Tuesday , November 5 2024
Home / Mike Norman Economics / Edward Harrison — The limits of monetary policy in today’s fiat currency world

Edward Harrison — The limits of monetary policy in today’s fiat currency world

Summary:
First, let me say that two primary goals of macro policy everywhere and always should be full employment and stable prices. Why? I am looking at this purely through the lens of the political economy – thinking about how our fellow citizens live and breathe the economy and how government should be designed to respond to their needs. On the jobs side, we have seen that high unemployment leads to political instability, economic turmoil and conflict. When you have masses of people unemployed or unable to earn enough money to sustain the lifestyle they aspire to – especially young males – you have the makings of discontent that leads to political instability, electoral desperation, fringe voting, and even revolt and insurrection. On the inflation side of things, high deflation and inflation

Topics:
Mike Norman considers the following as important:

This could be interesting, too:

Angry Bear writes Open Thread January 4 2024 overly “restrictive” monetary policy

Hasan Cömert & T. Sabri Öncü writes Monetary Policy Debates in the Age of Deglobalisation: the Turkish Experiment – III

Hasan Cömert & T. Sabri Öncü writes Monetary Policy Debates in the Age of Deglobalisation: the Turkish Experiment – III

Hasan Cömert & T. Sabri Öncü writes Monetary Policy Debates in the Age of Deglobalisation: the Turkish Experiment – III

First, let me say that two primary goals of macro policy everywhere and always should be full employment and stable prices. Why? I am looking at this purely through the lens of the political economy – thinking about how our fellow citizens live and breathe the economy and how government should be designed to respond to their needs. On the jobs side, we have seen that high unemployment leads to political instability, economic turmoil and conflict. When you have masses of people unemployed or unable to earn enough money to sustain the lifestyle they aspire to – especially young males – you have the makings of discontent that leads to political instability, electoral desperation, fringe voting, and even revolt and insurrection.
On the inflation side of things, high deflation and inflation are equally problematic. When you have, say, families with mortgages or businesses trying to expand, doing the things we see as ‘normal’ to get ahead, deflation makes their task harder by unexpectedly increasing the real burden of that debt. That leads to a downward spiral as fire sales force prices even lower, what we now called debt deflation. Now I know the Austrians say just let this play out. But politically, that’s never going to happen. Think about the housing busts of this last crisis. Just as with joblessness, you have the same makings of political discontent that leads to chaos. And as bad as deflation is, we know inflation is difficult too – not just Weimar or Zimbabwe-style inflation but even the moderately high levels of the 1970s....
Credit Writedowns
The limits of monetary policy in today’s fiat currency world
Edward Harrison
Mike Norman
Mike Norman is an economist and veteran trader whose career has spanned over 30 years on Wall Street. He is a former member and trader on the CME, NYMEX, COMEX and NYFE and he managed money for one of the largest hedge funds and ran a prop trading desk for Credit Suisse.

Leave a Reply

Your email address will not be published. Required fields are marked *