Text

In the early days, before most countries had central banks, countries operated under the gold standard, which entailed its own set of rules. The world supply of money was determined by the usable goId supply. New gold discoveries would lead to monetary expansions in recipient countries, which would then experience rises in prices and output. Contractions in the supply of usable gold would require contractions in prices and output. lf a country on its own over-inflated demand, say by fiscal policy, its demand would spilI over to foreigners and its gold would flow out. While the gold standard was in this sense self-regulating, it was not a perfect system. Monetary policy was not set consciously in terms of the economic needs of the country, but by the world gold market. The world gold stock would fluctuate in line with international discoveries, while the stock in particular countries reflected trade flows. There was no automatic provision for money or liquidity to grow in line with the normal production leveIs in the economy. John Taylor (1998) has shown that this regime was responsible for large fluctuations in real output, much less stability in real output than has been achieved in the post gold standard era. In the gold standard period of 1890-1905, for example, the US economy suffered five major recessions.

Remarks by governor E. M. Gramlich on 24th Annual conference of the eastern economic association. New York 2/27/98 (with adaptations).

Text

In the early days, before most countries had central banks, countries operated under the gold standard, which entailed its own set of rules. The world supply of money was determined by the usable goId supply. New gold discoveries would lead to monetary expansions in recipient countries, which would then experience rises in prices and output. Contractions in the supply of usable gold would require contractions in prices and output. lf a country on its own over-inflated demand, say by fiscal policy, its demand would spilI over to foreigners and its gold would flow out. While the gold standard was in this sense self-regulating, it was not a perfect system. Monetary policy was not set consciously in terms of the economic needs of the country, but by the world gold market. The world gold stock would fluctuate in line with international discoveries, while the stock in particular countries reflected trade flows. There was no automatic provision for money or liquidity to grow in line with the normal production leveIs in the economy. John Taylor (1998) has shown that this regime was responsible for large fluctuations in real output, much less stability in real output than has been achieved in the post gold standard era. In the gold standard period of 1890-1905, for example, the US economy suffered five major recessions.

Remarks by governor E. M. Gramlich on 24th Annual conference of the eastern economic association. New York 2/27/98 (with adaptations).

The big picture

The US economy is currently enjoying the biggest boom since the 50s, caused mainly by the explosive technology sector. Look at the newsstands, watch TV, go to the movies: everyone is talking about the Web. And the media themselves are changing. Of course, once TV and movies switch to digital formal - and ultra high bandwidth comes to the masses - all TV shows and all movies will be downloadable at all times. The Congressional Budget Office is predicting that in 2003 the volume: of paper mail will level off and start dropping for the first time in history, leading to budget cuts and layoffs. Why? People are turning to free e-mail. And how will the phone company make money on long distance services when anyone with a computer and net connection can make quality calls for free?

But what's more astonishing is how the models developed by these e-commerce pioneers are spilling over into other aspects of life. For example, people are increasingly buying houses, cars, and other big-budget items on-line. Thousands of products and services that used to be expensive are now free on the Internet. Scientists are using the Web to monitor earthquakes and look for intelligent life in the universe.

The Web is transforming politics, love and war.

Mike Elgan. The biggest story of the millennium,10/22/99 (with adaptations).

Text

In the early days, before most countries had central banks, countries operated under the gold standard, which entailed its own set of rules. The world supply of money was determined by the usable goId supply. New gold discoveries would lead to monetary expansions in recipient countries, which would then experience rises in prices and output. Contractions in the supply of usable gold would require contractions in prices and output. lf a country on its own over-inflated demand, say by fiscal policy, its demand would spilI over to foreigners and its gold would flow out. While the gold standard was in this sense self-regulating, it was not a perfect system. Monetary policy was not set consciously in terms of the economic needs of the country, but by the world gold market. The world gold stock would fluctuate in line with international discoveries, while the stock in particular countries reflected trade flows. There was no automatic provision for money or liquidity to grow in line with the normal production leveIs in the economy. John Taylor (1998) has shown that this regime was responsible for large fluctuations in real output, much less stability in real output than has been achieved in the post gold standard era. In the gold standard period of 1890-1905, for example, the US economy suffered five major recessions.

Remarks by governor E. M. Gramlich on 24th Annual conference of the eastern economic association. New York 2/27/98 (with adaptations).

Text

In the early days, before most countries had central banks, countries operated under the gold standard, which entailed its own set of rules. The world supply of money was determined by the usable goId supply. New gold discoveries would lead to monetary expansions in recipient countries, which would then experience rises in prices and output. Contractions in the supply of usable gold would require contractions in prices and output. lf a country on its own over-inflated demand, say by fiscal policy, its demand would spilI over to foreigners and its gold would flow out. While the gold standard was in this sense self-regulating, it was not a perfect system. Monetary policy was not set consciously in terms of the economic needs of the country, but by the world gold market. The world gold stock would fluctuate in line with international discoveries, while the stock in particular countries reflected trade flows. There was no automatic provision for money or liquidity to grow in line with the normal production leveIs in the economy. John Taylor (1998) has shown that this regime was responsible for large fluctuations in real output, much less stability in real output than has been achieved in the post gold standard era. In the gold standard period of 1890-1905, for example, the US economy suffered five major recessions.

Remarks by governor E. M. Gramlich on 24th Annual conference of the eastern economic association. New York 2/27/98 (with adaptations).

