In The Conservative Case for QE2, David Beckworth provides a quasi-monetarist defense for the second round of quantitative easing.
He states that the purpose of QE2 is "about fixing a spike in the demand for money that has significantly hampered spending." He elaborates, "Because the monetary base has been increasing so rapidly and there has been very little inflation, it must be the case that demand for the money must be increasing even more. In fact, money demand has been so pronounced that even the previous $1.2 trillion increase in the monetary base was not enough to prevent outright deflation in 2009 or a sustained decline in core inflation (which shows the trend path of inflation) over the past two years. Thus, a significant portion of the money supply is being hoarded and not spent. This is the excess-money-demand problem."
In essence, the Federal Reserve has failed in the same regard that Milton Friedman blamed it for the Great Depression: "The fact that total current-dollar spending has remained depressed for so long means that the Federal Reserve has failed to do its job and effectively has kept monetary policy too tight." The solution is produced by the new monetary policy: "QE2, then, is a long-overdue attempt by the Federal Reserve to address the excess-money-demand problem. It will do so in two complementary ways. First, QE2 will increase inflation expectations, which should reduce the demand for money. Knowing that prices will be higher in the future will motivate creditor households, firms, and banks to start spending their money today while prices are lower. Second, QE2 will increase the monetary base, and this should begin to satiate excess money demand. Together, these developments should provide the catalyst needed to get the virtuous spending cycle started."
And, of course, lowered-interest rates are not necessarily problematic: "Note that lower long-term interest rates are not the key to QE2 working. Yes, long-term interest rates may initially drop as the Federal Reserve buys up long-term Treasury securities to increase the monetary base. But this effect will be fleeting if QE2 is successful. Once the economy starts recovering, interest rates will start increasing. Similarly, QE2 may initially cause the dollar to lose value, but by spurring a recovery QE2 will ultimately put upward pressure on the dollar."
Bob Murphy responds to Beckworth's quasi-monetarism with several Austrian challenges.
In turn, Bill Woolsey responds, once again pleading the quasi-monetarist case. David Beckworth, too, responds to Bob Murphy. He summarizes his key points skillfully: "During 2008 there emerged a surge in money demand as the housing fiasco began to unfold. This spike in money demand got even more pronounced in late 2008 with the uncertainty created by the financial crisis. Given that we have a central bank — and this is not an endorsement of the Fed — its job should be to offset and stabilize such money demand shocks. The Fed failed on this count and, as a result, what should have been an ordinary recession got turned into the 'Great Recession' of 2007-2009. Yes, this Fed failure — like its failure to raise the federal funds to its natural rate level sooner in the 2002-2004 period — is another indication the Fed is flawed. Nonetheless, we are stuck with this monopoly producer of money and have to work with it. This means the Fed should have done more to prevent the surge in money demand. Because it did not, the Fed effectively tightened monetary policy in 2008. Moreover, despite the large increases in the monetary base to date, money demand remains elevated. From this perspective, then, monetary policy is still relatively tight. QE2 is an attempt — a flawed one as I will discuss later — to address it."
He adds, "Appreciating the importance of money demand shocks also helps explain why conservative economists like Scott Sumner, Bill Woosley, Josh Hendrickson, and I are sympathetic in spirit (if not in form) to QE2. It would do all hard-money advocates some good to wrestle with the monetary disequilibrium literature and its implication for a commodity standard. It is worth noting that there are prominent Austrians like George Selgin and Steve Horwitz who take the monetary disequilibrium seriously."
I think the money demand shock, given our monopolized currency, can only be treated through the machinery of the Federal Reserve; given the excess money demand, greater supply is required.
P.S. I fully endorse free banking.
"I'm not a fan of Murray Rothbard." -- David D. Friedman
z1235: AdrianHealey:Here I am giving you basically a home run and you blew it with such a comment. I thought I hit it straight out of the park, sarcastically so. My comment implied exactly what you just explained.
AdrianHealey:Here I am giving you basically a home run and you blew it with such a comment.
I thought I hit it straight out of the park, sarcastically so. My comment implied exactly what you just explained.
I figured. :)
The state is not the enemy. The idea of the state is.
On the other hand: the MET crowd also argues that the supply of money in the long run is always 'oke'. But their emphasis is on the short run. Also: they don't argue just for monetary expansion (monetary contraction also makes sense). The quantity of money is something that should adopt to consumer preferences.
