Trickle down. Remember that? This was the idea that if we redirect real income towards capital by boosting profits via real wage suppression and/or corporate tax cuts, as if by magic, corporations will start investing the largesse in productive capital, which stimulates economic growth, and, the benefits ‘trickle down’ to the workers who made the initial sacrifices. The evidence base has never supported the idea yet it still resonates. I read two interesting articles yesterday, which are related even if at first blush they may not appear to be. The first reveals the shocking decline in productive investment by both private and public sectors and the long-term damage that that will have for our capacity to meet the climate challenge. The second shows that the arguments that cutting corporate taxes is good for economic growth is false....
Bill Mitchell – billy blog
Trickle down. Remember that. The evidence base continue to reject the notion as a scamBill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia
30 comments:
" The Reserve as well as the commercial banks create new money. The IOR remuneration rate impedes outside money, the reserve requirement impedes inside money. And there's too much inside money.
If the FED raises the remuneration rate on interbank demand deposits, it will cause an interest rate inversion, and nonbank disintermediation (drop in velocity). "
This statement is based around the discussion on the 2nd derivative. Macro guys talk about it all the time.
Here we have an old discussion on it - What The Velocity Of Money Tells Us About The Market
https://seekingalpha.com/article/4078609-what-velocity-of-money-tells-us-market
The real debate actually taking place in the comments section of the article. Well worth a read of the comments.
Which then leads to this..
https://seekingalpha.com/instablog/7143701-salmo-trutta/5313771-second-dimension#scroll_comments
Has MMT missed any of this ??
Or do we have it covered?
Do MMT'rs believe the statement above ?
“ The individualism in one breath, the collective in the next one.”
Yo it’s called paradox and is part of any Art Degree training…
https://en.wikipedia.org/wiki/Paradox
“ A paradox usually involves contradictory-yet-interrelated elements that exist simultaneously and persist over time.[5][6][7] They result in "persistent contradiction between interdependent elements" leading to a lasting "unity of opposites".[8]”
It’s perfectly normal in Art Degree methodology…you can’t complain about it..,
Science degree people think it’s hypocritical…
You guys make sure you have your AAA dues paid up….
Large Time Deposits, All Commercial Banks
https://fred.stlouisfed.org/series/LTDACBM027NBOG
US banks have 3.3T of reserve assets getting 1.65% IOR…. Soon to be 2.4%…
That’s resulting in (top line) about 4.5B per month of additional capital as this increases bank reserve assets with no corresponding increase in bank liabilities… USD transferred from TGA to depository reserve asset accounts..,
Put a 10x on that and it could provide about an additional 45B per month of lending authority…
MIke is reporting a current steady increase in bank credit..,
Derek you keep reading people who are looking at past system output to try to predict current system output…
We’ve never had these current conditions in which the policy is to pay IOR when the reserve assets are so high as % of total depository assets..,
“Apples and oranges”..,
Just look at what they are doing NOW….
Derek here:
“ the reserve requirement impedes”
The current reserve requirement is ZERO…. was reduced to zero in 2020 iirc… from previous 10%…
No longer applicable…
I'm just asking if we have it covered.
Or if we missed anything.
I'm reading it because he can tell you the exact month when inflation bottoms and peaks months the in advance.
I'm reading it because he can tell you the exact month when the 10 year bottoms and peaks months the in advance.
I'm reading it because he can tell you the exact month when SP500 bottoms and peaks months the in advance.
He has done it for years. Knows recently that certain things have been discontinued and no longer apply.
All using the 2nd derivative.
The fact that he can do it and has done it for 30 years. Make a me ponder if MMT has missed something.
https://monetaryflows.blogspot.com/2021/11/economics-is-exact-science.html
Told EVERYONE a year before when inflation was going to peak. Before the FED screwed everything up.
Knows recently that certain things have been discontinued and no longer apply.
Moans about it all the time Because some of the things that have been discontinued he used as his Crystal ball.
Had to combine other measures that produce the same results.
People think predicting when inflation, 10 year and SP500 will bottom and peak months in advance is impossible.
He has showed for 30 years it isn't impossible it is a science.
He says MMT'rs don't know the difference between a debit and a credit.
When it comes to the 2nd derivative.
But only in the USA.
Following all the debates he has had with mainstream economists online starting with Canadian Brad and ending up debating with all of the big names In economics.
I think his name is Spencer worked very closely with people at the FED was educated by the economist Dr Pritchard out of Chicago.
He really liked MMT.
In the early days of Bills blog he posted as Flow 5. Tried to explain to Bill that Bill had completely missed the obvious. Told Scott Fullwiler he had done the same.
It took me 4 years to figure all that out by reading just about every conversation be has ever had with anybody.
Only in the USA
Yes, Japan and Canada throw him for a loop. Can't explain what's happening there.
At the most basic level it works like this..
To calculate the true money supply, the flow that really effects the economy you have to differentiate between means of payment money that generates velocity and savings that don't.
He figured out how to do it. Why he can predict these things. The reason being is once you have figured out how to calculate the true flow. The lags it creates has never changed in over 100 years and never changes.
The way the banks used to create loans Baily Brothers had a lot more velocity than the way banks create loans now. So he measures bank lending differently only concentrates on lending that increases velocity.
That's it in a nutshell.
Says the budget deficit doesn't really measure velocity because they are savings.
By velocity he means Vt not Vi.
That the way a loan is made today if you zoom out and look at the system as a whole nothing changes. The assets and liabilities equal out and nothing changed.
The blob just shuffles it around reducing Vt.
The only way to change it is when lending is done by non banks and that increases Vt.
Or something like that anyway.
Deposit insurance massively decreased Vt
In fact, when they increased it bigly one time he predicted to the month when the SP500 would drop by 15%.
