Of course the price as measured in goods doesn't change because you change the amount of money available: That is why it is inflation rather than an increase in the value of the goods.
I don't understand what you're trying to say there.
In the following, you butchered my reply in a way that allows you to miss the point, so I rearranged things a bit.
Let it, it is not important. And sorry for any butchering, I have tried to keep your quotes as intact, but this system isn't exactly conductive to this.
The "money supply" is a stock. It is something like the sum of all deposits, depending on the definition. How could that possibly affect inflation directly?
Who cares if it affected "directly", whatever that means. You are changing the question, which is : "Will increased money supply increase inflation (or decrease deflation, if you like)" Again, you are arguing a strawman.
Perhaps my rearranging of the quotes and the added emphasis already helps you to see my point, but let me reiterate in a different way just to be sure.
Think of the price-setting process of an individual supermarket (or other firm) as an algorithm. It has inputs (such as the cost of production, the effective demand seen by the firm, profit motive, behavior of competition, whatever), and it has an output (the price that is ultimately set). My point was that the stock of money is not one of those inputs.
Says who? It is a pretty common practice to simply adjust all prices to account for inflation. Not a perfect method, to be sure, but easy and simple.
However, at least one of those inputs is a flow of money, i.e. the effective demand that has been seen previously.
Says who, and even if true, so what?
You have not argued against that, just continued to claim some causality from an increase of stocks to an increase of flows as I predicted.
Not only claim, but supported the claim; a support which you ignore. But since you are arguing a strawman (the "directly") part, it is hard to get to the truth of the matter. Let me put it in bullet form, then you can tell me where I am wrong.
1. If the sum of deposits (ie., the money supply) increases, there must be some entities who has more money than before.
2. Entities with more money tends to either use or invest money. Let's discount the investment, as that just moves the money to someone else.
3. When some entities use more money, demand increases.
4. Increased demand tends to increase prices.
5. Increased prices leads to increased profitability for the sellers of said goods.
6. Increased profitability leads to more entities with more money.
Repeat from 2, and you can easily see how this leads to increased prices across the board, AKA increased inflation. Or tell me which of 1..7 (7 being the repeat) that you think is wrong.
I've cut out the majority of the rest, because I think the really important point is the following (and yes, I'm also a mathematician - but it's kind of lame of you to bring that up, considering that you really only need high-school arithmetic for these things; I on the other hand apologize for exaggerating about V, I got carried away).
I am shocked that you claim to be a mathematician and makes such a fatal, obvious error in a logical argument. Well, at least you are conceding (as you like to put it) that you were flat out wrong.
No it does not. For instance, assume that M=V=P=Q=1. That us assume that M is increased to 2, then the equation would still be satisfied by V=P=Q=2. Note how nothing is constant with that solution.
I know. Who knows, two years ago I might have reacted in the same way that you do. Telling apart the fringe theories that have merit from those that don't is a difficult problem. I appreciate you checking out the Wikipedia Criticism section. You'll note that the points mentioned there have been addressed by MMT academics. I'm really not trying to sound paternalistic or something, but try putting yourself in my shoes. What if MMT really had some merits? What could possibly convince you?
Posting convincing answers in that section would be one thing; convincing a significant number of the experts in the field would be another.
No, it doesn't, at least not in the way that you think. Here's why: in regular goods markets, both demand and supply are essentially flows. Producers produce a certain amount of goods per time unit, whence the supply. Consumers demand a certain amount of good per time unit, whence the demand - both can be functions of price or whatever, but the point about flows is important. Prices change on the margin.
Of course the price as measured in goods doesn't change because you change the amount of money available: That is why it is inflation rather than an increase in the value of the goods.
The "money supply" is a stock. It is something like the sum of all deposits, depending on the definition. How could that possibly affect inflation directly? Inflation is a measure of average price increases, so e.g. increase of prices set by supermarket bureaucrats.
Ah, argument from personal incredulity.. Anyway, here it is how it works: If the total amount of deposits increase, some people would have more money. Those someone would then use those more money to buy more goods. This will increase demand, thus increasing prices. As those who sell the goods now also have more money, this effect will propagate until we reach a new equilibrium (in theory anyway). At this point, everyone will be paying more for all goods, in effect making the money worth less.
But the people who make decisions about how to set prices in supermarkets only see the flow of customer demand. They do not see the size of the stock of money. So how can their decision possibly depend on the latter?
That is nonsense. They don't really care about demand, at least directly. They want to set the price exactly where they earn the most. And people who have more money (nominally) can pay more, which is the case if the stock increases. So they will increase the price (possibly with some delay due to competition; supermarket price-setters are not exactly first movers in this game).
You could argue that there is some relationship between the stock of money and the flows of money, i.e. that increasing the stock of money will also increase the flow of money. In terms of Quantity Theory of Money, this is the claim that V (the "velocity" of money) is constant.
