This is Tschaff's Typepad Profile.
Join Typepad and start following Tschaff's activity
Join Now!
Already a member? Sign In
Tschaff
Recent Activity
heavy hitter #2: http://neweconomicperspectives.org/2012/04/krugmans-flashing-neon-sign.html
1 reply
@DWB- "In the banking system, loans, including those for business investments, create equal deposits, obviating the need for savings as a source of money. Investment creates its own money." It's not silly at all unless you've been taught the textbook money multiplier story. Mosler, unlike most economists owns a bank and spent years working in depository institutions. Everyone, even Nick Rowe and Paul Krugman agree loans create deposits. Anyways, this reverses causality that savers are required to fund investment, it's not true when you have a CB that will supply reserves at their target interest rate. "Bernanke announces more QE tomorrow (pick a number). he says the fed will continue to buy assets until inflation hits 3%. in mmt land does or does this: not a) raise AD and/or b) raise inflation." I thought I answered that the last time with the link I sent "what if the government just prints money." So if the Fed action means your portfolio grows nominally, sure you might spend more than you otherwise would have, and that could cause inflation. If all that changed was you lost a very liquid treasury bill, and gained cash, you might spend less since you'll be earning less interest income. Overall the Fed returns to the Treasury every month a sizable profit from interest it earned on its assets. Had the Fed not owned these, that interest income would have been going to those the non-govt sector. It's the economic equivalent of a federal tax increase or a spending cut.* "now, same question, instead he says "ngdp" or output gap." Look, if the Fed's actions expand the net-worth of the non-govt sector, as in capital gains/losses, interest from the federal reserve to banks, this can indeed effect their spending decisions and close the output gap. This is not typical monetary policy though, this is typical fiscal policy. It should be noted that the change in net worth of the non-govt sector will be equal and opposite to the change in federal government's budget. There is a reason why we have our elected officials decide fiscal policy and not unelected, unaccountable, independent central bankers. "explanations using terms like "hidden fiscal policy" or "verticaltranactions" will be ignored." Look, MMT doesn't fit on a single blog post, it requires a time commitment, a significant one, at least until we figure out how to do that thing Neo does to learn new stuff. :-) *there are more things going on here, but I know you have little patients for long readings, so I just put the main point.
1 reply
Here come the heavy hitters: First up Steven Keen http://www.creditwritedowns.com/2012/04/banks-matter-krugmans-barter-mysticism.html
1 reply
@Ramanan "I guess Krugman's appeal to authority failed miserably :-)" :D
1 reply
lol, what made my skin creep is the use of the word money. Clarify your thinking, and ours of yours, Nick and talk about who's specific liability you're talking about.
1 reply
@Nick Rowe-Save yourself a headache, accept that central banks target interest rates, and they achieve this by having a perfectly elastic supply of reserves at their target rate every day. Quantity of reserves will change up or down depending on lending behavior of banks which is influenced by the price of reserves. Build the rest of your thinking around that information or you'll end up driving yourself (and all those who try to follow you) mad.
1 reply
@DWB "Some MMTers seem to think QE is nothing more that 'asset swaps'' Save yourself a tremendous amount of time and learn MMT from the developers, not autodidacts like myself. :-) QE is an asset swap. There is a lot more you can say about it as well. "and call expectations "magic'" You need to understand the context that they call in magic in. Usually it is in reference to the CB being able to create inflation via altering people's expectations of inflation via open market operations. People wrongly believe that a bigger monetary base = inflation, you know more of something dilutes its value. Krugman calls it a credible threat to act irresponsibly. See: http://www.winterspeak.com/2010/12/why-inflations-expectation-model-is.html The trouble is how can the CB actually create the inflation, since they don't actually add demand for real goods and services, how does the CB buying a security inflationary? See: http://neweconomicperspectives.org/2009/11/what-if-government-just-prints-money.html In short, it's possible for the CB to credibly create inflation a few ways and not how we commonly think they do. The CB can take huge huge capital losses in hopes people will spend more, they could buy loads of foreign currency importing inflation, they could do away with capital requirements (or enforcing them) in hopes banks go on a lending binge maybe helped by focusing loans on unproductive things, maybe raise interest rates so the interest paid to the non-govt sector on the national debt increases demand (though this one has so many wheels turning at once it's a little ambiguous to the inflationary results of an interest rate hike). Most of these things it is illegal for the CB to do for obvious reasons, but since we like thought experiments there ya go. MMTers prefer to use fiscal policy to target inflation, it's a much sharper and direct tool. "how its any different that new Keynsianism." For starters it includes banks in their models. "Yes, I've tried to read MMT stuff, get part way through, and I find it mind numbing, like trying to make sense of Dianetics with its own ill-defined lingo" They may not be the best writers, but nobody is perfect. Moser's seven deadly innocent frauds and soft currency economics is an easy read for everyone. There are videos if you're too lazy to read here: http://www.netrootsmass.net/fiscal-sustainability-teach-in-and-counter-conference/ It's a deep rabbit hole DWB.
