Please explain how when I say it "only accommodates" you can reply with “no but it doesn’t just accomodate”? What does that mean? And what do you do if the demand increases?The reply is either poorly written or nonsensical, or you are just disagreeing without taking anything I’ve written into account. And no, I haven’t made the same argument as Jake.
You are missing the crux (and simply ignoring history) and still just assuming that any change in the money supply negatively affects the interest rate. Consider the difference between the public increasing its wish to save and foregoing some current spending (consumption) out of their income in order to increase their holdings of time-deposits issued by the banks and the same public instead foregoing some current spending out of their income in order to increase their holdings of demand-deposits. Why you say accommodating one shift automatically leads to disequilibrium but not the other is just inconsistency. Both are shifts, both must be accommodated and failing to do so would be a grave error.
Absolute nonesense. How about we just say “economics” is meaningless in economics and open this economic debate up to anyone with any ideas about anything and take them seriously? Thinking about it, at this point I pretty much doing that.
New money distorts prices at the point of contact when injected into the economy. It is not thrown our of a helicopter like Friedman conveniently assumed. For credit markets, it is the interest rate.
Wait!? Are you saying that the new money issued by banks accounts to savings because people are willing to hold that money in deposits? So now again, we are saving money but not goods? I must have an answer for this.
Economics is not meaningless, Oh no! But “economics” of “velocity” and such is! Let’s not argue about “velocity” we’ve just had this debate a week ago.
Well, for starters you should learn that tbe theories about ‘equilibrium’ are not really ‘Austrian’ - they are not sound economic reasoning at all. People who babble about equilibrium are your typical positivist, pseudo-scientist, pseudo-economist, who’s got human action and mechanics confused, I dare say, on purpose.
100% reserve doesn’t mean that the money never leaves the bank. It means that any loan the bank makes is matched by a deposit in which the depositor agreed to not use his money for a given time.
If Smith wants to have 10 apples for a year, there must be people who own 10 apples and are willing to lend the apples for a year, for the loan to be possible. Of course, when apples are replaced with tickets which can be just ‘magically’ printed you can ‘overcome’ that little restriction on lending…
Friedman is so clueless when he writes about the evenly rotating economy and the stationary economy. Here’s the really amusing part though, Horwitz and Boettke are both economists who would make a normative statement about the benefits of maintaining monetary equilibrium, they’re also two Austrian who would staunchly reject all sorts of equilibrium theorizing. Of course, you would know this if you had read their work.
That’s interesting because I hear all the time that economics is supposed to be ‘value-free’ - whatever that means. So these people reject moral considerations but make normative statements, and they reject ‘equilibrium theories’ but advocate equilibrium.
Are you trying to paint them as especially clueless, or do you believe that their position is consistent and should be praised ? (praised in a value-free manner of course.)
I’ve better things to do than wasting my time with academics.
There’s no contradiction here whatsoever, unless you believe that value freedom in economics implies that one can make no ethical judgements whatsoever. But, that’s a pretty absurd position, so I’m not sure if you’re going to want to agree with it. As for the alleged contradiction concerning equilibrium if you read Horwitz’ work perhaps you’d know that he rejects equilibrium theorizing due to the static picture it paints of the economy, nonetheless, equilibrium can be a useful foil against which one can compare the real workings of an economy.
I am not ignoring anything. You are ignoring basic logic because you are so fixated on your preconceived notions of how the economy works.
There is no way you can introduce new money via credit markets and still maintain investments=real savings where real savings means real goods that are being channeled into investors instead of being consumed by the saver.
If you want to avoid real economics, i.e. the exchange between real goods, and instead continue with you velocity of circulation, then I’m afraid we’re at a dead end. At this point, I’m not sure you fully realize what savings really means.
With respect to a demand for money, they can’t do anything productive except hold that money for you, or convince you to convert that money into a time deposit (CD) where you can earn interest. Anything else will be unproductive.
I think your answer to my above question is Yes?
Your “velocity” does not provide you with real answers regarding real economic analysis of real goods being exchanged.
You simply have no clue how to resolve the problems with the apples: I save 10 apples, yet your are lending out claims for 100. No velocity or demand is going to solve this mystery. When you decide to analyze the economy in terms of real stuff, maybe you’ll see your blunder.
It’s funny really, you made ad hoc arguments and go out of your way to avoid mainstream arguments about velocity or circulation and the price level, but then you adopt fallacious treatments of money-using economies that most Austrians would reject. Look, you can’t talk about a monetary economy without reference to the use of money. The fact of the matter is that when prices are rigid downwards an increase in the demand for money will lead to excess goods that can be used to sustain the economy whilst the capital structure is being adjusted.
I see you’ve not taken me up on my challenge. That’s OK, you’re not under any obligation to, but please do us the favour and stop the condescending tone.
Almost. In response they lend out 10X the cash being held.
The holder of cash refrains from say $10 worth of consumption, but FRB creates multiple copies of this $10 claim. This is how FRB works. That is the multiplier factor, that is the inflationary effect of FRB.
The new money reflects no increase in production. No new goods have been produced, so the value of the money unit simply goes down. But you know that inflation is not a uniform phenomenon, it distorts the prices at the injection point. New money via credit markets distorts the interest rate. The interest rate no longer represents only the $10 worth of saved goods, but much more depending on the multiplying factor. There is no more an alignment between credit and time preference.
This whole demand issue is confusing you all.. Demand for money could be offseted in a free market perhaps by money producers like gold and silver mints, where it actually requires labor to produce the money, and the money is injected by employee wages in a more dispersed and uniform fashion. Then the quantity of new money could be regulated by the value of the money, where it would be relatively profitable to produce money only when the value of money is below a certain point (due to the costs of labor). Such a mechanism for new money is the only conceivable way that you can make a case for some equilibrium theory.
I don’t recall your challenge. There are too many exchanges here.
I don’t know how somebody who has some basic knowledge of sound economics can reach the conclusion that I have adopted fallacious treatments of money that Austrians would reject. Perhaps only by “Austrians” such as yourself.
100% reservists keep jumping between two different arguments against FRB. The first is that it is automatically distortionary while the second is that is sensative to runs. The first point only makes sense if you also believe that depositors do not know that their money is being loaned out. The second point is not a problem of FRB per se, rather it is simply caused by unstable time preferences.
If we replace demand deposits with time deposits, approximately the same volume of loans will be made as under the current system, assuming depositors understand that their deposits are being loaned out. Therefore the real argument of the reservists must be that depositors don’t know that their deposits are being loaned out. Is this really plausible? Also, is a switch to time deposits the best way to ward off runs?