tag:blogger.com,1999:blog-2546602206734889307.post291259433589810149..comments2024-03-28T04:29:22.717+00:00Comments on mainly macro: Eurozone fiscal policy - still not getting itMainly Macrohttp://www.blogger.com/profile/09984575852247982901noreply@blogger.comBlogger44125tag:blogger.com,1999:blog-2546602206734889307.post-66426408537427478472015-04-14T17:27:30.776+00:002015-04-14T17:27:30.776+00:00This post is very useful and helpful. I like your ...This post is very useful and helpful. I like your posts. I always follow your Posts. I hope, in the future, you will present us with such important posts.<br /><a href="http://vettys.com/pathway-to-the-paralegal-profession-how-to-become-a-paralegal/" rel="nofollow">how to become a paralegal</a><br />Anonymoushttps://www.blogger.com/profile/04368247962118623069noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-39472850744783048552015-03-16T17:44:29.613+00:002015-03-16T17:44:29.613+00:00I really like that your reply the most important p...I really like that your reply the most important point in the post is an utterly nonsensical offering with not even an argument- let alone evidence. Between that and your suggestion that the overnight rate is equivalent to the ZLB means you can be safely ignored.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-41305191744046543102015-03-04T15:55:02.881+00:002015-03-04T15:55:02.881+00:00I'm not talking about base money. I'm talk...I'm not talking about base money. I'm talking about cash, deposits, bonds -- anything that is viewed as "money" in today's system. And I say there is no money -- only different kinds of IOUs.<br /><br />As you are unable to "unlearn" money, I'll pose the following question:<br /><br />Has, or has not, the velocity of "money" slowed down markedly in most if not all of the advanced economies between 1982 and 2014?<br /><br />And if it has, I would like you to prove wrong my hypothesis:<br /><br />Had the velocity of "money" remained stable between 1982 and 2014, we would have seen substantially smaller growth in the quantity of "money" (and thus, quantity of debt) than we have and still we would have achieved the same economic growth we have.<br /><br />I don't believe in the quantity theory of money. It's badly flawed. But I try to argue in the terms you use.Peter Golovatscheffhttps://www.blogger.com/profile/16845984508247222295noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-19994345743131350662015-03-04T11:59:12.219+00:002015-03-04T11:59:12.219+00:00That is not utopia, that is what capitalism is whe...That is not utopia, that is what capitalism is when economy grows. When this process stops it causes recession and if it was severe enough to start deleveraging process ( destruction of money) then it causes depression.<br /><br />How can I be wrong about money when money can be many things and type of money differs in diffferent countries? I mostly described fiat money there when it is used properly to the gratest benefit to society.<br /><br />Total amount of money is not the sole reason for economic growth, there is velocity that is dependent on amount of money growth acceleration. You are talking about base money, while i am talking about all types of money used in economy.Critical Tinkererhttps://www.blogger.com/profile/08540226813192385645noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-253918837946705102015-03-04T08:43:17.594+00:002015-03-04T08:43:17.594+00:00I'm also for debt forgiveness. It needs to hap...I'm also for debt forgiveness. It needs to happen, because many debtors will not be able to pay their debts back. And because the little people should not be squeezed. It's going to be very hard in practice to find out whose debts need to be forgiven. Everyone needs to suffer, both debtor and creditor, but no one more than he -- and ultimately, the society -- can take.<br /><br />But this doesn't change the fact that you're wrong about "money". What you describe is a utopia. There is no easy way out from this debt overhang. You have misunderstood the logic behind "money", as we all have. If you go and read Schumpeter (for instance, "Theory of Economic Development") and other economists from his days and earlier, you might understand how the total amount of "money" is not what ultimately drives economic growth and a higher standard of living. Economic growth is attainable even with a declining total amount of "money".Peter Golovatscheffhttps://www.blogger.com/profile/16845984508247222295noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-26154988601670546042015-03-03T15:15:37.270+00:002015-03-03T15:15:37.270+00:00I have my synthesis formed, for sovereign and non ...I have my synthesis formed, for sovereign and non sovereign countries for capitalist system and for communist system. That would be four synthesys.