Central banks worldwide are putting their faith in negative interest rates. Unfortunately, these central bankers do not understand what interest rates are supposed to do, or how manipulating them will lead to a bust.
Europe’s problems will not be solved by a Greek exit, and a breakup of the euro certainly won’t fix things as long as the Europeans remain in the thrall of many economic fallacies that have long driven the debate over the euro.
A recent report commissioned by the prime minister of Iceland calls for limits on the money supply through ending fractional reserve banking and deposit insurance. Unfortunately, the report also calls for nearly unlimited control of the money supply by the central bank.
Reserve currencies serve an important economic purpose. If the dollar loses its status as a reserve currency, the resulting adjustments will be painful for many. So, the global economy would benefit from a new US monetary policy devoted to a sound dollar.