For a long time the Aussie dollar (AUD/USD) has tracked gold and for good reason: Australia is a big gold producer.
The Aussie has been plunging nonstop since April 27 (and really, since hitting its high on Feb 28). It's been literally straight down without even the slightest bounce.
On the other hand, gold has rebounded a bit in the past two days. Looking at the relentless pummeling the aussie continues to take, I believe the gold market will start to head lower very soon.
are you sure...?
ReplyDeletehttp://www.youtube.com/watch?v=T4kHcEpH5Q4
http://www.youtube.com/watch?v=eON8mQA0rVA
I recall watching a video about 6mths back where Marshall Auerback was bullish Gold. I think it would be interesting to hear his justification for such a move. Especially considering how Mike labels Gold as a 'fetish'. An interesting inconsistency within MMTers.
ReplyDeleteTaxes suck money or Taxes pull money. MMT is really bad at using the english language to promote ideas. For example MMT?? Is it a theory? No. It actually describes how things are. Not how they should be, or how they can be if we believe enough. MMTers(stupid word, should be Chartilists) please use a dictionary and thesaurus before publicizing phrases. Money isn't a car, nor is it some substance that is 'pushed' by 'taxes'. Do we say that the vacuum cleaner 'drives' dirt into the vacuum bag?
ReplyDeleteTaxes demand money this is the best I think. 'demand' implies mandatory, and direction of money towards taxes.
ReplyDeleteTaxes suck money or Taxes pull money. MMT is really bad at using the english language to promote ideas. For example MMT?? Is it a theory? No. It actually describes how things are. Not how they should be, or how they can be if we believe enough. MMTers(stupid word, should be Chartilists) please use a dictionary and thesaurus before publicizing phrases. Money isn’t a car, nor is it some substance that is ‘pushed’ by ‘taxes’. Do we say that the vacuum cleaner ‘drives’ dirt into the vacuum bag?
ReplyDeleteShaun, what are you talking about?
ReplyDeleteThere is a comment in Moderation over at NEP. Saw a comment where Stephaine is emphasizing that MMTers say 'Taxes drive money', in response to another comment. Just reminds me of other naming absurdities by MMT. Gives MMT a really good impression when your trying to explain that something titled with the word 'Theory' is in fact an empirical description of reality. Instant egg on the face.
ReplyDeleteThen Cullen thinks just a little bit more and comes up with MMR, why didn't MMTers come up with first?
And Cullen's description of the J.G as a price buoy is more correct than Mosler's description of price anchor.
ReplyDeleteGood points, Shaun. And while we are at it, I also blame MMT for 'Take Your Kids to Work' day. Because NO ONE ever says to take them back home again. The fact that MMT does not address this issue in every single post is quite telling.
ReplyDeleteOne step at a time Trixie, of-course I agree though.
ReplyDeleteThe problem is that most people are clueless about what "theory" means in science. A theory is a general description. It is a causal explanation, generally formalized, that enables prediction, which is how specific hypotheses are tested. Hypotheses based on causation that are supported by evidence ("everything speaks for and nothing against") are recognized as being scientific "laws."
ReplyDeleteTheories are not prescriptive in themselves, but in their application. This is called "engineering: and "management", in which the criteria are effectiveness wrt goals and efficiency wrt means. Macro is theory. It's application in policy through the formulation and assessment of policy options is engineering or management.
And that folks, is a wrap.
ReplyDeleteFor the meaning of "nominal price anchor and its application, consult Modern Central Banking: an Academic’s Perspective. This is not an MMT article. It simply shows how "nominal price anchor" is a key economic concept. MMT is using it in this technical context.
ReplyDeleteI came up with the spelling Sean instead of Shaun. Why didn't MMT think of that? Gotcha MMT!
ReplyDeleteThe problem is that most people are clueless about what "theory" means in science.
ReplyDeleteThen choose (a) more appropriate word(s). Otherwise most people will remain clueless about the message you have.
What are we going to do? Wait until everyone becomes educated so that they know what all the big words we use mean?
For the meaning of "nominal price anchor and its application, consult Modern Central Banking: an Academic’s Perspective. This is not an MMT article. It simply shows how "nominal price anchor" is a key economic concept. MMT is using it in this technical context.
