Statistical charts provide one of the most effective tools for conveying information (and misinformation) When a commentator presents a graph as "proof" of their argument, view it with great care. Graphics can help describe patterns of behavior and provide evident of structural connections, but they never prove anything. Scientists must continually subject theoretical "proofs" to … Continue reading Graphic Comparisons
Effects of Quantitative Easing
Introduction Last week, I published an article that hinted at the possibility that drawing conclusions from too little data can be misleading. I offered as an example a graph of the money supply (M2) with no comparison data. Some might conclude from that one graph that The Fed has been steadily expanding the money supply … Continue reading Effects of Quantitative Easing
Total Reserves and Excess Reserves
Introduction This article has more to do with clear thinking than it does about the important, but widely misunderstood, subjects of money and banking. When one of the many talking heads on YouTube and elsewhere makes definitive statements about money and banking, and the federal reserve stop to ask yourself whether all the pieces actually … Continue reading Total Reserves and Excess Reserves
Money Creation Explained No. 1
Introduction I have on my schedule the writing of an article about the creation of money. Before starting this note, I watched a couple of videos about money and bonds. These presentations contain numerous errors that call the validity of the entire presentation into question. I want to offer some new information that readers can … Continue reading Money Creation Explained No. 1
Distinguish Between Money & Reserves
Introduction If you believe that all dollars “are” money, I have a whole bag of dollars (about $165) that I will exchange for one $5 bill. Bag of Money I have used the image of shredded dollars to demonstrate that use determines what people do or do not use as “money.” The definitions of many … Continue reading Distinguish Between Money & Reserves
Why The Fed Cannot Change Interest Rates
Introduction Last week, I published on The Free Market Center Journal an article entitled “Price Determination and Interest Rates”. In addition, on May 6, 2024, I published “How to Calculate Interest Rates.” These two articles provide support and an introduction to this week’s article about “Why The Fed Cannot Change Interest Rates.” This article has … Continue reading Why The Fed Cannot Change Interest Rates
Price Determination and Interest Rates
Introduction I have encountered numerous, and very certain statements about the Federal Reserve "changing rates." I cannot, however, figure out how, in a logical and mathematically sound manner, any entity, even The Fed, can unilaterally "change rates." Instead of starting with an explanation of how one calculates interest rates, I thought I would begin with … Continue reading Price Determination and Interest Rates
People do not deposit “Money”
Introduction I’ll dial the phone. I’ll hang-up the phone. Let’s watch the sun rise. Let’s watch the moon set. I’m going to deposit my money [cash, check, or debit card transaction] into the bank. Most people know that a person does not dial or hang up a modern phone (which is actually a radio). Watching … Continue reading People do not deposit “Money”
Federal Deficit and Monetary Expansion
Introduction I hear a lot of talk about the impending "debt crisis." Commentators seem to have a fixation on the Federal Debt-to-GDP ratio, yet I have never heard why they place such significance on it. The Federal Debt to GDP ratio actually compares a stock—the accumulation of flows over a long period—with a flow—the measure … Continue reading Federal Deficit and Monetary Expansion
Money Not a Measure of Value Revisited
Summary::Money does not measure value; people do. A bad cold has made editing my next article ("Federal Deficit and Monetary Expansion") a little difficult. I have decided to republish an article that I published several months ago. Some people argue that money—or a monetary unit e.g. dollars, pounds, lira—acts as a measure of value. A … Continue reading Money Not a Measure of Value Revisited