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  • Author: George Selgin
  • Publication Date: 07-2014
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: For a private-sector firm, success can mean only one thing: that the firm has turned a profit. No such firm can hope to succeed, or even to survive, merely by declaring that it has been profitable. A government agency, on the other hand, can succeed in either of two ways. It can actually accomplish its mission. Or it can simply declare that it has done so, and get the public to believe it.
  • Topic: Government
  • Political Geography: United States
  • Author: Athanasios Orphanides
  • Publication Date: 07-2014
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: The founding of the Federal Reserve was a good idea, but its performance during its first hundred years has been hampered by the lack of clarity of its mandate. At times its mandate was interpreted as requiring the pursuit of multiple targets resulting in the failure to safeguard price stability over time. This article reviews the evolution of the Federal Reserve's mandate and argues that Congress should clarify the primacy of price stability as the central bank's mandate to ensure that the Federal Reserve will better safeguard monetary stability going forward.
  • Political Geography: United States
  • Author: Lawrence H. White
  • Publication Date: 07-2014
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: Proposals abound for reforming monetary policy by instituting a less-discretionary or nondiscretionary system ("rules") for a fiat-money- issuing central bank to follow. The Federal Reserve's Open Market Committee could be given a single mandate or more generally an explicit loss function to minimize (e.g., the Taylor Rule). The FOMC could be replaced by a computer that prescribes the monetary base as a function of observed macroeconomic variables (e.g., the McCallum Rule). The role of determining the fiat monetary base could be stripped from the FOMC and moved to a prediction market (as proposed by Scott Sumner or Kevin Dowd). Alternative proposals call for commodity money regimes. The dollar could be redefined in terms of gold or a broader commodity bundle, with redeemability for Federal Reserve liabilities being reinstated. Or all Federal Reserve liabilities could actually be redeemed and retired, en route to a fully privatized gold or commodity-bundle standard (White 2012). All of these approaches assume that there will continue to be a single monetary regime in the economy, so that the way to institute an alternative is to transform the dominant regime.
  • Topic: Government
  • Political Geography: United States
  • Author: Richard H. Timberlake, Jr.
  • Publication Date: 07-2014
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: The Federal Reserve System is no longer just an unconstitutional monetary institution promoting a continuing inflation; it has also become, with quantitative easing, an unauthorized fiscal agent for the U.S. government. The fiat currency and equally fiat bank reserves it creates are much in contrast to the private currency and bank reserves that the commercial banks' clearing house associations provided in the latter half of the 19th century. It is that episode I review here.
  • Topic: Civil War
  • Political Geography: United States
  • Author: John A. Allison
  • Publication Date: 07-2014
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: I am going to talk from a different perspective because I am the only person who actually ran a bank that's been speaking today, and from that context I can tell you with absolute certainty that market discipline beats regulatory discipline. In fact, I will argue that regulatory discipline will always fail to reduce volatility and will slow economic growth. These observations are based on my understanding of public choice theory and particularly on 40 years of concrete experience in the banking business.
  • Political Geography: United States
  • Author: Martin Hutchinson, Kevin Dowd
  • Publication Date: 07-2014
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: Financial regulation is a recurring and central issue in contemporary policy discussions. Typically, leftists want more of it, while proponents of free markets want less, or preferably, none of it. We would suggest, however, that the central issue is not whether markets should be regulated, but by whom—by the market itself, which includes self-regulation by market practitioners, or by the state or one of its agencies. To put it in Coasean terms, what is the most appropriate institutional arrangement by which markets—including financial markets-should be regulated?
  • Political Geography: United States
  • Author: Gerald P. O'Driscoll, Jr.
  • Publication Date: 07-2014
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: The intellectual climate has never been more open to a critical analysis of existing monetary institutions both here and abroad. When the Germans agreed to a monetary union, they were promised that they would keep the Bundesbank; only the name would be changed to the European Central Bank. Instead, Germans with whom I have spoken now think they got the Banca d'Italia. In the United States, before the financial crisis, the Federal Reserve was held in high regard by the public. Now, at least in some circles, "the Fed" has become a term of opprobrium, not unlike "the IRS."
  • Political Geography: United States, Europe, Germany
  • Author: R. David Ranson
  • Publication Date: 07-2014
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: Passing its 100th birthday, the Federal Reserve is receiving unprecedented scrutiny. We (the public) are living through the consequences of its attempts to bolster the U.S. economy through exceptionally low interest rates and the conversion of great quantities of debt to money. Although these efforts are ongoing, we are disappointed. Even with the help of strenuous actions on the fiscal side, economic and credit-market recovery from the recession of 2008–09 was notoriously slow. It took 15 quarters for U.S. real GDP to pass its pre-recession high in the fourth quarter of 2007, compared to only 7 quarters following the deep recession of 1981–82. On a per capita basis, there was an even starker contrast between the two recoveries. Moreover, the Fed remains a suspect in the genesis of the financial crisis that precipitated the Great Recession. The ultimate test of its role as overseer and regulator of the commercial banking system met with a very poor result.
  • Political Geography: United States
  • Author: Leighton Ku, Brian Bruen
  • Publication Date: 02-2013
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: Claims are sometimes made that immigrants use public benefits, such as Medicaid, the Supplemental Nutrition Assistance Program, or the Temporary Assistance for Needy Families programs, more often than those who are born in the United States. This report provides analyses, using the most recent data from the Census Bureau, that counter these claims. In reality, low-income non-citizen immigrants, including adults and children, are generally less likely to receive public benefits than those who are native-born. Moreover, when non-citizen immigrants receive benefits, the value of benefits they receive is usually lower than the value of benefits received by those born in the United States. The combination of lower average utilization and smaller average benefits indicates that the overall cost of public benefits is substantially less for low-income non-citizen immigrants than for comparable native-born adults and children. The report also explains that the lower use of public benefits by non-citizen immigrants is not surprising, since federal rules restrict immigrants' eligibility for these public benefit programs.
  • Topic: Economics, Health, Humanitarian Aid, Markets, Immigration
  • Political Geography: United States
  • Author: Brink Lindsey
  • Publication Date: 10-2013
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: For over a century, the trend line for the long-term growth of the U.S. economy has held remarkably steady. Notwithstanding huge changes over time in economic, social, and political conditions, growth in real gross domestic product (GDP) per capita has fluctuated fairly closely around an average annual rate of approximately 2 percent. Looking ahead, however, there are strong reasons for doubting that this historic norm can be maintained.
  • Topic: Economics, Globalization, International Trade and Finance, Markets, Financial Crisis, Governance
  • Political Geography: United States