ReplyDeleteWhy should MMT be bound to terms and descriptions that apply to a different context? Price Buoy conveys more meaning than anchor. I don't like the underlying message of MMR, but one should pay credit where it is due. Thanks for the paper though.
Price Anchor Ne-go-ti-aaator!
ReplyDeleteI agree with Schumpeter, who refused to be associated with a school or a label. Or to paraphrase Milton Friedman, there are correct ideas and incorrect ones. The job of rigorous thinking is distinguishing them, thereby increasing the store of correct ideas and decreasing the store of incorrect ones.
ReplyDelete"Why should MMT be bound to terms and descriptions that apply to a different context? Price Buoy conveys more meaning than anchor. I don't like the underlying message of MMR, but one should pay credit where it is due. Thanks for the paper though."
ReplyDeleteWhy. Because economists use language that economists use. Google "price buoy" and tell me what you find.
The funny thing is "price buoy" is supposed to communicate "an earnings floor rather than an earnings ceiling."
ReplyDeleteMaybe I'm dense but that's not what I get from "buoy" or "anchor" while the floor/ceiling wording seems crystal clear and accurate.
The paper Tom linked to is helpful with regard to the anchor concept but still a tough nut to chew on for popular consumption (or maybe just me, still chewing on it).
The difference between a buoy and an anchor is that one is a marker of a location (a mere pointer - so to say) while an anchor prevents the shifting of an object (say a ship) -- so to my way of thinking, a price anchor would probably be the right way of thinking about it.
ReplyDeleteThe point it linking to the paper is to show both how the concept of "price anchor" is both standard economic terminology and that the price anchor is considered necessary. The price anchor in a fixed rate system is obvious, but in a floating rate system not so much. This is the objection of many to a floating rate system. In the absence of an anchor set by policy in terms the fixed rate, the question becomes what the anchor should be.
ReplyDeleteSince no one else commented about it,
ReplyDelete@Unforgiven…
That was funny.
Why. Because economists use language that economists use. Google "price buoy" and tell me what you find.
ReplyDeleteSomething isn't correct just because everyone uses it. At the same time why place so much value on conveying the MMT message to mainstream academia? This the same dysfunctional group that has contributed to the disconnect between productivity and wages. Why don't ordinary people deserve the same attention?
The funny thing is "price buoy" is supposed to communicate "an earnings floor rather than an earnings ceiling."
Maybe I'm dense but that's not what I get from "buoy" or "anchor" while the floor/ceiling wording seems crystal clear and accurate.
In order for the J.G to work there must be a supply of J.G workers. Otherwise prices go up. Therefore the J.G is not a price anchor.
If there are no J.G workers, then how can the economy increase output in order to offset increasing demand and thus prevent inflation?
Also, if we assume that the J.G operates as the only price stability mechanism, how is the J.G suppose to 'anchor prices' once there are no J.G workers( or very little)? This is why the creators of the J.G say that the J.G can't work in isolation and requires fiscal policy in order to prevent cost-inflation/demand-inflation. Consequently this implies that fiscal policy must be used in order to maintain an adequate level of J.G workers.
Maybe a price-floor would be better. However the thing 'buoy' conveys a sense of dynamism - something that oscillates around a level.
People who spend too much time reading Cullen Roche seem, after a while, to become terminally confused about even the simplest of things.
ReplyDeleteIts called 'theory' because it is 'theory'. If you don't understand the meaning of the word, look it up in a dictionary.
Theory:
1. the analysis of a set of facts in their relation to one another.
2. abstract thought : speculation.
3. the general or abstract principles of a body of fact, a science, or an art.
4a. a belief, policy, or procedure proposed or followed as the basis of action.
b. an ideal or hypothetical set of facts, principles, or circumstances.
5. a plausible or scientifically acceptable general principle or body of principles offered to explain phenomena.
6a. a hypothesis assumed for the sake of argument or investigation b. an unproved assumption : conjecture.
c. a body of theorems presenting a concise systematic view of a subject.
