Tag: Federal Reserve

Krugman Attacks Us »

When Paul Krugman starts attacking us, we know we’re doing something right. John Maynard Keynes’s presumptive heir, Krugman apparently doesn’t like the findings of our recent book edited by Research Fellow David Beckworth, Boom & Bust Banking: The Causes and Cures of the Great Recession, exposing the profound fallacies of Lord Keynes’s love affair...
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The Fiscal Cliff and Policy Uncertainty »

In today’s issue of the Wall Street Journal, economics editor David Wessel has a useful column about policy uncertainty—worries about government spending, the expiration of provisions in the tax code, inflationary expectations, and the like—and its role in hampering economic growth by discouraging private investment. (The piece is available online to WSJ subscribers here.)...
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Crisis and Leviathan, 25th Anniversary Edition »

The Independent Institute is delighted to announce the publication of the 25th Anniversary Edition of Crisis and Leviathan: Critical Episodes in the Growth of American Government, by Independent Institute Senior Fellow Robert Higgs. First published in 1987, this classic work introduced to the reading public the notion that national crises—the Great Depression, the two...
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Extraordinary Demand to Hold Cash—The Mystery Persists »

Since the fall of 2008, the Federal Reserve System has pumped an almost incomprehensibly large amount of reserves into the commercial banking system—about $1.4 trillion. In normal circumstances, this action would have given rise to hyperinflation. Of course, not only has no hyperinflation occurred, but scarcely any inflation at all has occurred, and policy...
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The Engine of Economic Growth Is Running, but Hardly at High Speed »

Real private fixed investment—the main driver of genuine economic growth—has recovered less than half of its loss between 2006 and 2010. As of the second quarter of this year, the amount of real private fixed (i.e., not including inventory) investment had barely recovered enough to exceed the low point it hit during the dot.com...
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QE3: An Example of Regulatory Capture »

One of Nobel Laureate George Stigler’s best-known articles is his “The Theory of Economic Regulation,” in which he argues that over time, regulatory agencies that are designed to regulate industries for the public interest become “captured” by the industries they are supposed to regulate. Stigler’s “capture theory of regulation” concludes that regulators end up...
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GM, QE3, and Crony Capitalism »

Yesterday on The Beacon I noted that the Federal Reserve’s new “quantitative easing” measure, QE3, is an example of crony capitalism: the use of public policy to increase the profitability of specific firms and industries. Today I want to compare QE3 with another example of crony capitalism to reinforce the point. General Motors provides...
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The Fed’s New Foray Into Crony Capitalism »

I’ve been teaching economics for decades, and until 2008 I taught my students that the Federal Reserve Bank (Fed) engages in monetary policy through open market operations by buying and selling government securities. (They have other policy tools too.) They dealt in government securities partly because their operations would alter the money supply without...
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Boom and Bust Banking—Causes and Cures »

The twenty-first century opened with optimism, as first the technology sector and then the housing sector boomed. But then came the financial crisis and the Great Recession—the worst economic malaise since the 1930s. Why, after several decades of economic stability, did the business cycle return with such force? Most attempts to answer this question...
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The Fading Promise of the Euro »

When the euro was created in 1999 the new currency promised to facilitate trade within the euro zone, to further unify Europe, and to challenge the dollar as the world’s reserve currency. The common currency does facilitate trade, but the differing goals of the member countries seem to be creating more divisiveness than unity...
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