Tag Archives: monetary theory

Replies to My Critics

Last week, I argued that the short run is short—that there is good reason to believe that we’re now past the point where monetary stimulus can do much to help the economy. Again, I am broadly friendly to market monetarism and not especially hawkish on inflation. I am not so much against QE3 as skeptical that it will work. I think that the broad facts and a lot of mainstream macro theory back me up.

My post garnered a fair bit of criticism around the blogosphere. Let me make one quick empirical point to get everyone on the same page, and then I will try to respond to my critics point by point.

The empirical point is summed up in the graph below. NGDP grew around 5 percent per year until around 2008, and then it fell, and then it grew at around 5 percent—or slightly less—per year again beginning in mid 2009. These facts are well known, but I bring them up here because they do constrain the kind of stories we can tell about the economy. Any story you tell has to contain a one-time shock that ended years ago, and it has to be consistent with NGDP that has grown at about the same rate over the last 3 years as it did before the shock arrived.

OK, now with that out of the way, let’s take the criticisms one by one.

Bryan Caplan and ADP unemployment

Bryan cites Akerlof, Dickens, and Perry on long-run unemployment as a reason why QE3 might boost employment in spite of the fact that we are out of what we would conventionally call the short run. The ADP model assumes heterogeneous firms and workers with money illusion. At any given time, some firms need to cut real wages, and since nominal cuts hurt morale, higher inflation helps those particular firms cut wages instead of jobs. Consequently, in a low-inflation environment, monetary stimulus can help lubricate the employment market.

This argument is a good one as far as it goes. Unfortunately, I don’t think it goes very far given the stylized facts. As I noted above, NGDP is growing at a rate of 4-5 percent per year, not that different from before the crash. So any long-run ADP-style unemployment should be about the same now as it was before the crash unless there was a structural change in the economy. You can’t have it both ways—if we’re in a low-inflation environment for ADP purposes now, then we were in a low-inflation environment for ADP purposes before the crash as well.

Furthermore, assuming QE3 is a temporary policy, then if unemployment is long-term ADP unemployment, the effect of QE3 on unemployment will be temporary. I would regard a temporary dip in unemployment as a result of QE3 as good but underwhelming, given the claims of many market monetarists. There may of course be interactions between short-run unemployment and ADP unemployment, and for that reason, the dip in unemployment may not literally be temporary, but I would be surprised if QE3 could fix the economy through this channel.

Bryan makes an interesting linkage between my views on the ZMP hypothesis and ADP unemployment. If there is a decreasing secular trend of low-skill labor productivity, then ADP unemployment will become more serious over time. I think this is a good point, and it pushes me at the margin to favor a higher long-run NGDP target than I otherwise would. I was previously inclined to believe that the exact value of the target doesn’t matter once you get to levels of around 3 percent, but now I see more merit in a higher target.

Insider-outsider models

Bryan and some of the commenters at MR say that it is a mistake to focus on the wage demands of the unemployed. Rather, it is the wage demands of the employed that are especially sticky. The failure of insider wages to adjust downward to long-run levels means that there’s no ability to hire outsiders at below long-run levels, either because companies can’t afford to do it or because they are afraid of hurting insider morale.

The problem is that even if this story is true, we are probably, again, out of the short run. NGDP is almost 10 percent higher now than it was at the pre-crash peak. The number of people employed, even with population growth, is still below the pre-crash peak. Even assuming that insider nominal wages are totally inflexible, nominal output per worker has grown fast enough that insider real wages have probably adjusted. Furthermore, in five years, a non-trivial fraction of insiders retire or change jobs.

More generally, I’ve never been a fan of insider-outsider models, at least not for the United States in recent times. Maybe it makes sense as a model of Europe or Detroit in the union heyday. But today in the US, “labor” is less homogeneous than ever, private sector unions have declined, and fewer workers have an expectation of lifetime employment. Yet the past three recoveries have been increasingly jobless! How can you square the fact that at a time when the insider-outsider distinction is weaker than ever, labor hoarding has basically ended and labor market adjustment has become more difficult? I do it by assuming that the insider-outsider mechanism does not play that big of a role.

But again, even if the insider-outsider story was true at the beginning of the recession, there is little reason to believe that it is still true.

Ryan Avent and corporate profits

At the Economist, Ryan Avent focuses on my point that corporate profits are at record highs.