That is mathematically false. You cannot conclude that V is constant from "there is some relationship between stock and flow". (Trust me on this, I am actually a mathematician). Since the rest of the argument rests on this falsehood, I have deleted it:)
Which interest rate, exactly? And once you tell me this, could you outline why the (market) interest rate would increase?
The interbank interest rate is most directly affected. When the government issues more bonds than it deficit spends, this means that the total amount of reserves held by banks shrinks.
Assuming that (private) buyers can be found. This would require that the effective interest on those bonds are greater than the interest rate that banks can offer, otherwise the private buyers would deposit their money in
Well, since we are talking science fiction, we could attempt to make humans live longer. If long enough, people could raise 2 batches, which I think would cover the existing gap and then some. Not everyone will want to, sure, but I think enough would.
Competition will drive the prices down. As for keeping existing setup,. few keeps their existing equipment for very long. I certainly buy a new car GPS every few (5?) years, because (a) batteries sucks after a while and (b) they get better and (c) I am too lazy to buy new maps. Admittedly, (a) and (b) has a big influence on (c).
.. more redundancy is always better. This is probably some of my tax money that has been spent the best. Aside for those used to repair the roads, teach the children, take care of the sick and so on and so forth.
You really should read up on MMT, since all of your points are addressed there. Let me reply with some pointers anyway even though I don't have much time, since you do sound like a reasonable person - but please excuse the fact that some of the following may become a bit badly-edited stream-of-consciousness:
You know, if I had a dollar for every time people asked me to read up on a fringe theory, I would be a rich man now. You seem reasonable enough that I read the criticism section, which convinced the theory was not solid.
Please read up on how bond sales and open market operations by the government interact to set the interest rate. The fact is that if the government deficit spends without issuing bonds, the interest rate goes down.
If the government covers a deficit by printing money, it will increase inflation, because greater supply leads to lower prices. This also applies to money.
Conversely, when the government issues more bonds than it deficit spends, the interest rate goes up.
Which interest rate, exactly? And once you tell me this, could you outline why the (market) interest rate would increase?
So the government can just give itself a better rate for the bonds if it wants to.
Tell the Greeks that;) That example alone should tell you something. Paying the few institutions left willing to buy Greek bonds with newly-printed money is unlikely to help the situation.
This clearly contradicts your understanding of how inflation works.
There is nothing magic about inflation. Inflation happens when there is an effective supply of money greater than the demand. Which is why any central bank can control the inflation rate if they want to, simply by increasing or decrease the amount of money it prints.
In fact, inflation is a mixture of different actors in the economy fighting for shares of real income, and a result of the interplay of supply and demand: if aggregate demand is too high for the productive capacity of the economy, this conflict will be resolved via increasing prices. If aggregate demand is too low for productive capacity, the conflict will typically be resolved via unemployment, and factories being idle.
Sorry, but that is just nonsense. No Western economy have had a general dearth of produce of any significant mind since after the aftermath of 2nd world war. So by your argument, we should not have experienced inflation since. In my little country, we hit well over 15% in the 1970's (due to bad policy of the government at the time).
So when private spending collapses and the government props up aggregate demand with its deficit, this is not inflationary. Whether the government issues bonds or not is irrelevant as far as inflation is concerned, it only affects the interest rate (yes, yes, monetarists claim that the interest rate is super important for inflation, and yes, there probably is some linkage there; but it's very indirect, and much weaker than the obvious link between aggregate demand and inflation).
The (state bank) interest rate is not that important for inflation, it's the amount of money printed. Of course, if the government are loaning out money to sub-market interest rates (as is currently common), that money has to come from somewhere. If that somewhere is by printing money, you'll get inflation. It really is quite simple.
Believe me, you're not the first person to engage me or the MMT academics on this topic. Suffice to say, what it eventually ends up being is that you concede all points, but declare them irrelevant by clinging to an extreme interpretation of the Quantity Theory of Money. The latter doesn't hold up to empirical evidence and not even to comm
Well, sure, but that would lead to the bank having more money to lend out, and the government having more money to spend, respectively. If they are lost, it is because of bad investments... companies or states that crash or at least diminish in value.
As far as the US federal government is concerned: do you really believe yourself what you are writing? I mean, think about it: The US federal government creates the money. Saying that they "have more money to spend" is like saying that Blizzard has more gold to issue inside World of Warcraft. The US government can spend as many US$ as they like or, to be more precise, as many as sellers are willing to take in exchange for goods. The only constraints are political, not technical. So to say that "they can spend more money If you buy their bonds" is simply false.
Not quite. Printing more money would just devaluate the currency, meaning that everything the government buys would be more expensive, and the taxes it gathers would be worth less. On the other hand, a better rate for the bonds (that is, people invests in bonds) translates directly into more buying power.
