tag:blogger.com,1999:blog-8702840202604739302.post6686829683894996538..comments2024-03-27T11:12:49.188-07:00Comments on MacroMania: Ron Paul's Money Illusion (Sequel)David Andolfattohttp://www.blogger.com/profile/12138572028306561024noreply@blogger.comBlogger236125tag:blogger.com,1999:blog-8702840202604739302.post-32526666627054061252013-05-22T12:35:38.573-07:002013-05-22T12:35:38.573-07:00Hey, what's up? I had been searching the net a...Hey, what's up? I had been searching the net and I got into your webpage.<br />I just found the thing I had been looking for!<br />I completely like your webpage! Pages with so correct text are much more easier to read!<br />I would recommend you to keep it up. 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Those who are self-taught by reading garbage do not, and they get hostile and angry. Try to ignore them and keep up the good work!<a href="http://www.china-direct.net/" rel="nofollow">China outsourcing</a><br />Anonymoushttps://www.blogger.com/profile/00181753070857437581noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-58735398844199160342012-12-14T05:25:43.808-08:002012-12-14T05:25:43.808-08:00Graphs like the one above have their uses. But one... Graphs like the one above have their uses. But one should not get too carried away with a single picture. Let me draw you another picture. This one plots the inverse of the U.S. nominal wage rate (total nominal wage income divided by aggregate hours worked). <a href="http://www.china-direct.net/" rel="nofollow">china manufacturing</a><br />Anonymoushttps://www.blogger.com/profile/00181753070857437581noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-30635873690587573632012-05-21T05:55:53.467-07:002012-05-21T05:55:53.467-07:00The people not reading your blogs are missing out ...The people not reading your blogs are missing out a lot of quality contents.<br /><a href="//www.callcash.com/quick-cash-loans" rel="nofollow"> the quickest loans</a>jimihttps://www.blogger.com/profile/04502959747701682479noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-61337510131754458302011-12-09T13:59:35.171-08:002011-12-09T13:59:35.171-08:00That is because Rothbard hated tradition and wante...That is because Rothbard hated tradition and wanted capital owners to own everything. Amazing the Alex Jones's of the world don't conspiracy that........mabye that is because............he is part of the conspiracy!!!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-30496392028738982352011-04-14T19:40:24.106-07:002011-04-14T19:40:24.106-07:00Steve may be the least intelligent person who is n...Steve may be the least intelligent person who is not currently trapped in a kitchen cabinet.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-85667599470096922772011-04-14T09:25:09.425-07:002011-04-14T09:25:09.425-07:00Hi David,
Thanks for the reply and the link to yo...Hi David,<br /><br />Thanks for the reply and the link to your other post helped me understand more. I don't fully understand your models yet, but I am trying to work my way through them.<br /><br />On Rothbard, I think you might misunderstand the his view. He thinks that a government granted monopoly on the issue of money is immoral. He considers "borrow short, lend long" banking schemes fraudulent and thinks they should be outlawed. Meaning that if a bank can only collect funds for 7 year CDs, then it should be illegal for them to loan out money for 30 years. <br /><br />Rothbard does think it totally acceptable that any individual or bank should be able to issue any notes they desire, then let the market work it out.Edwardhttps://www.blogger.com/profile/06899761220886572260noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-11671731048356205072011-04-13T14:22:47.423-07:002011-04-13T14:22:47.423-07:00Great post! Every macroeconomics undergrad in Nor...Great post! Every macroeconomics undergrad in North America should read this post.<br /><br />Come to think of it, every business and economic journalist in North America should read this post. <br /><br />To think that theory and data once slept in separate bedrooms....Erik Poolehttps://www.blogger.com/profile/02442592238782846163noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-74732581836985812422011-04-12T07:38:01.085-07:002011-04-12T07:38:01.085-07:00It isn't 2-3% of GDP, Gabe.
