One side-effect of this growing popularity is that I am getting an increased number of e-mails asking me economics questions. I answer most of them, but they're becoming so many that I have difficulty finding time to answer all of them while having time for the blog and other projects that I'm involved with.
For this reason, I will introduce a new feature on this blog called Q&A, inspired by a similar feature on the blog of Swedish objectivist philosopher Carl Svanberg. In the comment field of the Q&A post you can post whatever questions you have about issues related to economics. Related to economics doesn't just mean questions about economic theory or how the economy works, but also related issues like economic policy, the epistemology and methodology of economics, economic history, financial market developments and so on. Questions that I consider completely irrelevant or otherwise inappropriate will however not be posted or answered.
The advantage of this feature is that not only does it give readers a place that they can turn too when they're uncertain about something, but they can also see in the comment thread whether I have already answered it or not, which in time will make it a reference point and almost an encyclopedia. In some cases I will simply answer by referring to an older post or article where the answer can be found. In some cases I will answer directly in the comment thread, in other cases when I consider it to be of particular general interest I will answer in a new post on the blog while in the comment thread linking to that new post.
I will therefore stop answering general economic questions via e-mail and instead refer those who continue to contact me to this post. Some of the questions I get via e-mail come from Swedes who -knowing that I am a Swede too- ask them in Swedish. I would prefer if even my Swedish readers ask questions in English (as most readers can’t understand Swedish), although I will at least sometimes approve (and translate for non-Swedish readers) questions in Swedish if you find it too difficult to formulate them in English. Since I don't understand other languages I will however not approve any questions in other languages than Swedish or English. This post will soon disappear from front page of the post section of the blog as new posts appear, but it will be a permanent feature of the side bar, that you can access whenever you have a new question. As an introduction I will answer two questions that have come via e-mail and in a comment thread on another blog and answer them in the comment section. To access that if you're on the main page click on either comments or the permanent link of this post.
The first question comes from blogger Wille Faler who wants to know more about Austrian economics and wonders which books I recommend. This is a question which I have received a lot of times from many other people, so it is clearly a good place to start.
The other question is not just one question, but several. The mail was written in Swedish by a student at the Stockholm school of Economics, but I'll present a translated version of them here:
1) Have I understood it correctly that the quantity theory in its modern version is incorrect? Is not velocity irrelevant for long-term general price increases?
2)I know that an (artificially) lowered central bank funds rate creates an increased money supply through a credit expansion, but I've also heard that an increased money supply lowers interest rates, which interest rates? What comes first, low interest rates or higher money supply? Why was inflation so high in Sweden in the 1980s when the central bank funds rate was also very high?
3)I know that an central bank is supposed to "control" inflation using the funds rate but that this is extremely difficult? In what other way do they directly control money supply? Does the central bank buy government bonds for money that don't exist and why do they do it and what happens when the bond is "paid back"? Who really controls money supply, the government or the central bank or both? I have read a bit Hazlitt and he makes it appear a little like the government creates money at will.
4) What does it mean when the central bank pumps in liquidity? Do they buy government bonds for money that doesn’t exist or do they give new loans to the banks?
5) Do all Swedish banks have the same reserve requirements? Where can you find information about that?