(It's funny how obviously false it is, but how widespread the belief is that it's true - kind of an "emperor's new clothes" thing.)
I mentioned this further up: When you find yourself disagreeing with a great majority of experts, it is time to recheck your facts. Odds are that you are mistaken:)
As far as banks are concerned, you're also simply wrong, although the points are less obvious because you really need to know at least a few technical details of how banking works. Banks do not lend out money, they give their borrowers access to a deposit. To put it another way: banks do not need money to make loans. They simply grow their balance sheet, adding your IOU as an asset, and your deposit as a liability. They then may have to refinance themselves as part of the settlement system, but the people who actually make the loan decision are quite disconnected from the people who worry about refinancing. The corresponding departments in banks are separate.
Again, not quite. Your point about deposits is rather silly, as the loaner will probably immediately withdraw the loaned amount from the bank. This money will come from deposits to the bank, or from loans from other banks. Due to the fractional reserve system, some money is created in the process, but only a certain multiple of the money originally issued by the state bank. The exactly factor depends on the locals laws. I suggest you read the Wikipedia article on the fractional reserve system to see how this process works.
Think about the term "deleveraging" applied to the economy as a whole. It means that balance sheets are shrinking in the financial sector, which is exactly what happens when loans are paid back without new loans being created. This has happened in the last few years before our very eyes. The empirical reality contradicts the belief that "then the bank will lend out more money" (which I think is what you implicitly claimed, and which is what really ultimately matters anyway). There's really nothing more to say.
This is called consolidating. It means that the banks have overextended themselves (or believe they have), and are trying to (or forced to) reduce the amount loaned out compared to the amount deposited. It is probably a good thing in the medium term, though it does stiffle growth right now. Again, this is just a bump on the road
Not necessarily. "The money" could be used to pay down debts, in which case you just get shrinking balance sheets, but no spending; or it could be saved, e.g. by buying government bonds.
Well, sure, but that would lead to the bank having more money to lend out, and the government having more money to spend, respectively. If they are lost, it is because of bad investments... companies or states that crash or at least diminish in value.
In fact, the latter point is part of where this whole crisis comes from in the first place: income has shifted, over the course of many decades, towards the rich, who have a higher savings rate. This would have caused a recession much earlier, if not for the fact that the financial sector got creative and managed to give out more and more loans to less and less credit-worthy customers - that's what enabled them to keep up the spending stream for the time being, but of course private debt is not sustainable indefinitely, and the shit hit the fan at some point.
I am not an expert in the crisis part. From what I gather, the crisis comes from overextension. In my simplistic world view, that means that we have already spend a lot of our resources in the past, borrowing from our future. It is but a bump in the road, the crisis *will* end and the happy time return for a time -- till the next crisis.
Well, unfortunately I am not such a creative thinker. It's just that I listen to what those in the subfield of Modern Monetary Theory have to say. Yes, they disagree with the majority of the rest of their profession, but given how politicized economics is, that alone is not enough to discredit them.
Of course, the majority could be wrong. But the criticism section on Wikipedia (which is my quick-test of any theory) seem quite enough to kill off that theory --- at least to me.
Leaving aside the overpopulation problem, that is simply not true.
As productivity increases, general wealth increases --- in fact, this is the main driver behind global economic growth. What happens when 1 man can do the work of a hundred (the actual increase is actually much higher than this) is that the price of the goods he manufactures drops to 1/100th -- approximately:) That means a lot more people can afford the goods, and thus leading to the aforementioned growth of global wealth. It also means that a lot of humans will come up with new ways to earn a living, so that we get more kinds of goods on the market. Look at the growth of new beers, of electronic toys, and as you mention, the service industry. Not long ago, only the richest could afford a personal trainer or wedding assistant.. this is no longer true due to productivity growth.
I am not that old, but I clearly remember what phones looked like when I was a child, and how many we had (1). My parents clearly remember having shared freezer facilities in the community. Growth in production is not what is going to cause some catastrophe, at least directly.
Excellent question! Lower pay leads to better competitiveness relative to other countries, which in turn will lead to increased exports and more growth. It will also lead to cheaper goods, which might sell more, but I am too tired to see if this will lead to increased growth right now.. darn cold.
If someone hoards a lot of money, they typically put them in a bank or other investment, which invests the money in business who hire people. They might hire them in China, of course, but somewhere people are getting jobs:) If they manage to take them out of the economy (placing them in say gold), then the remaining money should be worth more, making everyone who has money richer. Follow that line to the end if you please.
When the pay goes down, individuals have less disposable income, but the money has not left the economy. It could go to other employers, or perhaps the owners gets richer and spends more money, or something else. Or perhaps the produce gets cheaper, which means said workers will be able to purchase as much with the same money.
