tag:blogger.com,1999:blog-6245381193993153721.post1456293734113601325..comments2024-03-28T17:08:15.784-07:00Comments on Social Democracy for the 21st Century: A Realist Alternative to the Modern Left: Monetarists Fail History, Time and AgainLord Keyneshttp://www.blogger.com/profile/06556863604205200159noreply@blogger.comBlogger34125tag:blogger.com,1999:blog-6245381193993153721.post-34401127352534967122013-08-09T10:11:14.299-07:002013-08-09T10:11:14.299-07:00Rob,
Average inflation 1954-1973 : 2.40%
average...Rob,<br /><br />Average inflation 1954-1973 : 2.40%<br /><br />average inflation 1983-2013 : 2.89%<br /><br />Look also at unemployment, it soared after 1970, no wonder inflation was easier to control. That inflation was as low int he full employment period shows the total failure of the recent paradigm. Most developed countries had unemployment at 2% (!!!!!) prior to 1970.<br /><br />http://bilbo.economicoutlook.net/blog/?p=20027<br /><br />PeterPhttps://www.blogger.com/profile/02032621777697914182noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-22664356494190373792013-08-09T09:51:16.753-07:002013-08-09T09:51:16.753-07:00The period of inflation targeting was preceded by ...The period of inflation targeting was preceded by 2 decades of rising inflation.<br /><br />http://www.multpl.com/inflation/tableRob Rawlingsnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-85973760863120108812013-08-09T02:57:39.569-07:002013-08-09T02:57:39.569-07:00I agree BJ, but you can use high unemployment to d...I agree BJ, but you can use high unemployment to destroy worker bargaining power and bring down unit labour costs. The money supply will continue to rise, due to the dynamic you point out, but it may dent inflation (as inflation and money supply growth are not tied in the way the monetarists think). Philip Pilkingtonhttp://fixingtheeconomists.wordpress.com/noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-8711602910856678522013-08-08T15:33:23.698-07:002013-08-08T15:33:23.698-07:00Increased interest rates also mean greater interes...Increased interest rates also mean greater interest incomes to the private sector. The only way to make a case that higher rates must reduce spending is by assuming demand for credit is infinite.Anonymoushttps://www.blogger.com/profile/11018306000410021518noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-12671878990117786502013-08-08T14:55:57.467-07:002013-08-08T14:55:57.467-07:00Again you're dodging the point. We had price ...Again you're dodging the point. We had price stability for decades before so-called inflation targeting, yet you chose to leave that data out suggesting inflation only came under control during the "monetarist" period, which is of course absurd. Just about anything can be made to correlate when you cherry pick data sets.Anonymoushttps://www.blogger.com/profile/11018306000410021518noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-131283834302804182013-08-08T14:50:36.194-07:002013-08-08T14:50:36.194-07:00It is generally undesireable when sonething doesn&...It is generally undesireable when sonething doesn't work, you're correct on that. Anonymoushttps://www.blogger.com/profile/11018306000410021518noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-23050640344714307042013-08-08T13:04:04.096-07:002013-08-08T13:04:04.096-07:00To some extent maybe due to the increased unemploy...To some extent maybe due to the increased unemployment. But a good deal of it would have carried on regardless due to the oil price hikes.Philip Pilkingtonhttp://fixingtheeconomists.wordpress.com/noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-50596245250599359052013-08-08T12:30:11.192-07:002013-08-08T12:30:11.192-07:00So if the fed had increased interest rates in the ...So if the fed had increased interest rates in the 70s would it have reduced inflation ?Rob Rawlingsnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-30223793273969069602013-08-08T12:00:35.352-07:002013-08-08T12:00:35.352-07:00No. The central bank has a control over interest r...No. The central bank has a control over interest rates. Changing the interest rate has effects, albeit ones that are far less linear than what mainstream/Austrian theory applies.Philip Pilkingtonhttp://fixingtheeconomists.wordpress.com/noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-30521958242180055662013-08-08T11:18:44.276-07:002013-08-08T11:18:44.276-07:00The logic of your views appears to be that not on...The logic of your views appears to be that not only at the ZLB but at all times monetary policy has no effect because whatever policies the CB implements to change the monetary base will be offset by changes in other types of credit and/or velocity.<br /><br />Is that a correct understanding ?Rob Rawlingsnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-36332927400785427782013-08-08T10:47:14.010-07:002013-08-08T10:47:14.010-07:00Bob,
