Juan Castañeda, Senior Lecturer at UNED and blogger at The Old Lady of Threadneedle St, talks to Alasdair Macleod, of the GoldMoney Foundation, about the economy and the dangers of monetary stimulus. They explain that at the root of our current problems is unsound money. Under sound money system there is some kind of objective rule that serves as a guarantee of what money is, that enforces the Rule of Law in economic matters. Prof. Castañeda believes that the US has the largest problem, given the recent monetary expansion.
They discuss the consequences of stopping monetary stimulus that the economy is addicted to. They talk about interest rates, the price level and how this is affected by monetary policy. Nevertheless they insist that the consequences of continuing to print will, eventually, be even worse.
They comment on the pressures on European monetary authorities to print. They comment on the mistake of focusing on CPI in the pursuit of monetary stability, while ignoring asset prices or even expansion of the monetary aggregates, such as M3. They comment on how this was the same mistake made by Peel’s Act of 1844, which only looked at banknote money, while ignoring other forms of money, which is after all fungible.
This interview was recorded on November 15th 2011 in Madrid.