One of the biggest mistakes people make is if the FED measures inflation over a 8 month period.
Then you don't measure it over a month, quarter or a year.
Using the prediction You measure it over 8 months same as the FED.
Rate of change is way more important than the figure. Rate of change in the true flow once you know how to calculate it is what counts. Drives everything else.
You can predict most things in advance.
He's proved it time and time again.
Cmon Derek the guy would have to be the richest man in the world…
I can only share with you all the conversations I've read over the years. As far as I can tell he only trades the bond market futures.
Only got the bond market wrong once when QE first appeared on the scene. Apart from that he never mentions trading anything else. Never talks about his wealth.
The stars have to align when the seasonal pivot approaches. That might happen only once a year. That's for the tops and bottoms in equities and most of the time they don't move very far before the next pivot.
Predicting when inflation tops and bottoms doesn't say much.
Here's an example based around the June Pivot in 2018.
https://seekingalpha.com/instablog/7143701-salmo-trutta/5176318-4th-seasonal-inflection-point#comments
For his followers benefit.
They are not big moves. But I've seen him do these predictions many, many times. In the 17k comments on seeking alpha it happens All the time. I've read a lot of them.
All he says is...
" Syntex (who developed the birth control pill) was the first stock I bought (in 67). Bought my first options (IBM calls) in Dec 1974. Was a commodity broker from 79 to 82. Have never had a losing trade in Treasury-bond futures since 1979.
Nominal gNp hit 19.2% in the 1st qtr 1981, the FFR to 22%, & AAA Corporates to 15.49%. My prediction for the peak in AAA corporate yields for 1981 was 15.48% (& that bonds would bottom in Oct).
Predicted the month stocks bottomed in 82 & in 84. Predicted the 87 crash. Predicted the top in the Y2K bubble. Predicted that the top in stocks would be July 2007. Predicted the severe contraction in the 4th qtr of 2008 in January of that year. Identified the bottom in stocks as March 2009. The markets confused me only once - when the FED executed QE2 (but I nailed the bottom in the CPI in Jan 2011 i.e., 7 months before it bottomed out). "
I trawled the internet and found an old blog were he made some of these predictions when he used the name flow 5. Sure enough he nailed them.
You can see some of his other predictions as Flow 5 in 2012 here
https://seekingalpha.com/user/79825#comments
I know it sounds crazy, I know it sounds impossible but .......
I've tried for a couple of years to find out what he thinks MMT has missed. But he speaks in riddles and just say we don't know the difference between a debit or a credit. I think it is Vt he's talking about.
He says..
" In "The General Theory of Employment, Interest and Money", John Maynard Keynes’ opus ", pg. 81 (New York: Harcourt, Brace and Co.), gives the impression that a commercial bank is an intermediary type of financial institution (non-bank), serving to join the saver with the borrower when he states that it is an “optical illusion” to assume that “a depositor & his bank can somehow contrive between them to perform an operation by which savings can disappear into the banking system so that they are lost to investment, or, contrariwise, that the banking system can make it possible for investment to occur, to which no savings corresponds.”
In almost every instance in which Keynes wrote the term "bank" in the General Theory, it is necessary to substitute the term non-bank in order to make Keynes’ statement correct.
This is the source of the pervasive error that characterizes the Keynesian economics, the Gurley-Shaw thesis, the elimination of Reg Q ceilings, the DIDMCA of March 31st, 1980, the Garn-St. Germain Depository Institutions Act of 1982, the Financial Services Regulatory Relief Act of 2006, the Emergency Economic Stabilization Act of 2008, sec. 128. “acceleration of the effective date for payment of interest on reserves”, etc. "
I've read every paper his lecturer Dr Pritchard has written. I've read at least 20 FED papers he linked to. I've read his old blog 4 times and his new blog 6 times. Read a lot of the comments on seeking alpha.
The guy might not speak in riddles and it just I am too stupid to understand it. The guy operates in a different educational sphere than me.
The only thing that runs through all of them like Blackpool rock is velocity.The Pritchard papers, the FED papers, the blogs, the comments it is velocity that sticks out. He uses Fischer's model to measure it and knows the values of M*Vt.
At the very beginning All I wanted to know is what MMT missed.
Ended up on this Alice in Wonderland journey, the more I learned the dumber I got.
How I found Alan Longborn and Balan.
re: velocity
The problem with velocity is that it does not distinguish between GDP and non-GDP transactions.
Solving the enigma of the ‘velocity decline’
The problems arising from the implicit assumption that nominal GDP (that is, PY) can be used to represent total transaction values (PT) are obvious. GDP transactions are a subset of all transactions. The mainstream quantity equation that uses income or GDP to represent transactions will thus only be reliable in time periods when the value of non-GDP transactions, such as asset transactions, remains constant (thus dropping out when considering flows). However, when their value rises, this will cause GDP to be an unreliable proxy for the value of all transactions. In those time periods we must expect the traditional quantity equation, MV = PY, to give the appearance of a fall in the velocity V, as money is used for transactions other than nominal GDP (PY). This explains why in many countries with asset price booms economists puzzled over an apparent ‘velocity decline’, a ‘breakdown of the money demand function’ or a ‘mystery of missing money’ - issues that severely hampered the monetarist approach to monetary policy implementation. —New Paradigm in Macroeconomics (R. Werner)
We don't know what M is because M is money that has been in flow, not static. We don't know what V is because who knows how many times money changed hands today, and we don't know what Y is because we can't decide which monetary transactions cause traction in the real exchange circuit and which don't.
That's how useful the theory is.
It’s monetarist….
Stocks have been rallying since June 15th when quarterly taxes were due…
Taxes were paid then we bottomed…
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