The period of low inflation coincided with th...Bob,<br />The period of low inflation coincided with the period of insufficient deficits and much higher unemployment than in 1950-1970.PeterPhttps://www.blogger.com/profile/02032621777697914182noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-2131196159310187402013-08-08T09:30:17.457-07:002013-08-08T09:30:17.457-07:00Yes it would have. The Fed do not have control ove...Yes it would have. The Fed do not have control over the money supply. But even if they did new types of credit would have come into existence and velocity would have increased.Philip Pilkingtonhttp://fixingtheeconomists.wordpress.com/noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-27719911199418970532013-08-08T08:59:51.757-07:002013-08-08T08:59:51.757-07:00Phillip, I read your post and actually I don'...Phillip, I read your post and actually I don't disagree too much with the socio-economic background you described that contributed to the inflation of that time.<br /><br />However I'd like to ask you question: If the fed had refused to expand the monetary base during that time do you think the inflation would have occurred anyway to the extent and length of time it did ?Rob Rawlingsnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-53288588168265394822013-08-08T08:07:58.640-07:002013-08-08T08:07:58.640-07:00Due to a number of factors. One being the massive ...Due to a number of factors. One being the massive unemployment that brought down ULCs. No one doubts that unemployment can be created through massive interest rate hikes. Also, move toward natural gas and a falling oil price.<br /><br />http://fixingtheeconomists.wordpress.com/2013/08/06/animism-and-monetarist-thinking-the-inflation-in-the-us-in-the-1970s/Philip Pilkingtonhttp://fixingtheeconomists.wordpress.com/noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-61751011955867813312013-08-08T07:14:06.032-07:002013-08-08T07:14:06.032-07:00You're right Ben, it could be a total co-inci...You're right Ben, it could be a total co-incidence that a 25-year period of low-inflation just happened to occur during a period when that was the fed's target.Rob Rawlingsnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-52994557515018011642013-08-08T07:06:08.074-07:002013-08-08T07:06:08.074-07:00The monetarists experiment of the early eighties d...The monetarists experiment of the early eighties did have one huge positive result - inflation was brought under control in the US and UK during this period.<br /><br />However the policy of targeting growth of the money supply directly was not a success as Friedman acknowledged. There is a simple reason for this. The target did not take into account the velocity of money which meant that targeting M1 or M2 had indeterminate results on inflation and GDP, (especially if the target actually had an impact on velocity itself). These variables were very important and closely monitored by the monetary authorities who then tended to fudge the monetary targets in the face of unwanted movements especially in GDP.<br /><br />Long before this time monetary theorists including Hayek had recommended stable MV, not stable M and this is what modern monetarists tend to push for.<br /><br />I assume that LK and the other post-Keynsian's would be equally sceptically of a CBs ability to hit a NGDP-based target? I think though that there is strong evidence that such skepticism would be misplaced.<br />Rob Rawlingsnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-60827428870300521422013-08-08T06:28:08.403-07:002013-08-08T06:28:08.403-07:00Just because some thing can be done doesn't me...Just because some thing can be done doesn't mean that that thing will bring desirable results.<br /><br />Clearly targeting the money supply directly didn't bring good results , and this is all that Friedman is acknowledging.<br /><br />Is that such a complex thing to understand ?<br /><br /> <br /><br />Rob Rawlingsnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-90572570762405316102013-08-08T06:22:20.365-07:002013-08-08T06:22:20.365-07:00Regarding pre-1914, what I mean is that
(1) in n...Regarding pre-1914, what I mean is that <br /><br />(1) in nations with a central bank like the UK the banknotes of the central bank came to be effectively a form of base money and reserves, and<br /><br />(2) in systems without a central bank the banknotes or assets of the most powerful or trusted private banks were used *as if* they were base money in final interbank clearing without conversion into gold.<br /><br />That is, in nations without a central bank like Canada the banknotes of the “Bank of Montreal” (a sort of de facto central bank, although a private commercial one) were probably being used as reserves.<br /><br />More discussion here:<br /><br />http://socialdemocracy21stcentury.blogspot.com/2013/04/free-banking-in-scotland.html<br /><br />http://socialdemocracy21stcentury.blogspot.com/2013/03/the-classical-gold-standard-era-was-myth.html<br /><br />http://socialdemocracy21stcentury.blogspot.com/2012/09/why-did-canada-have-no-mass-banking.htmlLord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-49931319474937712712013-08-08T06:13:53.132-07:002013-08-08T06:13:53.132-07:00Depending on how the CB's policy is pursued, i...Depending on how the CB's policy is pursued, interest rates and the actual jacking thereof may not precede but rather result from their open market activities. For instance, if the CB doesn't offer interest on reserves, as the U.S. Fed didn't until recently, then even the description you just gave is flawed — if my reading of the above is true to your meaning.