Why the Monetary Policy Framework in Advanced Countries Needs Fundamental Reform

This paper was published on 3 August 2023 by INET as  Working Paper No 210. It is argued in the paper that monetary policy should be guided much more by financial sector developments (credit and debt) and much less by near term targets for inflation. This argument is first supported by an empirical review of the negative outcomes produced by the inflation targeting framework. In particular, it has led to financial bubbles that have created ever larger bubbles that now seriously threaten future growth prospects. Second, support is provided through questioning the need for and the effectiveness of easy money  (deemed necessary by the inflation targeting framework) and through pointing out its many unintended  consequences. The search for an alternative monetary policy framework would begin with the observation that an economy is a complex, adaptive system like many others in nature and society. From this perspective, arguments for introducing a “narrow money” regime need more attention.

Posted by williamw in Publications

The new age of scarcity: How we can adapt

On 22 November, William White was honored to present the 2023 Sylvia Ostry lecture as a webinar for the CD Howe Institute in Toronto, Canada. He began by noting that he shared Sylvia Ostry’s view that the economy was a complex, adaptive system nested within other such systems. He then proceeded to show that this insight had important lessons for policy makers. White then provided evidence that we were moving from an age of plenty (disinflation) to one of scarcity (inflation), and that pressure for higher real rates would be significant. This pressure would arise from the conjuncture of  lower growth potential with the need for higher investment to meet such challenges as climate change. White finished by suggesting a number of “unpalatable” supply side and fiscal reforms that might lower the danger of “disastrous” outcomes.

Posted by williamw in Publications

What next after Covid-19?

William White’s January 2023 INET Working Paper, “What next for the global economy: Could negative supply shocks disrupt other fragile systems?”, has just been published by Palgrave Macmillan as the Introductory essay in a book. The book’s title is “Fault lines after covid-19: Economic challenges and opportunities”,  edited by R Z Aliber, M Gudmundsson and Gylfi Zoega. A link to the publisher can be found below.

Posted by williamw in Publications

Mitigating global warming is not our only problem

The Global Risk Institute in Toronto has just posted the paper linked below. It suggests that at least three conditions will have to be satisfied to meet the global challenge of mitigating climate change. We need to know what we should do. We need to have the power to actually do what needs to be done. Finally, we need the will to act, to do what we should do. The paper focuses on current impediments to meeting each of these three challenges. The paper finishes by discussing the possibility that we are inadvertently (“sleepwalking”) towards a polycrisis; that is, the possibility of a cascade of tipping points in a number of systems (economic/financial, political and environmental) that are each fragile and are also nested within each other. The second link is to a video recording of my session at the GRI Summit 2023.

Posted by williamw in Publications

The case for pessimism: the coming new age of scarcity

This article was recently published in the Summer edition of “The International Economy”. It suggests that we are moving from an “Age of Plenty” to an “Age of Scarcity”. For the last few decades we have benefited from a variety of positive supply shocks. Unfortunately, every one of these shocks has now turned negative. Moreover, there is now  a need for much higher investment levels to minimize the effects of these negative shocks. The legacy of this fundamental change will be that inflationary pressures will prove more persistent that currently anticipated, that consumption must suffer and that interest rates will stay “higher for longer”.



Posted by williamw in Publications

What next for the post covid global economy: Could negative supply shocks disrupt other fragile systems?

This INET Working Paper, posted on 26 January 2023, is based upon an earlier  presentation. White’s general premise is that our economic, political, public health and environmental systems are all complex, adaptive systems and each is showing clear signs of distress. Moreover,  problems in any one system could easily spread to other systems in a “cascade of tipping points”. In this particular paper, White suggests that existing stress in our economic/financial system is likely to be made worse by a multitude of future, negative supply shocks. In turn, these economic problems might pose a threat to the democratic order in some countries. The paper finishes with reflections on policies that might help to stabilize the situation.

Posted by williamw in Publications

People get ready: An era of shortages is going to replace our era of plenty

The C D Howe Institute in Toronto published on 5 December an Intelligence Memo written by William White. Essentially a short letter written to the Canadian Minister of Finance, the Memo identifies six sets of negative, future  supply shocks that will put upward pressure on Canadian prices in the next few years. Adding to the difficulties, the Memo also identifies a number of sectors where higher investment spending will be required – not least to deal with environmental issues. To mitigate inflationary pressures, and to  avoid a potentially dangerous reliance on tighter monetary policy, White implies that consumption should be constrained through targeted fiscal measures.



Posted by williamw in Publications

Is a Dollar Crisis Coming?

This article was published in the Summer 2022 edition of The International Economy. William White notes that forecasts to date which have predicted the demise of the US dollar have been wildly inaccurate. Nevertheless, the arguments supporting those earlier forecasts remain valid and may even have strengthened over time. White suggests there are reasons (solid) for anticipating another global economic and financial crisis, and for believing (less solid) that this could finally trigger a dollar crisis as well.

Posted by williamw in Publications

How central bank mistakes after 2019 led to inflation

William White wrote the Forward for a New Zealand Initiative publication, authored by Graeme Wheeler and Bryce Wilkinson, in which they contend that expansionary central bank policies contributed significantly to the global inflationary pressures which have emerged in recent years. In his Forward, White agrees that the analytical framework used by many central banks is fundamentally flawed. Not least, central banks have for decades underestimated the importance of recurrent shifts in the supply capacity of the global economy.

Posted by williamw in Publications