<br /><br />All synthesys comes down to a form of debt forgivness, without it can not function. It is a crucial point that enables and represents solidarity and cooperation of societies that are slowly solving its problems. Money is what motivates society to cooperate and implement familly values onto whole country, cooperating toghether to work on finding solutions toward better life.<br /><br />Money growth is esential part of any economy. It is instituted through banks issuing credit and public debt as a mean to return savings back into economic activity.<br />So, net credit creation have to be positive and also public debt have to keep growing in order to keep liquidity growing. Net credit inflow is neccessary to keep old debts repayable and public debt is to keep liquidity from leaking due to negative trade- not to allow money leave the country.<br />Imagine those countries with negative trade balance for decades allowing the money to leak out of the country. In few decades such country would have no money left for domestic economy. That is why Greece accumulated such debts and is in trouble when they ask for that money to leave the country to pay off debts even tough sellers to them got their money.<br /><br />Rules for healthy economy is evergrowing debt enabled by wage push inflation and no country can ever reduce its debt unless there is economic war going on and power empires want to destroy such country then such country must repudiate all its debts.<br /><br /> Debt forgivness is implemented through wage pushed inflation that reduces burden of debt over time and it is a measure for masses. For those with less luck there must be a bankrupcy intsitution that allows them to start over.<br /><br />If only there could be that those with low income get to have better credit score and those with high income lower score then inequality would be reduced. There is a great benefit to having a credit, but present credit scoring is a way to make poor poorer and rich richer. Credit score is what makes credit really expensive to poor people while cheap for already rich.<br />To prevent powerfull buying political power over time and remove such policies that enable growth there should be high marginal tax on wealthy and corporations in the level of 90%. This high marginal tax have multiple ways to keep machine well oiled and economy humming. Not to fund government but to prevent looting of corporations and more equal sharing of profits to lower employees.<br />Critical Tinkererhttps://www.blogger.com/profile/08540226813192385645noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-3951123297436213532015-03-03T09:19:31.712+00:002015-03-03T09:19:31.712+00:00Jure,
I whole-heartedly agree with you on the fol...Jure,<br /><br />I whole-heartedly agree with you on the following (=you're writing my thoughts out):<br /><br />"Oh, i am Minskyite too, but also Keynesian, Fisherite, Marxist, Shumpeter, MMTer, Philipsite Krugmanite... but also Friedmanite, Ricardian, Smitheran...<br />They all have different topics and different time horizon but all of them have something important to say that can be used to trully fully understand economy. Sometimes one side is aplicable, sometimes other side applys, depending in what condition economy is in and what particular topic is about.<br /><br />Macro is what gives the full picture and what conditions are signaling to agregate, but micro is what matters to people, how people live and what needs to be done to help them when suffering is present. So it is important to include people and their experiences because that is why macro and micro is created - to help people live better lives. Otherwise economic theory is useless.<br /><br />State is also created to help people so state accounting should be used with such goal in mind.<br /><br />[...]<br /><br />If state is not helping people then it is doing wrong and should change its policies. All state rules were accepted through social conventions and democratic rules, so we can change them to start helping all people, cause we can."<br /><br /><br />I really do. Think about this for a moment. On some "moral" or "value" continuum, I'm fully on your side. That's why I'm here, trying to argue *about scientific matters* with people who more or less share my goals/opinions/beliefs when it comes to the *normative* side of economics.