Tuesday, July 16, 2013

whats wrong with this...

".. in normal times the AD curve slopes down, we think, because other things equal a higher price level increases the demand for money, which drives up interest rates, which reduces desired spending. (In terms of IS-LM analysis, higher P leads to lower M/P which shifts LM left.) " YUP...PK


how far can we go with this ?
 

do higher prices increase the demand for money
 or higher nominal income and or wealth  ?

can money proxy both nominal wealth and nominal  income and obligations

on H- toon earth
 wealth ...net wealth that is ...is money
 that stock may be distributed in ways that crunch lots of "firm activity "
creditors with  not modeled   wildly appreciating IOU's ...in real value

but also hold money appreciating  in real value

may not spend "enough "  more as  money wealth in real terms   appreciates

and debtors who  hold  "negative money "
their  collateral or real income stream must rise in real terms as fast as deb rises or credit spigots get turned off and loans called etc
at best we see shrinking gross  income increasingly drained by paying back nominally fixed  IOUs

bad   no ?

so its demand for income

oh lets
cut to the chase
its not more capital gains and higher nominal dividends and interest flows
but demand for higher  take home wages and more  transfer payments