real GDP from 1960 to 2012.
dashed lines extrapolate from prior period's rate of growth
slopes get flatter over time,
growth phase of each business cycle has been slowing down. "
Wednesday, March 20, 2013
decelerating expansion phases
" longer periods of economic recovery and
slower growth with each business cycle since 1960. "
real GDP from 1960 to 2012.
dashed lines extrapolate from prior period's rate of growth
slopes get flatter over time,
growth phase of each business cycle has been slowing down. "
real GDP from 1960 to 2012.
dashed lines extrapolate from prior period's rate of growth
slopes get flatter over time,
growth phase of each business cycle has been slowing down. "
lets go to cloud nine
our tour guide ?
my sister agora paine
interest effects :
1) monetary policy
lower interest rates => more borrowing
for housing
consumer durables
i note this channel produced the lot bubble
-----------------------------------------------------
asset price effects
2) exchange rate effect on exports
3) Q effects
4) wealth effects => equity prices
silk hat socialism
-------------------------------------------------
credit efects
bank lending channels
5) more deposits => more loans
umh credit standards ?
as in default risk
balance sheet
6) increasing asset values
useable as collateral
see channel 1
7)cash flow
lower borrowing costs higher cash flow
our corporations are already cash sumps
just how many firms
are " at that sacred extensive margin"
ready to tip into big time spending ?
8) unanticipated price change effect
cart before the horse
got to get spending going here first eh pal?
9) household liquidity effects
portfolio effect...wealth effect on spending
financial duress relief
yup silk hat hand outs again
unless portfolios seriously impact lots more widows and orphans
then i imagine
DEE lungfish on MMT
When people like Paul Krugman or me read the writings of, say, Warren Mosler, we tend to focus on statements like "a government that can print its own currency can never be forced into default", and "if government bonds find no buyers, that simply means that instead of lending the government money and a positive nominal interest rate the banks are holding excess reserves and constructively lending the government money at zero", and that the government is not constrained by its budget because "the deficit can present no financial risk.
The underlying gestalt we get from things like Warren Mosler's Soft Currency Economics is this:
But it is also the case that in the long run the governments spending has to be balanced by the government's taxes, with two qualifications. (1) The first qualification is that the tax on real money balances that is inflation must be included in the government's tax accounting. (2) The second qualification is that if we are in the peculiar situation in which the real rate of return on government debt is and is certain to be less than the growth rate of the economy, the government can finance its spending by engaging in the highly profitable business of banking--of getting people to pay it real resources to carry their purchasing power forward in time.
The true knowledge is, I think, to maintain a proper balance between these two perspectives--the government-can-never-run-out-of-money perspective and the government's-books-must-balance perspective--and to understand how they complement each other.
From Paul's perspective, the Austerians who shriek about how the US is about to become Greece have no understanding of how the money systems and government debt actually work in the real world.
But, also, from our perspective, the MMT folks are under strong suspicion of heresy for failing to acknowledge that the resources the government deploys cannot always be manufactured out of thin air, but (sometimes) involve real allocations of scarce resources to alternative uses.
For example, things that seem off balance:
L. Randall Wray:
Randy continues:
Cutting spending in the future when you would not otherwise have done so is paying for today’s tax cuts. Raising taxes in the future when you would not otherwise have done is is paying for today’s tax cuts. Introducing non-price rationing to diminish aggregate demand--as a way of telling people: “You know that money you loaned us and we promised to pay back with interest so that you could then spend it? Well, guess what? You can’t spend it!”--is paying for today’s tax cut with a rather sneaky future tax, and so are wage and price controls, and so is the implicit tax on holdings of government debt via explicit inflation, and so is the implicit tax via financial repression.
Now the terms on which you pay in the future for today’s tax cuts are wildly variable. It is the business of fiscal policy for the government to be a good steward for taxpayers and set things up so that the terms on which the government pays for what it does are as attractive as possible. And there certainly are times—like right now—when at the margin at least it looks as though additional government purchases are at least at the margin free, in what we hope is only a once-in-a-lifetime opportunity.
But the tub may fill. And odds are that larger government deficits over the next twenty years will bring the date at which the tub may fill and policy has to change closer in time. And it would be only prudent to have a plan for how to push off the time at which we might have to deal with the full bathtub, or at least to have a plan for how to deal with the full bathtub, or at least to measure how full the bathtub is.
