Keynes was a failure in Japan – No need to embrace him in Europe

Tokyo's Ginza on Sunday  (photo by Groink)

Draghi’s volte-face two weeks ago has emboldened the Keynesian majority in the media and in economic research departments. It has injected new life into their relentless campaign for yet more state intervention in the Eurozone economy. It wasn’t anything the ECB actually did (or announced) that initiated this new euphoria. As usual, the measures fell short of what the tireless advocates of “stimulus” demanded. To the true Keynesian, no interest rate is ever low enough, no “quantitative easing” program ever ambitious enough, … [Read more...]

As Germany loses battle for ECB, QE goes global

Mario Draghi, ECB (photo by IMF/Stephen Jaffe)

What is Super Mario up to? First, he gave an unexpectedly dovish speech at the Jackson Hole conference, rather ungallantly upstaging the host, Ms Yellen, who was widely anticipated to be the most noteworthy speaker at the gathering (talking about the labor market, her favorite subject). Having thus single-handedly and without apparent provocation raised expectations for more “stimulus” at last week’s ECB meeting, he then even exceeded those expectations with another round of rate-cuts and confirmation of QE in form of … [Read more...]

Our obsession with monetary stimulus will end in disaster

money symbols getting sucked into a vortex

The following is a commentary I wrote for The Forum section of London business-paper City A.M. It was published yesterday. The link is here. It is now six years since the collapse of Lehman Brothers, and considering that the US economy has officially been in recovery for the past five years, that equity indexes have put in new all-time highs, and that credit markets are once again ebullient to the point of carelessness, it is worth contemplating that monetary policy remains stuck in pedal-to-the-floor stimulus mode. … [Read more...]

QE will come to the eurozone – and, like elsewhere, it will be a failure

Eurotower In Frankfurt

The data was not really surprising and neither was the response from the commentariat. After a run of weak reports from Germany over recent months, last week’s release of GDP data for the eurozone confirmed that the economy had been flatlining in the second quarter. Predictably, this led to new calls for ECB action. “Europe now needs full-blown QE” diagnosed the leader writer of the Financial Times, and in its main report on page one the paper quoted Richard Barwell, European economist at Royal Bank of Scotland with “It’s … [Read more...]

Detlev appears on the Bryan Callen Show

Screen Shot 2014-08-05 at 09.43.03

Bryan Callen and Hunter Maats recently interviewed me for an episode of the Bryan Callen Show. The interview has now been released as episode 141 on Bryan’s website. I very much enjoyed my talk with Bryan and Hunter, and I hope you like the result as well. Here is the link. And while I have your attention, allow me to point out that the second edition of Paper Money Collapse – The Folly of Elastic Money has just been released in the US. The amazon.com page is here. The book will soon be shipped to overseas markets as well … [Read more...]

These fake rallies will end in tears

New York Stock Exchange 1963 (Photo: Wikimedia; US News and World Report; Library of Congress)

Investors and speculators face some profound challenges today: How to deal with politicized markets, continuously “guided” by central bankers and regulators? To what extent do prices reflect support from policy, in particular super-easy monetary policy, and to what extent other, ‘fundamental’ factors? And how is all this market manipulation going to play out in the long run? It is obvious that most markets would not be trading where they are trading today were it not for the longstanding combination of ultra-low policy … [Read more...]

ECB decision: Unnecessary, ineffective but further entrenching bad habits

Euro banknotes

After months of whinging and whining by the international commentariat, and of relentlessly redefining what any sensible person would call “price stability” as a grave economic problem, the ECB has caved in, as expected, and yesterday announced further stimulus measures. Unnecessary I have pointed out repeatedly that low inflation is not a problem, and that the slow growth in money and credit that is presently its cause, is understandable and not entirely unhealthy. In many parts of the eurozone households, … [Read more...]

ECB under pressure to abandon superior policy stance

Balls of euro banknotes

The European Central Bank is under pressure. Inflation in the eurozone is at 0.7 percent but as Ben Bernanke supposedly stated, we are never sure if we measure these things correctly. So by all we know, the eurozone may already be in mild deflation. This should come as no surprise. The eurozone has practically had zero money growth and zero growth in lending for some time. As reported today, growth in the M3 money aggregate fell to a snail’s pace of 0.8 percent year-over-year in April. Loans to the private sector are 1.8 … [Read more...]

Keynesian madness: central banks waging war on price stability, savers

Eurotower In Frankfurt

There is apparently a new economic danger out there. It is called “very low inflation” and the eurozone is evidently at great risk of succumbing to this menace. “A long period of low inflation – or outright deflation, when prices fall persistently – alarms central bankers”, explains The Wall Street Journal, “because it [low inflation, DS] can cripple growth and make it harder for governments, businesses and consumers to service their debts.” Official inflation readings at the ECB are at 0.7 percent, still positive so no … [Read more...]

The a priori method in economics – In defence of Ludwig von Mises (essay)

Ludwig von MIses

I gave a speech on this topic at the Libertarian Alliance in March. A link to the video recording of that speech is here. The following essay covers similar ground but is not identical with the speech. I develop the argument differently here. My hope is that this text is a better articulation of my views and hopefully a good basis for further debate. The topic of this essay is broadly the method of economics: What phenomena does economics deal with? How do economists develop and test economic theories? What type of … [Read more...]