It is 2-3% of c...It isn't 2-3% of GDP, Gabe. <br /><br />It is 2-3% of currency in circulation. <br /><br />That is more like $25 billion in most years, which is more like 0.2% of GDP, half of which comes from people who don't live in the United States -- which means it is a transfer from non-Americans to Americans -- and much of the rest comes from people involved in illegal businesses. <br /><br />Aren't you embarrassed to be pontificating on a subject on which you are so badly informed?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-44757471836414160762011-04-11T20:08:16.022-07:002011-04-11T20:08:16.022-07:00gabe:
Right from the start I called it a tax. The...<b>gabe:</b><br /><br />Right from the start I called it a tax. The inflation tax. Some people, like you I guess, interpret all taxes as a form of tax. Fine. Some people interpret all property as theft. Whatever.David Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-7429454135487009942011-04-11T15:36:25.271-07:002011-04-11T15:36:25.271-07:00"My argument, all along, has been a quantitat..."My argument, all along, has been a quantitative one. Seigniorage, theft, counterfeiting, etc. is peanuts...small potatoes I called it, relative to other forms of taxation." <br /><br />So you admit it is theft...it is just your opinion that 2-3 % of GDP is insignificant.<br />wow...ok.<br /><br />Next you'll tell us that we shouldn't prosecute Halliburton for bribing Senators because it is small potatoes compared to the Pentagon bribing foreign dictators with "foreign aid".<br /><br />We are pretty aware that there are many many components to the corruption in Washington DC and London and Brussels. It doesn't really help the argument of a criminal to say..."but but but they are stealing so much more money!"gabehttps://www.blogger.com/profile/18265135497422170600noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-77392906128600673292011-04-09T08:55:23.656-07:002011-04-09T08:55:23.656-07:00Edward:
For a model of M1 and M, take a look here...<b>Edward:</b><br /><br />For a model of M1 and M, take a look here: http://andolfatto.blogspot.com/2010/07/interpreting-recent-movements-in-money.html<br /><br />The movement in M1 is irrelevant for computing the inflation tax; at least, under the assumption that new money created by the banking sector is being used to finance positive NPV projects.<br /><br />As far as the government budget constraint is concerned, write the revenue from money creation as:<br /><br />S(t) = M(t) - M(t-1)<br /><br />Let's assume, for simplicity, that the base money supply grows at some constant rate m; so that <br /><br />M(t) = m*M(t-1)<br /><br />Therefore, seigniorage revenue is given by:<br /><br />S(t) = [1 - 1/m]M(t)<br /><br />Divide through by the price-level p(t) to transform variables into real quantities:<br /><br />s(t) = [1 - 1/m)]q(t)<br /><br />where q(t) denote the real quantity of base money.<br /><br />We can now make some behavioral assumptions. From basic theory, and basic intuition, the demand for real money balances q is a decreasing function of m (which in a steady state, corresponds to the inflation rate). <br /><br />So now you have a classic "Laffer curve." That is, s(t) is increasing for low rates of inflation, and decreasing for high rates of inflation. There is a revenue maximizing inflation rate. <br /><br />All of this is independent of how policy influences private money creation (M1). <br /><br />Of course, this assumes that banks use their new money loans to finance worthy capital projects. If you instead take what is apparently a "Rothbardian" view that banks are counterfeiters, then the conclusions here will obviously be different.<br /><br />Does this help?David Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-19733243367113480062011-04-08T18:30:20.600-07:002011-04-08T18:30:20.600-07:00"And I think we can all lay the blame pretty ..."And I think we can all lay the blame pretty squarely on congress."<br /><br />This is a good point. The Fed is a creature of Congress and ultimately does what Congress wants. The Fed has taken a lot more grief over the years for tighter monetary policy than Congress or the President wanted than the reverse. <br /><br />"Even for the people arguing that central banking enables government to overspend (which I believe to be true), it's still a legislative body pulling the trigger."<br /><br />This is not a good point. Monetary policy has essentially zero to do with the ability of Congress to spend. I've no idea where this idea got started but it is nuts.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-64303586260409003782011-04-08T09:41:31.217-07:002011-04-08T09:41:31.217-07:00David,
When you discuss the "inflation tax,&...David,<br /><br />When you discuss the "inflation tax," how do you measure it? By CPI or the change in money supply. Meaning, if Fed actions led to an increase in M-1 of 10%, but CPI only increased by 2%, would you say that the inflation tax is 10% or 2%? <br /><br />What mathmatical models do you use to measure the effects of a Fed action like I described above?Edwardhttps://www.blogger.com/profile/06899761220886572260noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-89586835295722704722011-04-08T08:58:14.586-07:002011-04-08T08:58:14.586-07:00If a 2% rate of inflation so dramatically distorts...If a 2% rate of inflation so dramatically distorts productive investment and business decision-making, what say ye of the 35% corporate income tax or the regulatory nanny state? Surely these factors must be far larger in mis-allocating capital.<br /><br />The problems here isn't that the Fed doesn't do bad things; David's making the point that every bad produced by the fed is dramatically outmatched by a bad produced elsewhere (0-10% inflation vs 35% corporate tax; small amount of Fed-originated money expansion vs large amount of private bank-originated monetary expansion).<br /><br />Of course, this is a Fed-related blog and David is not the vice-president of the EPA or the SEC, but I think his point stands. I for one would be much happier if 25% of my hard-earned income wasn't stolen from me under color of law every year to fund programs and wars I disagree with. I'd take that improvement over a hypothetical regime of zero average inflation. Once we get rid of the most outrageous violations of human rights, we can move on to the less outrageous ones.