Central Banks

Economist Jonathan Newman joins Ryan to discuss how deficit spending and runaway debt is causing price inflation and higher interest rates. 

The Federal Reserve and so-called government stabilizers exist ostensibly to balance a market economy that supposedly is fundamentally unstable. But what if government intervention itself causes the instability?

One of the fallacies pushed by monetary economists is that a growing economy needs a growing supply of money in order to prevent deflation, which they claim is as harmful as inflation. However, as Austrians point out, there is no “optimum” amount of money in the economy, since prices adjust.

In replying to a previous article by Frank Shostak, Douglas French writes that if an increase in the supply of gold ultimately leads to an expansion of bank credit, that is enough to start the boom-and-bust cycles, even if there is no central bank to accelerate the process.

Bob explains that the beloved Wizard of Oz movie involved an allegory of the bimetallism debates of the late 1800s.

States can vastly expand their own power when they can print their own money. This is why virtually all governments have a central bank.

Ruchir Sharma, a non-Austrian, gets it right. He lends strong support to the Austrian position that because competition moves resources to where they best fulfill consumer demand, the government must not interfere with this process by bailing out businesses that fail.
 

The newly-released 2025 Sound Money Index has identified Wyoming, South Dakota, and Alaska as the states with the most favorable policies toward constitutional sound money, while Vermont, Maine, and California take the most hostile stances.

David Glasner shares his perspectives on the famous Sraffa-Hayek debate, a topic on which he has expressed disagreement with Bob in print.

Like Orwell‘s famous statement from Animal Farm, “All animals are equal, but some animals are more equal than others,” it turns out that bank bailouts are not as equal as the state would like us to believe. Unsurprisingly, benefits accrue to the banks with the biggest depositors.