Money, Banking and Financial Markets

Commentary

Commentary

 
 
Posts tagged Gold
Russian Sanctions: Questions and Answers

This post is authored jointly with our friend and colleague, Professor Richard Berner, Co-Director of the NYU Stern Volatility and Risk Institute.

Russia’s invasion of Ukraine is altering global security and economic relationships. In this post, we focus on the financial and trade sanctions imposed on Russia. These sanctions are the most powerful and costly punishments imposed on a major economy at least since the Cold War. Their speed, breadth and coordinated global support appear unprecedented.

Not surprisingly, the impact is immediately visible. The damage to the Russian economy and financial system includes, but is not limited to, a plunge of the ruble (by about 40 percent versus the dollar over the past month amid heightened volatility); runs on domestic banks; a sharp hike in the central bank’s policy rate; imposition of capital controls; shutdown of the Russian stock market; collapse in the value of Russian companies traded on foreign stock exchanges; removal of Russian equities from global indexes; and the collapse of Russia’s sovereign credit rating to junk status.

The purpose of this post is to pose and provisionally answer a series of questions raised by this new sanctions regime.…

Read More
Steve Cecchetti and Kim SchoenholtzRussia, Ukraine, Sanctions, Primary sanctions, Secondary sanctions, Sanction evasion, Sanction busting, Central bank, SWIFT, Energy, Oil, Natural gas, Supply shock, Commitment, Gold, Foreign exchange reserves, Capital controls, Lender of last resort, Financial stability, Bank runs, Currency, Central bank digital currency, CBDC, Current accunt, Net foreign assets, Net international investment position, Volatility, Autarky, Globalization, Crypto-asset, Bitcoin
Post hoc, ergo propter hoc?

On the occasion of the Fed’s Jackson Hole Symposium, the New York Sun published an editorial attacking central banking and fiat money. Let’s get this out of the way at the start: we are big fans of both. In our view, the world is a more stable and prosperous place with central banks than it was without them. And fiat money allows a central bank to stabilize the price of goods and services that would be quite volatile if, instead, we chose to steady the price of gold (the Sun’s apparent favorite). The result is higher growth from which we all benefit.

We also like tabloids. They’re fun. Our main problem with the Sun’s piece is its all-too-common mode of argument.

Read More
Steve Cecchetti and Kim SchoenholtzCausation, Correlation, Systematic risk, Bretton Woods, Gold, Exchange rate regime, Big data