Would the current financial crisis matter as much in a world without money? Let me be more specific. Imagine we lived in a world where we still had money as a medium of account, so prices were measured in money. But people did not use any medium of exchange; they used barter instead. Would your […]

{Update: Preface: Is it possible that an economy could find itself in an absolute liquidity trap because the natural rate of interest went negative? Or is it only possible if mistakes in monetary policy caused expected inflation to go negative?] We argue that the nominal rate of interest cannot be negative. If it were, people […]

This Bloomberg story reports the Fed saying that rising bond yields are a good sign. They don't precisely say that monetary easing is what caused the rise in interest rates; they are perhaps too modest to claim credit? But I will say it for them: by buying bonds, and easing monetary policy, the Fed has […]

Suppose there were an excess demand for antique furniture. Antique furniture is not part of GDP. By Walras Law, if there were an excess demand for antique furniture, there must be an equal and offsetting excess supply of something else, like newly-produced goods for example. Could an excess demand for antique furniture cause a general […]

Mark Carney, Governor of the Bank of Canada, spoke yesterday about short run "speed limits" to economic recovery. This is a concept you don't hear very often, so I thought I would briefly discuss it. It's easily confused with the much more familiar long run "speed limits" to economic growth. And those long run "speed […]