<br /><br />I'm no Minskyite. Neither am I Keenanite. There is no school of economic thought where you could fit me. And instead of trying to start my own school, I'm trying to form a synthesis. Sounds ambitious? Hell, yes. But what can I do if my reason says it must be possible -- if I have a fairly simple credit theory which seems to have a massive explanatory power? All I can do is proceed.Peter Golovatscheffhttps://www.blogger.com/profile/16845984508247222295noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-74168781298427031552015-03-03T09:02:48.581+00:002015-03-03T09:02:48.581+00:00Acorn,
I'm a pragmatist. I have no political ...Acorn,<br /><br />I'm a pragmatist. I have no political leanings whatsoever (unlike you?). I'm against The Big Casino -- what has been going on with "financialization" since 1980s is a terrible mistake. Bankers don't deserve their big paychecks, as they work in a government utility type of industry. I'm for the "little man", because I think that only by taking care of the "bottom half" we can take care of our society. I would also call myself a humanist.<br /><br />What I say here comes from the positive, not normative, science I'm trying to do.<br /><br />The mistakes we have made are due to our common ignorance of the logic behind debt/credit. We are all to blame. Not just the "bankers" or the "rich and powerful", but the academic economists, central bankers, politicians -- you and me.Peter Golovatscheffhttps://www.blogger.com/profile/16845984508247222295noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-34523838821130963122015-03-03T07:59:55.618+00:002015-03-03T07:59:55.618+00:00Peter, this money thing is not that complicated. ...Peter, this money thing is not that complicated. Politicians and Spiv City of London sponsors (the 1%), would like you to think it is, so they can keep the Big Casino skimming off the top of the little people's income.<br /><br />Go back and read http://heteconomist.com/mmt-in-simple-parables/ . Statements like "talking about "helicopter money" and the possibility for financing fiscal deficits with it" is putting the Cart before the Horse. Best regards Acorn.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-6543679574680912052015-03-02T20:24:34.160+00:002015-03-02T20:24:34.160+00:00Peter Golovatscheff
Oh, i am Minskyite too, but al...Peter Golovatscheff<br />Oh, i am Minskyite too, but also Keynesian, Fisherite, Marxist, Shumpeter, MMTer, Philipsite Krugmanite... but also Friedmanite, Ricardian, Smitheran...<br />They all have different topics and different time horizon but all of them have something important to say that can be used to trully fully understand economy. Sometimes one side is aplicable, sometimes other side applys, depending in what condition economy is in and what particular topic is about.<br /><br />Macro is what gives the full picture and what conditions are signaling to agregate, but micro is what matters to people, how people live and what needs to be done to help them when suffering is present. So it is important to include people and their experiences because that is why macro and micro is created - to help people live better lives. Otherwise economic theory is useless.<br /><br />State is also created to help people so state accounting should be used with such goal in mind.<br />You say that we have to live in negative growth economy because too much private debt. No, we do not have to, we just accept theories that says that due to powerfull propaganda, but we could use different theories that say opposite (if we could force government to do it). If state is not helping people then it is doing wrong and should change its policies. All state rules were accepted through social conventions and democratic rules, so we can change them to start helping all people, cause we can.<br />So, debts could be forgiven and there is no more "need" to have negative growth. Tomorow we could start growing at 10% rate if we forgive debts as through mass bankrupcies. So that we can grow debts again as we did for last 80 years. So, today i am Keenanite the most or Yanis Varufakisite.<br /><br />First, after debt jubilee, increase minimum wage to the inflation corrected 70' level and also raise top marginal taxes to post WWII level and we will go back to growth right away.