If you are disagreeing with an entire field of experts, it is often a good idea to ask yourself if you are really *that* clever:)
It doesn't work like that. It's not as if there was and 100.000.000 people in USA, there would be another 100.000.000 unemployed:) More people means more work, more people who starts businesses and so on.
When there is surplus employees, the pay should go down, which in turn leads to increased economic growth and thus less unemployment. So it will balance itself out, eventually.
Excepting the last, that sounds like solid policies that should make everyone richer in the middle-to-long run. The last one sounds like they are combating tax evasion, though I wouldn't know if I am guessing correctly.
Could we borrow your government for a bit here in the East?;) We have a very charming newly elected prime minister you can borrow in return;)
Well yes, Sweden is rather special. Somehow, a liberal coalition has managed to convince the population that the price of a huge economic sector is that everyone gets poorer, including the poor. My hat is off to them, but I see few signs that this spreads to the rest of Europe, where an ever-increasingly glottousnous public sector is devouring hope for the future faster than human invention can feed it, trampling down any freedom and individual liberty that we might previously have enjoyed.
Social Democracy works just great however. Pretending that there isn't a middle ground between Capitalism and Socialism is stupid.
I happen to live in a social democratic country (Denmark), and let me tell you that it's not dance on roses by any means. It may sound like the golden middle road, and it might be, but it also combines evils of both the system. It is also a system that tend to lead to more and more socialism, and less and less on capitalism, which has sent Denmark sliding down the list of rich countries (we are currently loosing a few ranks every year).
Oh sure, the best system is probably some mix of capitalism and public benefits, but getting the right mix is neigh impossible. And anyway, USA is not even close to pure capitalism, especially not the real estate and banking segments.
Currently, I am wondering whether voting should be reserved for those not receiving public benefits. Alienation would be a key problem with that idea, though.
Bottoming out batteries is absolutely retarded. Even "deep cycle" batteries are only supposed to be discharged to 20% AT THE VERY LOWEST. And doing so reduces the number of cycles by orders of magnitude. Another thing to point out is that batteries become EXTREMELY non-linear in discharge rate at the bottom of their SoC. I like his comment about hacking but everything else is retarded.
If 20% is the "very lowest", then the scale should be recalibrated so that 20% is the new 0%....:)
So you are arguing for including data that is known to be bad (and raise the error bad, as if that would make it any better). *That* is not poor science, that is fraud, pure and simple.
So the question is: Why do you want fraudulent science? Because you have a conclusion you want to reach, and doing so makes it easier to draw that wanted conclusion - exactly what you are accusing other people of doing. People, I might add, whose works has been examined by independent scientists and even investigation boards, and come off as clean. This leads me to conclude that in this case, "The thief believe everyone steals".
Yes, we know the data i _bad_. We have thermometers to correlate with, and the data doesn't match. There is absolutely no question about this.
I did touch the "deletion" of the very old data. That is a matter of data density: Going back to pre-1600 (I think it was), the sample is too sparse to be stastically sound. Simple reason, and quite public too.
As I've said repeatedly: Discard the entire tree ring data set, and the conclusions are the same. To bend the this in metaphorical neon for you: The data cannot be included for fraudulent purposes because it does not change the conclusion to leave it out. The only way to change the conclusion is to *include* the *known bad* data of post-1950.
So, back to the question: Now that you know the data is, in fact, _bad_, do you agree that the post-1950 data (and the pre-1600 data, if you want to) should be discarded?
You haven't even answered my question: Knowing the data is bad (as you do with post-1950 tree ring set), do you really think they should be included?
If you do, you are fraudulent. If you don't, you agree with me and the scientific community.
The only other reasonable position you could have is to discard the tree ring data set entirely. Which is fine, and will give you the same results as the science has today, if with lower statistical confidence.
I'm sorry, but cherry picking from proxies _only when they agree with your foregone conclusion_ is not science. In any way.
Of course not. Nor is that what is happening. Proxies are discarded when they disagree with known, better data... in this case thermometer data, and satellite data. Or are you suggesting knowingly using bad data? In order to get to a conclusion you'd prefer?
If I am allowed to do that, and also allowed to select from any proxy I'd like, I can create a graph to show anything. It becomes a simple etch-a-sketch.
Indeed, which should have told you you are arguing against a straw man. Proxies are only used when they, to the best of our ability to determine, lead to a better data set (where better = more correct, not "fits with whatever conclusion you prefer).
Slashdot Mirror
Of course the price as measured in goods doesn't change because you change the amount of money available: That is why it is inflation rather than an increase in the value of the goods.
I don't understand what you're trying to say there.
In the following, you butchered my reply in a way that allows you to miss the point, so I rearranged things a bit.
