Politics

The New Deal and Recovery, Part 11: The Roosevelt Recession, Continued

“Massive jolts of New Deal spending had stopped the economic slide, [but the economy crashed again when] over two years, FDR slashed government spending 17 percent.” (From a 2011 NPR presentation.) In the last installment of this series, I discussed the hypothesis that the 1937 collapse resulted from an ill-conceived tightening of monetary policy to […]

Politics

The New Deal and Recovery, Part 10: The Roosevelt Recession

By the start of 1937, things were looking up for the U.S. economy. Although the Supreme Court had struck down both the NIRA and the AAA—the chief pillars of the original New Deal’s recovery plan—some time ago, like a glider released by its tow plane, the recovery itself kept going. Indeed, the glider analogy doesn’t […]

Politics

The New Deal and Recovery, Part 9: The AAA

Having devoted the last two posts in my New Deal series to the NRA, I may have given readers the impression that I had nothing to say about the consequences of the Agricultural Adjustment Act (AAA) passed more than a month before the National Recovery Act. As this series is about the New Deal’s contribution […]

Politics

Has Bitcoin Succeeded?

The answer depends on what you mean. Succeeded at what? With the US dollar price of Bitcoin reaching an all-time high above $23,000 this month, and its market cap reaching an all-time high above $400 billion, there has been much celebration among Bitcoin holders about their success at investing. The run-up has accompanied the announcements […]

Politics

Modeling the Legend, or, the Trouble with Diamond and Dybvig: Part II

 [This is the last half of a two-part critique of Douglas Diamond and Philip Dybvig’s highly influential paper purporting to show that fractional reserve banking systems are inherently unstable. Part I can be found here.] Sauce for the Goose… Half a century after the fact, the “aggregate uncertainty” version of the Diamond-Dybvig model appeared at […]

Politics

Modeling the Legend, or, the Trouble with Diamond and Dybvig: Part I

Has any theoretical work on banking been more influential than Douglas Diamond and Phillip Dybvig’s 1983 JPE article, “Bank Runs, Deposit Insurance, and Liquidity”? If so, I can’t think of it. With well over 12,000 Google citations and counting, it’s certainly among the most cited academic papers in economics, let alone in the sub-discipline of […]

Politics

Postal Savings: A Third-Class Remedy?

This essay, the first of a series on government efforts to bank the “unbanked,” reviews the history of postal banking and its deleterious role in the Great Depression. Subsequent posts will discuss contemporary proposals for government involvement in retail banking, such as through the U.S. Postal Service and the Federal Reserve, in light of this […]

Politics

Two Sorts of Average Inflation Targeting

It occurs to me that recent discussions of the Fed’s new average inflation targeting plan gloss over a subtle distinction between two different kinds of Average Inflation Targeting (AIT). Hence this post explaining the difference, and why I think it matters. The difference between the two sorts of AIT that I have in mind is […]

Politics

The Fed’s Policy Drift

The unanimous decision of the Federal Open Market Committee (FOMC) to shift from inflation targeting to average inflation targeting is another step away from its mandate to achieve long-run price stability. Section 2A of the Federal Reserve Act does not say the Fed’s long-run objective should be 2 percent inflation. It calls for maintaining the […]