<br />Solution to GFC is same as the solution to Great Deppression, cause the causes are same. We can go Hitler's way and employ everyone within 2 years or FDR way and do same in 5 years. Hitler just printed alternative money as needed and FDR created banks that did the same. We should not follow military way as they did, of course.Critical Tinkererhttps://www.blogger.com/profile/08540226813192385645noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-55679670061683124102015-03-02T18:58:36.286+00:002015-03-02T18:58:36.286+00:00Keep taking the pills Peter, you will get better, ...Keep taking the pills Peter, you will get better, I promise.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-18370293399513751972015-03-02T18:45:53.695+00:002015-03-02T18:45:53.695+00:00Acorn wrote: "No it isn't Peter, it is a ...Acorn wrote: "No it isn't Peter, it is a "tax credit". The government would call it a "you owe me". All FIAT currencies have to have some attribute that gives them value. In every fiat currency economy I can think of, it is the requirement for residents to pay their taxes in the sovereign currency, that gives that currency value."<br /><br />And who is the government if not we -- the taxpayers? We are talking about an IOU, issued by the taxpayers. For the person or a business who receives it as a consequence of government spending (government buys something, or it's a transfer payment) it is a "you owe me". And the "you" is the taxpayer. Which taxpayer, depends on how this person or a business will use the IOU and, thus, who will end up using it to get rid of his/her/its tax obligation. (These IOUs are not "ear-marked", so we cannot follow them through the system. But the logic holds on macro level.)<br /><br />This is a very basic (chartalist, I assume) explanation. And when we are talking about "helicopter money" and the possibility for financing fiscal deficits with it, we are talking about partly breaking this "debt through taxation" logic which ultimately gives the government IOUs their value. Governments have "tinkered" with it throughout the ages, but it hasn't usually ended well. This is not about "a little bit of inflation when we need it", but about playing with agents' *non-linear* trust in the currency.<br /><br />As I say in my post "Money Pays For Nothing":<br /><br />"We could think of this ultimate logic -- which goes unnoticed by most of us -- behind the value of "money" as a law of nature. We could compare it, say, to gravity. Thanks to the gravitational pull of Earth, people have been able to run fast for thousands of years without knowing that these gravitational forces existed. If we somehow managed to substantially lessen Earth's gravitational pull, we couldn't possibly expect people to run, and all kinds of machines to work, just as before. This much we know now, but we have not always known it. Way back in time, when we understood much less, we could have well imagined life to proceed as before even if the mass of Earth was greatly reduced.<br /><br />To me, the Chicago Plan is about breaking the supporting law, or logic, behind "money". It's about removing its link to debt -- a link which ultimately gives it its value -- and hoping that people's mistaken beliefs about "money" remain intact."<br /><br />http://clumsystatements.blogspot.no/2015/02/money-pays-for-nothing.htmlPeter Golovatscheffhttps://www.blogger.com/profile/16845984508247222295noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-24166017466400063552015-03-02T18:18:45.305+00:002015-03-02T18:18:45.305+00:00This comment has been removed by the author.Peter Golovatscheffhttps://www.blogger.com/profile/16845984508247222295noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-82148641003631461162015-03-02T18:18:07.598+00:002015-03-02T18:18:07.598+00:00This comment has been removed by the author.Peter Golovatscheffhttps://www.blogger.com/profile/16845984508247222295noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-82817341915877302962015-03-02T18:17:51.862+00:002015-03-02T18:17:51.862+00:00This comment has been removed by the author.Peter Golovatscheffhttps://www.blogger.com/profile/16845984508247222295noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-46670791538053873312015-03-02T18:17:42.081+00:002015-03-02T18:17:42.081+00:00This comment has been removed by the author.Peter Golovatscheffhttps://www.blogger.com/profile/16845984508247222295noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-24109960266740997382015-03-02T18:17:35.485+00:002015-03-02T18:17:35.485+00:00To Jure Jordan:
I see what you mean.
