Eichengreen – Bernanke – James Pursuit of the “Holy Grail”

1. Eichengreen – Bernanke – JamesPursuit of the “Holy Grail” • Aggregate demand themes – Villain Gold • Post – WWI gold standard asymmetry • Central Bank weakness – little room to maneuver • Breakdown of cooperation • Loss of credibility – Labor power – Internal balance counts • Currency crisis threats • Intellectual mindset – Deflate! Liquidate! • Aggregate supply themes • Debt Deflation  Agency problems  Credit crunch • Information loss • Wage resistance  Unemployment • Insider vs. Outsider • Government intervention

2. Money – Gold Multiplier (1.1) Ml = (Ml/BASE) x (BASE/RES) x (RES/GOLD) x PGOLD x QGOLD where Ml = Ml money supply (money and notes in circulation plus commercial bank deposits) BASE = monetary base (money and notes in circulation plus reserves of commercial banks) RES = international reserves of the central bank (foreign assets plus gold reserves), valued in domestic currency GOLD = gold reserves of the central bank, valued in domestic currency GOLD = PGOLD x QGOLD PGOLD = the official domestic-currency price of gold QGOLD = the physical quantity (e.g., in metric tons) of gold reserves FEAR and the ratios  Multiple M1 equilibria