The more Rothbardian idea is that the supply of money doesn't have to change - period. Any quantity of money, both short and long term, is sufficient.
If we take into account that monetary expansion can happen - the debate on fractional reserve banking, based on a gold standard is connected to this - but we also remember that monetary contraction can happen, than the 'demand' of Z can be satisfied: because people have a higher demand for money, the banking industry can, in fact, provide it for them - but there is, in fact, a cost: it has to be paid back to the bank.
Just theorizing here a bit.
Block, not exactly a monetary equilibrium theorist, also thoroughly refuted the every money supply is optimal idea in QJEA or JLS.
scineram, please supply a link. hard to beleive.
My humble blog
It's easy to refute an argument if you first misrepresent it. William Keizer
On the Optimum Quantity of Money by William Barnet and Walter Block. Not too difficult to find.
Our thesis... is that “more is better,” or, more strictly speaking, at the very least it is possible that additional stocks of money can make a positive contribution to economic welfare.
TY
@Smiling Dave,
You were quoting Mises to try and refute Esuric, which is silly because he is correct, and you were mistkaken in this case. Furthermore you are missing a key tenant in the understanding of the ABCT, which would lead me to believe that your understanding of it is less then bragged about. Mainly, that changes in the supply of money effect prices unevenly.
And since you were trying to quote Mises, I will do the same and ask you to go back and read the chapters suggested.
Chapter XVII Indirect Exchange
Chapter XX - Interest, Credit Expansion and Trade Cucles
Chapter XVII Section 4
HA: The main fault of the old quantity theory as well as the mathematical economists’ equation of exchange is that they have ignored this fundamental issue. Changes in the supply of money must bring about changes in other data too. The market system before and after the inflow or outflow of a quantity of money is not merely changed in that the cash holdings of the individuals and prices have increased or decreased. There have been effected also changes in the reciprocal exchange ratios between the various commodities and services which, if one wants to resort to metaphors, are more adequately described by the image of price revolution than by the misleading figure of an elevation or a sinking of the “price level.”
HA:But even in setting aside all these things, we must never forget that changes in the quantity of money affect prices in an uneven way. It depends on the data of each particular case at what moment and to what extent the prices of the various commodities and services are affected. In the course of a monetary expansion (inflation) the first reaction is not only that the prices of some of them rise more quickly and more steeply than others. It may also occur that some fall at first as they are for the most part demanded by those groups whose interests are hurt.
Chapter XX Section 6
HA:The essence of monetary theory is the cognition that cash-induced changes in the money relation affect the various prices, wage rates, and interest rates neither at the same time nor to the same extent. If this unevenness were absent, money would be neutral; changes in the money relation would not affect the structure of business, the size and direction of production in the various branches of industry, consumption, and the wealth and income of the various strata of the population.
Obviously there is much more. You must have missed these sections, or disagreed with them.
Dear filc.
Far be it from me to disagree with Mises without any proof whatsoever. I agree with him. Further, I knew that he says what I think is obvious upon reflection, that printing money does not affect all prices the same.
However, the disagreement between Esuric and me consists in the following.
1. I assert what to me is totally obvious, that printing money is NEVER good for an economy.
2. I assert that printing money raises prices. [Esuric very reluctantly agrees, but thinks the rise is trivial. I fail to see how he explains Zimbabwe and the Weimar Rebuplic and other hyperinflations].
3. I assert that this rise in prices, [uneven though it is], is an EVIL, and quoted Mises to that effect. [Esuric totally diagrees with this, It is either benign, or positively good].
4. I assert that deflation does no harm to an economy. Though it may change [or to use a judgemental loaded word. "distort"] relative prices, there is nothing wrong with that. Relative prices change all the time. For a reason. As opposed to the change in prices caused by money printing, which is caused by one group gobbling up resources without having earned the right to do so by their productivity. My source for this is the wise Hazlitt, in hs books on Inflation. [Esuric disagrees with this and thinks deflation is some horrible monster we must fear].