(Merriam Webster)
"A set of assumptions, propositions, or accepted facts that attempts to provide a plausible or rational explanation of cause-and-effect (causal) relationships among a group of observed phenomenon. The word's origin (from the Greek thorós, a spectator), stresses the fact that all theories are mental models of the perceived reality."
http://www.businessdictionary.com/definition/theory.html
In contrast Cullen Roche's incoherent ramblings are not "realism".
ReplyDelete@Anon
ReplyDeleteThis isn't about strictly adhering to the literal definition of words. Its about choosing words that convey the best meaning.
How many ordinary people comprehend your dictionary definition of 'theory'? IMO most people associate the word 'theory' with 'possibly false'.
And even though most of Cullen's writing are incoherent, that doesn't necessarily imply that what he writes is always false.
"Possibly false" is one interpretation of the word "theory". As noted above.
ReplyDeleteDarwin's "Theory of Evolution" is "possibly false". Einstein's "Theory of Relativity" is "possibly false". Keynes' "General Theory of Employment, Interest and Money" is "possibly false".
MMT is a "theory" which contains many "facts". "MMR" is the same thing. The former accurately describes itself, the latter incorrectly and misleadingly describes itself.
If people don't understand the meaning of words or their usage, then they always have the option of educating themselves - it only requires opening a book called a dictionary or typing a word into a webpage called a search engine.
Creationists often like to say that evolution is "only a theory", as if this somehow makes their own beliefs more respectable. They gain confidence from their own arrogance and ignorance.
"MMRists" are also fond of saying that MMT is "only a theory".
nIf people don't understand the meaning of words or their usage, then they always have the option of educating themselves - it only requires opening a book called a dictionary or typing a word into a webpage called a search engine.
ReplyDeleteI believe this is an unreasonable expectation. Take the word 'theory', your definition requires that someone understands the concepts 'abstract' 'set of facts' 'abstract principles' 'body of fact' 'policy' 'procedures', etc. Most people come with some preconceived notion of what the word means, therefore not only do you have to educate them on the correct meaning, but they must also remove the old meaning and acquire the new meaning. Which is usually a challenging process.
Is MMT about teaching word definitions or economics? MMT doesn't have the luxury of demanding a prerequisite vocabulary. Just because you think some features on your product are great doesn't mean everyone else does. Sometimes features are bugs.
I don't get why MMT is so insistent upon adhering to current economic conventions and norms. MMT is never recognized by the mainstream, what is the point in trying to please them? MMT's audience is the common person not academics. This expectation that eventually everyone will become proficient in Academic norms & meanings is unrealistic.
The JG wage is called a nominal price anchor because it is a nominal price anchor. The JG wage is a fixed price that does not change in response to market conditions. Market prices may go up or down around it, but the JG wage remains fixed. What changes is the number of people receiving the fixed JG wage.
ReplyDelete1. If the economy is experiencing higher than desired inflation, the number of people on the JG fixed wage is increased as the result of fiscal policy changes (higher taxes, lower spending), or monetary policy changes.
2. If the economy enters into a recession, the number of people on the JG fixed wage increases as people are laid off in response to a lack of demand.
In both 1 and 2 inflation is kept relatively stable, in line with the nominal price anchor. In 1 prices are stopped frm rising, in 2prices are stopped from falling.
What is the role of an anchor? To fix an object in place and stop it from drifting off in any given direction. What is the purpose of a buoy? to serve as a marker of a given position.
ReplyDeleteIf a buoy is not anchored, then it can easily drift off over the horizon, never to be seen again.
If people don't understand the meaning of words or their usage, then they always have the option of educating themselves - it only requires opening a book called a dictionary or typing a word into a webpage called a search engine.
ReplyDeleteI believe that this is an unreasonable expectation. In order for an ordinary person to understand your definition of 'theory' then they would need to understand the concepts 'set of facts' 'abstract thought' 'principles' 'body of fact' 'policy' 'procedure', etc. Usually people have false ideas about the word 'theory'. Therefore they will need to remove the old definition and learn the new one. Which is usually a challenging process.
Is MMT about teaching word definitions or economics. Why is MMT so insistent on appeasing the mainstream academic norms and definitions? MMT isn't even recognized by the Mainstream. And the mainstream has significant foundational flaws. Just because you think that some features on your product are nice, doesn't mean everyone else does. Sometimes features are bugs.