Firms could be enjoying high profits simply because revenues have stabilised while costs are low, perhaps because low expectations for future nominal spending growth have discouraged investment.

First, note that in the series I cited, corporate profits are adjusted for inventory valuation and capital consumption. The purpose of these adjustments is to make the series less responsive to exactly the kind of behavior Ryan posits. If firms decide not to invest in production and simply sell out of inventory instead, that can increase profits, but it doesn’t increase profits adjusted for inventory valuation. Likewise, a firm can temporarily increase profits by making inefficient use of existing equipment, which could lead to faster depreciation. Are these adjustments perfect? No. But they do offset some of Ryan’s concerns. Corporate profits are high even when you subtract some of the temporary gains firms get from not investing. The unadjusted series is here, by the way; I avoided it because I anticipated Ryan’s argument.

Second, whatever firms’ expectations were, as I’ve said repeatedly, nominal spending growth has not been especially low in the last three years. A better story, if you are trying to resist structural theories, might be that firms are wary of investing due to fears of shocks from Europe or Asia, which monetary easing now does little to help. It would be great if the Fed would commit now to keeping NGDP growing at 4-5 percent when those shocks do hit, but in the meantime, I am not expecting a lot out of QE3.

Ryan also makes a couple of other points, but none of them cut to the heart of my critique of QE3 optimism. He gestures to the New Keynesian literature, but of course even the New Keynesians don’t argue that the short run lasts forever. And Mankiw, who is one of the authors Ryan cites, is a well-known proponent of the unit root hypothesis. I do not read Mankiw as expecting a return to trend, no matter what monetary policy is, although I of course do not speak for him and am happy to be corrected. Ryan also quotes Weitzman on how increasing returns creates unemployment, which is true, but tautologous: if there were no increasing returns, anyone who was unemployed could start his own firm and be just as productive as when he was employed.

Bill Woolsey

Bill Woolsey cordially welcomes me, despite my heterodoxy, to the market monetarist club. I am glad to make the cut.

I think that I failed to make myself clear in my original post. Bill says, “Dourado’s version of how shifts in nominal GDP impact real output and employment is based upon an assumption of market clearing.” This is not what I intended to convey. I think that part of the effect of nominal shocks propagates through market-clearing monetary misperceptions (Lucas islands), and the rest through non-market-clearing nominal rigidities, or as I wrote in the original post, “because some wages, prices, and contracts don’t adjust instantaneously.” I am not as New Classical as Bill seems to think. I like some elements of the New Classical school, but in the end I think the correct theory of macro for now is pluralism.

In the long run, I do think that markets mostly clear. And I think that Bill must agree, for he writes at the end of his post:

On the other hand, most of us do believe that firms eventually cut prices and wages in the face of persistent surpluses of output and labor. Most of us remain puzzled by the slow adjustment.

This is my point. If our problems were purely cyclical, “eventually” would have happened already, so our problems must not be purely cyclical. Time to start looking at structural explanations.

Scott Sumner and cutting-edge research

I was pleased to get a reply from the high priest of market monetarism himself, Scott Sumner.

I addressed the plausibility of sticky wages here, and in numerous other posts in reply to Tyler Cowen and George Selgin. I’d also point out that there is lots of cutting-edge research that tells us that the “common sense” approach to the wage stickiness hypothesis is not reliable. By common sense I mean; “Come on, wouldn’t the unemployed have cut their wage demands by now.” Yes, they would have, but that doesn’t solve the problem.  This is partly (but not exclusively) for reasons discussed in this recent Ryan Avent post.

Well ok, I followed the first link, which gives the usual argument and then ends with the line, “Until we get a more plausible theory of unemployment, I’m sticking with stickiness.” This is honest, and it certainly is a common view, but I don’t think it’s a good idea to rely so heavily on a theory just because we don’t understand competing theories well yet. Macro of the gaps, I call it.

We have a long way to go in macro, so I’m glad that Scott brings up the issue of cutting-edge research. If he has particular examples of recent work that undermines the common sense approach, he should write about them at greater length. I assume that when he says “cutting-edge” he is not referring to the papers cited in Ryan’s post, since those are both from the 1980s.

Speaking of cutting edge research, let me point everyone to a paper, “Countercyclical Restructuring and Jobless Recoveries,” by David Berger, a new PhD from Yale, and now a professor at Northwestern. Berger creates a model in which firms grow fat during expansions and respond during recessions by laying off their least productive workers. His model creates jobless recoveries and matches the new stylized facts (they have changed since the 1980s) about business cycles pretty well.