5. I assert that the brilliant Austrians who examined the effects of inflation on the trade cycle did not mean that said effects are the ONLY significant way inflation affects the economy. Their new discovery was, in my opinion, that inflation causes booms and busts IN ADDITION to all the other evils it was known to cause previously. I quoted Mises to back that up, who said inflation raises prices in an evil way. I also give you Zimbabwe and the Wiemar Republic and many other countries were destroyed not by trade cycles, but by higher and higher prices caused by constant money printing. [Esuric diagrees and thinks the Austrian books explaining booms and busts meant to say that all praxeological and historical knowledge gathered till now concerniong inflation is obsolete. Further, that when Mises wrote the chapters in Human Action on boom and busts he meant for us to at that point rip out all the other pages in Human Action that describe another great evil of inflation, rising prices.]
6. Esuric also has a mistake even if we grant all his other mistaken assumptions. He thinks that some magic formula exists that will tell us exactly how much money to print [and who to give it to for free] in such a way that the distortions caused by printing the money will exactly cancel out the distortions caused by deflation, and not create any new distortions. I consider this absurd, to put it mildly. if it is distortions one fears, adding new distortions [=money printing] on top of the old distortions [=deflation] seems to me an untenable position.
7. Walter Block does not say what scineram attributed to him. I quote from the link Mr Green so kindly provided. The bolded words are Blocks, but I'm the one who bolded them.
To the extent Mises is saying that the extant quantity of fiat money should not be changed and it is socially wasteful to use scarce resources to add to the stock thereof, he is correct.
However, to the extent he says that using resources (or goods in the case of conversion of the money commodity from nonmonetary uses to monetary uses) to increase the supply of monetary gold, e.g., any increase in the stock of gold money is socially wasteful, he is wrong in our view, as is Rothbard, who agrees with Mises on this, as we shall show.
So unless Esuric and scineram mean that when there is deflation we should start mining more energetically for gold, as opposed to printing more fiat money, then they cannot claim Dr Block as a supporter.
Smiling Dave:1. I assert what to me is totally obvious, that printing money is NEVER good for an economy.
Lets assume a free market. The money is gold, and money substitutes of various sorts. Would you say that gold miners are evil?
Smiling Dave:2. I assert that printing money raises prices. [Esuric very reluctantly agrees, but thinks the rise is trivial. I fail to see how he explains Zimbabwe and the Weimar Rebuplic and other hyperinflations]. 3. I assert that this rise in prices, [uneven though it is], is an EVIL, and quoted Mises to that effect. [Esuric totally diagrees with this, It is either benign, or positively good].
Then you are left with a problem of explaining how rising prices alone is quote, "evil". Assuming an ERE, prices increasing uniformly, what exactly is evil about this situation?
What Esuric is pointing out is that you are mis-characterizing the issue. There is a reason why Mises's explanation of monetary expansion does not dwell on inflation, or the "Crackup-boom" alone. If it were just that rising prices were evil, why waste time in creating a business cycle theory at all?
Printing Money is argued by Austrians to cause two problems, Inflation, and Business cycles. In an ERE inflation isn't a problem, and Mises explains this in HA, I am too drunk and lazy to find the passage for now. Austrian's instead really pay attention to the alteration in the structure of production during an inflationary period. The issue is that a stable structure of production is getting altered radically over a short period of time.
Smiling Dave:4. I assert that deflation does no harm to an economy.
A radical reduction in the money supply would equally distort the structure of production. Economic calculation is looking for stability to some extent. It's basing it's judgements based on the historical data of yesterday, if the data moves relatively too quickly, there will be problems.
Smiling Dave: Esuric also has a mistake even if we grant all his other mistaken assumptions. He thinks that some magic formula exists that will tell us exactly how much money to print [and who to give it to for free
Esuric also has a mistake even if we grant all his other mistaken assumptions. He thinks that some magic formula exists that will tell us exactly how much money to print [and who to give it to for free
I would be very reluctant in ever stating that Esuric is in error, without some serious, serious research and homework done on my part. I personally have never heard Esuric state exactly what you claim, that he endorses the printing of money.
However lets assume that he does advocate the printing of money. Assuming Banking occurs on the free market, with no central coercive authority, do you think we would have the same problems at hand? I personally think we would not.
IMHO, I think it stands that Esuric will have to clarify his position, because something tells me you are mis-representing him to some extent.