And Stephanie Kelton:
If not, then while it is certainly true that the U.S. government cannot be forced into bankruptcy or “run out of money”, it would be imprudent not to take steps now to guard against the possibility of monetary and financial disruption--not now, not five years from now, but ten, thirty, or fifty years from now--when we can no longer refinance our debt on easy terms but instead need to retire our outstanding government debt via high explicit taxes or very rapid rates of money creation that levy the inflation tax on holders of outside money.
As I have said, repeatedly, austerity now and for the several years is surely counterproductive. But it is not the case that austerity is always and everywhere unneeded.
The underlying gestalt we get from things like Warren Mosler's Soft Currency Economics is this:
- The government spends what it wants.
- The government pays for it spends by creating reserve deposits.
- The government then faces two technical financing decisions: (i) how much of the zero-nominal interest rate government debt that are reserve deposits does it wish to transform into interest-bearing government debt? and (ii) how much of its reserve deposits does it want to to extinguish via taxation?
- But these are technical government financing decisions: they don't carry with them real constraints on what the government can spend when.
But it is also the case that in the long run the governments spending has to be balanced by the government's taxes, with two qualifications. (1) The first qualification is that the tax on real money balances that is inflation must be included in the government's tax accounting. (2) The second qualification is that if we are in the peculiar situation in which the real rate of return on government debt is and is certain to be less than the growth rate of the economy, the government can finance its spending by engaging in the highly profitable business of banking--of getting people to pay it real resources to carry their purchasing power forward in time.
The true knowledge is, I think, to maintain a proper balance between these two perspectives--the government-can-never-run-out-of-money perspective and the government's-books-must-balance perspective--and to understand how they complement each other.
From Paul's perspective, the Austerians who shriek about how the US is about to become Greece have no understanding of how the money systems and government debt actually work in the real world.
But, also, from our perspective, the MMT folks are under strong suspicion of heresy for failing to acknowledge that the resources the government deploys cannot always be manufactured out of thin air, but (sometimes) involve real allocations of scarce resources to alternative uses.
For example, things that seem off balance:
L. Randall Wray:
[M]y inquiring mind wants to know why Brad is worrying about “funding” tax cuts…. Here I only examine the notion that you must “pay for” tax cuts by either higher taxes or lower spending…. No analogy is perfect…. Economists often use a bathtub analogy to explain stocks and flows: water runs into the bathtub from the faucet (in-flow) that fills the tub (stock), so long as the water running out of the drain (out-flow) is less than the water running into the tub. If we plug the drain, the water stops running out—so the in-flow fills the tub. Brad wonders how do we “fund” the reduced outflow? I think that is a nonsensical question. Now, he might instead have wondered: what do we do when the tub is full? Would it then make sense to open the drain, or to slow the flow from the faucet? Sure. But how is that “funding” the previously reduced outflow during the period in which we closed the drain?My answer, IMHO, is that reducing the outflow--lowering tax collections--means that that date is closer at which the tub is full and we have to either open the drain (i.e., raise taxes) or slow the flow from the faucet (cut spending).
Randy continues:
Makes no sense to me…. Tax cuts today cannot be “paid for” later by tax increases or spending reductions. There could come a time in the future when we decide that aggregate demand is too high--perhaps sparking inflation. At that time we might raise taxes, or cut spending, or stimulate more production, or use non-price rationing, or institute wage and price controls, or… who knows? But if and when we take those actions, they do not “pay for” today’s tax cuts…To this my response is: yes they do.
Cutting spending in the future when you would not otherwise have done so is paying for today’s tax cuts. Raising taxes in the future when you would not otherwise have done is is paying for today’s tax cuts. Introducing non-price rationing to diminish aggregate demand--as a way of telling people: “You know that money you loaned us and we promised to pay back with interest so that you could then spend it? Well, guess what? You can’t spend it!”--is paying for today’s tax cut with a rather sneaky future tax, and so are wage and price controls, and so is the implicit tax on holdings of government debt via explicit inflation, and so is the implicit tax via financial repression.
Now the terms on which you pay in the future for today’s tax cuts are wildly variable. It is the business of fiscal policy for the government to be a good steward for taxpayers and set things up so that the terms on which the government pays for what it does are as attractive as possible. And there certainly are times—like right now—when at the margin at least it looks as though additional government purchases are at least at the margin free, in what we hope is only a once-in-a-lifetime opportunity.