One thing that I like about the Berger paper is that it shows why some nominal shocks, if not addressed immediately, are not easily reversible by monetary authorities. Once a firm has fired its least productive workers, it is not going back. If the monetary authority wants to prevent a recession, at least post-1984, it needs to act before firms lay off their workers. This perspective actually bolsters the case for NGDP targeting, because it means that the Fed should have an apparatus in place now so that the economy will be automatically stabilized when the next shock hits. Here is Tyler on Berger.

My question for Scott, since he’s so interested in cutting-edge research, is: “What do you think about Berger’s paper?” I assume that Scott is familiar with the changes in business cycles that Berger documents. Does he not think that Berger’s model accounts for some significant fraction of our current unemployment better than simply sticky wages forever?

The bottom line

None of my critics seem to be willing to make any sort of broadly falsifiable claim about how long the short run lasts. (I should say that Bryan is not arguing that we are necessarily in the short run in the bulk of his post). There is a lot of assuming trend stationarity, talk about output gaps, and pointing to literature I am well aware of—in short, a lot of question begging.

I would like to see a greater emphasis in the blogosphere on understanding stylized facts about recessions, a greater willingness to explore micro phenomena (even if we are not using fully microfounded models), and more macro-ecumenicism. No one school of macro has it all figured out, and that includes market monetarism. There is enough ambiguity in our current situation that reasonable people can disagree about what is going on. But I don’t think that reasonable people can be totally certain that all we need is more nominal stimulus.

The Short Run is Short

I’m a fan of Scott Sumner, NGDP level targeting, and many of the ideas of market monetarism in general. However, unlike many of those who support these ideas, I am pessimistic that QE3 will fix the economy, and I worry that too much celebration by market monetarists over the structure of easing will only serve to undermine what remains good in market monetarism if and when the economy fails to recover quickly. In particular, I think that many commentators fail to appreciate the mainstream macroeconomic distinction between short run and long run analysis, and that many economists overestimate how long the short run lasts.

The case for stimulus is based in monetary non-neutrality. If we double the money supply, the real productive capacity of the economy does not increase—real productive capacity has nothing to do with monetary factors. However, because people are tricked, and because some wages, prices, and contracts don’t adjust instantaneously, output may go up briefly. Business owners see an increase in nominal demand for their products and mistakenly assume that it is an increase in real demand. They see this as a profit opportunity, so they expand production. As prices, wages, and contracts adjust to the new money supply and their assumption is revealed to be false, they cut back on production to where they were before.

If we view the recession as a purely nominal shock, then monetary stimulus only does any good during the period in which the economy is adjusting to the shock. At some point during a recession, people’s expectations about nominal flows get updated, and prices, wages, and contracts adjust. After this point, monetary stimulus doesn’t help.

Obviously, there is no signal that is fired to let everyone know that the short run is over, so reasonable people can disagree about how long the short run lasts. But I think there is good reason to think that the short run is over—it is short, after all.

My first bit of evidence is corporate profits. They are at an all time high, around two-and-a-half times higher in nominal terms than they were during the late 1990s, our last real boom.

If you think that unemployment is high because demand is low and therefore business isn’t profitable, you are empirically mistaken. Business is very profitable, but it has learned to get by without as much labor.

A second data point is the duration of unemployment. Around 40 percent of the unemployed have been unemployed for six months or longer. And the mean duration of unemployment is even longer, around 40 weeks, which means that the distribution has a high-duration tail.

Now, do you mean to tell me that four years into the recession, for people who have been unemployed for six months, a year, or even longer, that their wage demands are sticky? This seems implausible.

A third argument I’ve heard a lot of is that mortgage obligations have remained high—sticky contracts—while income has gone down. Garett Jones endorses this as a theory of monetary non-neutrality, and I agree. In fact, I beat him to it. But just because debt can make money non-neutral in the short run does not mean that we are still in the short run.

In fact, there is good evidence that here too we are out of the short run. Household debt service payments as a percent of disposable personal income is lower than it has been at any point in the last 15 years.

Yes, this graph includes mortgage payments.

