tag:blogger.com,1999:blog-8702840202604739302.post5811702673916360646..comments2024-03-28T03:38:53.734-07:00Comments on MacroMania: Global Imbalances: Good for the World?David Andolfattohttp://www.blogger.com/profile/12138572028306561024noreply@blogger.comBlogger37125tag:blogger.com,1999:blog-8702840202604739302.post-34212308880658876822012-12-05T23:40:58.472-08:002012-12-05T23:40:58.472-08:00perhaps countries like China simply find the USD u...perhaps countries like China simply find the USD useful and are therefore willing to pay for it (with exports). The US values foreign produce and so imports it (by exporting USD). Both countries experience gains from this trade. <a href="http://www.china-direct.net/" rel="nofollow">China sourcing</a><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-3313819604780089602010-10-27T05:49:52.949-07:002010-10-27T05:49:52.949-07:00Nick: I get email alerts when people comment on ev...Nick: I get email alerts when people comment on even old posts. <br /><br />I agree with what you say. But, so what? Implicit in your statement (I could be wrong) is that the ensuing deflation (the increase in the rate of return of paper that you issue at zero cost to yourself) is a bad thing.David Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-23251005327503191472010-10-27T02:40:55.828-07:002010-10-27T02:40:55.828-07:00Damn, but this is an ancient post! I followed Stev...Damn, but this is an ancient post! I followed Steve's link here. Thought it was a new one. Oh well.Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-38693448544672258772010-10-27T02:37:53.621-07:002010-10-27T02:37:53.621-07:00Suppose you got a letter in the mail offering you ...Suppose you got a letter in the mail offering you a low interest loan, but one that could be called any time the lender wishes. You could and would turn down that offer, if it were against your interest to accept it.<br /><br />The US Fed/government cannot turn down those loan offers, even if it wanted to. It either prints more money/bonds to satisfy the foreign demand, or else there's deflation, and the real stock of money/bonds expands to satisfy the demand that way.Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-48074698582734816222010-09-04T11:46:39.081-07:002010-09-04T11:46:39.081-07:00Westslope,
Back to your first post. If I print an...Westslope,<br /><br />Back to your first post. If I print an intrinsically worthless note and use it to purchase something made in China, how does this reduce my wealth? I can see how I "stimulated" Chinese employment (some poor bugger has to make the product I purchase), but I am not entirely clear why this makes me poorer.David Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-9437624663565426152010-09-04T08:43:45.002-07:002010-09-04T08:43:45.002-07:00David: I'm well aware that Congress sets the ...David: I'm well aware that Congress sets the mandate. <br /><br />Greg: The crack-cocaine-like goal of Full Employment has been dropped but the goal of more employment has been retained and the threat of cocaine-like psychosis is on-going.Erik Poolehttps://www.blogger.com/profile/02442592238782846163noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-5126557194964951652010-09-02T05:46:07.331-07:002010-09-02T05:46:07.331-07:00David
I'm glad to see you apply your trade an...David<br /><br />I'm glad to see you apply your trade analysis to govt debt as well. I agree with you. So is it fair to put you into the camp of people who want economists and lawmakers to stop talking about sustainability of SS/medicare from a financial perspective?<br /><br />Lets start asking people to start arguing that old people dont deserve the amount of resources they are consuming ( and see how many GOP and Dem senators want to jump into THAT framing). There is no financial threat to these programs, they can be fully funded to perpetuity. What we have to make sure of is there are people to deliver the health care, technology to treat the medical conditions and affordable food/housing for them to be able to purchase with their SS checks. Lets stop talking about money, its created out of thin air as is already known<br /><br />http://www.georgewashington2.blogspot.com/2010/03/more-evidence-that-banks-create-credit.html<br /><br />http://www.npr.org/blogs/money/2010/08/26/129451895/how-to-spend-1-25-trillion<br /><br />http://www.correntewire.com/fed_money_spreadsheet<br /><br />best wishes<br /><br />GregGreghttps://www.blogger.com/profile/03139782404004492965noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-31428766406636660562010-09-01T17:42:56.044-07:002010-09-01T17:42:56.044-07:00westslope
