tag:blogger.com,1999:blog-2761684730989137546.post5943251416129959797..comments2024-03-29T02:19:19.866-04:00Comments on Mike Norman Economics: Paul Meli — Sectoral Balances within the Domestic Non-Governmentmike normanhttp://www.blogger.com/profile/03296006882513340747noreply@blogger.comBlogger47125tag:blogger.com,1999:blog-2761684730989137546.post-77895577017215604852012-11-01T19:09:39.038-04:002012-11-01T19:09:39.038-04:00Lars Svensen: MMT says State Money comes from the ...Lars Svensen: MMT says State Money comes from the State. And Bank Money comes from the Banks. And Monopoly Money comes from Parker Brothers.<br /><br />Do you disagree? <br /><br />But these days the Banks come running to Mommy, the State, when they poop themselves, not vice versa. Maybe a few hundred years ago it could be vice versa during an unusual period in human history. <br /><br />You really think Lerner was wrong when he said "Money is a creature of the State"?<br /><br />"Reputable economists"? An oxymoron. <br /><br />*****<br /><br />Think Ramanan is right here, might have said something slipshod recently here myself.<br />Calgacushttps://www.blogger.com/profile/06031818010224747000noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-43425402285897831252012-11-01T18:24:35.508-04:002012-11-01T18:24:35.508-04:00@ Ramanan
Right.
Definition of 'Gross Profit...@ Ramanan<br /><br />Right.<br /><br /><i>Definition of 'Gross Profit'<br />A company's revenue minus its cost of goods sold. Gross profit is a company's residual profit after selling a product or service and deducting the cost associated with its production and sale. <br /><br />To calculate gross profit: examine the income statement, take the revenue and subtract the cost of goods sold. Also called "gross margin" and "gross income".<br /><br />Read more: http://www.investopedia.com/terms/g/grossprofit.asp#ixzz2B0ojo500</i><br /><br />That's why I am suggesting to paul to star with the balance sheet and income statement as a general accounting paradigm, but putting the system in his own definitions.<br /><br />If one goes with the standard accounting definitions, I doubt it will be possible to come up with a simple explanation that non-experts can understand. At least no one has been successful yet as far judging by the results.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-46094617707863985912012-11-01T18:01:09.803-04:002012-11-01T18:01:09.803-04:00Tom, See what I mean?Tom, See what I mean?paul melihttps://www.blogger.com/profile/04604543110795683837noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-46537148374507636372012-11-01T17:52:04.477-04:002012-11-01T17:52:04.477-04:00Tom,
We 're on the same page. I could use som...Tom,<br /><br />We 're on the same page. I could use some input from time to time, but I would prefer to discuss these kinds of things on a back channel.paul melihttps://www.blogger.com/profile/04604543110795683837noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-3252199787514533572012-11-01T17:48:52.538-04:002012-11-01T17:48:52.538-04:00"Income equals (identity) expenditure plus pr..."Income equals (identity) expenditure plus profit (loss)."<br /><br />Tom,<br /><br />That is not what profit is!Ramananhttps://www.blogger.com/profile/11123448543333785121noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-16692017033418563072012-11-01T16:44:56.873-04:002012-11-01T16:44:56.873-04:00paul, I think it would probably be less confusing ...paul, I think it would probably be less confusing and more helpful to your cause of arriving at a closed system diagram if you drop customary terminology that has technically defined meaning. Just define your own technical terms and don't use terms already in use.<br /><br />I would also be guided by the two chief accounting identities.<br /><br />Stock: Assets equals (identity) liabilities plus net worth<br /><br />Flow: Income equals (identity) expenditure plus profit (loss).<br /><br />Other accounting relationships that break this out are consistent with these and with each other. But I would not be too concerned with this at this point. Accounting gets pretty involved pretty fast, and there is probably no reason to get into the nuances to construct a simple closed system model.<br /><br />ou could start thinking of a very simple closed economy with one firm and one household and elaborate from there. E.g. one firm and many households as the next step.<br /><br />Just stipulate your own terms and definitions, but I would suggest staying away from technical terms in other use.<br /><br />The idea is to construct a model that anyone can understand without needing to know the technical details of either economics or finance. Right now, neither the economists nor the finance people have been able to explain this clearly enough for non-experts to get their heads around. I think that a systems approach could advance the ball down the field.<br /><br />Then maybe we can match the model with the accounting satisfactorily.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-31039647656902399112012-11-01T15:20:05.966-04:002012-11-01T15:20:05.966-04:00"That's why MMT has not caught on at all ..."That's why MMT has not caught on at all with any reputable economists. They see the accounting errors.... "<br /><br />Oh c'mon Lars, most Economists ignore the accounting in general.... rsp,Matt Frankohttps://www.blogger.com/profile/11978352335097260145noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-79277948757185202472012-11-01T14:57:09.945-04:002012-11-01T14:57:09.945-04:00"Ramanan has been very thorough in explaining...