So what is the evidence that we are still in the short run? I think a lot of people assume that because unemployment remains above 8 percent, we must be in the short run. But this is just assuming the conclusion. There are structural hypotheses for higher unemployment, but even if unemployment is cyclical, it doesn’t mean that monetary adjustment has failed to occur—real sector recalculation may just take longer than monetary recalculation.

Again, I favor NGDP targeting, but it is most effective when it is done simultaneously with the nominal shock. Evan Soltas points to the case of Israel, and indeed, the Israelis did it right. But it seems like wishful thinking to assume that four to five years after a nominal shock, you can fix the economy with monetary stimulus.

I would be delighted to be wrong. And I wouldn’t be surprised to see a slight decrease in unemployment as the result of QE3. But I would be surprised if we experience a plummeting of unemployment in the next two years down to what we previously thought of as “normal” levels of around 5 percent. Yes, it is good that the Fed is now using the expectations channel, but it did it four to five years too late, and there’s little theory or evidence its failure can be easily reversed.

UPDATE: I reply to my critics here.

Can the War on Drugs Bootstrap Bitcoin?

A few weeks after my last post on Bitcoin, the cryptocurrency was featured on EconTalk. From there it captured the imaginations of libertarian geeks everywhere. When I last wrote about it on March 12, one Bitcoin was worth 88 cents; today one is worth $17.14. There are now numerous startups dedicated to serving as Bitcoin exchanges, banks, e-wallets, etc. Notably, there are not yet any futures markets, which has led many commentators to quite reasonably cry bubble.

There is a sense in which all fiat currencies are based on bubbles. After all, by definition fiat currencies have no intrinsic value; they are valuable because they are liquid, and they are liquid because they are valuable. This circular reasoning is not far from the information cascades that economists discuss in the context of bubbles.

Let’s call the process by which a currency comes to circulate as a widely-accepted medium of exchange “bootstrapping.” For fiat currencies, bootstrapping typically involves some coercion: the government demands that taxes be paid in its fiat currency, which creates demand for the currency. If the currency has other properties that make it useful as money—it’s divisible, transportable, and a reasonably good store of value—then this coercion is enough to make the currency widely-accepted for non-tax payments as well.

Bitcoin does not have a sponsoring government that demands Bitcoin-denominated tax payments. But it has something close: the black market. This week Gawker ran a piece describing Silk Road, an online black market where you can buy everything from marijuana to heroin, plus drug lab supplies and small weapons (no WMDs—yet).

Silk Road is only accessible through the encrypted and decentralized Tor network, so I did what any anarcho-curious geek would do. I downloaded and configured Tor and merrily browsed the Silk Road website (link only works if you have Tor running). I can confirm that it is like a candy store for drug users. According to the merchant reviews, the drugs are shipped in vacuum-sealed packages that emit no odor to be detected by the drug-sniffing dogs. Furthermore, each merchant lists the country from which he ships; pick a merchant based in your country and your package won’t have to go through customs, further decreasing the likelihood of detection. Most customers seem very happy with the care taken in shipping as well as the quality of the products they have received.

Nearly all payments on Silk Road are made using Bitcoin. Bitcoin is an excellent fit for the black market because it is pseudonymous—every payment is made from and accepted at a public 33-character address, but users can generate as many addresses as they want to preserve anonymity.

The question remains of whether the quasi-anonymity of Bitcoin is enough to keep the Feds from being able to shut down Silk Road or to make it unsafe to use the site. As Jerry Brito points out, we are now observing a natural experiment on the anonymity of Bitcoin. The hacker group LulzSec has recently undertaken some activities that make it a prime FBI target and solicited donations at a publicly-listed Bitcoin address. Assuming that the address is a real one and not devised to throw the FBI off the scent, we’ll soon know whether the government is able to identify people on the basis of their Bitcoin transactions.

Assume that it turns out to be safe and convenient to use Bitcoin in the black market. This fact may then turn out to be enough to bootstrap Bitcoin. As I wrote above, bootstrapping a fiat currency involves coercion. In this case, that coercion is supplied by governments who enforce the illegality of black market activities. They are coercively creating demand for the currency that is most convenient to use in the black market. Once there is enough demand for Bitcoin for black market purposes, Bitcoin may become more widely-accepted for legitimate transactions, just as the demand for fiat currency that governments create through taxation spills over to non-tax payments.

