Author name: John Greenwood IMM

Fortune Magazine article by John Greewwood and Steve Hanke In this op-ed version of IMM Newsletter #56 Steve Hanke joins me to lay out some of thebasics of monetary analysis which the consensus of economists, and especially those at theFed, have systematically – and, in retrospect, foolishly – ignored over the past two or threedecades.First, we point out that only a handful of monetarists – including ourselves – successfullypredicted the post-Covid inflation. Second, we explain some of the reasons why mosteconomists got their forecasts wrong. Third, we show how Fed Chair Kevin Warsh’s answersto questions from journalists at his post-FOMC meeting press conference on September 16were dramatically different in style from the answers that would have been given by hispredecessor, Jerome Powell. The tone of his replies was distinctly monetarist. This is why,for example, he would not give an answer to the typically consensus question about thenatural or equilibrium rate of interest (known to economists as r*). It is not relevant tomonetarists.At his first two press conferences in June and July Warsh made a shaky start. However, heis now speaking with much more confidence and authority as he shapes a framework that isstarting to sound notably more coherent than that which the Fed was following previously. Read the full article on Fortune →

In this op-ed, Steve Hanke and I assess the prospects of success for US Treasury SecretaryBessent’s intervention in the government bond market. We cite three prior examples of“Operation Twist” which do not have a good record. The problem is that unless theunderlying fiscal policy is changed (e.g. reducing the budget deficit), or unless monetarypolicy is shifted in a helpful direction (in this case, tightening to lower the current inflation),the government’s attempt to fix bond yields is contrary to fundamentals. Read the full article on Fortune →

A common misconception is that, because interest rates in Japan have been abnormally lowfor most of the past 30 years, monetary policy in Japan has been “easy”. In this article, SteveHanke and I explain that monetary policy in Japan has not been easy; on the contrary it hasbeen tight when judged by the anaemic growth of the broad money supply. To achieve asustainable 2% inflation rate, Japan would need about 5% p.a. money growth, not the 2-3%it has typically experienced. This helps to explain some of the conundrums evident in Japantoday. Read the full article on Fortune →