As always there are no price controls, there are just shortages. Place President Biden’s rhetorical attacks on “junk fees” in the price control category, along with the CFPB’s regulatory attacks. Nothing is free. Yet the CFPB wants to bring down the $32 charged for late payments on credit cards to $8. Someone will pay for this. Readers can guess who.
This will cause some heads to explode within the various free-market and interventionist religions, but market forces born of production decide which currencies circulate, not central banks or presidents. Which means Javier Milei is wise to not dollarize.
When banks acquire capital expensively, they don’t just acquire cash. They put it to work, albeit in securities approved of by regulators. Highly liquid securities. Think government bonds, or more specifically U.S. Treasuries.
We didn’t even have to get to 2024 for economists to start speculating on what the Fed might do to boost or harm the re-election chances of the incumbent president through rate cuts, or a lack of them.
No doubt prices for many goods are higher post-Covid lockdowns, but Cochrane has mistaken the culprit.
The Fed is full of PhDs bereft of the simple knowledge required to gauge economic health. It’s held down by a near total lack of originality.
The bigger the crack-up the better, because the big errors signal enormous information-creation that will bring us closer to the kind of knowledge that represents enormous progress and wealth.
Money isn’t abundant in Palo Alto but scarce in Baltimore because the state decreed it so, rather money in circulation is production determined. It’s a market phenomenon every bit as powerful as the production that drives it. There is in fact a free market for money, and it’s exacting.
The inflation fight was a non sequitur, not to mention that the higher prices had nothing to do with inflation. The wonder is if the various economic religions will ever accept that the fastest path to lower prices isn’t Fed rate fiddling, rather it’s spreading production across as many hands and machines as possible.
Argentina is already “dollarized.” For Javier Milei to decree dollarization would be for him to insert the state into monetary policy.