<i>"Ramanan has been very thorough in explaining why your post is "totally wrong""</i><br /><br />He's been thorough in checking my grammar, that's for sure. Meanwhile, you're over here arguing for him by proxy and it's still content free.<br /><br />In every other respect Ramanan has been non-responsive so it isn't possible to tell whether he's wrong or right, although he has left some clues.<br /><br />Why do you care what I think anyway?paul melihttps://www.blogger.com/profile/04604543110795683837noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-34854988086759760942012-11-01T14:50:29.114-04:002012-11-01T14:50:29.114-04:00"I'm copacetic but that sort of flies in ...<i>"I'm copacetic but that sort of flies in the face of "Accrual Accounting" under which a firm can be "profitable" without actually getting paid…."</i><br /><br />Matt, they get paid in the next period, it all comes out in the wash. If a net gain doesn't show up in one period, it will show up in the next.<br /><br />This is the beauty (and simplicity) of closed-system analysis. All of those funky transactions and their timing become unimportant. We focus on net changes.<br /><br />When a business files it's first tax return, it gets to choose which way it wants it, cash or accrual. After that it's set in stone, no going back.<br /><br />Whichever way you keep your books, net profit over history will converge on the same number, but the date profits are recorded (the snapshot) will be different. It always adds up, of that you can be sure.<br /><br />There's no real advantage either way. The dead give-away is the IRS doesn't care which way you choose.<br /><br />They don't let you switch back-and forth because it gives you the opportunity to "finagle" the books to show losses so you can take tax breaks you normally wouldn't be able to take.paul melihttps://www.blogger.com/profile/04604543110795683837noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-33788905043292768942012-11-01T14:22:14.826-04:002012-11-01T14:22:14.826-04:00Paul,
"The way I look at it, what is the poi...Paul,<br /><br />"The way I look at it, what is the point of "profit" if it doesn't increase your net cash position?"<br /><br />I'm copacetic but that sort of flies in the face of "Accrual Accounting" under which a firm can be "profitable" without actually getting paid....<br /><br /> it's sort of a scam imo whereby accountants can book "profits" and everybody takes out commissions and bonuses and then when the deals look like they are unraveling because the customers can't actually pay (perhaps due to a lack of actual system balances that you point out), everybody leaves for new companies and no one can clawback the bonuses and commissions as the recipients have left the firms... <br /><br />rsp,<br /><br />Matt Frankohttps://www.blogger.com/profile/11978352335097260145noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-66367337338397118532012-11-01T14:01:27.625-04:002012-11-01T14:01:27.625-04:00Paul,
Ramanan has been very thorough in explainin...Paul,<br /><br />Ramanan has been very thorough in explaining why your post is "totally wrong". You refuse to understand why. Or you just can't understand why. Many of us tried to explain the same points to you earlier this year when JKH wrote his S=I posts. You didn't understand those either. You didn't even come close. <br /><br />You're a classic case of a non-economist who believes the MMT nonsense about how money only comes from the government and government spending. MMT completely distorts Godley's sector financial balances and the UMKC economists get it completely wrong by changing definitions and creating a government based view of the world. The only people who fall for it are non-economists. That's why MMT has not caught at at all with any reputable economists. They see the accounting errors and basic flaws in the understandings. <br /><br />But this was all explained to you in the past and you didn't get it then so you won't get it now. Plus, I've seen your debate style and it's among the nastiest MMT has to offer. Good day.Anonymoushttps://www.blogger.com/profile/14032553794912148798noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-10924539810150670512012-11-01T13:28:52.251-04:002012-11-01T13:28:52.251-04:00"Please get the definition of profits right. ...<i>"Please get the definition of profits right. Net profit is not equal the net accumulation of financial assets. "</i> - Ramanan<br /><br />Umm…I didn't make that claim, not even close.<br /><br />You are free to state the definition of "gross profit" for the record, although I'm discussing the net flow of funds between housholds and business entities, and I'm calling the difference "gross profit".<br /><br />Give it a name for me, I don't mind. The resulting arithmetic is the same in any case as presented, the net flow of funds is towards business, this isn't possible without a net add from an external source of funds.<br /><br />So far you have just been mailing in your criticisms…you're not even trying.<br /><br />@ Lars<br /><br />Your comment is content-free. Please make a specific technical criticism based on the relationships I've laid out in my post, ie net flows wrt arithmetic.