<br /><br />And I think we can all lay the blame pretty squarely on congress. Even for the people arguing that central banking enables government to overspend (which I believe to be true), it's still a legislative body pulling the trigger.Natehttp://gunsandbullets.wordpress.comnoreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-84799137487997441002011-04-08T05:52:37.821-07:002011-04-08T05:52:37.821-07:00Steve, this idea that data cannot prove or disprov...Steve, this idea that data cannot prove or disprove theory is crazy. Where do you come up with these things? <br /><br />Have you ever taken a physics class? Do you realize how many times theoretical physics have made predictions that have either supported or disproved theory? <br /><br />Natural scientists have theories that imply predictions that are either supported by new data or not. If they are not, the new data informs the modification of the theory. <br /><br />No theory is a complete description of reality so no amount of data can "prove" a theory. But it can be supported or disproved. <br /><br />You example of taxes and regulations is an incomplete and ill-specified theory so it cannot be proved. Of course, the answer is that some times taxes and regulations are good and other times they are bad for our standard of living.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-39885319226021523222011-04-07T18:32:41.713-07:002011-04-07T18:32:41.713-07:00Mike:
I agree about John Cochrane's paper, b...<b>Mike:</b><br /><br /><i> I agree about John Cochrane's paper, but that still leaves the question: If you believe the stock/money analogy, then you have to conclude that the Fed's issuance of money is not generally inflationary (unless the Fed's liabilities outrun its assets). So the best answer to give to the "inflation tax" folks is that there is NO inflation tax. But you answer them just by saying that the inflation tax is small. </i><br /><br />I guess the answer is that I do not agree completely with the money-stock analogy. The logic is sound, of course. But the conclusion rests on some assumptions that I do not believe are met even approximately in reality. Same thing with Wallace's Modigliani-Miller theorem for open market operations.<br /><br /><b>Steve:</b> Just wanted to let you know that I do not necessarily disagree with your "Austrian" explanations. But just like those who seem to believe so strongly in their "Keynesian" interpretations, I ask what evidence they use to support their beliefs. This is the same question I ask myself all the time too--and I assure you that I am much harder on myself than I have been on you!David Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-91093170518119708852011-04-07T15:14:38.823-07:002011-04-07T15:14:38.823-07:00Mike,
I don't see how the following relates t...Mike,<br /><br />I don't see how the following relates to the dilution of money and/or stocks by issuing more. Can you explain a bit more please?<br /><br />"Maybe you'll like the following better than the stock/money analogy: A bank accepts 100 oz. of silver on deposit, and issues 100 paper receipts ('dollars') in exchange. Each dollar is clearly worth 1 oz. Now the bank accepts another 200 oz. on deposit and issues another $200. Each dollar is still worth 1 oz. Now what if the bank trades 200 oz of silver for other assets that have a combined value of 200 oz. I say the dollars will remain worth 1 oz. each, because the bank's assets (worth 300 oz.) are exactly enough to buy back every dollar the bank has issued at 1 oz/$"<br /><br />This is just bartering the 200 oz of silver for other assets. It doesn't seem to have anything to do with increasing supply of anything. They clearly changed their assets, but their valuation did not change at all by the issuance of new stock or money.Kyle Davidsonnoreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-30380806273962754112011-04-07T14:34:31.731-07:002011-04-07T14:34:31.731-07:00Steve:
Yes, we have established that we can know ...<b>Steve:</b><br /><br />Yes, we have established that we can know SOME things through theory alone. We have also established that many competing and equally coherent (logically valid) theories can potentially explain a given set of facts. So there is only so far one can go with theory alone. <br /><br />And yes, this is one reason why I am not taking Murphy's post seriously (I did not mean to be rude). It was he who asserted that the evidence supported his claims; and yet he provides no evidence. What sort of argument is that?<br /><br />I'm not sure what you are trying to say with your concluding paragraph. You are trying to persuade me by an exercise in logic that is based on a ill-specified (non mathematical) model. You want to disregard evidence, claiming that it is too hard to measure the real-world effects of what you are talking about. <br /><br />Oh, and you want me to believe what you say is true. C'mon Stephen...get a grip!David Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-91834571208488996202011-04-07T14:21:59.952-07:002011-04-07T14:21:59.952-07:00David,
We established that we can know things for...David,<br /><br />We established that we can know things for certain through theory alone. Yet, you rudely brush aside Robert Murphy's criticisms, which are legitimate, because he doesn't provide evidence? This is why I am pursuing this point.<br /><br />Many things in economics are not quantifiable. Just because an argument is quantitative doesn't mean that it expresses something meaningful; theory has to determine this.Stevenoreply@blogger.comtag:blogger.com,1999:blog-8702840202604739302.post-2687482736711356042011-04-07T13:38:10.369-07:002011-04-07T13:38:10.369-07:00Steve:
My argument, all along, has been a quantit...<b>Steve:</b><br /><br />My argument, all along, has been a <b>quantitative</b> one. Seigniorage, theft, counterfeiting, etc. is peanuts...small potatoes I called it, relative to other forms of taxation. <br /><br />Your final point is a legitimate one, but so what? Should I therefore concede to you? Do you honestly believe you have the ammunition to persuade with that sort of argument? No hard evidence to back up your claim? Fine; we can stop here.David Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.com