<br /><br />MB is only a lever in one direction: down. In the other direction, the only pre-emptive action you can take is to continue to raise a ceiling that the economy may not be large enough to reach, anyway. It would still has to grow into it at whatever rate it's bound to. And if you've been raising the ceiling in that fashion, then you'll have to do some backtracking before you get to the point at which the aforementioned downward levering can even happen.<br /><br />It's not clear to me that Market Monetarists have a strong understanding of <i>how</i> tightening monetary policy can have the mentioned effect, as all the explanations I've heard from them seem to beg the question wherever possible. It's just an alphabet soup of MV's and PT's, without any clarity as to which M, what V, and why it is that those are taken to be the independent side of the equation, rather than PT.<br /><br />V, in particular, is such a nebulous concept. As far as I can see, "measurements" of it are actually <i>derived</i> in the fashion of V = PT/M. So it's just an unstable coefficient drawn from an assumed identity, with no necessary causal value — just like the "money multiplier." <br /><br />As if that's not enough of a problem, we also have to consider that most of the money in our economy is credit money, and credit money doesn't "circulate" as such; it operates in an accounting cycle, being generated and extinguished at different points along the continuous sequence of transactions between different bank members. So it's no help at all to speculate about how many times the "total" money supply is spent in a fixed period (as though said supply itself were also somehow fixed). It's just a mess from every angle.Hedlundnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-23658614861182320532013-08-08T05:37:30.544-07:002013-08-08T05:37:30.544-07:00I'm interested in that "pre-1914" st...I'm interested in that "pre-1914" stuff. If you've got time, could you cite sources?Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-45746328776977393772013-08-08T04:45:27.703-07:002013-08-08T04:45:27.703-07:00Exactly. No one has less control over quantity th...Exactly. No one has less control over quantity than the Federal Reserve because it must necessarily prioritize the short-term interest rate.Anonymoushttps://www.blogger.com/profile/11018306000410021518noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-72461453820863045072013-08-08T04:44:08.406-07:002013-08-08T04:44:08.406-07:00That's a circular argument:
Assertion 1) The ...That's a circular argument:<br /><br />Assertion 1) The Fed can control inflation<br /><br />Assertion 2) Inflation is always monetary<br /><br />Assertion 3) In an arbitrary period inflation was low<br /><br />Assertion 4) Therefore the Fed controls the money supply<br /><br /><br />Note this thinking requires us to ignore everything else that was happening in our economy as well as decades of price stability before the inflation targeting of the period you cherry-picked.Anonymoushttps://www.blogger.com/profile/11018306000410021518noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-4511342670405965402013-08-08T04:35:20.595-07:002013-08-08T04:35:20.595-07:00Unfortunately the central bank has no more control...Unfortunately the central bank has no more control over monetary velocity than it does over aggregates, unless it has somehow gained the capacity to control tax rates, trade balances and savings desires when I wasn't looking.Anonymoushttps://www.blogger.com/profile/11018306000410021518noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-41827344766867361032013-08-08T04:10:44.074-07:002013-08-08T04:10:44.074-07:00Some nice gobbledeegook from monetarist types on h...Some nice gobbledeegook from monetarist types on here. When a theory like monetarism -- sorry "old monetarism" -- breaks down adherents become incomprehensible and say inconsistent things. You can say what you want about Friedman but he was (mostly) consistent. His modern day followers talk out both sides of their mouths. Very mediocre.<br /><br />Here's a nice Wynne Godley quote, by the way:<br /><br />"Governments can no more "control" stocks of either bank money or cash than a gardener can control the direction of a hosepipe by grabbing at the water jet."<br /><br />http://128.118.178.162/eps/mac/papers/9801/9801002.pdfPhilip Pilkingtonhttp://fixingtheeconomists.wordpress.com/noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-48699231609991482652013-08-08T02:23:45.648-07:002013-08-08T02:23:45.648-07:00On (4), yes, CBs must supply reserves or cause fin...On (4), yes, CBs must supply reserves or cause financial system to have shortages. But even here the commercial banks might innovate and find some other asset to act as reserves for interbank clearing, just as pre-1914 commercial banking systems without CBs managed to innovate and accept new reserve assets.<br /><br />Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.com