, which was arguably an incidental feature of the 1950s economic institutions.

Book Review: The Shifts And The Shocks

The book The Shifts and the Shocks: What We've Learned - And Have Still To Learn - from the Financial Crisis, by Martin Wolf (a prominent writer for the Financial Times)  offers a comprehensive explanation of the malaise in the economies of the developed world, as well as suggested reforms. One thing that stands out is how he has given up on mainstream economics, and looks for guidance from heterodox economists. Although not his intention, his book underlines my suspicion that reforming increasingly sclerotic developed countries will not be easy.

What Can We Learn From Austrian Economics?

Although they are now thin on the ground within academia, 'Austrian' economists are ubiquitous in the financial markets and across the internet. (They are called Austrian because many of the founders of the school of thought were originally from that country.) Since Austrian economics is a fairly pure 'free markets' doctrine, it is politically attractive to many in finance, which partially explains its appeal. But the question is whether it offers any insights that give an 'edge' to analysts? I recently read "Paper Money Collapse: The Folly of Elastic Money" by Detlev Schlichter, and I am somewhat unconvinced about the amount of insights that are on offer.

Link: "Lord Keynes" On Austrian Economics

This article by "Lord Keynes" is a bibliography of his posts explaining (and debunking) Austrian Economics. Taken together, the posts are probably near book length. "Everything you wanted to know about Austrian economics, but were afraid to ask."