tag:blogger.com,1999:blog-2761684730989137546.post5646826340007473240..comments2024-03-28T04:13:36.779-04:00Comments on Mike Norman Economics: Martin Wolf schools BIS on sectoral balancesmike normanhttp://www.blogger.com/profile/03296006882513340747noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-2761684730989137546.post-15637186871497869292011-06-30T23:45:58.651-04:002011-06-30T23:45:58.651-04:00There is a good argument that QE is deflationary b...There is a good argument that QE is deflationary because it transfers the interest on the tsys that the cb purchases for its balance sheet to government, effectively depriving nongovernment of an increase of net financial assets through interest payments. <br /><br />Moreover, unless QE increases either spending or borrowing, it is not inflationary. QE1 and QE2 increased excess reserves by shifting asset composition and term without increasing nongovernment net financial assets. <br /><br />All the inflationary expectations were based on misunderstanding of how the modern monetary system actually operates. The transmission mechanism from excess reserves to increased borrowing/spending that was supposed to work, e.g., the money multiplier, didn't because the causality runs in the opposite direction. <br /><br />The money multiplier is actually an ex post accounting residual rather than the ex ante cause that mainstream theory erroneously presumes. This was pointed out by MMT economists weel before MMT was undertaken.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-81362800815139144052011-06-30T23:04:03.446-04:002011-06-30T23:04:03.446-04:00Though it's worth asking whether QE is technic...Though it's worth asking whether QE is technically inflationary or just psychologically inflationary, isn't it? The psychological effect wears off pretty quickly and the mechanical one is neither proven, nor theoretically sound under a fiat currency regime and western CB-policy.HarPenoreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-56158900626535934392011-06-30T07:22:38.573-04:002011-06-30T07:22:38.573-04:00Martin Wolf argues that “government structural def...Martin Wolf argues that “government structural deficits must be eliminated” and then, asks “where are the offsetting adjustments to occur?” Neither Wolf nor the BIS answer the question satisfactorily.<br /><br />Strikes me the answer is to reverse the process that brought to the deficit into being (which was borrowing instead of collecting sufficient tax). The reverse is to raise taxes and pay back the debt. That on its own would be too deflationary, but the latter problem can be remedied by obtaining some of the money for the “pay-back” from the printing press. That is, mix some Q.E. into the brew.<br /><br />Assuming the inflationary effect of the Q.E. equals the deflationary effect of the tax, the net effect is neutral: that is, there would be little effect on GDP, total numbers employed, etc.<br /><br />For a fuller explanation of this point, see: <br /><br />http://www.thejeffersontree.com/the-debt-and-deficit/Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-58740361032106803412011-06-29T18:17:12.235-04:002011-06-29T18:17:12.235-04:00Martin Wolf & MMT go waaayyyyyy back.
Abba L...Martin Wolf & MMT go waaayyyyyy back. <br /><br />Abba Lerner, in his last book, MAP: Market Anti-Inflation Plan, thanks him for reading & commenting on the manuscript. He clearly got something valuable from the master himself. The only other thankee there I recall that is still kicking is Alice Rivlin, who has become something of a deficit terrorist, or deficit dove at best. How that could happen is a mystery to me. It is like unlearning arithmetic, or how to ride a bike. Oh well, I guess Einstein was right on the infinitude of human stupidity.Calgacushttps://www.blogger.com/profile/06031818010224747000noreply@blogger.com