The possibility that central banks might resort to extreme monetary measures, including helicopter money, is much debated in monetary policy circles. But what is “helicopter money”? * In normal times, central banks in developed countries try to control inflation and the level of economic activity by controlling the short term interest rate. But since the… Continue Reading
Tag Archives: money
When bank notes were fun
The ever fascinating blog of the New York Fed tells us that, among the many different types of bank note issued by around 1,600 US banks during the nineteenth century, some included pictures of Santa Claus. Only in 1861 did the Federal Government start issuing paper currency; from that point the Treasury had a monopoly on note… Continue Reading
Cash remains king
Despite the increasing ease of electronic payments, cash remains popular in the UK, according to the Bank of England. * Money is anything that fulfils the three functions of money: i) a means of payment; ii) a unit of account; and iii) a store of wealth. Physical cash does all of these rather well and… Continue Reading
Money, money, money – three different meanings
Money can mean physical cash, or the funds in a bank account or the flows of short term funding used by government and companies. No wonder finance can be confusing. * Finance is a subject bedevilled by jargon – words, phrases and acronyms that are barriers to understanding the relatively simple things that actually go on… Continue Reading
Could we do without physical money?
Physical money is becoming increasingly unnecessary in everyday life. Could it be heading for extinction and does it matter? I’ve just spent three days on holiday in the wonderful city of Copenhagen, using physical cash only once (when the ice cream seller’s card machine was broken, and the ice cream is really good so I couldn’t… Continue Reading
Getting money right
It must be puzzling and exasperating to the general public that economists still seem so clueless about perhaps the most important and central topic in economic policy, the money system. Yet a lot of economic news is about the problem of money – not having too little but the money system. The Fed has been… Continue Reading
A simple but misleading model of inflation
A lot of hedge fund managers seem to believe that the Fed and other central banks that have been using unconventional monetary policy, specifically “quantitative easing” (see note 1), are dooming us to much higher inflation in future. Some believe the very large increase in central bank balance sheets will cause hyperinflation, economic ruin and… Continue Reading