tag:blogger.com,1999:blog-2761684730989137546.post7273901828692062610..comments2024-03-28T04:13:36.779-04:00Comments on Mike Norman Economics: Irony comes full-circle. Paul Krugman touted as "MMT grand-poobah"mike normanhttp://www.blogger.com/profile/03296006882513340747noreply@blogger.comBlogger47125tag:blogger.com,1999:blog-2761684730989137546.post-38235191610507363412012-11-29T12:52:37.186-05:002012-11-29T12:52:37.186-05:00"Ya think?"
Well that appears to be the..."Ya think?"<br /><br />Well that appears to be the view of vimothy. i.e. save more, reduce consumption, and investment will increase (I'm guessing here because vim is being his usual cryptic self). <br /><br />“Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer. The maxim is so selfevident that it would be absurd to attempt to prove it. But<br />in the mercantile system, the interest of the consumer is<br />almost constantly sacrificed to that of the producer; and it<br />seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce”,<br /><br />(Adam Smith, 1776).<br /><br /> yhttps://www.blogger.com/profile/03233997168975370006noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-77973447893362529742012-11-29T12:15:44.365-05:002012-11-29T12:15:44.365-05:00But it seems unlikely that an importing country ca...<i>But it seems unlikely that an importing country can reduce that 'imbalance' by just consuming less/saving more, unless other countries are prepared to consume more, without some sort of recession or rising unemployment in the importing country. Could be wrong.</i><br /><br />Markets don't solve all problems as neoliberals claim. They often create problems that people have to solve. This is the case with international trade as the world goes into the global economy will a lot of imbalance among countries and regions, roughly sectioned into developed (eg. West,including Japan, Australia), emerging (eg. BRIC), developing (e.g. Indonesia), and under-developed (e.g. much of Africa) — with the petro-rich countries of MENA the wild card.<br /><br />Without concerted action and close coordination, this transition is going be messy and painful.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-79723467470259721612012-11-29T09:32:41.750-05:002012-11-29T09:32:41.750-05:00"But it seems unlikely that an importing coun..."But it seems unlikely that an importing country can reduce that 'imbalance' by just consuming less/saving more"<br /><br />Ya think? Hibernation worked for bears, for awhile, but even Polar Bears may soon be extinct.<br /><br />Rip Van Winkley never endowed a chair in economic development ... as far as I know. It just didn't work out.Roger Ericksonhttps://www.blogger.com/profile/17515506247888521516noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-60096223368144438942012-11-29T08:23:56.914-05:002012-11-29T08:23:56.914-05:00"Import-driven countries consume more than th..."Import-driven countries consume more than they produce and therefore use more net resources from other countries. This is a an imbalance of real resources and it shows up in employment"<br /><br />But it seems unlikely that an importing country can reduce that 'imbalance' by just consuming less/saving more, unless other countries are prepared to consume more, without some sort of recession or rising unemployment in the importing country. Could be wrong.yhttps://www.blogger.com/profile/03233997168975370006noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-961687492041212192012-11-29T07:07:04.819-05:002012-11-29T07:07:04.819-05:00instead of the Singularity, we may get the Psychos...instead of the Singularity, we may get the Psychosity (where individual human intelligence declines, to accommodate scaling of network intelligence; humans will become just one classs of dumb neurons in a vast brain);<br /><br />It's inescapable that cultural scaling requires componentization - i.e., simplification of system nodes, to allow transition to intelligence on another scale of magnitude.<br /><br />lots of implications from this;<br /> for example; we're squandering Trillions taking potshots at Taliban.<br />Why bother? Their own kids will render them into Talidandruff in one generation.<br /><br />I have a bad feeling about this. Sad, really. If we can't use what we can produce, then we're in the process of wasting our capabilities. <br /><br />Reminds me of that finding that all kids score at "Imagination Genius" level ... UNTIL they arrive at school, where we beat it out of them.<br /><br />There's hope, of course, but ONLY if adults get out of the way faster than they do now. That'll require a whole new culture, and the transition could get ugly. Or not. <br /><br />I'll get out of the way now. :) Roger Ericksonhttps://www.blogger.com/profile/17515506247888521516noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-47868841011104189262012-11-29T06:45:14.193-05:002012-11-29T06:45:14.193-05:00It's as many have long said.