Reminder: My replies are in bold.
filc: Smiling Dave:1. I assert what to me is totally obvious, that printing money is NEVER good for an economy. Lets assume a free market. The money is gold, and money substitutes of various sorts. Would you say that gold miners are evil? Gold still has intrinsic value. Mining it is productive input. Printing money has no intrinsic value [and dont jump on me for saying gold has, this was discussed at length in other threads, Esuric finally admitting it does]. Those who print it do not contribute something productive to the economy. That said, your q seems to be a point of debate between Walter Block and Mises and Rothbard, so I reserve opinion on that matter. But they all agree that it is wasteful to print fiat money. Smiling Dave:2. I assert that printing money raises prices. [Esuric very reluctantly agrees, but thinks the rise is trivial. I fail to see how he explains Zimbabwe and the Weimar Rebuplic and other hyperinflations]. 3. I assert that this rise in prices, [uneven though it is], is an EVIL, and quoted Mises to that effect. [Esuric totally diagrees with this, It is either benign, or positively good]. Then you are left with a problem of explaining how rising prices alone is quote, "evil". It steals our purchasing power. When you read Human Action, and got to the part where Mises writes that rising prices are evil, did you write in the margin of your copy that Mises fails to explain why rising prices are evil? Assuming an ERE, prices increasing uniformly, what exactly is evil about this situation? Did you decide Mises was in error when you read HA because of that q? I already explained why it is an evil. It gives Obama and pals the means to gobble up our resources without having produced anything. I suspect you know this, how could you not? What Esuric is pointing out is that you are mis-characterizing the issue. You mean he thinks I am. But I'm not. There is a reason why Mises's explanation of monetary expansion does not dwell on inflation, or the "Crackup-boom" alone. If it were just that rising prices were evil, why waste time in creating a business cycle theory at all? Remember, Mises did mention it, and quite clearly. The reason he does not dwell on it is because it is readily understood. He did not realize some people wouldn't get it unless he explained it for 500 pages. That's like asking "If 2+2=4, why did Carl Gauss not dwell on that fact in any of his writings?" Mises did not "create" a business cycle theory. He explained a well known, but hiterto unexplained, phenomenon. Had he not explained it, it would remain unexplained. For example, if a scientist notices that washing the hands before operating reduces the death rate of his patients, but has no explanation why, it is a boon to mankind for someone to explain why. See here [number 4] for what happens otherwise. Don't really understand the q. Also, there are times when the the rise is prices is invisible, offset as it is by better technology etc that lowers prices. Then the only thing we see is the cycle. An example of this is the thirties. In other times, we have stagflation. Printing Money is argued by Austrians to cause two problems, Inflation, and Business cycles. In an ERE inflation isn't a problem, and Mises explains this in HA, I am too drunk and lazy to find the passage for now. Then I am too drunk and lazy to believe you, especially since I quoted Mises saying explicitly otherwise. He said it is an "evil". He did not say it is "not a problem". Even if we grant that he wrote such a thing about an ERE, an ERE is a fictional thing, what one might call a thought experiment. In the real world, there is no such thing as an ERE, and in the real world, Mises wrote, Inflation is an "evil". You have many questions and arguments to show it is not an evil. Are you saying Mises was mistaken? That he contradicted himself, in one place saying it is an evil, in another that it is not a problem? Why are you ignoring the explicit evidence I presented from HA? To address yourself to the quote I supplied, you can remain drunk and lazy and need not look up anything else. It should be the first thing you do, before asking q's and saying you remember that somewhere or other Mises said the opposite. Austrian's instead really pay attention to the alteration in the structure of production during an inflationary period. "Pay attention"? What does that mean? Do Mathematicians not "pay attention" to 2+2=4, because they don't write about it? Again, what are you going to do with the quote from Mises saying it is an evil? Was he "not paying attention" when he wrote that? What about Hazlitt's two books devoted solely to inflation? Did he write those works without "paying attention"? The issue is that a stable structure of production is getting altered radically over a short period of time. That is one issue. There is another, equally important, and at times more so. It's called rising prices. And anyone fool enough to endorse money printing because rising prices is "not a problem" and nobody "pays attention" to rising prices may well end up with another Zimbabwe on his hands. Smiling Dave:4. I assert that deflation does no harm to an economy. A radical reduction in the money supply would equally distort the structure of production. Not distort. Change. Do not conflate the two. Esuric already wrote