Patrick Bolton and Haizhou Huang presented their new book Money Capital: New Monetary Principles for a More Prosperous Society. The founding ideas of this book are that fiat money is the equity capital of a nation, and inflation costs for a nation are akin to dilution costs for shareholders. The authors ask two key questions: How does money enter the economy, and what does it buy? The book outlines a framework that integrates the real and monetary sides of the economy, with a banking sector and debt at its core.
A first monetary policy principle pits inflation costs against default and debt-overhang costs. When a nation prints money to finance positive net present value investments it increases output not inflation, as evidenced by the strong growth in GDP and money in China over the last four decades, and in the US during WWII. A second monetary principle is on the central bank’s role as rescuer of last resort (ROLR): in a systemic financial crisis the optimal policy rule is to provide unrestricted support via equity intervention (contrary to Bagehot’s prescription of lender of last resort (LOLR) via debt intervention) to keep the economy going, and to resolve the debt overhang problem through equity dilution rather than costly debt restructuring. A third principle is that money is sovereignty: it gives the nation an option to print money in times of exigency. A monetary union trades off greater monetary discipline against a greater ability to manage financial crises. These principles and others developed in this book provide a novel perspective on monetary and fiscal policy, central banking, money and growth, and the international monetary system.
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Patrick Bolton is Professor of Finance at Imperial College London and senior advisor to the Lazard Climate Center. His career began at University of California at Berkeley, then Harvard University, L' Ecole Polytechnique, London School of Economics, l'Université Libre de Bruxelles, John H. Scully ’66 Professor of Finance and Economics at Princeton University and Barbara and David Zalaznick Professor of Business at Columbia University.
During four decades in the discipline of economics, he has made seminal contributions in the areas of Contract Theory, Corporate Finance, Corporate Governance, Banking, Sovereign Debt, Political Economy, Law and Economics, and Sustainable Investing. His recent work addresses how financial systems and institutions will have to adapt in the face of climate change. He is the author of numerous journal articles and books, among which is “Contract Theory”, the classic book widely regarded as a landmark and a standard reference in this important field, and “the Green Swan: Central Banking and Financial Stability in the Age of Climate Change”, a groundbreaking book which, since publication in 2020, has had a significant influence on central banker’s understanding of the urgency and scale of the climate crisis: the term “Green Swan” has become widely used in climate risk discussions.
Beyond his own research, Professor Bolton has made other important contributions to the economics profession. He has served as President of the American Finance Association, Fellow of the Econometric Society, the American Academy of Arts and Sciences, and Corresponding Fellow of the British Academy. He has been the managing editor of the Review of Economic Studies, and the Journal of the European Economic Association and member of the Editorial Boards of Econometrica, Review of Finance, Journal of Financial Intermediation, Theoretical Economics etc.
Professor Bolton received his PhD from the London School of Economics in 1986 and holds a BA in economics from the University of Cambridge and a BA in political science from the Institut d'Etudes Politiques de Paris.
Haizhou Huang is Special-Term Professor of Finance at PBC School of Finance at Tsinghua University and Shanghai Advanced Institute of Finance at Shanghai Jiaotong University, and has started to serve as an external member of the Monetary Policy Committee of the People’s Bank of China since March 2024.
Dr. Huang has over thirty-year experiences spanning across academic, policy and financial services.
Upon completing his PhD at Indiana University in 1994, Dr. Huang taught at the Chinese University of Hong Kong and the London School of Economics. He was a senior economist at the International Monetary Fund (IMF) from 1998 to 2005, and Chief Economist of Greater China at Barclays Capital from 2005 to 2007. He joined China International Capital Corporation (CICC) in 2007 as a Managing Director, and his management roles at CICC include serving as Member of Management Committee and Chairman of Capital Markets Committee, heading Research and Sales and Trading Departments, and heading the Equities Department and increasing its revenue by 9 folds over 9 years.
He has numerous publications in leading academic and policy journals. Together with Patrick Bolton, he won the Pagano-Zechner Best Paper Prize by the European Financial Association in 2018 and the 19th Sun Ye-Fang Prize in Economics, the highest prize in economics in China, in 2021.
He has authored Global Financial System: Crises and Reforms (2018, CITIC Press, in Chinese), co-edited The Changing Fortunes of Central Banking (2018, Cambridge University Press), and co-authored with Patrick Bolton Money Capital: New Monetary Principles for a More Prosperous Society (2024, Princeton University Press)，which is published in Chinese by CITIC Press in 2024.
Charles Goodhart was appointed to the Norman Sosnow Chair of Banking and Finance at the London School of Economics in 1985, until his retirement in 2002 when he became Emeritus Professor of Banking and Finance. Prof. Goodhart helped to found, with Prof. Mervyn King, the Financial Markets Group at London School of Economics, which began its operation at the start of 1987. He was elected a Fellow of the British Academy in 1990, and awarded the CBE in 1997, for services to monetary economics.
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