Let it, it is not important. And sorry for any butchering, I have tried to keep your quotes as intact, but this system isn't exactly conductive to this.
The "money supply" is a stock. It is something like the sum of all deposits, depending on the definition. How could that possibly affect inflation directly?
Who cares if it affected "directly", whatever that means. You are changing the question, which is : "Will increased money supply increase inflation (or decrease deflation, if you like)" Again, you are arguing a strawman.
Ah, argument from personal incredulity.. (...)
Perhaps my rearranging of the quotes and the added emphasis already helps you to see my point, but let me reiterate in a different way just to be sure.
Think of the price-setting process of an individual supermarket (or other firm) as an algorithm. It has inputs (such as the cost of production, the effective demand seen by the firm, profit motive, behavior of competition, whatever), and it has an output (the price that is ultimately set). My point was that the stock of money is not one of those inputs.
Says who? It is a pretty common practice to simply adjust all prices to account for inflation. Not a perfect method, to be sure, but easy and simple.
However, at least one of those inputs is a flow of money, i.e. the effective demand that has been seen previously.
Says who, and even if true, so what?
You have not argued against that, just continued to claim some causality from an increase of stocks to an increase of flows as I predicted.
Not only claim, but supported the claim; a support which you ignore. But since you are arguing a strawman (the "directly") part, it is hard to get to the truth of the matter. Let me put it in bullet form, then you can tell me where I am wrong. 1. If the sum of deposits (ie., the money supply) increases, there must be some entities who has more money than before. 2. Entities with more money tends to either use or invest money. Let's discount the investment, as that just moves the money to someone else. 3. When some entities use more money, demand increases. 4. Increased demand tends to increase prices. 5. Increased prices leads to increased profitability for the sellers of said goods. 6. Increased profitability leads to more entities with more money. Repeat from 2, and you can easily see how this leads to increased prices across the board, AKA increased inflation. Or tell me which of 1..7 (7 being the repeat) that you think is wrong.
I've cut out the majority of the rest, because I think the really important point is the following (and yes, I'm also a mathematician - but it's kind of lame of you to bring that up, considering that you really only need high-school arithmetic for these things; I on the other hand apologize for exaggerating about V, I got carried away).
I am shocked that you claim to be a mathematician and makes such a fatal, obvious error in a logical argument. Well, at least you are conceding (as you like to put it) that you were flat out wrong.
No it does not. For instance, assume that M=V=P=Q=1. That us assume that M is increased to 2, then the equation would still be satisfied by V=P=Q=2. Note how nothing is constant with that solution.
I know. Who knows, two years ago I might have reacted in the same way that you do. Telling apart the fringe theories that have merit from those that don't is a difficult problem. I appreciate you checking out the Wikipedia Criticism section. You'll note that the points mentioned there have been addressed by MMT academics. I'm really not trying to sound paternalistic or something, but try putting yourself in my shoes. What if MMT really had some merits? What could possibly convince you?
Posting convincing answers in that section would be one thing; convincing a significant number of the experts in the field would be another.
No, it doesn't, at least not in the way that you think. Here's why: in regular goods markets, both demand and supply are essentially flows. Producers produce a certain amount of goods per time unit, whence the supply. Consumers demand a certain amount of good per time unit, whence the demand - both can be functions of price or whatever, but the point about flows is important. Prices change on the margin.
Of course the price as measured in goods doesn't change because you change the amount of money available: That is why it is inflation rather than an increase in the value of the goods.
The "money supply" is a stock. It is something like the sum of all deposits, depending on the definition. How could that possibly affect inflation directly? Inflation is a measure of average price increases, so e.g. increase of prices set by supermarket bureaucrats.
Ah, argument from personal incredulity.. Anyway, here it is how it works: If the total amount of deposits increase, some people would have more money. Those someone would then use those more money to buy more goods. This will increase demand, thus increasing prices. As those who sell the goods now also have more money, this effect will propagate until we reach a new equilibrium (in theory anyway). At this point, everyone will be paying more for all goods, in effect making the money worth less.
But the people who make decisions about how to set prices in supermarkets only see the flow of customer demand. They do not see the size of the stock of money. So how can their decision possibly depend on the latter?
That is nonsense. They don't really care about demand, at least directly. They want to set the price exactly where they earn the most. And people who have more money (nominally) can pay more, which is the case if the stock increases. So they will increase the price (possibly with some delay due to competition; supermarket price-setters are not exactly first movers in this game).
You could argue that there is some relationship between the stock of money and the flows of money, i.e. that increasing the stock of money will also increase the flow of money. In terms of Quantity Theory of Money, this is the claim that V (the "velocity" of money) is constant.
