It is with Russ Roberts and it covers the roots of our current crisis, why things are far more troublesome than most people expected (and that is the really tough question; real estate bubbles have burst before), why monetary policy matters at all, the tricky balancing act played by the Fed, why a gold standard isn’t the answer, and many other macroeconomic topics. My core attitude, in case you don’t already know it, is that monetary policy is both an art and a science and there are no secret ways of getting it right, understood by only a few. The podcast is here.
Addendum: Arnold Kling summarizes.
Would love your thoughts on these two papers…
When Bubble’s Burst by the IMF
http://www.imf.org/external/pubs/ft/weo/2003/01/pdf/chapter2.pdf
Is Price Stability Enough by William White of the BIS
http://www.bis.org/publ/work205.pdf
As an I-told-you-so, on Mar 26, 2007, I replied to this comment:
With this:
I was roundly told here, as recently aas March 2007, that the sub-prime thing was nothing like the Savings & Loan crisis, of course.
that old thread
I really think its only because we have trained ourselves on inflation that people are so irrational as not not like lower-wage plus lower-prices. I don’t think its so ingrained that it would take long to untrain ourselves. And I think that is a weak criticism of natural deflation, meanwhile the fed’s intervention is actually seriously bad policy, which actually detrimental effects.
I love this quote from Russ Roberts (2007/10/09) –
Ron Paul thinks we’re in a recession at a time when unemployment is under 5 percent and blames it on monetary policy. This resonates with people who are scared and confused. I’m neither, so I’m not sure what he’s talking about.
Oooops…. Not trying to be too harsh on you guys, but I’m not sure whether your record is good enough to debate just this recessin
Anyway, I’m going to listen to the podcast
a regular listener of Roberts’ casts, and this was a good one.
Pardon me, that was the 29th. link
And similarly, your argument on gold volatility are very weak – yes its volatile now, because of the fiat money, the hedging against fiat money, etc. “Why take the risk?” Well in order to prevent the kind of thing we are dealing with right now, the subject of the podcast! The one argument that made sense is that if it is only one country, it won’t be effective. That is something to consider.
“All around the world, central banks are doing a good job.”
Which planet are you broadcasting from? I’d like to move there. I’m pretty sure it’s not Earth.
We need a government monetary policy in the same sense that we need a government food policy, a government housing policy, a government energy policy, and a government health care policy. We’re reaping the results of the Fed’s “artful and scientific” monetary policy: a shambles.
I never understood the “credit snob” charge. But we’re now seeing the consequences of making bad loans, encouraged by the Fed’s continuing money-credit expansion and pressure to reduce underwriting standards.
Roubini’s position looks better all the time.
David,
What we need is an Austrian central banker!
Wasn’t Greenspan an Austrian, originally?
Wouldn’t an Austrian central banker be a contradiction
in terms?
jomama: ask Jim Rogers
“What would you do if you were a central banker?” – “I would abolish the Fed and resign”….
It’s worth noting that a few of you in this comments section, such as Bill Stepp, are confusing Alex’s proclamations with mine…
IIRC, “credit snob” was more Alex’s thing, though Tyler had fun with it now and again.
(I see the “predatory borrowing” kerfuffle in the googles but probably don’t need to go there.)
Liberty,
In a world with population growth and a fixed money supply, everyone’s wages would actually decrease each year. Instead of a yearly raise, you would get a yearly pay cut. Of course, as long as productivity increased, prices would decrease more than your pay, so you could buy more. But I can’t help but think that this would be psychology tough for workers.
PF,
1. We got used to inflation every year – prices of everything we want to buy continually going up all the time. “Shouldn’t they be going down, as productivity increases??”, we might be thinking to ourselves. Neither inflation nor deflation is really more natural, psychologically.
2. I’m not sure that what you say about the value of gold makes any sense at all. Are you saying that if I stole all the gold in the world and hid it in my basement, that I could only sell it off for a total value of US $10,000 today’s money? That is what it means that gold is worth that. I don’t think that is true – I think demand is very high and supply is low, and so I could sell it for a lot, like many billions or trillions of dollars.
If gold is actually worth a lot, then if we backed the US currency with it, it would still be valued in that range so long as demand for it didn’t change. Now, demand would actually go up since demand for its use as a currency would go up, but this isn’t relevant to the point at hand. The point is that if the bottom fell out of the currency qua currency, the gold would still have value. This is like a “value of money of last resort.” If nothing else, it still has some inherent value. At least that is my take – maybe I am missing something totally obvious. If so, please excuse me.
Patrick, the only reason people started using the commodities is because it had real use.
Silver has very wide industrial use, gold is a substitute. Both have wide jewelery use.
I would run to buy jewelery if it was 50$/oz. Computer makers would love to use gold on much of their parts. I would love to have golden things at home….everyone would. That’s why gold would never be 50$/oz, even if it was not used as money.
The price of gold will fluctuate with business cycles – it will be depndent on how many people want to exchange gold for industrial use and upon the demand for these goods.
The price of gold would never drop bellow the price of industrial use. But the price of gold would never be too high as well – people would start using other commodities as store of value (silver, copper, other investments) – because gold would become essentially a fiat currency.
I think it may be argued that the demand for gold is probably quite flat, which is why it makes good money – the huge imports of gold in 15th century caused only 100% rise in prices over 100 years. If there are other substitutes as ‘store of wealth’ (property, stocks, futures on commodities), there is no reason for the price of gold to be extreme. It would become ‘fiat’ currency and because unlike commodities there is no equilibrium value, it would tend to depreciate over time back to some normal price.
This is the finest piece of research I have come across regarding the Federal Reserve. It is a stunningly well documented film entitled, “The Money Masters: How International Bankers Gained Control of America” This will awaken and enlighten many MANY people.
http://video.google.com/videoplay?docid=-515319560256183936&hl=en
But I would argue that the solution is neither a gold or silver backed currency.
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