Imagination is ...It's as many have long said. <br /><br />Imagination is far more important than technology.<br /><br />Human biology may once again become the limiting factor. If we can't throw away & rebuild entire cultures at the same rate as youngsters do cell phones ... we won't know what to do with what we can produce.<br /><br />What's the point of producing stuff, if you can't get or won't allow people to use it?<br /><br />At this rate, people will be Luddites by age 20, and retired by age 30. Can we drive change that fast, through these brains?<br /><br />Who says human evolution is slowing down. In 100 years, ONLY the ADHD may have survived, and 3 seconds may be considered a long attention span.Roger Ericksonhttps://www.blogger.com/profile/17515506247888521516noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-76808397840857792752012-11-28T20:32:14.634-05:002012-11-28T20:32:14.634-05:00ONLY if they resources gained by the importing com...<i>ONLY if they resources gained by the importing community are wasted, instead of being plowed into building yet more capacity and/or capabilities, by pursuing yet bigger challenges!</i><br /><br />Yes, but developed countries are now exporting jobs that will be robotized as wages pick up in developing countries, in exchange for trinkets. It's moronic. China is already robotizing.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-80008469208773621132012-11-28T19:52:59.677-05:002012-11-28T19:52:59.677-05:00Net imports "is a an imbalance of real resour...Net imports "is a an imbalance of real resources and it shows up in employment ... "<br /><br />ONLY if they resources gained by the importing community are wasted, instead of being plowed into building yet more capacity and/or capabilities, by pursuing yet bigger challenges!Roger Ericksonhttps://www.blogger.com/profile/17515506247888521516noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-40676074425963878522012-11-28T19:38:36.357-05:002012-11-28T19:38:36.357-05:00I would prefer to view it in real terms, i.e. wrt ...I would prefer to view it in real terms, i.e. wrt real resources instead of financial resources. Export-driven countries produce more than they consume and therefore supply net resources to other countries. Import-driven countries consume more than they produce and therefore use more net resources from other countries. This is a an imbalance of real resources and it shows up in employment, for example. The financial resources involved are just an ex post accounting record of this non-financial activity.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-41278560882099656322012-11-28T19:18:43.743-05:002012-11-28T19:18:43.743-05:00Instead of "importing capital" we could ...Instead of "importing capital" we could perhaps follow the old Samuelson textbook and say "exporting IOUs".<br /><br />This would have the advantage of implying a + sign to counterbalance the minus sign that is the result of the trade deficit.<br /><br />It would clarify the discussion, I think.Jose Guilhermehttps://www.blogger.com/profile/00313496015841693181noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-82776428216649994712012-11-28T17:51:28.189-05:002012-11-28T17:51:28.189-05:00"There isn't any reduction in demand"..."There isn't any reduction in demand"<br /><br />less spending = less sales... less sales = ... more investment?<br /><br />If you have lower consumer spending and higher saving, won't either exports or government spending have to rise, to avoid a 'paradox of thrift'? But if interest rates rise and the yen strengthens, won't this further reduce exports?<br /><br />Yen borrowed by the Japanese obviously originates in and is held in Japan. If foreigners want to buy yen, save yen, etc, that's going to strengthen yen. If they want to sell it that's going to weaken it. But yen doesn't come from anywhere other than Japan, that's all I meant.<br /><br />"a deficit will cause the yen to appreciate." Don't you mean depreciate?<br /><br />"The worry is that no one will want to hold it.". Sure, that would be a currency collapse. It seems more likely that the yen would simply fall to a level at which enough people would want to buy it for it to stabilise again. With a country like Japan, it seems unlikely that it would have to fall very far for that to happen, though I could be wrong. <br /><br />"Japan is necessarily importing capital, not money". Ok, an increase in foreigners buying or holding yen increases its value, so that's an increase in ‘capital’, correct?<br /><br />However you said:<br /><br />higher interest rates - > higher domestic savings - > no need to import foreign capital to finance investment.<br /><br />If "importing capital" really means supporting the exchange rate (rather than 'providing funds' for investment), increasing domestic saving doesn't provide a ‘different source of funds’ to 'imported capital', it just reduces domestic spending.