In the short run, Bitcoin will likely become more widely associated with the black market and therefore demonized. If you want Bitcoin to succeed, you should be OK with this, since it’s pretty much inevitable. Read up on Agorism and counter-economics. The demonization of Bitcoin may make some legitimate users hesitant to adopt the currency. In my view, this is silly. I will happily accept your Bitcoin-denominated tips and donations at 1FMxbQLh2hEoWXgM4GggbSAMoR61iL7zdp.

I am by no means certain that Bitcoin will succeed. The rapid rise in value that it has experienced may in fact be because there is a Bitcoin bubble. This guy is evidence of that. But it’s hard a priori to differentiate between a bubble and the successful bootstrapping of a currency (this is one reason we need Bitcoin futures). However, I am confident that if Bitcoin succeeds, it will be because of the War on Drugs and other policies that increase demand for a quasi-anonymous, internet-transportable currency to engage in online black market activities.

Why RBC is Awesome

Paul Krugman disses RBC theory and those who study it as unscientific. I’m not an RBC theorist, but I’ll stick up for freshwater macro. Here are some reasons why RBC theory deserves more respect than Krugman gives it.

1. Suppose monetary policy is conducted so that all nominal shocks are perfectly offset. Zero percent of net shocks, shocks adjusted for changes in the quantity of money, are nominal; 100% of net shocks are real. Therefore as monetary policy improves it is the policy conclusions of the RBC literature, not the New Keynesian literature, that are relevant.

2. Empirically, I agree with Krugman and others contra pure RBC theory that money appears to be non-neutral. But why is money non-neutral? Saltwater macro offers answers to this question that are frankly absurd. Menu cost arguments rely on a fallacy of composition. Even if all businesses face costs of changing prices, unless they synchronize their price changes, there is no reason to believe that the price level as a whole is sticky; see Caplin and Spulber. If the nominal price level is not sticky, there is no reason to believe that real stickiness—efficiency wages and so on—can be the source of monetary non-neutrality. Freshwater macro has advanced the much more plausible idea that money is non-neutral because of legal restrictions on financial intermediation. Under laissez-faire, money would be neutral, and RBC would be correct.

3. Critics of RBC argue that it is hard to find shocks to real factors such as technology, particularly negative shocks, to account for recessions. However, they overlook shocks to credit, which is—wait for it—a real not a nominal factor.

4. Critics of RBC ridicule the theory by saying that according to freshwater economists, the Great Depression was the Great Vacation. But their own theory is no less ridiculous. According to saltwater economists, unemployment of over 20 percent persisted for almost a decade because people were too stubborn to accept wage cuts. Sorry, not plausible.

5. RBC makes strong assumptions, but it should be appreciated for what it is, which is an attempt to do macro as pure economics without post hoc additions to make the theory fit with measurement (which is, after all, imperfect). In contrast, other approaches exhibit a tendency toward, to coin a phrase, Macro of the Gaps. The models don’t always make this clear, but a lot of the features that do the work in saltwater theory are residuals. I am not aware, for instance, of a serious effort to give a theoretical account of the value of the fiscal multiplier. Instead, the fiscal multiplier is whatever regressions say it is. I am not against empirical work, but how convenient that regressions set the multiplier to whatever level is necessary to make the theory work. In fairness, some RBC papers empirically calibrate models, but there is more honesty about the fact that they are calibrating, not independently estimating results.

6. As Tyler used to say in Macro I, 98 percent or more of business cycles in human history were indisputably real business cycles. There was no central bank and no fiscal authority in caveman days. “My theory explains 98 percent of business cycles” seems like pretty good justification to me.

As I said before, I’m not an RBC theorist, but not everything has to be about petty tribalism. RBC is both scientific and worth studying.

The Economics of Cryptocurrency

Is there a word for serendipitous Wikipedia browsing? Yesterday I started out seeking information on punk music and I ended up discovering Bitcoin, an open source peer-to-peer digital currency. Bitcoin uses strong cryptography and decentralized computing to produce scarcity in the money supply, which grows at a predefined rate that is clearly visible in the source code. Tamper with that growth rate and your software becomes incompatible with the rest of the cloud, and your Bitcoin holdings become valueless. Double-spending is impossible unless at least half the computing power of the cloud is in on the attack against the currency. You can read all the technical details here.

