Finance

Why the ‘Great Inflation’ didn’t happen

Along with many others, I expected that the great money printing binge that the US Federal Reserve kicked off in November 2008 to create massive inflation. As the Fed does, they came up with a great term to make it seem as if they knew what they were doing (Quantitative Easing, or QE for short, of which there have now been three programs, QE1 through QE3) and a rationale for it, based firmly in Keynesian economics: that triggering inflation would stimulate demand.

Those of us who consider classical (i.e. pre-Keynesian) economics to be a better depiction of reality took one look at this and either shook our heads sadly or laughed hysterically. Many of the classical (or Austrian economics) writers claimed this would inevitably lead to inflation, and probably hyper-inflation given the massive scale of the printing.

Why then have we not seen the prices of everyday goods spiralling upwards … Read the rest


What will a future monetary system look like?

The ways in which money has evolved over the last century are greater than the changes that have happened since it first emerged millennia ago. Money emerged as a means of simplifying barter transactions, acting (in a way) as a central counterparty between buyers of good A and sellers of service B. By the end of the 19th century it had changed from being a physical good (think gold or silver) that both parties to a transaction would accept, into certificates representing physical gold and silver. They were still acceptable to both sides as they knew (or thought they knew) that there was real gold and silver available if they wanted to front up to their local bank.

That started to change as the world’s governments nationalised and monopolised the central banking system. This process started in the early 19th century in Europe and was largely completed by … Read the rest