Central Banking
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Interest Rates, the Money Supply, and Say’s Law
“Say’s Law absolutely helps us understand booms and busts on the demand side, but because of its emphasis on money, not interest rates.” ~ Alexander William Salter
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Have We Crested the Inflation Wave?
“My view is the Fed should pause its rate hikes in the short-run. Disintermediation might be the cause of recent money-supply trends. In the long-run, the Fed should resume forward guidance, but not on interest rates.” ~ Alexander William Salter
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The Fed Isn’t Powerless
“Responsible students of monetary policy must vigorously resist the ‘powerless Fed’ myth. All it does is absolve central bankers of responsibility for what, on the basis of good theory and mounting evidence, is primarily their fault to begin with.” ~ Alexander William Salter
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Does Government Spending Lead to Inflation?
“The key point is that it is the central bank’s willingness to help finance government spending, not the spending itself, that drives inflation. In short: inflation remains a monetary phenomenon.” ~ Bryan Cutsinger
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Does the Fed Control Interest Rates?
“The Fed is a failed institution in need of major reforms. But we won’t make the right changes if we don’t understand the basic relationship between central banks and capital markets.” ~ Alexander William Salter
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Supply, Demand, and Inflation: The Big Picture
“Where did all this inflation come from? Supply-side issues are a problem, but in terms of magnitudes, it just doesn’t make sense to call them the chief contributor.” ~ Alexander William Salter
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CBDC in the USA: Not Now, Not Ever
“The fact that the New York Fed, in conjunction with a handful of private banks, has implemented a ‘pilot’ program with digital tokens is worrying enough. Under no circumstances should we allow the government to roll out a CBDC.” ~ Alexander William Salter
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CBDCs: What Can We Learn From Dollarized Countries?
“How much more could FDR have done had he had a CBDC? The risk of a CBDC goes beyond the serious issue of financial privacy.” ~ Nicolás Cachanosky
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Helping Banks Help Themselves: Extended Shareholder Liability
“The best way to reduce systemic risk is to give the risktakers the incentive to economize on risk. An extended liability regime for banking is a simple and elegant way to improve incentives. We should seriously consider it.” ~ Alexander William Salter
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Inflated Hopes and Burst Bubbles
“The Fed’s chief task is to restore its lost credibility. In retrospect, the switch to average inflation targeting was a mistake. It gave the Fed plausible deniability for noisier, less predictable policy.” ~ Alexander William Salter
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The CBDC Tradeoff
“Rather than crowding out the private sector with a CBDC, the government should let a thousand payment mechanisms bloom.” ~ William J. Luther
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Will A Digital Dollar Offer Financial Privacy?
“At some point, a CBDC that fails to provide a high degree of financial privacy will be used to monitor and censor the transactions of one’s political enemies. It is foolish to think otherwise.” ~ William J. Luther