That is mathematically false. You cannot conclude that V is constant from "there is some relationship between stock and flow". (Trust me on this, I am actually a mathematician). Since the rest of the argument rests on this falsehood, I have deleted it :)
Which interest rate, exactly? And once you tell me this, could you outline why the (market) interest rate would increase?
The interbank interest rate is most directly affected. When the government issues more bonds than it deficit spends, this means that the total amount of reserves held by banks shrinks.
Assuming that (private) buyers can be found. This would require that the effective interest on those bonds are greater than the interest rate that banks can offer, otherwise the private buyers would deposit their money in
I can see Sony from here: We'll stop all your cars unless you pay your royalties! We 0wn you 'cause you bought the latest Britney Spears album !
I should be fairly safe, then.
Well, you'll soon be sharing the road with cars without drivers.
I wonder if this push the number of occupants per car (including driver) to under 1?
Well, since we are talking science fiction, we could attempt to make humans live longer. If long enough, people could raise 2 batches, which I think would cover the existing gap and then some. Not everyone will want to, sure, but I think enough would.
Competition will drive the prices down. As for keeping existing setup,. few keeps their existing equipment for very long. I certainly buy a new car GPS every few (5?) years, because (a) batteries sucks after a while and (b) they get better and (c) I am too lazy to buy new maps. Admittedly, (a) and (b) has a big influence on (c).
.. more redundancy is always better. This is probably some of my tax money that has been spent the best. Aside for those used to repair the roads, teach the children, take care of the sick and so on and so forth.
Wikipedia to the rescue. In short, there are several ways to increase the supply of money.
You really should read up on MMT, since all of your points are addressed there. Let me reply with some pointers anyway even though I don't have much time, since you do sound like a reasonable person - but please excuse the fact that some of the following may become a bit badly-edited stream-of-consciousness:
You know, if I had a dollar for every time people asked me to read up on a fringe theory, I would be a rich man now. You seem reasonable enough that I read the criticism section, which convinced the theory was not solid.
Please read up on how bond sales and open market operations by the government interact to set the interest rate. The fact is that if the government deficit spends without issuing bonds, the interest rate goes down.
If the government covers a deficit by printing money, it will increase inflation, because greater supply leads to lower prices. This also applies to money.
Conversely, when the government issues more bonds than it deficit spends, the interest rate goes up.
Which interest rate, exactly? And once you tell me this, could you outline why the (market) interest rate would increase?
So the government can just give itself a better rate for the bonds if it wants to.
Tell the Greeks that ;) That example alone should tell you something. Paying the few institutions left willing to buy Greek bonds with newly-printed money is unlikely to help the situation.
This clearly contradicts your understanding of how inflation works.
There is nothing magic about inflation. Inflation happens when there is an effective supply of money greater than the demand. Which is why any central bank can control the inflation rate if they want to, simply by increasing or decrease the amount of money it prints.
In fact, inflation is a mixture of different actors in the economy fighting for shares of real income, and a result of the interplay of supply and demand: if aggregate demand is too high for the productive capacity of the economy, this conflict will be resolved via increasing prices. If aggregate demand is too low for productive capacity, the conflict will typically be resolved via unemployment, and factories being idle.
Sorry, but that is just nonsense. No Western economy have had a general dearth of produce of any significant mind since after the aftermath of 2nd world war. So by your argument, we should not have experienced inflation since. In my little country, we hit well over 15% in the 1970's (due to bad policy of the government at the time).
So when private spending collapses and the government props up aggregate demand with its deficit, this is not inflationary. Whether the government issues bonds or not is irrelevant as far as inflation is concerned, it only affects the interest rate (yes, yes, monetarists claim that the interest rate is super important for inflation, and yes, there probably is some linkage there; but it's very indirect, and much weaker than the obvious link between aggregate demand and inflation).
The (state bank) interest rate is not that important for inflation, it's the amount of money printed. Of course, if the government are loaning out money to sub-market interest rates (as is currently common), that money has to come from somewhere. If that somewhere is by printing money, you'll get inflation. It really is quite simple.
Believe me, you're not the first person to engage me or the MMT academics on this topic. Suffice to say, what it eventually ends up being is that you concede all points, but declare them irrelevant by clinging to an extreme interpretation of the Quantity Theory of Money. The latter doesn't hold up to empirical evidence and not even to comm
Well, sure, but that would lead to the bank having more money to lend out, and the government having more money to spend, respectively. If they are lost, it is because of bad investments... companies or states that crash or at least diminish in value.
As far as the US federal government is concerned: do you really believe yourself what you are writing? I mean, think about it: The US federal government creates the money. Saying that they "have more money to spend" is like saying that Blizzard has more gold to issue inside World of Warcraft. The US government can spend as many US$ as they like or, to be more precise, as many as sellers are willing to take in exchange for goods. The only constraints are political, not technical. So to say that "they can spend more money If you buy their bonds" is simply false.
