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12. The Need for a Price Stability Mandate
- 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
13. The Troubling Suppression of Competition from Alternative Monies: The Cases of the Liberty Dollar and E-gold
- 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
14. Clearing House Currency
- 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
15. Market Discipline Beats Regulatory Discipline
- 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
16. How Should Financial Markets Be Regulated?
- Author:
- Martin Hutchinson and 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
17. Prospects for Fundamental Monetary Reform
- 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, and Germany
18. Why the Fed's Monetary Policy Has Been a Failure
- 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
19. Anna Jacobson Schwartz: In Memoriam
- Author:
- George S. Tavlas
- Publication Date:
- 10-2013
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- This issue of the Cato Journal is dedicated to Anna Jacobson Schwartz, who passed away on June 21, 2012, at the age of 96. Anna was an economic historian whose scholarship was marked by, among other things, dedication, tenacity, and perseverance. Her career spanned three quarters of a century. When Anna was about 90, her son Jonathan complained (somewhat tongue-in-check) that he had thought about retiring, but did not feel comfortable doing so while his mother was still working. In 1936, she began collaborating with A. D. Gayer and W. W. Rostow on a study of fluctuations in the British economy between 1790 and 1850. The study was not published until 1953, although most of the work on the study had been completed by the early 1940s. Anna joined the National Bureau of Economic Research in 1941 and remained there for the rest of her life, continuing to go to her office until shortly before her death. She published her first NBER paper in 1947 with Elma Oliver, and her last with Michael Bordo and Owen Humpage in 2012. Her collaboration with Milton Friedman on A Monetary History of the United States, 1867–1960 began in 1948 and was not completed until 1963. The underlying objective of Anna's scholarship throughout her career was to use historical evidence, which she assembled with meticulous attention to accuracy, to understand the workings of the economy better.
- Topic:
- Economics
- Political Geography:
- United States
20. Balance Sheet Crises: Causes, Consequences, and Responses
- Author:
- Steven Gjerstad and Vernon L. Smith
- Publication Date:
- 10-2013
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Balance sheet crises, in which the prices of widely held and highly leveraged assets collapse, pose distinctive economic challenges. An understanding of their causes and consequences is only recently developing, and there is no agreement at all on effective policy responses. A preliminary purpose of this article is to examine in detail the events that led to and resulted from the recent U.S. housing bubble and collapse, as a case study in the formation and propagation of balance sheet crises. The primary objective of the article is to evaluate similar events around the world with a view toward assessing the economic performance of countries that have pursued varied alternative policies.
- Political Geography:
- United States