<br /><br />If you raise interest rates, consumer spending decreases and saving increases, the yen will probably strengthen and exports will probably fall. Why would investment increase? If government spending doesn't increase aren't you going to end up with higher unemployment?<br />yhttps://www.blogger.com/profile/03233997168975370006noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-46019312502039561062012-11-28T17:19:29.425-05:002012-11-28T17:19:29.425-05:00"money essentially moves from their account i..."money essentially moves from their account in Japan to the foreign exporter's account in Japan"<br /><br />y, you're on it here imo with the 'metaphor'... ie nothing "moves". <br /><br />Saying "money moves" is not edifying/scientific. I believe this is termed "teleological" and should be avoided...<br /><br />These events/phenoms are probably best described using a series of accounting transactions.... instead of statements where "money moves"...<br /><br />rsp,Matt Frankohttps://www.blogger.com/profile/11978352335097260145noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-10431399509199834642012-11-28T15:34:39.919-05:002012-11-28T15:34:39.919-05:00"Importing capital" would then mean gett...<i>"Importing capital" would then mean getting foreigners to buy yen. Really it's a question of exchange rates and currency strength/weakness, rather than "getting money from abroad", if that makes sense.</i><br /><br />If more foreigners are buying yen than selling it, then Japan is necessarily importing <i>capital</i>, not money.<br /><br />When Japan runs a trade deficit, it is importing goods and services from abroad. In order to do this, it sells claims against itself. <br /><br />So that, when an exporter to Japan holds a yen denominated bank deposit, it holds one of these claims. <br /><br />The issue is not that some mysterious force will render these claims impossible to find, or prevent the Japanese from issuing them, but that foreigners will no longer wish to acquire them.vimothyhttps://www.blogger.com/profile/03640237743360160587noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-71276310685875869452012-11-28T15:26:27.509-05:002012-11-28T15:26:27.509-05:00As a tangent, Ed Dolan has a new blog post up talk...As a tangent, Ed Dolan has a new blog post up talking about fiscal policy and MMT. I really liked it, he's not "in paradigm" but imo he gives a fair account of MMT positions from which he establishes points of common ground. He also mentions in the comments that he's been corresponding with Wray, so it's really encouraging to see a piece like this come out of it.<br /><br /><a href="http://www.economonitor.com/dolanecon/2012/11/28/what-does-it-mean-for-fiscal-policy-to-be-sustainable-mmt-and-other-perspectives/" rel="nofollow">What Does it Mean for Fiscal Policy to be “Sustainable”? MMT and Other Perspectives</a>geerussellhttps://www.blogger.com/profile/10631984593634015839noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-7797653104660430142012-11-28T15:15:08.644-05:002012-11-28T15:15:08.644-05:00If you have lower spending, higher saving, what...<i>If you have lower spending, higher saving, what's going to make up for the reduction in demand?</i><br /><br />There isn't any reduction in demand, so nothing needs to happen to offset it. There's a reduction in consumer spending, and an increase in saving.<br /><br /><i>That's what I meant. We have these terms that are often inaccurate metaphors. Perhaps 'importing capital' comes from gold standard days, when gold was shipped around the world?</i><br /><br />I think "importing capital" is okay as far as metaphors go. Savings are borrowed from foreigners: a capital inflow. <br /><br />Everything is confusing at first, and international macro is more confusing than most, but this seems pretty straightforward to me.<br /><br />I think that perhaps you'd like to extend the kind of claims that MMT makes about the government to the country as a whole. The Japanese government doesn't really borrow, because it issues money. In the same way, Japan can't really be said to borrow from (or lend to--Japan was a surplus country until very recently) the international sector, because it issues yen.<br /><br /><i>Ok, but in Japan, a stronger yen has been associated with a fall in exports. Higher interest rates are likely to strengthen the currency, negatively affecting exports.</i><br /><br />Right, you would expect a stronger yen to lower exports, <i>ceteris paribus</i>, because they would become more expensive. But that's a very partial analysis, isn't it?<br /><br />You want to say, it seems to me, that it doesn't matter what happens to Japans current account, because a deficit will cause the yen to appreciate.<br /><br />Suppose that this were true. But so what? What will an appreciation in the yen give you? Implicitly, you're assuming that whatever the yen does, it's going to bring the system to some kind of sustainable equilibrium.