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Posts Tagged ‘linear programming

“The almighty dollar, that great object of universal devotion”*…

The reigning global financial regime, at the center of which sits the U.S. Dollar, was first formalized at the 1944 Bretton Woods Conference. While the rules have evolved since then, the Dollar remains by far the world’s leading reserve currency and is routinely used to price/settle international transactions around the world.

While there are concerns in the U.S. that a strong dollar can hurt U.S. exports and costs jobs, high global demand for dollars allows the United States to borrow money at a lower cost and amplifies the power of its sanctions.

So recent talk of “the decline of the dollar” (c.f., e.g., here) has concerned many. Not to worry, Noah Smith suggests…

Saudi Arabia recently announced that it’s open to settling trade (i.e., oil sales) in currencies other than the U.S. dollar. This has provoked a fair amount of consternation about the potential end of dollar dominance. This fear has been intensified by all the Bitcoin people who are screaming that the banking system is going to collapse and that this is going to spell the end of the U.S. dollar.

In fact, people shouldn’t be concerned at all. I’ve written two posts — one last year and one this February — explaining why A) de-dollarization is extremely unlikely to happen anytime soon, and B) some degree of diversification away from the dollar would actually be good for the United States. Both posts were paywalled, but I decided to unpaywall them, so that everyone can enjoy the peace of mind of not having to worry about the death of the dollar…

Read them at “Unpaywalled: Two posts about de-dollarization,” from @Noahpinion.

Then contemplate this analysis (by economists at the Federal Reserve Bank of New York) of the consequences of that continuity…

The importance of the U.S. dollar in the context of the international monetary system has been examined and studied extensively. In this post, we argue that the dollar is not only the dominant global currency but also a key variable affecting global economic conditions. We describe the mechanism through which the dollar acts as a procyclical force, generating what we dub the “Dollar’s Imperial Circle,” where swings in the dollar govern global macro developments… 

Worth reading in full and pondering: “The Dollar’s Imperial Circle,” from @LibertyStEcon (a newsletter of @NewYorkFed).

* Washington Irving


As we contemplate currency, we might spare a thought for Leonid Kantorovich; he died on this date in 1986. An economist and mathematician best known for his theory and development of techniques for the optimal allocation of resources, he is regarded as the founder of linear programming— for which he received the Nobel Memorial Prize in Economic Sciences in 1975.


“Monetary policy is one of the most difficult topics in economics. But also, I believe, a topic of absolutely crucial importance for our prosperity.”*…

Basement of a bank full of banknotes at the time of the Mark devaluation during the economic crisis in the Weimar Republic

What can we learn from a twentieth century economist who was a critic of Keynes and a staunch advocate of the Gold Standard? Samuel Gregg considers the career of Jacques Rueff

Money, it is often said, makes the world go round. The inverse of that axiom is that monetary disorder brings chaos in its wake. As we learned from the hyperinflation that wreaked havoc in 1920s Germany and the stagflation which hobbled Western economies throughout the 1970s, the effects of such disorder go far beyond the economy. Further complicating the problem is that restoring monetary stability is invariably a painful exercise, often bringing unemployment, recession and lasting social damage in its wake.

As a rule, monetary theory and monetary policy are dry affairs, dominated by highly technical discussions concerning topics such as the nature of capital or the likely impact of interest-rates set by central banks. One thinker who did not conform to this mould was the French monetary theorist Jacques Rueff (1896-1978). Arguably France’s most important twentieth-century economist, Rueff played a major role in shaping the Third Republic’s response to the Great Depression in the 1930s, designed the market liberalisation programme that saved France from economic collapse in 1958, and emerged in the 1960s as the leading critic of the US dollar’s role in the global economy and a prominent advocate of a return to the classic gold standard.

Rueff was, however, much more than an economist. A graduate of the École Polytechnique, he was among that small elite of civil servants trained in administration, engineering, mathematics, the natural sciences, foreign languages, and political economy whose role was to inject stability into the perpetual political pandemonium of the Third Republic. But even among that highly-educated cohort, Rueff stood out for the breadth and depth of his knowledge and his willingness to integrate it into his economic reflections. For Rueff, the significance of monetary order went beyond issues such as economic growth or employment, as important as they were. Ultimately, it was about whether Western civilisation flourished or embraced self-delusion…

Gregg recounts Rueff’s career, his championing of “real rights” (e.g., property rights) vs. “false rights” (which involve the state declaring something such as unemployment benefits to be a right and then trying to realize it through means that destroy real rights), and his advocacy of a return to the Gold Standard (part of his critique of the use of the U.S. dollar as a unit of reserve)… all positions with which reasonable people (including your correspondent) might disagree. But Gregg reminds us that Rueff’s most fundamental goal– a healthy society– surely remains desirable, and that his fear of the chaos that monetary meltdowns can cause is only too justified…

Monetary order wasn’t everything for Rueff. His writings reflect deep awareness of the ways in which culture, religion, philosophy, music and literature influenced civilisational development. Nonetheless Rueff insisted the threats posed by monetary disorder were more than economic. For him, civilisational growth was impossible without monetary order…

Let us not allow means with which we disagree to obscure important ends.

After examining the economic chaos of the early twentieth century, monetary theorist Jacques Rueff argued that without monetary order, civilizational growth is impossible: “Jacques Rueff’s quest for monetary order,” from @DrSamuelGregg in @EngelsbergIdeas.

* Maxime Bernier


As we remember that neither should we allow ends with which we disagree to obscure important means, we might spare a thought for Leonid Kantorovich; he died on this date in 1986. An economist and mathematician best known for his theory and development of techniques for the optimal allocation of resources, he is regarded as the founder of linear programming— for which he received the Nobel Memorial Prize in Economic Sciences in 1975.


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