MMT doesn't have the luxury of demanding newcomers have a prerequisite vocabulary.
..... What is the role of an anchor? To fix an object in place and stop it from drifting off in any given direction. What is the purpose of a buoy? to serve as a marker of a given position.
If a buoy is not anchored, then it can easily drift off over the horizon, never to be seen again.
It would be a 'price-anchor' if it was called 'J.G with fiscal manipulations'. However the J.G in isolation is not a 'price-anchor'.
Also the vertical behaviour of the buoy is what I see as being similar to the J.G. Try to push the buoy(prices) down and it will stabilize and try to stay afloat at a certain level. Meaning, unemployment increases, J.G kicks in and increases J.G payments, which keeps prices above a certain level.
If you think that the horizontal behaviour or any other behaviour of the buoy may give the wrong impression of the J.G, then perhaps there is a better word.
However, anchor is wrong.
"Something isn't correct just because everyone uses it."
ReplyDeleteMMT is already criticized for using non-standard language. In a discipline one has to stick pretty closely to the accepted universe of discourse to be considered in the game.
"At the same time why place so much value on conveying the MMT message to mainstream academia?"
Because most of the MMT professionals happen to be academics speaking to other academics. Warren, Marshall, and Rob Parenteau are financial types and speak to other financial types. The blogs are attempt to break it down simply enough for us to understand.
"This the same dysfunctional group that has contributed to the disconnect between productivity and wages.:
Yes and they happen to be the people in charge.
"Why don't ordinary people deserve the same attention?"
Ordinary people should be happy that professional take the time to blog, which they do gratis.
Since economics is so important to economic policy and politics, why don't ordinary people study economics?
Moreover, ordinary people tend to be run by emotion. What reaches them is rhetoric not logic and facts. There are studies on this. So professionals avoid dealing with ordinary people because it affects their professional cred. It's gets left to the PR people, the political operatives and politicians. Yes, it is a bad system.
"Creationists often like to say that evolution is Anon: ""only a theory", as if this somehow makes their own beliefs more respectable. They gain confidence from their own arrogance and ignorance."
ReplyDeleteThe "it's only a theory" people tend to be pushing some fundamentalist ideology (could be religious, could be something else), in which their ideology is either privileged from falsity through authority ("God's word", "first principles," "natural law") or "self-evident."
"However, anchor is wrong."
ReplyDeleteIf you understand the way economists use "anchor" it is exactly right and anything else would be non-standard. Every field has its standard vocabulary. If one wants to operate in a field then one has to acquire the language and methods, or hire an expert in the field to do one's work.
The job of popularization of professional literature falls to either pros who take the time and have the ability to do so, professional writers who see a buck to be made, or pros working with professional ghost writers. That's how just the game works, although the blogs have extended the reach of professional and it sometime confuses ordinary folks who are not familiar with technical terminology and the jargon of the field, which are second-nature to pros. It's the way they've been trained to think and communicate with each other.
Ordinary people should be happy that professional take the time to blog, which they do gratis.
ReplyDeleteHuh. Do they want some praise as well? The common folk should be oh so grateful that 'professionals' have the time and energy to write a few lines for them.
Why are they blogging in the first place, to help people understand? To improve society? I didn't realize that it was such a hassle. Or to show their intellectual superiority to the rest of 'high thinkers'.
I thought that MMTers started these blogs to spread the truth of the economic system to people. To help people - whom are mostly ordinary - understand how their economic system works. Silly me.
Since economics is so important to economic policy and politics, why don't ordinary people study economics?
One can't value something that can't be seen. If you see a truck coming towards a blind-deaf person on the road do you think 'should have learnt how to recognize trucks'?
Moreover, ordinary people tend to be run by emotion. What reaches them is rhetoric not logic and facts. There are studies on this. So professionals avoid dealing with ordinary people because it affects their professional cred. It's gets left to the PR people, the political operatives and politicians. Yes, it is a bad system.
Everyone is run by emotions.
Shaun, I can understand professionals writing popular books on the basis of "maximizing utility," i.e., making extra money, but they get nothing from blogging other than a lot of criticism in the comments and elsewhere when they try to simply a complex message and don't measure up to someone's standards.