<br /><br />But what has to happen to bring that equilibrium about and how do you know it will be sustainable? <br /><br />Let's say that the yen strengthens. That doesn't mean that Japan isn't going to have a current account deficit does it? It just mean that the yen strengthens. Suppose that we end up with a stronger yen, a moderate CAD and lower equilibrium income and employment. What's to prevent that?<br /><br /><i>What do you mean? As far as I can tell the money is created in Japan, the foreign exporter receives it in payment, and if he saves it stays in the Japanese banking system.</i><br /><br />So, the money is an asset. In your example, the importer didn't pay for the asset using money printed in Japan. Money printed in Japan is the object of the exchange. He paid for it with some flow of goods or services.<br /><br />Japan's worry is not that it will run out of money in the sense of its banks being unable to issue the stuff. The worry is that no one will want to hold it.vimothyhttps://www.blogger.com/profile/03640237743360160587noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-45115963796081374142012-11-28T14:54:24.656-05:002012-11-28T14:54:24.656-05:00"money essentially moves from their account i..."money essentially moves from their account in Japan to the foreign exporter's account in Japan"<br /><br />Or of course it could be that a domestic importer receives payment in yen and then sells yen for foreign currency to pay the foreign exporter. <br /><br />"Importing capital" would then mean getting foreigners to buy yen. Really it's a question of exchange rates and currency strength/weakness, rather than "getting money from abroad", if that makes sense.yhttps://www.blogger.com/profile/03233997168975370006noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-82562441334615181642012-11-28T14:46:56.483-05:002012-11-28T14:46:56.483-05:00"if he saves it stays in the Japanese banking..."if he saves it stays in the Japanese banking system." <br /><br />i.e. it gets "lent back into the Japanese economy" through either private or government borrowing (or used to buy other financial assets).yhttps://www.blogger.com/profile/03233997168975370006noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-45581714762600404172012-11-28T14:40:21.224-05:002012-11-28T14:40:21.224-05:00"That's not a recession!"
If you ha..."That's not a recession!"<br /><br />If you have lower spending, higher saving, what's going to make up for the reduction in demand?<br /><br />"Importing capital" is kind of a metaphor."<br /><br />That's what I meant. We have these terms that are often inaccurate metaphors. Perhaps 'importing capital' comes from gold standard days, when gold was shipped around the world?<br /><br />"if Japan is borrowing from foreigners, the savings it is borrowing are not created in Japan"<br /><br />My basic understanding is that when people in Japan buy imported goods, money essentially moves from their account in Japan to the foreign exporter's account in Japan. If the foreigner saves it, it remains in the Japanese banking system. The savings are created and held in Japan and not abroad.<br /><br />"the exchange rate is equating supply and demand for foreign exchange"<br /><br />Ok, but in Japan, a stronger yen has been associated with a fall in exports. Higher interest rates are likely to strengthen the currency, negatively affecting exports.<br /><br />"The stronger yen and weak overseas demand will also keep squeezing exports. Until 2009 exports had been buoyed by an abnormally weak yen, as foreign investors borrowed in yen to invest in higher-yielding currencies. But that carry trade has now been unwound as interest rates elsewhere have plunged.<br /><br />The stronger yen and high corporate taxes are also encouraging manufacturers to shift production abroad."<br /><br />http://www.economist.com/node/21542794<br /><br />"The assets are Japanese, but the money used to buy them is obviously not created in Japan."<br /><br />What do you mean? As far as I can tell the money is created in Japan, the foreign exporter receives it in payment, and if he saves it stays in the Japanese banking system. <br /><br />Alternatively the foreign exporter sells the yen he receives to buy his domestic currency. The yen still stays in Japan of course, but if sellers of yen outnumber foreign currency buyers, then the yen will depreciate.... (?)<br />yhttps://www.blogger.com/profile/03233997168975370006noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-44120157140174449442012-11-28T13:45:30.563-05:002012-11-28T13:45:30.563-05:00The money used to buy assets is created in Japan i...<i>The money used to buy assets is created in Japan isn't it?</i><br /><br />In fact, think of the assets as Yen denominated bank deposits. The assets are Japanese, but the money used to buy them is obviously not created in Japan.vimothyhttps://www.blogger.com/profile/03640237743360160587noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-33364188715270386192012-11-28T13:21:53.772-05:002012-11-28T13:21:53.772-05:00ok, but how exactly? Higher interest rates - less ...<i>ok, but how exactly? Higher interest rates - less spending - more saving - ...