Typography

1934 Chinese silver dollar with Sun Yat-sen on the obverse side. The ship may be in freshwater. I have been hitting my head against the wall these last few weeks trying to understand Chinese monetary policy, a project that I've probably made harder than necessary by starting in the distant past, specifically with the nation's experience during the Great Depression. Taking a reading break, I was surprised to see that Paul Krugman' s recent post on the topic of freshwater macro had surprising parallels to my own admittedly esoteric readings on Chinese monetary history. Unlike most nations, China was on a silver standard during the Great Depression. The consensus view, at least up until it was challenged by the freshwater economists that people Krugman's post, had always been that the silver standard protected China from the first stage of the Great Depression, only to betray the nation by imposing on it a terrible internal devaluation as silver prices rose. This would ev...

The word "moneyness" is synonymous with liquidity-premium. Both refer to that portion of an item's value that is derived from an individual's ability to sell it in the future. I wrote about bitcoin's liquidity premium here , and here I talked about how QE affects the liquidity premium of the targeted asset. Since it happens so rarely, it's always fun to see the idea of liquidity premiums pop up in academic literature. I was recently reading an old interview with Thomas Sargent in which he describes himself as “a Harrison-Kreps-Keynesian.” Here is Harrison and Kreps's paper ( pdf ), and here is the money quote: We say that investors exhibit speculative behaviour if the right to resell a stock makes them willing to pay more for it than they would pay if obliged to hold it forever. This phenomenon will not occur in a world with one period remaining (as in the capital-asset-pricing model), in a world where all investors are identical, or in a world with compl...