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Strategies & Market Trends : Currencies and the Global Capital Markets
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To: jameswallen who wrote (3516)2/4/2003 2:04:47 PM
From: SofaSpud  Read Replies (1) of 3536
 
...any and every jockey in the field could have won with Secretariat

You're quite correct, my assertion was certainly an expression of the post hoc ergo propter hoc argument.

The most important contribution a central banker can make is to grow the money supply at a constant rate consistent with the long-term ability of the economy to expand. This provides price stability and a consistent expansion of the economy.

As Friedman said, "inflation is always and everywhere a monetary phenomenon." I don't recall precisely the rest of the quote, but it's something like 'It is always and ever cause by an expansion of the money supply at a rate greater than the growth of the productive capacity of the economy.' The tricky policy question is at what rate is productivity growing? Unfortunately, productivity growth isn't a constant, so the appropriate rate of growth of the money supply isn't a constant either. Nor is everyone agreed on how to measure productivity ex ante or even contemporaneously. The only agreement in productivity changes come so far ex poste as to be useless in a policy sense.

I'm not necessarily disagreeing with you that activist monetary policy is a bad thing. But I'm also not convinced that the gold standard is a suitable alternative.
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