that stuff, and I explained at least twice in the earlier posts why he is wrong. You ignore what I wrote there, as opposed to pointing out what you think is the flaw in my reasoning. Do you think constant repetition of your assertion, without adressing any objections raised to it, will convince me or whoever is following this discussion? EDIT: Also, according to Esuric, why are there never "busts and busts", always "booms and busts"? According to Esuric, there should be, somwhere on this planet, at some point in time, a business cycle started by deflation. But not only are there no historical examples of such a beast, there is no mention of them in Mises or Hayek or anywhere else. How did this happen? Economic calculation is looking for stability to some extent. And I am looking for Santa Claus. The difference is, my efforts to find him won't harm anyone. Printing money in a doomed effort to achieve what is undesirable in the first place [beacuse stability is not a good thing in and of itself] will do great harm, as I have explained and have quoted Mises as agreeing with me. It's basing it's judgements based on the historical data of yesterday, if the data moves relatively too quickly, there will be problems. No there won't. And even if there will be, meddling will only create greater problems, as I explained and quoted Mises to back me up. Smiling Dave: Esuric also has a mistake even if we grant all his other mistaken assumptions. He thinks that some magic formula exists that will tell us exactly how much money to print [and who to give it to for free I would be very reluctant in ever stating that Esuric is in error, without some serious, serious research and homework done on my part. The truth is more beloved to me than is Esuric. I have stated my reasons for concluding he is in error, and until shown why they are wrong, I go by them. I personally have never heard Esuric state exactly what you claim, that he endorses the printing of money. How do you think he plans to "fight" deflation? By donating all the millions that are under his mattress to charity? However lets assume that he does advocate the printing of money. Assuming Banking occurs on the free market, with no central coercive authority, do you think we would have the same problems at hand? I personally think we would not. You think printing money is fine in a free market absent a central bank? You think everyone should be allowed to counterfeit freely? The problems that counterfeiting raises when done on a massive scale are exactly the problems raised by money printing. In fact they are identical [but for some arbitrary law declaring one legal and the other not]. IMHO, I think it stands that Esuric will have to clarify his position, because something tells me you are mis-representing him to some extent. I deduce that you think that his position as I stated it is pretty shaky. Glad we agree on something.
Gold still has intrinsic value. Mining it is productive input. Printing money has no intrinsic value [and dont jump on me for saying gold has, this was discussed at length in other threads, Esuric finally admitting it does]. Those who print it do not contribute something productive to the economy.
That said, your q seems to be a point of debate between Walter Block and Mises and Rothbard, so I reserve opinion on that matter. But they all agree that it is wasteful to print fiat money.
Then you are left with a problem of explaining how rising prices alone is quote, "evil".
It steals our purchasing power. When you read Human Action, and got to the part where Mises writes that rising prices are evil, did you write in the margin of your copy that Mises fails to explain why rising prices are evil?
Assuming an ERE, prices increasing uniformly, what exactly is evil about this situation?
Did you decide Mises was in error when you read HA because of that q? I already explained why it is an evil. It gives Obama and pals the means to gobble up our resources without having produced anything. I suspect you know this, how could you not?
What Esuric is pointing out is that you are mis-characterizing the issue.
You mean he thinks I am. But I'm not.
There is a reason why Mises's explanation of monetary expansion does not dwell on inflation, or the "Crackup-boom" alone. If it were just that rising prices were evil, why waste time in creating a business cycle theory at all?
Remember, Mises did mention it, and quite clearly. The reason he does not dwell on it is because it is readily understood. He did not realize some people wouldn't get it unless he explained it for 500 pages. That's like asking "If 2+2=4, why did Carl Gauss not dwell on that fact in any of his writings?"
Mises did not "create" a business cycle theory. He explained a well known, but hiterto unexplained, phenomenon.
Had he not explained it, it would remain unexplained. For example, if a scientist notices that washing the hands before operating reduces the death rate of his patients, but has no explanation why, it is a boon to mankind for someone to explain why. See here [number 4] for what happens otherwise. Don't really understand the q.
Also, there are times when the the rise is prices is invisible, offset as it is by better technology etc that lowers prices. Then the only thing we see is the cycle. An example of this is the thirties. In other times, we have stagflation.
