It's funny because the generally accepted narrative (as far as I understand it) is that New World gold was a cursed resource that poisoned the Spanish economy and eventually started the peninsular decline relative to the rest of Europe.
But when that bullion stops coming now it was bad too! Long-term vs short-term effects I guess.
The issue is the _optimal_ rate of inflation, which is never negative and can be too low.
As for the resource curse aspect, that always comes back to saving and investment. Spain consumed too much of the wealth in wars [including fighting off the Ottomans (Thanks).] instead of investing.
In the first 20 years under the Federal Reserve Act of 1913, there were over 20,000 bank failures (shipwrecks). The intention of the framers of the Act was to establish a unified banking system under 12 central banks. There were many flaws in the original Act, one being the establishment of 12 rather than one central bank
The fatal flaw was not making membership in the System compulsory for all money creating institutions. And had not Franklin Roosevelt declared a “banking holiday” in March 1933, the lack of confidence in the banking system would have resulted in the failure of virtually every bank in the United States.
Some unprecedented things have been happening since the coming of the “New Deal” in 1933. On a year-to-year basis, Federal Reserve Bank credit has always expanded. The same applies to commercial bank credit, and the means-of-payment money supply. The consumer price index has fallen on a year-to-year basis in only two years, 1937 and 1949. The chief factor affecting the level of long term interest rates since the early 1950’s is inflation expectations, not the level of business activity.
We now actually have a central bank. It is called the Federal Reserve Bank of New York. An amendment to the Federal Reserve Act in 1933 established The Federal Open-Market Committee and gave it the power to control Total Reserve Bank Credit. The Fed can now buy an unlimited volume of earning assets. (With the federal debt at over 30 trillion, and expanding, and billions of dollars of “eligible paper” available, the term “unlimited” is not an exaggeration in terms of any potential needs of the Fed.) In the process of buying Treasury Bills etc., new Inter-Bank Demand Deposits (IBDDs) are created. These deposits can be cashed by the banks into Federal Reserve Notes, without limit, on a dollar-to-dollar basis.
Today, the public, seeking to cash their deposits, would soon have a surfeit of paper money. A general run on the banks is impossibility. Where the Federal Deposit Insurance Corporation cannot handle the situation (Continental Illinois, for example), the Fed will guarantee the liquidity of the bank’s deposits.
Yes, having even a centralized Fed can't really optimize inflation with a commodity link (although F&S argue that it could have done better than it did in '29 -.
It's funny because the generally accepted narrative (as far as I understand it) is that New World gold was a cursed resource that poisoned the Spanish economy and eventually started the peninsular decline relative to the rest of Europe.
But when that bullion stops coming now it was bad too! Long-term vs short-term effects I guess.
The issue is the _optimal_ rate of inflation, which is never negative and can be too low.
As for the resource curse aspect, that always comes back to saving and investment. Spain consumed too much of the wealth in wars [including fighting off the Ottomans (Thanks).] instead of investing.
In the first 20 years under the Federal Reserve Act of 1913, there were over 20,000 bank failures (shipwrecks). The intention of the framers of the Act was to establish a unified banking system under 12 central banks. There were many flaws in the original Act, one being the establishment of 12 rather than one central bank
The fatal flaw was not making membership in the System compulsory for all money creating institutions. And had not Franklin Roosevelt declared a “banking holiday” in March 1933, the lack of confidence in the banking system would have resulted in the failure of virtually every bank in the United States.
Some unprecedented things have been happening since the coming of the “New Deal” in 1933. On a year-to-year basis, Federal Reserve Bank credit has always expanded. The same applies to commercial bank credit, and the means-of-payment money supply. The consumer price index has fallen on a year-to-year basis in only two years, 1937 and 1949. The chief factor affecting the level of long term interest rates since the early 1950’s is inflation expectations, not the level of business activity.
We now actually have a central bank. It is called the Federal Reserve Bank of New York. An amendment to the Federal Reserve Act in 1933 established The Federal Open-Market Committee and gave it the power to control Total Reserve Bank Credit. The Fed can now buy an unlimited volume of earning assets. (With the federal debt at over 30 trillion, and expanding, and billions of dollars of “eligible paper” available, the term “unlimited” is not an exaggeration in terms of any potential needs of the Fed.) In the process of buying Treasury Bills etc., new Inter-Bank Demand Deposits (IBDDs) are created. These deposits can be cashed by the banks into Federal Reserve Notes, without limit, on a dollar-to-dollar basis.
Today, the public, seeking to cash their deposits, would soon have a surfeit of paper money. A general run on the banks is impossibility. Where the Federal Deposit Insurance Corporation cannot handle the situation (Continental Illinois, for example), the Fed will guarantee the liquidity of the bank’s deposits.
Yes, having even a centralized Fed can't really optimize inflation with a commodity link (although F&S argue that it could have done better than it did in '29 -.