At the Cato Institute Monetary Policy, Part 2

The next panel:

Lawrence H. White
Professor of Economics, George Mason University

Richard H. Timberlake
Author, Constitutional Money

Scott B. Sumner
Professor of Economics, Bentley University

Lawrence White begins with obstacles to alternative means of exchange.  Why should the government have a monopoly on what is money?

Liberty Dollar — one ounce silver pieces denominated in dollars. When silver was $5 denominated at $10.  When silver was $10 re-denominated at $20.  Arrested based on code 18-486 outlaws minting your own coins, dating back to the Civil War to compete with greenbacks.  Still awaiting sentencing.

eGold — Accused of money laundering, and transmitting money without a license, even though gold is not “money.”  Essentially a gold credit card.

Ability to transfer money is a human rights issue.  Government interest not just legal tender laws and trying to tax capital gains.

Moderator: FATCA compelling every bank to disclose customers.

Dick Timberlake

Talks about clearinghouse loan certificates, and how they became less than fully reserved over time, prior to the Fed.  Warns against tight relationships between the Fed and the Treasury.

Scott Sumner

NGDP targeting was a right-wing view, now viewed as left-wing.  Argues that monetary policy has been too tight over the last five years.  Again, ignores the overindebteness of the economy.  Confuses and ignores the loose monetary policy 2001-2007.  Views the fall of asset prices as evidence of tight monetary policy.

Makes lame argument that bubbles are hard to spot.  Gives a false dichotomy that the crash in housing did not cause rise in unemployment.  Of course, but that misses the real cause, that the US economy was over indebted.  Wages/GDP is his proxy for unemployment.

Europe worse than US…

Q&A

Q1 — argues NGDP targeting has forecasting problems.  Sumner says if Fed had followed TIPS, would have loosened policy sooner.

Q4 — Sumner says he does not trust the CPI.  All the questions are going to Sumner.

Q5 — Can the internet outsmart the regulators and create alternative money?  White: alternative currencies flourish in extreme situations.

Q6 — My question: was monetary policy policy too loose 2001-7?  Sumner downplays the monetary policy effect on the housing bubble, and says the banks were misregulated (I agree with the latter, but not the former).

Q7 — Weren’t clearinghouses exclusive? Timberlake seems confused.  Poor guy.  Argues clearinghouses were not exclusive generally.  It was a free banking era of sorts.