1 reply
I am a student of MMT, so take everything I say as maybe correct with regards to the MMT literature... "I find MMT puzzling and annoying, there seems to be no explanation for how Bernanke's jaw is able to move the markets (expecations)" There are at least two explanations you can find in MMT. First, the fed just has to announce an interest rate target, and market participants will take it to that price knowing that it is foolish to bet against someone with an unlimited checkbook. It doesn't mean fools don't exist, if they do the NY Fed can give them a schooling. See http://www.nakedcapitalism.com/2010/03/auerbackparenteau-operation-twist-part-deux.html for more on this point. The ECB a few times that I'm aware of stepped in to buy Greek debt to calm speculative attacks on Greek debt, not the same as announcing an interest rate target, which for political/legal reasons they don't do, but nevertheless an example of how the CB changes market expectations. The second way is people try to guess the likely outcomes of what the Fed is doing and adjust their portfolio accordingly. Think QE will be inflationary? Buy up commodities and other inflation hedges, so you're wrong that expectations don't matter. "no private sector demand for loans" Where do you get this from? You couldn't be more wrong, private loan demand is endogenous in MMT's (and other post Keynesians) book. "no endogenous growth or productivity" Again, fear not, there is both of these in MMT. "and no nominal (or real) interest rates" Ok.. have you read ANY MMT literature? "or inflation (among other strange issues)." :-( ok... someone needs to go to Mosler's mandatory reading section before posting about what they haven't read, therefore doesn't exist.
1 reply
I should add that CBs (universally?) target rates, which has influence on the demand for reserves from banks.
1 reply
Very hard argument to follow Nick. So far everyone, even Krugman agrees that loans create deposits. The disagreement is over if the monetary base constrains bank lending. Krugman and the neo-classicals say yes, many central bankers, bankers, and empirical researchers say no. Krugman, regrettably, leaves out modern central bank policy from his story, a divorce that will leave him with false conclusions. Reading Scott Fullwiler's Modern Central Bank Operations— The General Principles would be a huge benefit to him.
1 reply
A group of economists, mainly at UMKC, have devoted large portions of their careers designing and simulating a job guarantee program. Their scholarly work can be found at the Center for Full Employment and Price Stability: http://www.cfeps.org/pubs/ Respected economists like Hymen Minsky also advocated a job guarantee program. Currently a candidate for US senate in Connecticut, Waren Mosler is advocating a job guarantee program. There is fierce resistance because economists are not widely supporting this powerful automatic stabilizer.
Toggle Commented Sep 30, 2010 on "The Ghost of Full Employment" at Economist's View
1 reply
The natural rate of interest is zero. http://bilbo.economicoutlook.net/blog/?p=4656 Low interest rates can be deflationary for a few reasons. Lower interest payments, say on car and house loans could make wages less sticky. In fact many borrower's costs are lowered. Conversely, high interest rates can add to supply side inflation, and yes to some degree decreased demand for credit. There is the Gibson paradox as Keynes put it, low interest rates decrease inflationary pressure, house buyers feel less buying pressure, housing prices stagnate or decline despite the low interest rate. There is a lot of empirical evidence to support this now.
1 reply
Tschaff is now following The Typepad Team
Aug 25, 2010