The total supply of Bitcoins is scheduled to grow geometrically and will asymptotically approach 21 million. This means that if the currency becomes successful and its velocity does not accelerate proportionally to its use, we should expect long-run deflation in Bitcoin-denominated prices. Bitcoins are technically divisible to 8 decimal places to accommodate this. Notably, if I am reading the data correctly, Bitcoins have appreciated by a factor of 300 against the dollar in the last year. One Bitcoin is worth around 88 cents as of this writing.

I have a number of questions. Perhaps my readers know some of the answers, or perhaps some enterprising young monetary economist will address some of these in an academic paper (calling Will Luther).

  1. Currencies are based on trust, and trust in money is accomplished through scarcity. Bitcoin is cryptographically guaranteed to be scarce since its supply will never exceed 21 million. But there is reason to believe that a perfectly fixed supply is not optimal. If people suffer from money illusion, it is better if prices increase gradually over time. If money has real effects, then it is best if the money supply is countercyclical. These two facts are at least part of why Sumner advocates a fixed NGDP trajectory. Is it possible to create a cryptocurrency that targets NGDP instead of the money supply?
  2. If there are competing currencies would we still want any one currency to target NGDP? MV ≡ PT, but notably T only represents transactions denominated in a particular currency. In general, what is the optimal path of the various money supplies when there is more than one currency in use in a given economy? When there are competing currencies, is there less money illusion? Does money continue to have real effects?
  3. What are the monetary implications of the fact that governments will probably have difficulty regulating banking in cryptocurrency? Does cryptocurrency provide a test of the legal restrictions theory developed by Fischer Black, Neil Wallace, and others?
  4. What if prices come to be denominated in Bitcoin (with its fixed supply), but different media of exchange and settlement are used? How does that change any of the above?
  5. In a number of the above scenarios, there may not be much deflation in Bitcoin-denominated prices (since the money supply is not defined, say, under the absence of legal restrictions on financial intermediation). Putting these scenarios aside, if deflation were consistent, then Bitcoins would yield a positive return due to appreciation. Would we see more money hoarding during recessions? Would the world finally see a real liquidity trap? With monetary policy out of the picture, would fiscal policy become necessary? Is crypto-anarchy self-defeating because it requires big government interventions?
  6. Decentralization of the currency means that it cannot be debased, but it also means that it cannot be confiscated at an institutional level. What are the political effects of this change?

I suppose I should add that I am not exposed to Bitcoin and am long USD. And by the way, thinking about Bitcoin reminded me of David Friedman’s Future Imperfect, which you may want to read if you enjoyed this post.

Update 4/4/11 — Bitcoin is the subject of today’s EconTalk.

Hail Fischer Black!

Twitter engineer Alex Payne made news today by announcing that he is leaving Twitter to co-found a bank, called banksimple. The new bank is supposedly focusing on simplicity and transparency: there are no fees, you can deposit checks by uploading a picture of them, the website is nice and clear, etc. That’s great and all, but I got really excited when I looked into the bank a little more. One of the things they claim on their About page is “No overdraft fees.” Further down the page it says, “We will launch later this year with a simple card with in built checking, savings, rewards and a line of credit.”

If I am interpreting their claims correctly, it seems that every checking account will be linked with a line of credit, and there are no fees for switching between a positive and a negative balance. This is a large step toward making Fischer Black’s famous article, Banking and Interest Rates in a World Without Money, a reality. Black imagines that everyone has a single account at a bank. At the end of each month, if your average balance was positive, they pay you interest. If your average balance was negative, they charge you interest.

The interesting aspect of this world is that if most payments are made by check or electronic transfer, there is no reasonable definition for the quantity of money. Gross deposits are not the quantity of money, because this makes an arbitrary distinction between positive and negative balances. The net value of bank accounts is not the quantity of money, since they will equal (by an accounting identity) the capital of the banking sector. That’s not too useful. If there is no quantity of money, then a lot of what we know about macroeconomics breaks down. There is no quantity theory of money, and there is no liquidity preference theory. “Monetary policy” is powerless. This goes to show how much of monetary macroeconomics is completely dependent on particular institutions and legal restrictions.

I would like to live in a world with the simple kind of Fischer Black-style banking, so I hope that banksimple takes off and works the way I expect it to. Even if it doesn’t, I think that the next few decades are ripe for changes in how we think about money; Black’s influence is likely to grow. If you haven’t yet read Business Cycles and Equilibrium (which contains a reprint of Banking and Interest Rates in a World Without Money), do it soon.