Macro N Cheese

Our friend John Harvey is back to answer a question that’s usually accompanied by much wailing and gnashing of teeth: “what happens if people lose faith in the dollar?” The question contains all sorts of assumptions and intentions, which the Cowboy Economist proceeds to dismember, dispelling all sorts of myths – from inflation to the Fed. (He even tells us why China will continue holding US dollars, in case you’re worried.) One approach taken by the “faith in the dollar” Cassandras is that government is bad, therefore non-governmental currency (Bitcoin!) is better... because the free market is more efficient. However, to say efficiency is good means accepting all sorts of negative social conditions and behaviors, including racism. John talks about economic models and their need to mirror real world behavior. ...you go back to Milton Friedman's philosophy of positivism. And this is how you do economic research. The idea was that it doesn't matter how unrealistic the assumptions of a model are, as long as th