What dual mandate? The fed gave up ful...westslope<br /><br /><br />What dual mandate? The fed gave up full employment decades ago. They have since paid people to develop theories like NAIRU to justify keeping a certain percentage of the people out of the job market....... cuz its for their own good dont you know.Greghttps://www.blogger.com/profile/03139782404004492965noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-83012874094335934602010-09-01T13:09:31.056-07:002010-09-01T13:09:31.056-07:00Westslope:
Personally, I think that most people i...Westslope:<br /><br />Personally, I think that most people in the Fed might welcome a single mandate of price stability. Remember that the Fed (and its mandates, presumely) were created out of an act of Congress. It is not within the powers of the Fed to change its mandate. You are barking up the wrong tree.David Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-51601365280376240312010-09-01T11:36:43.726-07:002010-09-01T11:36:43.726-07:00So, at the end of the day, does American per capit...So, at the end of the day, does American per capita wealth go up or down?<br /><br />So we have any learned papers discussing the social benefits of declining US wealth?<br /><br />I must admit that the US fed is doing one helluva job of stimulating the economies of net resource exporters. Who have known that Americans were this generous? <br /><br /><br />P.S. In the background, 1/4 of Americans think President Barack Obama is a Muslim and Ron Paul believes that the US federal reserve is hiding critical information on gold assets and transactions. <br /><br />So David: When is the US fed going to drop the dual mandate and focus only on price stability? Or would that too much like eating and living well in a disciplined manner as opposed to the popular choice off using massive amounts of drugs and surgical intervention to resolve "lifestyle issues"?Erik Poolehttps://www.blogger.com/profile/02442592238782846163noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-45621552504290135832010-09-01T08:40:21.518-07:002010-09-01T08:40:21.518-07:00gbgasser,
The argument developed in my post can ...gbgasser,<br /> <br />The argument developed in my post can be applied to government deficits. The government (in my model) creates new debt, which it ships abroad (or to its citizens) in return for goods and services. Under the conditions stated in my model, growing government debt is sustainable. <br /><br />Cheers,<br />DavidDavid Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-65765255302648764202010-09-01T03:05:29.125-07:002010-09-01T03:05:29.125-07:00David
You were talking about trade deficits only ...David<br /><br />You were talking about trade deficits only were you not? I went off topic of your post and was talking about govt budget deficits and debt levels as well.<br /><br />You seemed to be saying that the current level of trade deficit is sustainable with no comment as to whether it could be sustained at a certain rate of growth in size. IOW are you also saying that a doubling of the CAD would also be sustainable since the conditions creating it (our desire for their goods their desire for our money) would still be operative? If you are I agree, because I dont think theres any absolute level of deficit( trade or govt budget type) that is unsustainable by definition any more than a balanced current account is "sustainable" by definition.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-69660890703826223462010-08-31T11:56:09.343-07:002010-08-31T11:56:09.343-07:00Greg,
I can't speak for all monetary theorist...Greg,<br /><br />I can't speak for all monetary theorists, but I don't think that this is the way they think about things.<br /><br />Moreover, in my post above, I am arguing that continued deficts *are* sustainable. Did you miss that?David Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-58444107565802595272010-08-31T03:31:03.655-07:002010-08-31T03:31:03.655-07:00"I am not entirely sure of your claim: "..."I am not entirely sure of your claim: "Armies of academic economists generate fancy formulas to "prove" that for our economic/monetary system to survive, this group of people must sacrifice."<br /><br /><br />Maybe I'm not framing it correctly. <br /><br />Would you agree with me if I said that a, if not the, fundamental claim of monetarist economists is that interest rate adjustments, which induce money one way or another between saving and spending (investment), is the way in which our economy manages the flow of money?? This in addition puts bond markets at the top of the hierarchy, making them the arbiter of where spending should go. It is in this paradigm that we come to the conclusions that our deficits are "unsustainable", that we cant afford our health care and SS obligations into the future and that most govt fiscal activity would be ineffective (because of investors' inflation expectations causing them to offset any spending with their own saving to prepare for future tax increases). Does this accurately describe many many economists postion today?