</i><br /><br />That's not a recession!<br /><br /><i>Is there any actual 'importing' going on though? </i><br /><br />"Importing capital" is kind of a metaphor. No physical object is brought into the country. Instead, ownership of assets is transferred to foreigners, so you could think of it as "importing ownership of the capital stock".<br /><br /><i>The money used to buy assets is created in Japan isn't it?</i><br /><br />In a literal sense, I suppose so, because Japan is the source of Yen, but I'm not sure what that has to do with the flow of savings in and out of Japan.<br /><br />By definition, if Japan is borrowing from foreigners, the savings it is borrowing are not created in Japan.<br /><br /><i>Not sure. What do you reckon?</i><br /><br />It could go anywhere, right? The point is that the exchange rate is equating supply and demand for foreign exchange. It's not equating imports and exports or the current account balance and the capital account balance. Just because the exchange rate appreciates, assuming that's what happens, doesn't mean you end up anywhere you want to be.vimothyhttps://www.blogger.com/profile/03640237743360160587noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-64450011084023347112012-11-28T12:19:00.900-05:002012-11-28T12:19:00.900-05:00"the goal is to avoid an economic contraction..."the goal is to avoid an economic contraction"<br /><br />ok, but how exactly? Higher interest rates - less spending - more saving - ... <br /><br />"I mean import capital"<br /><br />Is there any actual 'importing' going on though? The money used to buy assets is created in Japan isn't it? <br /><br />"Say that the currency depreciates, where is the current account going to end up? What else is going to move?"<br /><br />Not sure. What do you reckon?yhttps://www.blogger.com/profile/03233997168975370006noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-26622844079721216872012-11-28T11:35:33.421-05:002012-11-28T11:35:33.421-05:00You mean less consumer spending on imports but not...<i>You mean less consumer spending on imports but not necessarily more sales of exports, due to stronger Yen. Basically just an economic contraction?</i><br /><br />Well, the goal is to avoid an economic contraction. Lower consumer spending isn't the same thing as a recession.<br /><br /><i>Do you mean ship Yen notes over from China?</i><br /><br />Not sure I understand this comment. I mean import capital, i.e., sell assets to the rest of the world.<br /><br /><i>Or do you mean shift credits from one account to another at the BOJ?</i><br /><br />Don't understand this either. Can you explain what you mean, please?<br /><br /><i>...Or the currency will depreciate, reducing imports and increasing exports?</i><br /><br />Anything is possible, right? But the exchange rate is not a market clearing mechanism that always brings you back to a good equilibrium, and I would be wary of people who treat it as such. <br /><br />It's kind of weird and counter-intuitive, though. Think about what's implied in your question. Say that the currency depreciates, where is the current account going to end up? What else is going to move?vimothyhttps://www.blogger.com/profile/03640237743360160587noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-72469952352860124562012-11-28T11:26:13.335-05:002012-11-28T11:26:13.335-05:00Why not go over to his place and ask him personall...Why not go over to <a href="http://moslereconomics.com/" rel="nofollow">his place</a> and ask him personally. Warren generally answers questions posed in the comments.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-17952910076849327292012-11-28T11:19:23.816-05:002012-11-28T11:19:23.816-05:00He’s the progenitor of some of the derivative prod...<b>He’s the progenitor of some of the derivative products traded today and even has his own ultra-cool car company, Mosler Automotive.</b><br /><br />http://blogs.reuters.com/rolfe-winkler/2010/01/06/mosler-vs-rickards-on-fixing-the-economy/<br /><br /><b>What!?</b> Derivatives were at least partially to blame for '08-'09 crisis. Does that mean Mosler was part of the problem and helped cause the crisis? Is MMT his way of redemption? :)Bullish_Bearhttps://www.blogger.com/profile/15535906840998631082noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-89806493992638233472012-11-28T11:06:00.522-05:002012-11-28T11:06:00.522-05:00"improved trade balance".
You mean less..."improved trade balance".<br /><br />You mean less consumer spending on imports but not necessarily more sales of exports, due to stronger Yen. Basically just an economic contraction?<br /><br />"import capital"<br /><br />Do you mean ship Yen notes over from China? <br /><br />Or do you mean shift credits from one account to another at the BOJ?<br /><br />"you will need to offer it some kind of competitive return"<br /><br />...Or the currency will depreciate, reducing imports and increasing exports?yhttps://www.blogger.com/profile/03233997168975370006noreply@blogger.com