The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design. – F.A. Hayek
Posted in Money, incentives on Mar 10th, 2010
Did you know that the U.S. government created an agency colloquially known as “Farmer Mac?” Yep, in 1988 Congress chartered a company to do in agriculture exactly what Fannie and Freddie have done in the mortgage market. Farmer Mac, a “private” company, is “allowed” to purchase loans from agricultural lenders and then repackage them into [...]
Posted in Money on Feb 10th, 2010
Last week Professor Landsburg discussed why it makes sense to eliminate taxes on capital gains. The reason is that any tax on capital is, in fact, a disguised tax on labor. The “problem” is that it (capital gains taxes) end up taxing labor differently in different time periods. I suspect that is a feature not [...]
Posted in Government Gone Wild, Money on Feb 8th, 2010
Is this what Barney Frank had in mind in 2003?
When Charles E. Haldeman Jr. became Freddie Mac’s chief executive officer in August, the ailing housing-finance giant had already consumed $51 billion of government money to stay afloat. It’s likely to need even more.Freddie’s federal overseers nevertheless have instructed Mr. Haldeman to focus on something that [...]
Posted in Money on Dec 13th, 2009
Here.
Yet, the bust in the twenties, which drove up foreclosures, did not induce a collapse of the banking system. The elements absent in the 1920s were federal deposit insurance, the “Too Big To Fail” doctrine, and federal policies to increase mortgages to higher risk homeowners. This comparison suggests that these factors combined to induce increased [...]
Posted in Money on Sep 22nd, 2009
Only by plundering the productive parts of society. Of course the FDIC is in trouble. The problem is that banks who have sufficient capital and invested prudently and thereby have not put their depositors at risk are being asked to take care of the banks that were not so prudent.
Where does that leave incentives for [...]
Posted in Money, Regulation on Jun 12th, 2009
The major problem with government intervention in Money and Banking over the centuries has really been the fact that each new round of regulation is laid over the existing pool of regulations – themselves typically responsible for the crisis that triggered the call for new regulation. So while I was sure that whatever the Obama [...]
Even though empirical research casts doubt on the quantity theory of inflation, there has always been a strong correlation between the rate of money growth and the rate of price level changes within the US and also across OECD Countries. However, something seems to have changed since the early 1990s.
The first two charts show the [...]
Posted in Money on May 19th, 2009
Why does the Federal Government (via the IRS) NOT accept its own currency as payment of taxes? I have my own ideas, which I’ll share later. But this seems strange particularly given the views of heterodox monetary economists that argue the only reason a particular thing is money or has value as money is because [...]
Posted in Money, Regulation on May 12th, 2009
In an excellent interview with the Richmond Fed, George Selgin writes:
Secondly, the tendency for banking systems to suffer failures, especially big clusters of failures, depends on the regulatory environment. Had we had nationwide branch banking all along in the United States, that alone would have allowed us to avoid many of the bank failures and [...]
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