<br /><br /><br />On the other hand, there are those, Bill Mitchell, WarrenMosler, Marshall Auerback and Randall Wray who argue that bond markets are NOT at the top of the money food chain, govts are with their currency issuing responsibilities. And this fact changes the questions we ask considerably. We never ask can we afford, do we have the money or not, we simply ask what is the benefit of doing so. Whether or not some bond trader(s) agrees with some spending decisions by a governing body becomes irrelevant. Their bonds come from govt spending. They would have no safe bonds to trade without govts issuing them in the first place.<br /><br />You might think the term "economic/monetary system to survive" was a little dramatic, however I see a lot of talk that these austerity measures are unpleasant necessities which are the only way to preserve what we have. Its these nebulous bond markets which are "telling" greeks how much to pay their public workers, Irish how long they have to work and American seniors that what they thought they "paid" for is no longer available.<br /><br /><br />Thanks for your discussion here.Greghttps://www.blogger.com/profile/03139782404004492965noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-74254224591472772882010-08-29T18:57:44.670-07:002010-08-29T18:57:44.670-07:00gbgasser,
You are surely correct that politics pl...gbgasser,<br /><br />You are surely correct that politics plays a huge role in these decisions.<br /><br />I am not entirely sure of your claim: "Armies of academic economists generate fancy formulas to "prove" that for our economic/monetary system to survive, this group of people must sacrifice."<br /><br />Can you provide a quick list of (say) 10 names? I will go and check out their work.David Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-75988198664920804972010-08-29T11:57:33.582-07:002010-08-29T11:57:33.582-07:00"but I am betting that, given the evolving de..."but I am betting that, given the evolving demographic structure, seniors will have no choice but to take a haircut on their savings/entitlements."<br /><br /><br />I have no doubt that you are correct. Where I am left with an empty feeling is that this is always presented by politicians and economists as NECESSARY. As if there is no other option. Armies of academic economists generate fancy formulas to "prove" that for our economic/monetary system to survive, this group of people must sacrifice. What about the option of actually paying the folks what has been promised to them and bondholders be damned? So what if their value is affected negatively? <br /><br />This is a pure political decision being made by people who have accumulated much and therefore they can use their power to force the change on a less represented group. <br /><br />The world wouldnt end if we continued SS as is for perpetuity?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-53722555907205347372010-08-29T07:59:08.755-07:002010-08-29T07:59:08.755-07:00Greg,
Yes, your last paragraph in particular make...Greg,<br /><br />Yes, your last paragraph in particular makes it clear where you're coming from. It is a valid point, I suppose. But I am betting that, given the evolving demographic structure, seniors will have no choice but to take a haircut on their savings/entitlements.David Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-86666946335426000742010-08-28T14:32:18.154-07:002010-08-28T14:32:18.154-07:00Thanks for your response David
No, I dont mean to...Thanks for your response David<br /><br />No, I dont mean to chide people for working too hard. What I'm getting at is these people made voluntary choices to be producers of excess goods and they NEED consumers. Our system seems to hold those producers out as examples for all of us. The answer, according to many, for the Euro zones problems is for the austerity plan countries to work harder and produce more and export their way to wealth. That is not a plan for everyone to use. Someone needs to be net importer for there to be a net exporter or everyone needs to be in complete balance. Neither activity exporting/importing producing/consuming is more necessary than the other. <br /><br />Saving is a great thing, when you are saving resources that are scarce but hoarding and excess accumulation (especially of money) lead to imbalances in political and economic power that I think are a large contributor to our issues today.<br /><br />We know how to store wealth, thats been solved. We've gone too far in my view, in encouraging accumulation of assets, financial and real.