Not quite. Printing more money would just devaluate the currency, meaning that everything the government buys would be more expensive, and the taxes it gathers would be worth less. On the other hand, a better rate for the bonds (that is, people invests in bonds) translates directly into more buying power.
(It's funny how obviously false it is, but how widespread the belief is that it's true - kind of an "emperor's new clothes" thing.)
I mentioned this further up: When you find yourself disagreeing with a great majority of experts, it is time to recheck your facts. Odds are that you are mistaken :)
As far as banks are concerned, you're also simply wrong, although the points are less obvious because you really need to know at least a few technical details of how banking works. Banks do not lend out money, they give their borrowers access to a deposit. To put it another way: banks do not need money to make loans. They simply grow their balance sheet, adding your IOU as an asset, and your deposit as a liability. They then may have to refinance themselves as part of the settlement system, but the people who actually make the loan decision are quite disconnected from the people who worry about refinancing. The corresponding departments in banks are separate.
Again, not quite. Your point about deposits is rather silly, as the loaner will probably immediately withdraw the loaned amount from the bank. This money will come from deposits to the bank, or from loans from other banks. Due to the fractional reserve system, some money is created in the process, but only a certain multiple of the money originally issued by the state bank. The exactly factor depends on the locals laws. I suggest you read the Wikipedia article on the fractional reserve system to see how this process works.
Think about the term "deleveraging" applied to the economy as a whole. It means that balance sheets are shrinking in the financial sector, which is exactly what happens when loans are paid back without new loans being created. This has happened in the last few years before our very eyes. The empirical reality contradicts the belief that "then the bank will lend out more money" (which I think is what you implicitly claimed, and which is what really ultimately matters anyway). There's really nothing more to say.
This is called consolidating. It means that the banks have overextended themselves (or believe they have), and are trying to (or forced to) reduce the amount loaned out compared to the amount deposited. It is probably a good thing in the medium term, though it does stiffle growth right now. Again, this is just a bump on the road
Not necessarily. "The money" could be used to pay down debts, in which case you just get shrinking balance sheets, but no spending; or it could be saved, e.g. by buying government bonds.
Well, sure, but that would lead to the bank having more money to lend out, and the government having more money to spend, respectively. If they are lost, it is because of bad investments... companies or states that crash or at least diminish in value.
In fact, the latter point is part of where this whole crisis comes from in the first place: income has shifted, over the course of many decades, towards the rich, who have a higher savings rate. This would have caused a recession much earlier, if not for the fact that the financial sector got creative and managed to give out more and more loans to less and less credit-worthy customers - that's what enabled them to keep up the spending stream for the time being, but of course private debt is not sustainable indefinitely, and the shit hit the fan at some point.
I am not an expert in the crisis part. From what I gather, the crisis comes from overextension. In my simplistic world view, that means that we have already spend a lot of our resources in the past, borrowing from our future. It is but a bump in the road, the crisis *will* end and the happy time return for a time -- till the next crisis.
Well, unfortunately I am not such a creative thinker. It's just that I listen to what those in the subfield of Modern Monetary Theory have to say. Yes, they disagree with the majority of the rest of their profession, but given how politicized economics is, that alone is not enough to discredit them.
Of course, the majority could be wrong. But the criticism section on Wikipedia (which is my quick-test of any theory) seem quite enough to kill off that theory --- at least to me.
Leaving aside the overpopulation problem, that is simply not true.
As productivity increases, general wealth increases --- in fact, this is the main driver behind global economic growth. What happens when 1 man can do the work of a hundred (the actual increase is actually much higher than this) is that the price of the goods he manufactures drops to 1/100th -- approximately :) That means a lot more people can afford the goods, and thus leading to the aforementioned growth of global wealth. It also means that a lot of humans will come up with new ways to earn a living, so that we get more kinds of goods on the market. Look at the growth of new beers, of electronic toys, and as you mention, the service industry. Not long ago, only the richest could afford a personal trainer or wedding assistant.. this is no longer true due to productivity growth.
I am not that old, but I clearly remember what phones looked like when I was a child, and how many we had (1). My parents clearly remember having shared freezer facilities in the community. Growth in production is not what is going to cause some catastrophe, at least directly.
Excellent question! Lower pay leads to better competitiveness relative to other countries, which in turn will lead to increased exports and more growth. It will also lead to cheaper goods, which might sell more, but I am too tired to see if this will lead to increased growth right now.. darn cold.
source
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If someone hoards a lot of money, they typically put them in a bank or other investment, which invests the money in business who hire people. They might hire them in China, of course, but somewhere people are getting jobs :) If they manage to take them out of the economy (placing them in say gold), then the remaining money should be worth more, making everyone who has money richer. Follow that line to the end if you please.