What you sa...To Jure Jordan:<br /><br />I see what you mean.<br /><br />What you say about Keynes's and my thinking... There might be something to it, as I agree with Minsky. Actually, I view my theory as a final proof that Minsky was right about the credit boom/bust cycle and stability leading to unstability.<br /><br />Sorry for not being precise enough. When I say that households won't de-lever, I don't talk in nominal terms. I live in a real world. What I'm interested in is debt/GDP (or, income).<br /><br />When you talk about the households' ability to take on more debt when interest rates are lower, you are in a micro world. (My theory is a macro theory.) On macro level, it doesn't work like that. Lower interest rates don't give us any *good reason* to increase the aggregate debt -- they only give us a *chance* to increase it, say, if we want to create more aggregate demand. And to increase credit spending to create more aggregate demand is the easy -- but not sustainable -- way to do it. Another way to do it would be through new, productive jobs for people.<br /><br />When it comes to inflating debts away. Sure. But then you should understand that it will lead to depression, just like not inflating them away. The real world doesn't work the way you think it works. You need to study more closely how credit works in the economy.<br /><br />Ever-increasing debt levels have been seen as the only source of economic growth since 1982 (although more importantly, since 2001). In the spiral we are in, it is probably true. But it is not sustainable. We need to tolerate negative growth in the future, and this is *because* of the debt levels we have built.Peter Golovatscheffhttps://www.blogger.com/profile/16845984508247222295noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-23586338008181033482015-03-02T18:10:46.421+00:002015-03-02T18:10:46.421+00:00This comment has been removed by the author.Peter Golovatscheffhttps://www.blogger.com/profile/16845984508247222295noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-79348019078488365762015-03-02T17:57:18.828+00:002015-03-02T17:57:18.828+00:00Peter
I would want to point out to you importance ...Peter<br />I would want to point out to you importance of inflating debt away to capitalist economy as the only source of growth. It is not important as total level of debt, but as a burden on income / spending power of debtors.<br />Governments used to give huge efforts on reducing the burden of debt on consumers. Financial sector was doing part of inflating debts away over time, now less so. Loans with fixed rates are the crucial for inflating debts away/ reducing burden of debts.<br />Inflation (only from wage growth price push) coupled with fixed rate loans, with interest tax deduction grately reduce burden of debts over time. This is very important to enable everincreasing debt levels which is the only source of economic growth (in normal times when deficits are lower). Some whom even that is not enough due to job loss or illness or divorce can enjoy bankrupcy which will relieve them of debt burden and start over again.<br /><br />In economic linque; Savers can enjoy positive real interest rates while at the same time borrowers enjoy negative real interest rates. If borrowers enjoy incresed wages, interest tax deduction and fixed debt rate then debt is being eaten away by inflation hence negative real interest rate.Critical Tinkererhttps://www.blogger.com/profile/08540226813192385645noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-18225246908838548642015-03-02T17:57:16.442+00:002015-03-02T17:57:16.442+00:00And this "new money" is not a new IOU?
...And this "new money" is not a new IOU?<br /><br />No it isn't Peter, it is a "tax credit". The government would call it a "you owe me". All FIAT currencies have to have some attribute that gives them value. In every fiat currency economy I can think of, it is the requirement for residents to pay their taxes in the sovereign currency, that gives that currency value.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-5790317945698696012015-03-02T17:41:57.512+00:002015-03-02T17:41:57.512+00:00Maybe you are not developing a new economic thinki...Maybe you are not developing a new economic thinking, maybe you are starting to fully grasp Keynes's writings. I would bet it is that since Keyness in his writings covered and used both sides of the arguments trying to explain different situations in economy. So he covered all but his writing is jumpy and hard to comrehend so some things are hidden from obvious understanding.<br /><br />Let me be more direct. <br />Your statement "Households will never "de-lever" if the economy and wages are growing." Deleveraging can be purely mathematical term, it doesn't have to mean 'reduction of debt' it can mean only that relationship between total debt and income changed. Total debt stays the same and income grew => deleveraging.<br />Another term is 'inflate debt away' for the same thing.<br /><br />If inflation is taken as wage push price growth then all is fine because such inflation reduces the debt burden.