<br />In order for the accumulators to get their desired return on their savings, the system imposes too much sacrifice on the rest. Why do you think the bond vigilantes are insisting that everyone everywhere else settle for less? Why are they insisting on higher rates on their savings which come at a cost to everyone else?<br /><br />Seniors must now sacrifice some financial security and possibly medical care so we can "afford" to pay those "loaning" our govt money? These are people who have forgone consumption in the past and saved their dollars. They now want everyone else to take less so they get a "fair" return.<br /><br />I hope this clarifies my position.Greghttps://www.blogger.com/profile/03139782404004492965noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-42668695301173159952010-08-28T12:45:15.307-07:002010-08-28T12:45:15.307-07:00Greg,
I've read your response over a couple o...Greg,<br /><br />I've read your response over a couple of times and I'm not really sure how to respond to it. <br /><br /><i>But we ask our system to always keep those virtuous savers whole or keep those excessive producers like the Germans and Chinese whole. </i><br /><br />Excessive producers? You are chiding people for working too hard and delivering their produce to you for paper? <br /><br />You say that your ultimate beef is with a system that "favors savers rather than consumers." <br /><br />For almost the entire history of mankind, the essential problem has been how to store wealth. The problem was so severe that mankind has lived at or near subsistence for most of recorded history. And now you want to go back to a system that rewards consumption (the destruction of wealth)? <br /><br />I'm sorry if I've missed your point. (Also, I'm not sure why your name changes when you post more than once. It is strange.)David Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-86625569148400682782010-08-28T06:24:28.434-07:002010-08-28T06:24:28.434-07:00Why does this system change my name the second tim...Why does this system change my name the second time I post?<br /><br />Its weird, I sign in as gbgasser and then when I put in a second comment it changes me to Greg.<br /><br />StrangeGreghttps://www.blogger.com/profile/03139782404004492965noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-72147333723249839172010-08-28T06:22:34.209-07:002010-08-28T06:22:34.209-07:00Sorry if I was a little cryptic.
It just seems to...Sorry if I was a little cryptic.<br /><br />It just seems to me that all these talks about "global imbalances", trade deficits and the like really simply come down to the fact that in many trade situations I have something you like and you either dont have something I need or particularly want at the time. So we've created a system whereby I save this ability to call what you owe me.<br /><br />Much effort gets put forth to making sure those who didnt get what they could have had a few months ago get that thing or its equivalent later, as much later as they want it to be. So what must happen? The price of those things either cant change or their money appreciates at a level equal to or more than (usually its expected to be more than) the rate of price increase.<br /><br />Is this a rational expectation? Seems that after a certain period of time all bets are off and you lost your chance to get the equivalent of what you "forwent". But we ask our system to always keep those virtuous savers whole or keep those excessive producers like the Germans and Chinese whole. Germany and China expect that they will be able to call their chips in at some point or at least they will accumulate enough influence with those chips that they can bring the world economy to align with their needs. I think this is a wrong headed desire.<br /><br /><br />Your simple beer model is reflective of what is wrong with much of modern economic thought. Individual transactions dont reflect at all what the whole of 300 million person economy interacting with a billion person economy. You wouldnt wait 10 years for that beer to be paid back and if in ten years you came to me and said "wheres my beer" and I simply gave you the money equivalent of the cost of beer ten years previous, if that money equivalent didnt pay for a modern beer (which could be the case for a variety of reason having nothing to do with my chincyness) you might feel you got gipped. You might scream about the inflation and how its deteriorated the value of your dollar.<br /><br />Your issue about banks and their coupons is a great example of the difference. Many businesses wont give you a coupon for service (which has a value of 60$) today and let you redeem it 5 years for the same service. They know the service will likely be worth more then and give you a window of time to redeem. Sure a bank will give you the $100 dollar nominal value, not caring if it gets you the same stuff it did when they issued it.<br /><br />My issue is with a system that more favors savers than consumers. All the savers say "Inflation is bad for me" but the out of work could use a little inflationary policy to become consumers again. The savers have accumulated a lot of power from our, IMO, flawed model.Greghttps://www.blogger.com/profile/03139782404004492965noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-12653550204332492732010-08-27T19:24:41.568-07:002010-08-27T19:24:41.568-07:00gbgasser:
