A large part of life is expectations: managing them, dealing with them, having them...or not. This is what American macroeconomist Robert J. Barro, prof at Harvard, really wanted people to know in the late 1970s and beyond.
Barro put forth the idea that measuring the effect of “money growth” on the economy as a factor on its own...is a mistake. Money growth means the expansion of the money supply, where the central bank pumps more dollar bills into the system, oftentimes in the form of buying bonds from banks, giving them a cash infusion. Barro argued that, if everyone anticipated money growth, prices would go up accordingly in a one-to-one ratio. In other words: pumping more money into the economy when everyone expects it just leads to inflation, and not much else. Bummer.
Unanticipated money growth, on the other hand, is another story. When nobody knows it’s coming, businesses don’t raise prices in anticipation of the expansion of the money supply. Sure, they’ll notice eventually, but this effect will be lagged. That gives the economy a chance to actually use that infusion of money before it disappears into inflation.
That’s a big deal, because it can affect things like unemployment and GDP. Of course, a lot of other factors affect unemployment and GDP, but still. Barro’s got a point, with empirical data to back up his theories.
To Barro, context is key. Whether or not people know about impending monetary policy will greatly determine the actual effect of that monetary policy. Once-Fed-Chair Al Greenspan was famous for “Greenspeak," which is where he would ramble and not really answer questions about his monetary policy plans. Al wasn’t cray. He did this on purpose, because he didn’t want everyone anticipating his movements, which might render his movements useless.
Notably, Fed Chairs since haven’t been Greenspeaking. For the most part, they announce what’s happening. But who knows...maybe that’s a part of their plan, too: making people behave a certain way by merely announcing something, even before that something is actually implemented...like changes in interest rates.
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Finance: What are Anti-Money Laundering ...5 Views
Finance a la shmoop, what are anti money laundering laws? All right well we really
wanted to do this video from Somalia where there are only pro money [Washing machine with a tick pops up on Somalia]
laundering laws but well.. you know we couldn't get a visa so we're stuck with old [Visa application stamped denied]
school money laundering and this concept comes to you direct from the Patriot Act [President Bush signing the act]
A tool by the government that was deployed after the al-qaeda bombing on
9/11 with the hopes of trying to make it harder for terrorists to you know just
raise easy money to go do more terror... But ok here's a newsflash you're not [News headline on the TV about money laundering]
supposed to launder money. And no this isn't the joke about the fiver in the [5 dollars going around a washing machine]
dryer. Laundering in the financial sense refers to hiding money from the
government essentially or hiding taxable earnings. Illustrative example time! Well there are lots of ways to
launder in the good old days the system was very straightforward a bootlegger [People handing money to each other]
made a ton of money selling illegal alcohol but wanted to find another way
to show he had quote legitimately unquote made the dough so the [Quotes going either side of the word legitimately]
authorities wouldn't catch on. Well a theater could show a cheap film but [Police officer walking past a theater]
still be you know sold out yeah, yeah every seat was taken... So a bootlegger [Girl asleep in the almost empty theater]
would buy a movie theater and voila the theater business shows itself to be
hugely profitable with repeated sold-out showings of old Three Stooges black and [Cashier with his thumbs up holding two glasses of beer]
white movies and the bootlegging profits well they're now hidden, they're
disguised they're laundered as movie theater profits right. Well today money
laundering usually involves fake accounts, fancy transactions, all over the [Someone picking up a stack of money]
globe with computers doing a whole lot of talking and you know a bunch of
offshore accounts. Well the idea is the same though you create falsified
documents in some way called cooking the books to hide what you're doing from the [Printing out documents]
IRS and from the government in general. Well anti money laundering laws are out
there to catch people who do it and make sure that if they do cook the books well [Guy holding up a false document quickly tires to hide it from the police officer]
and then their goose is cooked too... [Guy in a cell with a goose]
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