Printing Money is argued by Austrians to cause two problems, Inflation, and Business cycles. In an ERE inflation isn't a problem, and Mises explains this in HA, I am too drunk and lazy to find the passage for now.
Then I am too drunk and lazy to believe you, especially since I quoted Mises saying explicitly otherwise. He said it is an "evil". He did not say it is "not a problem".
Even if we grant that he wrote such a thing about an ERE, an ERE is a fictional thing, what one might call a thought experiment. In the real world, there is no such thing as an ERE, and in the real world, Mises wrote, Inflation is an "evil".
You have many questions and arguments to show it is not an evil. Are you saying Mises was mistaken? That he contradicted himself, in one place saying it is an evil, in another that it is not a problem? Why are you ignoring the explicit evidence I presented from HA? To address yourself to the quote I supplied, you can remain drunk and lazy and need not look up anything else. It should be the first thing you do, before asking q's and saying you remember that somewhere or other Mises said the opposite.
Austrian's instead really pay attention to the alteration in the structure of production during an inflationary period.
"Pay attention"? What does that mean?
Do Mathematicians not "pay attention" to 2+2=4, because they don't write about it?
Again, what are you going to do with the quote from Mises saying it is an evil? Was he "not paying attention" when he wrote that?
What about Hazlitt's two books devoted solely to inflation? Did he write those works without "paying attention"?
The issue is that a stable structure of production is getting altered radically over a short period of time.
That is one issue. There is another, equally important, and at times more so. It's called rising prices. And anyone fool enough to endorse money printing because rising prices is "not a problem" and nobody "pays attention" to rising prices may well end up with another Zimbabwe on his hands.
A radical reduction in the money supply would equally distort the structure of production.
Not distort. Change. Do not conflate the two.
Esuric already wrote that stuff, and I explained at least twice in the earlier posts why he is wrong. You ignore what I wrote there, as opposed to pointing out what you think is the flaw in my reasoning. Do you think constant repetition of your assertion, without adressing any objections raised to it, will convince me or whoever is following this discussion?
EDIT: Also, according to Esuric, why are there never "busts and busts", always "booms and busts"? According to Esuric, there should be, somwhere on this planet, at some point in time, a business cycle started by deflation. But not only are there no historical examples of such a beast, there is no mention of them in Mises or Hayek or anywhere else. How did this happen?
Economic calculation is looking for stability to some extent.
And I am looking for Santa Claus. The difference is, my efforts to find him won't harm anyone. Printing money in a doomed effort to achieve what is undesirable in the first place [beacuse stability is not a good thing in and of itself] will do great harm, as I have explained and have quoted Mises as agreeing with me.
It's basing it's judgements based on the historical data of yesterday, if the data moves relatively too quickly, there will be problems.
No there won't. And even if there will be, meddling will only create greater problems, as I explained and quoted Mises to back me up.
I would be very reluctant in ever stating that Esuric is in error, without some serious, serious research and homework done on my part.
The truth is more beloved to me than is Esuric. I have stated my reasons for concluding he is in error, and until shown why they are wrong, I go by them.
I personally have never heard Esuric state exactly what you claim, that he endorses the printing of money.
How do you think he plans to "fight" deflation? By donating all the millions that are under his mattress to charity?
You think printing money is fine in a free market absent a central bank? You think everyone should be allowed to counterfeit freely? The problems that counterfeiting raises when done on a massive scale are exactly the problems raised by money printing. In fact they are identical [but for some arbitrary law declaring one legal and the other not].
I deduce that you think that his position as I stated it is pretty shaky. Glad we agree on something.
Smiling Dave:That said, your q seems to be a point of debate between Walter Block and Mises and Rothbard, so I reserve opinion on that matter. But they all agree that it is wasteful to print fiat money.
As far as ABCT is concerned, this is irrelevant.
Smiling Dave:It steals our purchasing power. When you read Human Action, and got to the part where Mises writes that rising prices are evil, did you write in the margin of your copy that Mises fails to explain why rising prices are evil?
The purchasing power is not stolen if the inflation occurs uniformly. So it is not inflation alone that is "Evil". You admit in this statement that it is not that inflation alone is what is evil(whatever that means) but the consequences it causes. Something Esuric was trying to further expand on. The issue here is an oversimplification by you, that Esuric was correcting. I believe you took issue with it, as most people on this forum take issue with people disagreeing with them.