ReplyDeleteMany of us remember the days before the Internet and blogging, when research was long, arduous and painstaking, and there were no mentor in the library or at the journals to answer questions for money, let alone free.
Blogging is a huge step forward for the gift economy, While it is true that knowledge is non-exclusive and non-rivalrous, it is still proprietary and professionals in most fields are not wont to do anything without the clock running.
Many people don't appreciate the monetary value being given way free on the blogs and through social networking. It's simply astounding.
I should add to this that there is also a lot of nonsense, misinformation, disinformation, propaganda rampant on the Interest and in the blogs, too. One has to be fairly sophisticated to be able to catch it and many get taken in and taken. too. So it's far from being only a plus.
ReplyDelete.... but they get nothing from blogging other than a lot of criticism in the comments and elsewhere when they try to simply a complex message and don't measure up to someone's standards.
ReplyDeleteWhat did they expect? Their ideas would be treated as flawless and easy to understand? It was going to be a simple matter of writing a few posts, and the rest will take care of itself? And I wouldn't say they only get the negative side.
Many people don't appreciate the monetary value being given way free on the blogs and through social networking. It's simply astounding.
This was always going to be a donation of resources. You don't make a donation to charity and expect the homeless person to recognize the value you have given away.
Shaun and Tom,
ReplyDeleteOne of the prime examples of value to be found on the blogs is Randy Wray's MMT Primer
That by itself is three college courses worth of information and discussion -- I would go so far as to say that you would not get as much from the three courses as you would from a careful perusal of the Primer, and the discussion and counter discussion.
"It would be a 'price-anchor' if it was called 'J.G with fiscal manipulations'. However the J.G in isolation is not a 'price-anchor'."
ReplyDeleteNo.
The jg WAGE is the price anchor.
Market dynamics + fiscal and/or monetary policy determine how many people receive the JG wage when inflation is above the desired level.
Market dynamics + fiscal and/or monetary policy determine how many people receive the JG wage when inflation is below the desired level.
In each case the 'price level' is kept in line with the price anchor - the basic fixed wage.
And "full employment" is maintained in each case.
(This is an important point, given that it is quite possible to have a 'price anchor' which does not consistently deliver "full employment". A gold standard, for example).
--------------------
"However, anchor is wrong."
No, because an "anchor" is a fixed point around which an anchored object drifts. The territory into which an object drifts may be classified as positive, i.e. inflation (+), or negative, i.e. deflation (-). In each case the "anchor" serves to bring the object back into line with the established "central", or neutral, point.
Market prices may move up or down, but the "anchor" remains static.
The concept of price anchor comes from tethering a currency to something real that determines its value in terms of the real economy. Gold and silver were supposed to do this, but neither had much use in the real economy. Silver does now but gold not so much.
ReplyDeleteWhat is the value of gold? it has little industrial value of than jewelry and it's value cannot be figured based on return. In fact the return is negative due to costs. It doesn't actual serve as an economic price anchor wrt value in the real economy.
The floor wage in the MMT JG sets the marginal price of unskilled labor. Labor is the highest value factor in the real economy based on what it can produce.
The MMT JG as variable buffer stock of employed and fixed price anchor is a real price anchor that also allows for zero involuntary unemployment as the buffer expands and contracts cyclically.
Nominal anchor has been a slippery concept for me but I think I finally got traction after that last explanation.
ReplyDeleteThink of the price anchor in terms of the question, "What is a dollar worth?" Well, in an untethered system, the answer is, "It depends on the inflation rate."
ReplyDeleteUnder gold standard of fixed rate of exchangeability is the fixed amont of gold, e.g., $x.xx per oz. (But what is gold "really" worth? For example, when Spain imported gold from the New World there was an increase in the gold supply and an inflation. Same with the discovery of gold in the Western US in the 19th c.)
With the MMT JG a dollar is worth an eighth of an hour of unskilled labor if the wage floor is fixed at $8.00. The floor wage does not change as the buffer stock of employed expands and contracts cyclically, establishing a fixed tether for the value the the USD in terms of nominal labor cost.
Also, a minimum wage law is meaningless, unless there is a job guarantee to anchor that wage.
ReplyDelete