12 Nov 2010

Gold: The Market’s Global Currency

Economics, Shameless Self-Promotion 2 Comments

Here is my Mises Daily about Robert Zoellick’s halfhearted call for a return to gold.

Also, the Hillsdale Collegian ran a story on the Krugman debate, though I actually stopped teaching there in 2006 (not 2008 as the article states). Since there are one or more Hillsdale economics professors who read this blog, I want to highlight this part of the article:

Joe Petrides, who graduated from Hillsdale in 2006 with a degree in economics, found out about the campaign through Murphy’s YouTube videos.

“I thought he was the smartest economics professor, as far as depth of knowledge goes,” Petrides said, recalling classes he took with Murphy. “He knows the minute details of the arguments. He won’t be scared by Krugman’s celebrity status.”

2 Responses to “Gold: The Market’s Global Currency”

  1. fundamentalist says:
    at

    Can’t wait for the debate! Go Bob!

  2. AP Lerner says:
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    In your essay Gold: The Market’s Global Currency, you say:

    “At some point, the trillion(s) in excess reserves will begin leaking back into the broader monetary aggregates. ”

    However, in this essay, titled “The Fractional-Reserve Banking Question” you clearly lay out the case that banks can create reserves out of thin air. You state:

    “bankers who engage in fractional-reserve banking really do “create money out of thin air” in a sense that I think many commentators don’t fully appreciate”

    So my question is, if banks can essentially create reserves at any time, out of thin air, they are essentially never constrained by reserves. You show that the banking system is never reserve constrained. But if the banking system is never reserve constrained, then is there concern about ” trillion(s) in excess reserves will begin leaking back into the broader monetary aggregates”.

    If there is no constrain to reserves, then excess reserves are meaningless, right?

    Also, one more quick question, if I may. In your essay: “The Fractional-Reserve Banking Question” you also state:

    “There is nothing in the legal reserve requirement to prevent banks from making new loans that are large multiples of a new deposit. Instead, it is prudence on the part of the banks that enforces this restraint.”

    But don’t capital requirements, not restraint, that forbids banks from “making new loans that are large multiples of a new deposit”? It seems the claim that banks can create unlimited amounts of money out of thin air forgets the fact that banks must meet capital requirements.