The Federal Reserve is continuing to experiment with new, more counterfeit-proof paper money. Recently, it was big faces, along with the introduction of a variety of other difficult-to-counterfeit characteristics into our Federal Reserve Notes. Next, maybe, it will be color. Or, writes Clifford Thies, perhaps the real issue is not the color on the back of the money, but money’s real backing.
The trouble with lowering the interest rate, writes Frank Shostak, is not that the Fed may lose a tool to fight a further downturn; the problem is that a lower rate now will make things much worse rather than better. Fifty years of experience suggest it will set in motion a much more painful economic adjustment in the months ahead.
News reports now indicate that WorldCom's overstatement of its profits in the last few years may exceed initial reports. But, writes George Reisman, whatever the ultimate figure may be—$7.1 billion or even $10 billion—it pales into insignificance in comparison with the overstatement of profits regularly engineered by the U.S. government.
Argentina and now Brazil are the latest chapters in Latin America's long financial history of foreign debt and default, writes Antony Mueller. It is a consequence of bad policy, underwritten by international financial institutions and subsidized from a pervasive culture of debt.
The present unstable financial system cannot be fixed by means of a monetary policy that targets the price of gold, argues Frank Shostak. This framework, favored by supply-siders, is likely to further destabilize the economy. What is needed is not a reversion to the bankrupt Bretton Woods system, but a genuine gold standard, where gold is money.
Fannie Mae's monopoly privileges have given it an ever-increasing share of the secondary conforming mortgage market, writes Robert Blumen, and it currently is seeking to expand into other parts of the mortgage market. The net result has been a nightmare of resource misallocation and massive systemic risk.
The U.S. government's plan to introduce an improved Consumer Price Index that theoretically would measure inflation more accurately is an exercise in futility. Inflation is not about a general increase in prices; it is about increases in the money supply. Hence, whatever the improved index would measure has nothing to do with true inflation.
Using changes in the margin regulation as a stick to beat the stock bubble does not work, fails to solve the underlying problem, and further injures investors by restricting their choices. What Fed Chairman Greenspan didn't know is something that the young Greenspan and his mentor Ludwig von Mises did: that monetary freedom is the way to end market bubbles once and for all.
It is time for Argentines to cash in their experience with government power, government law, government regulation, government money, and government care. They attended a hard school and paid high tuition. It taught all who cared to learn that, after every conceivable political device has been tried and found wanting, there remains freedom.
The prolonged Japanese economic slump is not due to price deflation but is the product of aggressive fiscal and monetary policies aimed at arresting the general fall in prices of goods and services. Contrary to the popular view, as a rule, price deflation is always good news for the economy. Thus, when prices are falling in response to the expansion of real wealth, this means that people's living standards are rising.