When the pay goes down, individuals have less disposable income, but the money has not left the economy. It could go to other employers, or perhaps the owners gets richer and spends more money, or something else. Or perhaps the produce gets cheaper, which means said workers will be able to purchase as much with the same money.
If you are disagreeing with an entire field of experts, it is often a good idea to ask yourself if you are really *that* clever :)
It doesn't work like that. It's not as if there was and 100.000.000 people in USA, there would be another 100.000.000 unemployed :) More people means more work, more people who starts businesses and so on.
When there is surplus employees, the pay should go down, which in turn leads to increased economic growth and thus less unemployment. So it will balance itself out, eventually.
That's the theory anyway.
Excepting the last, that sounds like solid policies that should make everyone richer in the middle-to-long run. The last one sounds like they are combating tax evasion, though I wouldn't know if I am guessing correctly.
Could we borrow your government for a bit here in the East? ;) We have a very charming newly elected prime minister you can borrow in return ;)
Take from a poor minority? That sounds somewhat contrived. Surely, a poor minority has little money to be taken away.
Well yes, Sweden is rather special. Somehow, a liberal coalition has managed to convince the population that the price of a huge economic sector is that everyone gets poorer, including the poor. My hat is off to them, but I see few signs that this spreads to the rest of Europe, where an ever-increasingly glottousnous public sector is devouring hope for the future faster than human invention can feed it, trampling down any freedom and individual liberty that we might previously have enjoyed.
Social Democracy works just great however. Pretending that there isn't a middle ground between Capitalism and Socialism is stupid.
I happen to live in a social democratic country (Denmark), and let me tell you that it's not dance on roses by any means. It may sound like the golden middle road, and it might be, but it also combines evils of both the system. It is also a system that tend to lead to more and more socialism, and less and less on capitalism, which has sent Denmark sliding down the list of rich countries (we are currently loosing a few ranks every year).
Oh sure, the best system is probably some mix of capitalism and public benefits, but getting the right mix is neigh impossible. And anyway, USA is not even close to pure capitalism, especially not the real estate and banking segments.
Currently, I am wondering whether voting should be reserved for those not receiving public benefits. Alienation would be a key problem with that idea, though.
Bottoming out batteries is absolutely retarded. Even "deep cycle" batteries are only supposed to be discharged to 20% AT THE VERY LOWEST. And doing so reduces the number of cycles by orders of magnitude. Another thing to point out is that batteries become EXTREMELY non-linear in discharge rate at the bottom of their SoC. I like his comment about hacking but everything else is retarded.
If 20% is the "very lowest", then the scale should be recalibrated so that 20% is the new 0%.... :)
So you are arguing for including data that is known to be bad (and raise the error bad, as if that would make it any better). *That* is not poor science, that is fraud, pure and simple.
So the question is: Why do you want fraudulent science? Because you have a conclusion you want to reach, and doing so makes it easier to draw that wanted conclusion - exactly what you are accusing other people of doing. People, I might add, whose works has been examined by independent scientists and even investigation boards, and come off as clean. This leads me to conclude that in this case, "The thief believe everyone steals".
Yes, we know the data i _bad_. We have thermometers to correlate with, and the data doesn't match. There is absolutely no question about this.
I did touch the "deletion" of the very old data. That is a matter of data density: Going back to pre-1600 (I think it was), the sample is too sparse to be stastically sound. Simple reason, and quite public too.
As I've said repeatedly: Discard the entire tree ring data set, and the conclusions are the same. To bend the this in metaphorical neon for you: The data cannot be included for fraudulent purposes because it does not change the conclusion to leave it out. The only way to change the conclusion is to *include* the *known bad* data of post-1950.
So, back to the question: Now that you know the data is, in fact, _bad_, do you agree that the post-1950 data (and the pre-1600 data, if you want to) should be discarded?
You haven't even answered my question: Knowing the data is bad (as you do with post-1950 tree ring set), do you really think they should be included?
If you do, you are fraudulent. If you don't, you agree with me and the scientific community.
The only other reasonable position you could have is to discard the tree ring data set entirely. Which is fine, and will give you the same results as the science has today, if with lower statistical confidence.
I'm sorry, but cherry picking from proxies _only when they agree with your foregone conclusion_ is not science. In any way.
Of course not. Nor is that what is happening. Proxies are discarded when they disagree with known, better data... in this case thermometer data, and satellite data. Or are you suggesting knowingly using bad data? In order to get to a conclusion you'd prefer?
If I am allowed to do that, and also allowed to select from any proxy I'd like, I can create a graph to show anything. It becomes a simple etch-a-sketch.
Indeed, which should have told you you are arguing against a straw man. Proxies are only used when they, to the best of our ability to determine, lead to a better data set (where better = more correct, not "fits with whatever conclusion you prefer).