Typography

Stephen Williamson catches a lot of flack on the net. Some is undeserved, some is deserved, but a big chunk is probably due to the fact that he and his fellow New Monetarist s have a communications problem. People don't understand what they're up to. So here's my attempt to bring Steve down to earth and explain to the world the importance of the research being done by him and his colleagues. I'll go about this by adding a bit of historical context. After a quick tour of the history of monetary thought, readers will be able to see where in the greater scheme of things the New Monetarists fit. Now Steve doesn't know much about the history of economic thought - he thinks it's unimportant. So in a way, I'm explaining not just Steve to the world, but Steve to Steve. One of the big problems in economics is how to deal with two significant but divergent streams of economic thought - monetary theory and real theory (ie. microeconomics). Put differently, there's...

John Cochrane has had a few interesting comments on Greece leaving the Euro, here , here , and here . Cochrane doesn't believe in the consensus view that a Greek default means a Greek euro-exit. He thinks Greece can default and stay in the Euro. He also makes the good point that Eurobonds already exist... in the form of Target2 transfers. His last post illustrates how difficult it would be to create a new drachma. I am sympathetic to many of his views. I had an interesting debate in the comments section of his last post on the difficulties of creating a new drachma. Someone pointed out that Gresham's law dictates that bad drachmas will easily drive out good euros. Therefore, drachmas will quickly gain currency. This is a mistaken view of how Gresham's law works: Gresham's law only applies when there are two circulating currencies and the authorities successfully enforce a peg such that one currency is artificially overvalued. The undervalued currency disappears from cir...