<br /><br />Then be prepared to defend your logic, or lack of.paul melihttps://www.blogger.com/profile/04604543110795683837noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-46370903142140834272012-11-01T13:09:55.957-04:002012-11-01T13:09:55.957-04:00This was covered months ago when JKH explained it ...This was covered months ago when JKH explained it correctly. The MMT people still don't understand it because they think all money comes from the government and that the private sector is helpless to survive without government spending. <br /><br />Paul didn't understand the nuances then and he doesn't want to understand them now because then he'd have to admit that MMT is wrong on many other points as well.Anonymoushttps://www.blogger.com/profile/14032553794912148798noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-46394959590601904522012-11-01T12:42:47.964-04:002012-11-01T12:42:47.964-04:00"You're wasting my time"
Well yeah...."You're wasting my time"<br /><br />Well yeah. Tried hard to get you straight. And since long. <br /><br />Please get the definition of profits right. Net profit is not equal the net accumulation of financial assets. <br /><br />What you do by that post is to mislead people into thinking that profits in the aggregate come only as a result of government deficits by changing the definition of profits to your own convenience. Ramananhttps://www.blogger.com/profile/11123448543333785121noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-26867617580353434252012-11-01T12:22:32.710-04:002012-11-01T12:22:32.710-04:00""Net aggregate profits require an incre...<i>""Net aggregate profits require an increase in NET nominal financial assets."<br /><br />That is *totally* wrong. <br /><br />Totally, totally wrong. "</i><br /><br />You've had the opportunity over the course of this thread to make your case, which you have failed to do.<br /><br />"Totally, totally wrong." is not an argument and doesn't cut it. You're wasting my time.paul melihttps://www.blogger.com/profile/04604543110795683837noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-9320912356513404642012-11-01T12:18:34.164-04:002012-11-01T12:18:34.164-04:00"Are they including "profits" that ...<i>"Are they including "profits" that are created only by Accrual accounting?"</i><br /><br />Matt, I don't know, the paper is general in nature, there are no equations or numbers.<br /><br />Here's a link to the paper (which I got from Tom H.):<br /><br />https://dl.dropbox.com/u/33741/wp74.pdf<br /><br />The way I look at it, what is the point of "profit" if it doesn't increase your net cash position?<br /><br />At any rate, corporate profits are reported in nominal dollars. The S/B is a nominal relationship, a direct function of the quantity of NFA in the non-government.<br /><br />(G-T) and (X-M) are nominal expressions, thus (I-S) is expressed in nominal terms.<br /><br />My analysis is wrt nominal flows. I am referring to nominal profits and nothing more.<br /><br />In a closed system if businesses extract nominal profits from an investment, those profits must come at the expense of households.<br /><br />Any stock of funds that households hold from prior periods have to have come from net government spending or they would have to have borrowed them.<br /><br />The debt circuit goes south pretty quickly if the government doesn't monetize gains. The economy fails by any definition. Flow decays.<br /><br />Where did businesses get the $2 Trillion in cash they are sitting on? Not part of my argument it's a rhetorical question.<br /><br />That is my argument in a nutshell and it takes nothing beyond simple arithmetic (and a little logic) to make it.<br /><br />Accounting/economic definitions do not handicap the ability to do simple arithmetic.<br /><br />There are no unknown unknowns in there to undermine the argument.<br /><br />Any attempts by others to inject non-nominal elements into the discussion are side-stepping the argument, which they are free to do but what's the point?.paul melihttps://www.blogger.com/profile/04604543110795683837noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-78227855775995273692012-11-01T12:06:47.344-04:002012-11-01T12:06:47.344-04:00"Net aggregate profits require an increase in..."Net aggregate profits require an increase in NET nominal financial assets."<br /><br />That is *totally* wrong. <br /><br />Totally, totally wrong. <br /><br />Second, that is not Minsky's definition of profits. His definition is the standard one. So please stop hiding behind Minsky. <br /><br />"it will require arithmetic"<br /><br />It is you who require arithmetic Paul. <br /><br />Ramananhttps://www.blogger.com/profile/11123448543333785121noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-40515820338503745512012-11-01T11:57:25.494-04:002012-11-01T11:57:25.494-04:00"Yes pretty clear that if government deficit ...<i>"Yes pretty clear that if government deficit is zero, profits NOT EQUAL to zero. "</i><br /><br />NET profits, in the aggregate, ie for the economy as a whole…<br /><br />…as a consequence of the closed system, it is impossible for any NET nominal gain in financial assets to occur with (G-T)=0 and (X-M)=0. <br /><br />Net aggregate profits require an increase in NET nominal financial assets.<br /><br />It's a simple statement, one which you continue to sidestep with obtuse responses. <br /><br />All you have to do is prove the counterfactual. Unfortunately for you, it will require arithmetic.paul melihttps://www.blogger.com/profile/04604543110795683837noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-60429541111765739722012-11-01T11:55:13.084-04:002012-11-01T11:55:13.084-04:00Paul,