The big picture

The US economy is currently enjoying the biggest boom since the 50s, caused mainly by the explosive technology sector. Look at the newsstands, watch TV, go to the movies: everyone is talking about the Web. And the media themselves are changing. Of course, once TV and movies switch to digital formal - and ultra high bandwidth comes to the masses - all TV shows and all movies will be downloadable at all times. The Congressional Budget Office is predicting that in 2003 the volume: of paper mail will level off and start dropping for the first time in history, leading to budget cuts and layoffs. Why? People are turning to free e-mail. And how will the phone company make money on long distance services when anyone with a computer and net connection can make quality calls for free?

But what's more astonishing is how the models developed by these e-commerce pioneers are spilling over into other aspects of life. For example, people are increasingly buying houses, cars, and other big-budget items on-line. Thousands of products and services that used to be expensive are now free on the Internet. Scientists are using the Web to monitor earthquakes and look for intelligent life in the universe.

The Web is transforming politics, love and war.

Mike Elgan. The biggest story of the millennium,10/22/99 (with adaptations).

The big picture

The US economy is currently enjoying the biggest boom since the 50s, caused mainly by the explosive technology sector. Look at the newsstands, watch TV, go to the movies: everyone is talking about the Web. And the media themselves are changing. Of course, once TV and movies switch to digital formal - and ultra high bandwidth comes to the masses - all TV shows and all movies will be downloadable at all times. The Congressional Budget Office is predicting that in 2003 the volume: of paper mail will level off and start dropping for the first time in history, leading to budget cuts and layoffs. Why? People are turning to free e-mail. And how will the phone company make money on long distance services when anyone with a computer and net connection can make quality calls for free?

But what's more astonishing is how the models developed by these e-commerce pioneers are spilling over into other aspects of life. For example, people are increasingly buying houses, cars, and other big-budget items on-line. Thousands of products and services that used to be expensive are now free on the Internet. Scientists are using the Web to monitor earthquakes and look for intelligent life in the universe.

The Web is transforming politics, love and war.

Mike Elgan. The biggest story of the millennium,10/22/99 (with adaptations).

Text

In the early days, before most countries had central banks, countries operated under the gold standard, which entailed its own set of rules. The world supply of money was determined by the usable goId supply. New gold discoveries would lead to monetary expansions in recipient countries, which would then experience rises in prices and output. Contractions in the supply of usable gold would require contractions in prices and output. lf a country on its own over-inflated demand, say by fiscal policy, its demand would spilI over to foreigners and its gold would flow out. While the gold standard was in this sense self-regulating, it was not a perfect system. Monetary policy was not set consciously in terms of the economic needs of the country, but by the world gold market. The world gold stock would fluctuate in line with international discoveries, while the stock in particular countries reflected trade flows. There was no automatic provision for money or liquidity to grow in line with the normal production leveIs in the economy. John Taylor (1998) has shown that this regime was responsible for large fluctuations in real output, much less stability in real output than has been achieved in the post gold standard era. In the gold standard period of 1890-1905, for example, the US economy suffered five major recessions.

Remarks by governor E. M. Gramlich on 24th Annual conference of the eastern economic association. New York 2/27/98 (with adaptations).

Text

In the early days, before most countries had central banks, countries operated under the gold standard, which entailed its own set of rules. The world supply of money was determined by the usable goId supply. New gold discoveries would lead to monetary expansions in recipient countries, which would then experience rises in prices and output. Contractions in the supply of usable gold would require contractions in prices and output. lf a country on its own over-inflated demand, say by fiscal policy, its demand would spilI over to foreigners and its gold would flow out. While the gold standard was in this sense self-regulating, it was not a perfect system. Monetary policy was not set consciously in terms of the economic needs of the country, but by the world gold market. The world gold stock would fluctuate in line with international discoveries, while the stock in particular countries reflected trade flows. There was no automatic provision for money or liquidity to grow in line with the normal production leveIs in the economy. John Taylor (1998) has shown that this regime was responsible for large fluctuations in real output, much less stability in real output than has been achieved in the post gold standard era. In the gold standard period of 1890-1905, for example, the US economy suffered five major recessions.

Remarks by governor E. M. Gramlich on 24th Annual conference of the eastern economic association. New York 2/27/98 (with adaptations).

Text

In the early days, before most countries had central banks, countries operated under the gold standard, which entailed its own set of rules. The world supply of money was determined by the usable goId supply. New gold discoveries would lead to monetary expansions in recipient countries, which would then experience rises in prices and output. Contractions in the supply of usable gold would require contractions in prices and output. lf a country on its own over-inflated demand, say by fiscal policy, its demand would spilI over to foreigners and its gold would flow out. While the gold standard was in this sense self-regulating, it was not a perfect system. Monetary policy was not set consciously in terms of the economic needs of the country, but by the world gold market. The world gold stock would fluctuate in line with international discoveries, while the stock in particular countries reflected trade flows. There was no automatic provision for money or liquidity to grow in line with the normal production leveIs in the economy. John Taylor (1998) has shown that this regime was responsible for large fluctuations in real output, much less stability in real output than has been achieved in the post gold standard era. In the gold standard period of 1890-1905, for example, the US economy suffered five major recessions.

Remarks by governor E. M. Gramlich on 24th Annual conference of the eastern economic association. New York 2/27/98 (with adaptations).