Jamesian Philosophy Refreshed

We have reached a critical moment in the life of the institution known as a "central bank." A central bank, as many of you likely know, is paradigmatically a bank that is NOT part of the government that it serves, an institution that has both private and public characteristics, and an institution that serves as the grease for macro-economic gears in the machinery of governance. Alexander Hamilton, an admirer of the London model, brought the institution to The United States. We now have a rather peculiar form of central bank, the Federal Reserve Board, created by the Wilson administration more than a century ago. Its peculiarities need not interest us today. But as I said above, we have reached a critical juncture. The central banks of the developed world appear to be running out of their usual arrows. They'll have to come up with something non-traditional when the traditional quiver is empty. What might that be? They might adopt distributed ledger technology -- ...

From a recent essay by Isaac Knowles, Edward Castronova, and Travis Ross, "Secondary markets can be further split into two types -- sanctioned and unsanctioned -- as determined by the game developer. Third parties in this case are firms that buy assets from players and so-called 'gold farms' and then sell the assets to other players. Gold farms are firms that employ people to spend several hours a day inside of a virtual world gathering currency and items, or developing avatars on a particular game account, for the specific purpose of selling the assets or the accounts to players or retailers." I had no idea there existed firms that employ people to spend their time inside virtual worlds in this way. What a business model! At any rate, once I knew I entered "gold farms" into Google Images and got the image above, of the workplace of some of these farmers.

  Finance studies the way in which liquid resources, cash and cash-like stuff, moves about in a broader economy, and – if all works well – gets to where it is needed. Finance is a branch of economics, and so as you might suspect is concerned with “supply” and “demand.” But it is concerned with a very particular branch of each. Consider the cash that some people have saved. We’ll call them the Jones’. They’ve put cash away somewhere – in a safe, let us imagine, or in a pillow case – where it is immediately available to them should they want it. Consider also that there are other people and institutions who very much want the use of that cash. These others may have a very restaurant and a distinctive brand, but may need a new infusion of cash in order to expand the restaurant, perhaps making it a chain. In this case, the idea naturally arises that the Jones’ money might be lent to the restauranteurs, as equity (in which case the Jones’ expect a share of profit) or as debt (in...

Recently, on an assignment for AllAboutAlpha, I had the privilege of interviewing James Rickards, the author of CURRENCY WARS. Since I've been following the Yellen-versus-Summers speculation here somewhat, as to who will be the next chairman of the Federal Reserve, I will quote Rickards briefly on both of them here, then send you to the full interview. On Janet Yellen, he said that she is "a known  quantity, a monetary dove who would be very slow to taper if at all, she might even speed the money creation." On Lawrence Summers, though, the verdict was more devastating: "Summers is neither a hawk nor a dove. He's a wild card."

Last month and this have seen dramatic developments in the world of bitcoin. Let's try to catch up. Bitcoin is one of a group of efforts to create a pseudo-currency online.   Its existence is a testimony on how little trust exists for the legal tender of the US, the one-time world numeraire . An issue I discussed at book length here. There was a massive sell-off on Wednesday, April 10, which resumed on Thursday. Daily Bail Natural News Conspiracy theories abound, both as to the run-up in the value of bitcoins that began in July 2012 and in the crash in April 2013. My own view is that bitcoin has been (at least for now) the victim of its own enthusiasts, who got ahead of themselves. On March 29, Jeffrey Tucker of Laissez Faire Books wrote, "Maybe the price will keep climbing," etc. One of those this-time-its-different things that often get themselves written just before a bubble bursts. Robert Wenzel called him out. It appears Wenzel was right. Anyo...

A couple of quotes from the book Greekonomics by Vicky Pryce. Speaking of the countries other than Germany that agreed to the initial deal creating the exchange rate mechanism and later the single currency, she writes, ""[T]his was a political project sold as an economic one to the electorates across Europe. In the rush to bind Germany into a union covering most of the countries in Europe, very little thought was given to whether the result might bear any resemblance to an optimal currency area." A little later, speaking specifically of Greece and why it joined,  she writes: "Interestingly, when the Greek nation expressed a real desire to join the EEC and then the euro, they were in reality secretly hoping that the Brussels bureaucrats would take over and free them from the control of their politicians, who they regarded as corrupt. Educated Greeks longed for a 'technocratic' government that would move them away from a rather Soviet-style economy su...

Allow me to get in my own two cents (and yes, I realize I'm rather late to this party) about the EU's receipt of the Peace Prize. The Peace Prize is awarded by a committee that is selected by Norway's Parliament.   Follow that link for some particulars. It is fitting, then (nay, it is pragmatically compelling) to observe that Norway isn't a member of the EU. Norway has twice held referenda to determine whether it would join, and in both cases the go-it-alone faction prevailed: 1972 and 1994. The Peace Prize is apparently justified this year by a simple and seemingly pragmatic tie: Europe hasn't gone to war since the nations thereof became a single economic unit. That is pretty clearly a post hoc ergo propter hoc argument, and thus a fallacy. Heck, the US hasn't had a civil war since the EU was created either, but even the Nobel Committee doesn't seem to draw that connection. I'll only note as a counter that Norway itself has managed to s...