tag:blogger.com,1999:blog-8599008936066276532.post2173822106951623373..comments2023-07-29T01:03:07.785-07:00Comments on The Chinese Capitalist: Argument Against Modern Monetary Theory and the New KeynesiansThe Chinese Capitalisthttp://www.blogger.com/profile/08893832291736797096noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-8599008936066276532.post-71068963366372292052010-09-11T07:22:36.610-07:002010-09-11T07:22:36.610-07:00Greetings to Chinese-American capitalist pig – hon...Greetings to Chinese-American capitalist pig – honk, honk.<br /><br />There are possible circumstances where your argument would hold water: in particular where a sizeable portion of the population thought that inflation was determined primarily by the size of the monetary aggregates and actually kept a close eye on those aggregates. But that is just no a realistic description of the real world.<br /><br />For example there has been an astronomic and unprecedented increase in the US monetary base in the last two years. Some people predicted inflation. Along with others, I predicted no effect. The former were wrong. The latter were right.<br /><br />Second, many countries tried to control inflation by controlling the monetary aggregates up to about ten years ago. It didn’t work. And it didn’t work because as numerous studies have shown, there is little relationship between the aggregates and inflation (except in the case of lunatic money supply increases, a la Mugabwe).<br /><br />The reason for this feeble relationship is that the money supply – inflation relationship is swamped by other factors: oil price changes, changes in consumer confidence, etc.<br /><br />Third, I suggest the main “money supply increase causes inflation” transmission mechanism is via demand. That is,1, give households money, 2, they spend some it, 3, if they spend the right amount, then full employment is obtained without inflation. Problem solved. Or 4, they may spend too much, in which case we get inflation.<br /><br />Getting the ideal money supply increase (3) would be difficult in an MMT regime, but then governments are not exactly brilliant at organising a nice stable and near full employment scenario using other tools, e.g. interest rate changes.<br /><br />Also, MMT does not rely just on money supply increases for its effect. If government prints money and uses the money to employ public sector workers, there is an immediate employment effect long before any significant money supply increase. Second, if government uses the money to fund a tax reduction, that will immediately increase workers’ pay packets, a portion of which will be spent immediately, and long before any significant money supply increase.Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-8599008936066276532.post-86950879579893329522010-09-08T11:55:59.861-07:002010-09-08T11:55:59.861-07:00Hyperinflation is a supply collapse phenomenon rat...Hyperinflation is a supply collapse phenomenon rather than a monetary one.<br /><br />http://bilbo.economicoutlook.net/blog/?p=3773WillORNGhttps://www.blogger.com/profile/03759801640058517521noreply@blogger.comtag:blogger.com,1999:blog-8599008936066276532.post-88099600853786465242010-07-29T01:20:17.325-07:002010-07-29T01:20:17.325-07:00New Keynesian theorists say the store of value in ...New Keynesian theorists say the store of value in the currency is backed by the ability to tax - thus offering incentive to increase demand for the currency in question. Also they claim that the government bond auctions are correlated to keeping the federal funds rate at the target set. Which would mean that the treasury and the federal reserve are working hand in hand as opposed to the commonly perceived 'independence' that the fed has. Not to mention they also commonly point out that private net savings is exactly equal to public net deficit or vice versa. In either case both are theories with their own merits. The truth lies somewhere between the two.Anonymousnoreply@blogger.com