Overview

A conventional economic theory, monetarism, holds that inflation is a monetary phenomenon driven by changes in the supply of money. Yet recent experience--including the aftermath of the financial crisis of 2008 and the economic development of China--contradict this basic prediction. In this book, Patrick Bolton and Haizhou Huang offer a novel perspective, viewing monetary economics through the lens of corporate finance. They propose a richer theory, where money can be seen as the equity capital of a nation, playing a similar role as stocks for a company. This innovative framework integrates the real and monetary sides of the economy, with a banking sector and debt at its core. In the financial world, companies issue new shares only if it results in some kind of value creation; this is a basic principle of corporate finance that Bolton and Huang argue can be applied to monetary economics. When the government increases the money supply to finance positive net value investments--when it prints money to keep the economy going--it increases output, not inflation. The effect of increasing money supply depends on how money enters the system and what the money buys. The principles outlined by Bolton and Huang shed new light on a range of issues, including inflation, 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. Past president of the American Finance Association and a fellow of the Econometric Society, he is coauthor of Contract Theory and The Green Swan: Central Banking and Financial Stability in the Age of Climate Change. Haizhou Huang is Special-Term Professor of Finance at both the Shanghai Advanced Institute of Finance at Shanghai Jiaotong University and the PBoC School of Finance at Tsinghua University. He is the author of The Global Financial System: Crises and Reforms and coeditor of The Changing Fortunes of Central Banking. Jonathan Cowley, an Earphones Award-winning narrator, is a British actor hailing from Eastbourne, East Sussex, but he currently calls Los Angeles home. He has narrated many audiobooks and can also be heard on both sides of the Atlantic narrating film trailers and documentaries. He is also an active television and film actor who has appeared in Grey's Anatomy, Veep, and WestWorld.

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