I never read a part of HA where Mises said that inflation was evil, period, end of story. Such a statement is out of context for HA. A large portion of the book is dedicated to catallactics and economic calculation. Saying that inflation is evil, end of story, is a mis-characterization of the lessons that HA has to offer.
Smiling Dave:Did you decide Mises was in error when you read HA because of that q? I already explained why it is an evil.
I never decided that Mises was in error on this specific aspect. I decided that you were. Furthermore you have to stop using the word "evil". It's incoherent as far as the discussion is concerned.
The rest of your comments are just back peddling trying to find ways to cover the fact that you missed crucial parts of ABCT, HA, and other Austrian tennats before arguing with Esuric.
Furthermore when you make comments like the following
Smiling Dave:The truth is more beloved to me than is Esuric.
You pretty much send your own credibility down the drain. I give zero credibilty and respect to the overlly aarogant. Especially someone who naively believes that they have the best interest of truth, while their opponent does not.
At any rate my point was only that you either mistakingly forgot this specific aspect of the Austrian Capital theory. That Esuric was correct in his earlier responses to you, and you were either looking to argue with him, did not understand his responses, or do not understand ABCT all together.
You seem to be dragging me away from the discussion which should involve capital theory and the structure of production. I haven't the time or interest to debate on anything else at the time. So my request is for you to stay on topic, your response was rather large, and little of it had to do with the topic at hand.
Smiling Dave,
You should note that I consider your posts valuable to the community as a whole, and I for one enjoy your participation here. Don't take anything I said too personally.
-Filc
The demand for money is _not_ the same as the demand for savings. 'Savings', 'liquidity holdings' and 'consumptions' are three different ways of using your money.
The demand for money is _not_ the same as the demand for savings.
'Savings', 'liquidity holdings' and 'consumptions' are three different ways of using your money.
You're absolutely right, my language was imprecise. I should have just said 'holding money' rather than 'saving'. I suppose another way to think about it is that when you sell goods you are buying money, and when you buy goods you are selling money. I think the concept 'demand for money' becomes more easily comparable to the concept of the demand for other goods when you think of it this way.
Smiling Dave:Did you decide Mises was in error when you read HA because of that q? I already explained why it is an evil. It gives Obama and pals the means to gobble up our resources without having produced anything. I suspect you know this, how could you not?
Smiling Dave, there is one point you're clearly missing. Nobody is saying that, given the world we live in, that inflation is bad. Indeed: because it raises prices and so on. But in a world where all prices _immediately_ would adjust to this 'new' money, inflation wouldn't be a problem. The problem is thus _not_ inflation 'in itself', but the Cantillon-effects that _necessarily_ happen (in this world) where money enters in the economy. That's the real crux of relative price differences and so on and so forth. Not the pure element of 'inflation' in and of itself.
Remember where Esuric, originally, responded too: "When someone engages in printing money. prices will certainly adjust. The problem is, we know which way they will adjust. Up"
Regarding the businesscycle; the relevant issue is price coordination, not the fact that 'prices rise'.
<= You are suggesting that these prices raises are a problem. Esuric, correctly, states: " Simply put, if prices were perfect, i.e., if they instantaneously and simultaneously adjusted to alterations in the supply of money, then inflation and deflation wouldn't really be a problem at all" <= The Cantillon-effects; those are what hamper the economy. If prices just adapt instantly, there wouldn't be a problem But that would be impossible in this world.
Furthermore; invoking the Weimar republic and Zimbabwe isn't an argument. The argument isn't 'we should print money'. The argument is that we should match the demand for money as liquidity as an variable, where market forces should work to match supply and demand. Inflation is thus possible, as a increase in the supply of money in excess of the demand for money, which would show up in price inflation and inflationary gdp numbers (as has happened in Zimbabwe and the Weimar republic). When you want to engage in an argument, it helps when you can argue against the argument itself and not some straw man version of it.
Nonetheless, we are stuck with this monopoly producer of money and have to work with it.
The monopoly is the only reason that it is used.
If only I didn't have this cup restricting me to carrying a limited amount of liquid. Very funny.
P.S. I fully endorse free printing.