Are they including "profits" that...Paul,<br /><br />Are they including "profits" that are created only by Accrual accounting?<br /><br />ie They are including "sales" or "revenues" that havent really settled on a Cash basis in the banking system?<br /><br />rsp,Matt Frankohttps://www.blogger.com/profile/11978352335097260145noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-76885774113609887052012-11-01T11:26:01.331-04:002012-11-01T11:26:01.331-04:00"Profits are possible, just not net profits i..."Profits are possible, just not net profits in the aggregate. I have not said otherwise."<br /><br />Now adding terminologies. <br /><br />You are still wrong. Profits are possible in the aggregate if netted. <br /><br />""In a more complex (though still highly abstract) structure, aggregate profits equal aggregate investment plus the government deficit." <br /><br />Pretty clear."<br /><br />Yes pretty clear that if government deficit is zero, profits NOT EQUAL to zero. <br /><br />You confuse matters. <br /><br />For firms as a whole, investment expenditure by one is a sales receipt for another and hence investment contributes to profits in the aggregate. <br /><br />HOWEVER, investment expenditure is not subtracted to arrive at profits. <br /><br />Unlike you Minsky knows this. Ramananhttps://www.blogger.com/profile/11123448543333785121noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-68399866726620006122012-11-01T11:13:15.315-04:002012-11-01T11:13:15.315-04:00"In a more complex (though still highly abstr...<i>"In a more complex (though still highly abstract) structure, aggregate profits equal aggregate investment plus the government deficit." </i><br /><br />Pretty clear.paul melihttps://www.blogger.com/profile/04604543110795683837noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-58810552195627008642012-11-01T11:11:33.844-04:002012-11-01T11:11:33.844-04:00"Minsky has profits even in the absence of go...<i>"Minsky has profits even in the absence of government deficits but in your case, firms' profits in the absence of government deficits is zero."</i><br /><br />Profits are possible, just not net profits in the aggregate. I have not said otherwise.paul melihttps://www.blogger.com/profile/04604543110795683837noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-16489373595694646242012-11-01T11:04:44.768-04:002012-11-01T11:04:44.768-04:00Minsky's definition of profits is not the same...Minsky's definition of profits is not the same as yours. <br /><br />You will keep making the same mistake again and again. <br /><br />Minsky has profits even in the absence of government deficits but in your case, firms' profits in the absence of government deficits is zero. <br /><br />"If (G-T)=0, p>0 is a closed system violation (which is impossible)"<br /><br />Happy muddling!<br />Ramananhttps://www.blogger.com/profile/11123448543333785121noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-42713459704803526792012-11-01T10:18:44.623-04:002012-11-01T10:18:44.623-04:00"Things would have been interesting if we wer...<i>"Things would have been interesting if we were discussing some nuances. But you completely screw up the definitions of profits and then keep asserting that there are no profits."</i><br /><br />Minsky defines profits in the quote I provided, and it is in harmony with my presentation. If you think otherwise we are speaking different English.<br /><br />The discussion is about closed system math. I am relating it to economic transactions that are constrained by that same math. Very simple argument.<br /><br />So far you have failed to address the problem I have defined. You've done everything but. <br /><br />If you don't understand or acknowledge the implications of closed system analysis then you aren't capable of addressing the problem. I can't force you to understand it, only you have the power to do so.<br /><br />The entropy comment is between Matt and myself, I didn't invite you into that conversation. Matt is a man of science, he knows what I am alluding to. Your comment about it is a cheap shot. No worries, I have thick skin.paul melihttps://www.blogger.com/profile/04604543110795683837noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-46936695292079947302012-11-01T09:55:11.039-04:002012-11-01T09:55:11.039-04:00Paul @November 1, 2012 9:39 AM,
What is you quote...Paul @November 1, 2012 9:39 AM,<br /><br />What is you quote is fine. <br /><br />However you are still wrong but do not see what Minsky says about profits is totally different from what you have and how you define it. <br /><br />It's a bit painful if you start bringing in icecubes and water melting and all that. It has nothing to do with what we are discussing. <br /><br />What you write is beyond ridiculous. Things would have been interesting if we were discussing some nuances. But you completely screw up the definitions of profits and then keep asserting that there are no profits. <br />Ramananhttps://www.blogger.com/profile/11123448543333785121noreply@blogger.com