16 books like Monetary Regimes and Inflation

Friedman, a Nobel-winning former Economics professor, writes brilliantly and playfully, and students of economics love to read him. Yet he delves into the heart of the monetary problems that have been confronted historically. This he uses to shed light on how to conduct monetary policy today.

He ranges across the whole of American history. For example, the failure of the Continental Congress’s currency occurred since it was printed to finance the Revolutionary War when there was no federal government and no federal tax revenue. This led to the new US Constitution and the ability to raise taxes, and a stable currency that was backed by gold and silver.

With the Civil War, the US Treasury printed money called “greenbacks” and suspended conversion to gold and silver during the War, but re-established convertibility in 1879 at the pre-War rate. Friedman shows how this convertibility led to prolonged, hugely damaging deflation for… show more.

Lombard Street is the classic statement of how central banks began functioning to insure the private bank system against bank panics. Walter Bagehot wrote this at the time of a revolution in banking that came about after the Joint Stock Companies Act of 1862 allowed private banks to have limited liability. Banking then boomed in England, and the Bank of England went from being a private bank to a bank also serving the Crown of England, and finally into a central bank as we see them today. 

The Bank of England would hold reserves for the entire private banking system should they need them in times of bank panic, which were periodic in those days (and still today). At the same time, the Bank provided the money supply through note issue. This created a money and banking authority that was efficient in its practice of stabilizing the money and financial… show more.

Goodhart, a former head economist of the Bank of England, builds upon Bagehot to describe how modern central banks evolved to insure the private bank system.

Goodhart argues that regulations over private banks were unnecessary and that the shadow bank system (that had evolved since the Vietnam War era inflation drove banks away from the Federal Deposit Insurance Corporation in the US) would never go bankrupt. He argues that the investment banks always had sufficient reserves, so that increased regulation was undesirable.

The Crash of 2008 proved Goodhart wrong. Yet ironically, it is the exact same set of arguments that are being used today: banks do not need increased regulation since the Fed and Bank of England are now holding reserves, and private banks are also holding more reserves. Even the FDIC has argued against bringing investment banks into the FDIC system that is efficient, because it would involve increased… show more.

King was the head of the Bank of England during the financial crisis of 2008. He declared full deposit insurance for the entire United Kingdom private banking system, with no deposit premiums required. This ended the run on the banks that spilled over into the streets of the UK during the crisis, when the Bank of England at first decided not to take care of Northern Rock, a private retail bank that was headed towards insolvency.

King provides a whimsical and sharp review of the private and central bank system before and after the crisis that builds very much on Charles Goodhart and Walter Bagehot. King laudably faults economists and the Economics profession for thinking that establishing negative real interest rates worldwide is the answer to central bank crises (in his newly added Introduction to the paperback edition of his 2016 hardback by the same name). Yet King sides with… show more.

Sargent shows how the monetary excesses leading to inflation have often been connected to using money to cover government budgetary shortfalls. This is vividly illustrated in chapter 3 by the way that ending the post-World War I hyperinflations required fundamental fiscal as well as monetary reform. 

Sargent also convincingly demonstrates the power of expectations and the idea that, as government behavior changes, people’s behavior adjusts as well.

You really cannot argue with the Ancient Chinese proverb included on the first page: “The government has strategies. The people have counterstrategies.” Amidst the rich trove of historical cases, my favorite remains chapter 6’s interpretation of the interactions between President Ronald Reagan and a recalcitrant US Congress in the early 1980s as a “game of chicken.” 

I am especially fond of this book because I edited it with a dear friend of mine, Prof. Mauro Baranzini, who, despite our different analytical backgrounds has always supported and encouraged my research in monetary macroeconomics.

The book lays the foundations for a fruitful collaboration among economists who share the same objective: to explain satisfactorily and comprehensively the disequilibria hampering the smooth development of our economies.

The works presented in this volume are a serious attempt to clarify the terms of the problem of inflation and unemployment.

They must be seen as contributions to building a modern theory of monetary and structural macroeconomics.

Most economists associate volume of money with price-level (inflation/deflation), not Keynes.

For him, a macro price-level does not reveal the unsynchronized dynamics affecting the prices of its components: commodities, labor, capital, raw materials, profits; it must be decomposed.

When FunCorp invests in a rollercoaster, its decision is based on present costs and future returns (ticket sales, performance, stock options, etc.).

Windfall profits will lead to more expansion; losses, to curtailed activity. Both expansion, contingent on easy credit, or recession, on the tightening of credit, depend on bankers’ use of individuals’ savings and their creation of more deposits.

For Keynes, an institutionalised banking system is essential for a modern economy but he advocated, in the public interest, for strict rules on bankers’ abuse of credit, to mitigate the inflation/deflation rollercoaster. 

This is a unique way of saving money by engaging in some extra creative activities, and thereby earning money from them outside of your normal salary/income.

For instance, this is similar to an employee or business owner having their own side hustle. Extra ways to earn money are also covered, and when you have saved in $1K parcels; then that money goes towards the relevant goal you have set for yourself.

The author uses her $1K parcels to buy shares. 

This book is perhaps one of the best-kept secrets in economics, overshadowed by Keynes’ more path-breaking General Theory, but oozing with wisdom on every page. Here Keynes transcends the bounds of economics. In his words: “It is one of the objects of this book to urge that the best way to cure this mortal disease of individualism is to provide there shall never exist any confident expectation either that prices are generally going to fall or that they are going to rise; and also that there shall be no serious risk that a movement, if it does occur, will be a big one.” Of course, inflation is the subject here. Its writing style alone elevates it above the commonplace. In this book, the reader finds the balance of practical judgment found in the best economists. 

Everyone deserves to live an abundant life, and this book is a metaphysical way to attract more abundance in your life.

There is a strategy for everyone. Using these abundance and prosperity principles will inspire you to save more money, and to build more wealth.

This book was born from a Church Minister who wanted to help her congregation not only survive, but thrive during recessions and leaner times.