<br /><br />Another point of incresed debts and wage growth at the same time is the level of interest rates. If interest rates are falling then with the same income you can have higher debt since what matters for calculation of loan approval is level of monthly payments on wich interest rate has huge role.<br />I used to be a loan officer and two conditions for loan size aproval are monthly payments for the loan of 33% and all debts monthly payments of 41% of pretax income.<br /><br />So if interest rates trends are falling or rising will cause increased or decreased debt availability. And also if state is forcing private sector to leverage up so it could avoid rise in public investment (deficit) during economic stagnation and for external reasons like for purpose of entering EU or EZ, then it will increase private debt while wages are rising. And you can call that that 'credit being pushed onto households'.<br /><br />Critical Tinkererhttps://www.blogger.com/profile/08540226813192385645noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-4204560540773062452015-03-02T17:00:36.709+00:002015-03-02T17:00:36.709+00:00Not a bad idea really...Not a bad idea really...Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-13103323965661072672015-03-02T16:43:16.390+00:002015-03-02T16:43:16.390+00:00Acorn,
You don't need to lecture me. I've...Acorn,<br /><br />You don't need to lecture me. I've read my Bagehot and MMT. I understand very well what you mean, and I thought like you thought only around 12 months ago. I was wrong back then.<br /><br />"Currency issuing governments do not issue IOUs to finance their operations; every time it spends, it spends new money; not recycled money (called taxes)."<br /><br />And this "new money" is not a new IOU?<br /><br />My theory starts with accepting "money" as an IOU -- a credit. Then it answers the question "How does credit really work in our economy?". To answer this, we need to study the individual agent, accept the subjectivity of this matter. There's a lot about human psychology in this. How we anticipate, discount, the future.Peter Golovatscheffhttps://www.blogger.com/profile/16845984508247222295noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-46275046863741725582015-03-02T16:07:08.509+00:002015-03-02T16:07:08.509+00:00Peter at 06:08.
Currency issuing governments do no...Peter at 06:08.<br />Currency issuing governments do not issue IOUs to finance their operations; every time it spends, it spends new money; not recycled money (called taxes). The UK Treasury does not have to issue bonds. The fact that it does, is a throw back to when we were on the Gold Standard and Fiat currency was pegged to Gold. Issuing "gilts" to match Pound for Pound the government's deficit, is a voluntary imposition. The Treasury could equally leave all its "net expenditure" (deficit) as "reserves" at its personal bank, the BoE. It would not have to pay out £40 billion a year of free money to the holders of those Gilts.<br /><br />The government's net expenditure this year, will add to all the other net expenditures (the national debt) but don't worry about it because it is all being "saved" by the private sector in bank accounts; building societies; pension funds and in my case, bookmakers. Eventually, it will get spent; the government will tax it every time it gets spent and reduce it to a fraction of a penny.<br /><br />The government gets all its spending back that way. The more the private sector holds on to it, the longer it takes the government to get it back. BUT, the government doesn't give a toss, because it didn't cost the government anything to issue those Pounds in the first place, and it mugged the private sector into supplying the government with Hospitals; Schools; Motorways and more public assets than you can shake a stick at.<br /><br />You need to clear your thinking a little and understand that there are two types of money, vertical (government sovereign currency) and horizontal money (commercial bank credit). The second is convertible into the first; the first can't be converted into anything except more of itself. The first sums to nothing; the second sums to zero. All the best Acorn.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-24763726656859820072015-03-02T15:02:26.805+00:002015-03-02T15:02:26.805+00:00Ralph,
To me, issuance of bonds to cover a fiscal...Ralph,<br /><br />To me, issuance of bonds to cover a fiscal deficit is mostly about reducing “maturity mismatch". It’s more transparent that way. There are historical reasons for this, too. It’s not hard to imagine people distrusting a government which doesn’t set any timetable for creating demand (in form of taxes or bond issuance) for the IOUs it issues in course of its spending throughout the year. A government which chooses not to cover its budget deficit through bond issuance has throughout history been, more often than not, a government in trouble.<br /><br />Milton Friedman did not understand “money”. He was a monetarist. We should not listen to him on this matter – on many other matters, we should.Peter Golovatscheffhttps://www.blogger.com/profile/16845984508247222295noreply@blogger.com