I'm not entirely sure what you'...gbgasser:<br /> <br />I'm not entirely sure what you're trying to say here. Would you care to elaborate, after I take a shot at answering the questions you pose?<br /><br />[1] Why should I expect that any forgone consumption today will be able to be replaced with at least equal consumption later?<br /><br />Who is claiming that you should expect this? There is uncertainty in the world. And when we model uncertainty in models, the return to saving is generally risky.<br /><br />[2] What type of sacrifices do others have to make in the future to ensure me getting tomorrow what I could have had yesterday?<br /><br />It is clear the type of sacrifices others have to make. If I borrow a beer from you today and promise to return a beer to you next week, the sacrifice to me, next week, is a beer. This is a property of every intertemporal model that I am aware of.<br /> <br />[3] Why should China be guaranteed that what they didnt get today they will get in five years? Ten years?<br /> <br />Who do you claim is making such a statement? There are no guarantees to holding USD. (Also a property of the model I present above). <br /> <br />Perhaps you have something like the following in mind. The current generation borrows (purchases with USD) output from China, but the next generation is expected to return the favor? <br /><br />With respect to your comment "Theres a reason why businesses that offer coupons and gift certificates have a redeem by date often times."<br /><br />I wonder what that reason is? And by the way, banks issue money (coupons) all the time with no set redemption date (demand deposit liabilities, for example).David Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-4421148905607298852010-08-27T19:01:27.837-07:002010-08-27T19:01:27.837-07:00I've come to the conclusion that what is wrong...I've come to the conclusion that what is wrong with our paradigm is we over value saving (of money). Why should I expect that any forgone consumption today will be able to be replaced with at least equal consumption later? What type of sacrifices do others have to make in the future to ensure me getting tomorrow what I could have had yesterday?<br /><br />Why should China be guaranteed that what they didnt get today they will get in five years? Ten years?<br /><br />It seems like we expect money to act unlike everything else in the universe. Most everything deteriorates in value over time, yet we try to insure those virtuous savers that what they forgo now will be there later. Its not a bad effort to make but what costs should we impose on everyone else to achieve this?<br /><br />Theres a reason why businesses that offer coupons and gift certificates have a redeem by date often times.<br /><br />No economists that Ive ever seen address this.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-71207482607654130012010-08-27T08:36:19.571-07:002010-08-27T08:36:19.571-07:00Sorry...accidently posted prematurely.
...Why not...Sorry...accidently posted prematurely.<br /><br />...Why not a program to encourage/subsidize saving as well? Just a thought.David Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-35508021293828101282010-08-27T08:35:02.695-07:002010-08-27T08:35:02.695-07:00Brooks Grace III:
That's quite the list of re...Brooks Grace III:<br /><br />That's quite the list of reforms you have in mind there! It would be interesting to work out the likely effects of these proposals in the context of an economic model, to see whether what you predict might conceivably happen (and under what circumstances). <br /><br />Just one thought though. With respect to these corporations who profit handsomely by paying Indian workers $15 per day.<br /><br />[1] $15 per day might be twice the amount they could earn in the countryside. You wish to deprive these people an increase in their living standard?<br /><br />[2] The last time I checked, everyone is free to purchase shares in these "profitable corporations," thereby sharing in the income they generate. Why not a progDavid Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.com