George Selgin on Average Inflation Targeting and "The Menace of Fiscal QE"

From Macro Musings comes this video in which David Beckworth interviews George Selgin about the Fed’s new policy framework and Selgin's recent book titled, The Menace of Fiscal QE. Specifically, David and George discuss the Fed’s quantitative easing evolution, and how the move to a floor system helped pave the way for fiscal QE to become a more popular policy in the present.

 

Macro Musings · George Selgin on Average Inflation Targeting and *The Menace of Fiscal QE*

George Selgin on "A Monetary Policy Primer, Part 11: Last-Resort Lending"

One of the few interesting bits of monetary policy is the central banks role as the lender of last resort.

For many, the "lender of last resort" role of central banks is an indispensable complement to their task of regulating the overall course of spending. Unless central banks play that distinct role, it is said, financial panics will occasionally play havoc with nations' monetary systems.

George Selgin's aim is to challenge this way of thinking. Its an interesting antidote to much of what you hear said about the importance of the lender of last resort role of central banks.

Worth a few minutes to read.

Fiat money vs. the gold standard

Scott Sumner and Larry White take on monetary policy in this Econ Duel.

Throughout the 19th century and up until the Great Depression, the gold standard was used in the United States. It was largely abandoned in the 20th century.

But what is the gold standard? It’s a system for defining the value of a currency in terms of gold. In other words, you could exchange your $20 paper bill for actual gold at one point in history.

Under a fiat money system, such as the one we have in the U.S. today, that $20 paper bill is inconvertible. You can’t exchange it for a backing store of value because there isn’t one.

In this Econ Duel, economists Scott Sumner and Larry White, who both focus on monetary theory and policy, debate the positives and drawbacks to the gold standard vs. fiat money, and the role of central banks.

On the side of the gold standard, White argues that, when properly implemented without a central bank intervening, it provides a more predictable price level and lower average inflation.

Sumner, taking up the banner for fiat money, argues that the gold standard is simply a rule that worked well in the 19th century and that a good fiat money system is, for this day and age, a better alternative.

Macro Musings podcast: George Selgin

From David Beckworth’s new podcast series, Macro Musings comes this audio of an interview with George Selgin.

My latest Macro Musings podcast is with George Selgin, director of the Cato Institute's Center for Monetary and Financial Alternatives. We discuss in depth Selgin's call for a a Productivity Norm, a nominal income target for central banks that would result in inflation moving inversely with expected productivity growth. That is, he would have central banks stabilize aggregate demand growth but allow more price level flexibility based on technological advances. Along the way we cover the difference between benign and malign deflation and look, examine some of the historical cases of deflation, and discuss the recent productivity surge of the late 1990s and early 2000s.

It was a great conversation with George. Those listeners wanting more information on his Productivity Norm target for central banks should check out the links below.

A more complete but readable discussion of the productivity norm idea is given in IEA's book "Less than Zero: the Case for a Falling Price Level in a Growing Economy" (pdf) by George Selgin