62 books like Rational Expectations 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.

This book not only offers an authoritative account of what the Federal Reserve has been up to since its founding in 1913 but also the rationale for why they did what they did. 

One particularly telling observation is made with respect to Arthur Burns, who was the Federal Reserve Chair during 1970-1978: “Burns always attributed [inflation] to nonmonetary sources.” Paul Volcker’s actions during 1979-1987 demonstrated how the restoration of monetary stability was a sine quo non for ending the 1970s inflationary spiral. No matter how necessary the Federal Reserve’s later massive 2020 monetary expansion may have been, it was imperative that this bulge in money also be unwound. 

A worrying element, however, is that, in the midst of all this, none of today’s Federal Reserve policymakers “ever mentions money.”

The enduring impact of Milton Friedman and his writings is ably captured in this volume.

Part II focuses on his monetary contributions and relates his writings to the policy actions of the Federal Reserve and many other recent and older episodes. Among these chapters, James Lothian offers a particularly compelling account of not only the evolution of Friedman’s work but also its impact on those around him. Eugene Lerner connects his Friedman-inspired early Civil War research to monetary developments after the global financial crisis in 2008. 

Nobel Prize winner Robert Lucas makes a particularly revealing personal observation: “Friedman has no interest at all in what side you are on. You are expected to articulate a view of the effects of policies. How will it work? Who gains? Who loses?”

In the west, China is often perceived as a recent entrant onto the world stage.

The sweeping historical perspective of this book quickly disavows any such notion. Horesh presents evidence of the significant circulation of Chinese coins across Eurasia under the Tang dynasty (618-907). This subsequently expanded to include India and Sri Lanka and even reached East Africa under the voyages of Zheng He (1371-1453). Horesh cleverly weaves the evolving situation in China over the centuries with that of the rest of the world and so the reader ends up with much more than just a Chinese-based history.

Perhaps the biggest takeaway, however, is that a global role for China's currency in the modern era would be no more than a return to the position it occupied in past epochs.

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.

I recommend this book because it deals with the main problems faced by capitalist economies, inflation, and unemployment, in a new and original way, and provides the theoretical foundations for quantum macroeconomic analysis.

Orthodox economics has failed to provide a consistent insight into the pathologies blighting our economies, and both the academic and the economic worlds badly need an alternative approach to convincingly diagnose these pathologies, where they come from, and how they can eventually be disposed of.

Schmitt’s volume provides a revolutionary explanation of the cause of today’s economic disorder as well as an innovative solution enabling for the passage from disorder to order.

Grappling with the meaning of money and unraveling its impact on prices or on the creation of wealth is enduringly controversial.

Fascination with money - to eyes or pockets - is universal. Fisher understood this!

He defined money simply as what is acceptable in exchange for goods: bills, coins, cheques - legal tender - or other forms of debt.

Since inflation, for Fisher, is a monetary phenomenon, and as in classical physics, where one matter is equalised to another, in his economics, money-on-the-move is always balancing products-for-a-price; in the long run, too much money or too little does not affect wealth creation but only the level of price.

Fisher is a ‘must read’ because this, his ultimate conclusion, deprived of his many subtleties, is the basis of present macroeconomics.

Bernholz, a renowned Swiss Economics professor, builds upon Friedman to provide an unparalleled view of how budget deficits and high government spending end up being financed by the “inflation tax” of printing money to cover the deficits.

Throughout history back some two thousand years, Bernholz describes ancient and modern monetary regimes based on metallic standards and fiat money unbacked by any metal. He analyzes how increased money supply causes moderate, high, and hyper-inflations throughout this history. He provides dozens of historical examples of money and inflation in times of crises including war.

Bernholz adds the dimension of how international exchange rates are affected during rising inflation and when deflation ultimately occurs. He shows how different “laws” regulate behavior, with good money driving out bad money until the bad money collapses in value and then good money is created or imported that drives out the bad money to its extinction. Bernholz… show more.

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. 

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.