The root cause of monetary confusion

Arguments about sound and unsound money often degenerate into a them-and-us dispute, with the supporters of unsound money casting sound money proponents as impractical out-of-date libertarian weirdos.

Supporting one side or the other as if they were opposing football teams does not represent constructive debate, which must be approached with an open mind.

This has now become crucial, because conventional and even unconventional monetary policies have demonstrably failed in their objectives, so it is time to look at the problem from another angle. This article does this by drawing on the implications of Gibson’s paradox, its recent resolutioni, and its apparent absence in the post-Volcker years. Continue reading The root cause of monetary confusion

Why the EU is doomed

We are accustomed to looking at Europe’s woes in a purely financial context. This is a mistake, because it misses the real reasons why the EU will fail and not survive the next financial crisis.

We normally survive financial crises, thanks to the successful actions of central banks as lenders of last resort. However, the origins and construction of both the the euro and the EU itself could ensure the next financial crisis commences in the coming months, and will exceed the capabilities of the ECB to save the system. Continue reading Why the EU is doomed

The impoverishment of the masses

Feudal and mercantilist economic systems were characterised by the lower orders of ordinary people being enslaved by, or subjected to, the commands of an elite.

Beyond basic subsistence, serfs and slaves were not enabled to consume other goods, nor were they given the means to do so. Communism was hawked as handing power to the serfs, or workers, united in and by the state. But again, it meant that workers remained serfs, employed and commanded by a state set up in their name. Freedom from the bourgeoisie became subjugation by the state. Only capitalism, founded on free markets and freedom of choice for all, held the promise of freeing the masses from a life of drudgery and servitude. Continue reading The impoverishment of the masses

How GDP conceals inflation

There are so many things wrong with GDP, that even mainstream economists are becoming vaguely aware of its shortcomings.

A good friend drew my attention to a Bloomberg article on this subject, which at least shows a growing awareness that there’s a problem. Unfortunately, this awareness does not extend to its underlying nature.

GDP statistics only capture an incomplete snapshot of the economy at one moment in time. Since the economy is continually evolving, that snapshot is immediately out of date, and therefore unfit for the purpose of economic planning. Furthermore, being an incomplete picture of the total economy, GDP badly misleads policy-makers on the subject of price inflation. Continue reading How GDP conceals inflation