LMR – May 2019

In a twenty-first century world of “fractional reserve banking,” long-term zero, and near zero interest rates, and now even the idea of “Modern Monetary Theory (MMT),” the natural market rate of interest has all but disappeared. But the wisdom of Frédéric Bastiat pierces through our present rate of interest debates and acts as a type of compass to help reorient us back to what rate of interest is economically sound and moral. Although the subtleties of the presentation would benefit from the later development of subjective value theory (from the hands of Carl Menger in 1871), nonetheless it is impressive how intuitively and passionately the classical economist Bastiat describes and defends the market economy.

BankNotes – May 2019

A Business Credit survey conducted and published in March 2016 by the Federal Reserve Banks of New York, Atlanta, Boston, Cleveland,
Philadelphia, Richmond, and St. Louis reports that “cash flow” is the number one problem facing small businesses with fewer than 500 employees. At the same time a Financial Stability Report dated November 2018 by the Board of Governors of the Federal Reserve cites that business-sector debt relative to GDP is historically high and “debt has been growing fastest at firms with weaker earnings and higher leverage.” In essence this report insinuates that the very same cash flow difficulty also exists among the larger companies, that is, those businesses with more than 500 employees.