But the tub may fill. And odds are that larger government deficits over the next twenty years will bring the date at which the tub may fill and policy has to change closer in time. And it would be only prudent to have a plan for how to push off the time at which we might have to deal with the full bathtub, or at least to have a plan for how to deal with the full bathtub, or at least to measure how full the bathtub is.
And Stephanie Kelton:
Brad DeLong is worried. And now I’m worried. He’s worried about “unfunded tax cuts,” which, he says, are “bad juju” in the long run. I don’t mean to pooh-pooh his juju, but what the heck is an “unfunded tax cut”?… Tax cuts leave taxpayers with more money to spend, but they don’t compromise the government’s ability to spend later. Nor is the debt ratio a binding constraint…. Can’t we just admit that the U.S. dollar comes from the U.S. government? That the i$$uer of the currency can never “run out” of money or be forced into bankruptcy…. Until people like us help awaken the population to the way modern money works, the deficit scolds will have the upper hand and the American people will suffer needlessly as Democrats and Republicans alike continue to hide behind the time-honored ”how will we pay for it?”As I understand it, Stephanie is going Abba Lerner--qualification (2) above. The hope is that the U.S. government can borrow and spend and that investors will always value U.S. government debt so highly as a safe store of value that, even without high inflation, the real interest rate on the debt will be on balance lower than the real growth rate of the American economy. If so, then the issuing of debt by the U.S. government is a very profitable business indeed: it makes something--safe nominal assets--that investors love and are willing to pay for through the nose, and we can finance whatever we want our government to spend on from the profits of this very profitable debt-issuing business.
If not, then while it is certainly true that the U.S. government cannot be forced into bankruptcy or “run out of money”, it would be imprudent not to take steps now to guard against the possibility of monetary and financial disruption--not now, not five years from now, but ten, thirty, or fifty years from now--when we can no longer refinance our debt on easy terms but instead need to retire our outstanding government debt via high explicit taxes or very rapid rates of money creation that levy the inflation tax on holders of outside money.
As I have said, repeatedly, austerity now and for the several years is surely counterproductive. But it is not the case that austerity is always and everywhere unneeded.
Saturday, March 16, 2013
recent PCE rate change spread ...(one month annualized )
| PCE: Gasoline & Other Motor Fuel Price Index | -32.7 |
| Personal Consumption Expenditures: Clothing Materials Price Index | -30.9 |
| Personal Consumption Expenditures: Sewing Items Price Index | -30.9 |
| Personal Consumption Expenditures: Commercial Banks Price Index | -26.1 |
| Sales Receipts: Foundatns/Grant Making/Giving Svcs to HH Price Idx | -25.8 |
| Personal Consumption Expenditures: Eggs Price Index | -21.0 |
| Personal Consumption Expenditures: Photographic Equip Price Index | -20.4 |
| Personal Consumption Expenditures: Natural Gas Price Index | -18.7 |
| Personal Consumption Expenditures: Fresh Fruit Price Index | -18.6 |
| PCE: Film & Photographic Supplies Price Index | -15.7 |
| PCE: Othr Depository Instns & Regulated Invest Companies Price Idx | -12.8 |
| PCE: Sporting Equip, Supplies, Guns & Ammunition Price Index | -12.0 |
| PCE: Employment Agcy Services Price Index | -10.3 |
| PCE: Computer Software & Acc Price Index | -10.0 |
| PCE: Net Health Insurance Price Index | -9.5 |
| Personal Consumption Expenditures: Tires Price Index | -9.2 |
| PCE: Personal Computers & Peripheral Equip Price Index | -8.2 |
| Personal Consumption Expenditures: Other Meats Price Index | -8.1 |
| Personal Consumption Expenditures: Furniture Price Index | -7.5 |
| PCE: Household Cleaning Products Price Index | -7.3 |
| Personal Consumption Expenditures: Fats and Oils Price Index | -7.2 |
| PCE: Coffee, Tea & Other Beverage Mtls Price Index | -7.1 |
| PCE: Children's & Infants' Clothing Price Index | -7.0 |
| Personal Consumption Expenditures: Nursing Homes Price Index | -6.8 |
| PCE: Mineral Waters, Soft Drinks & Vegetable Juices Price Index | -6.7 |
| PCE: Moving, Storage & Freight Services Price Index | -6.5 |
| PCE: Hair/Dental/Shave/Misc Pers Care Prods ex Elec Prod Price Idx | -6.0 |
| PCE: Elec Appliances for Personal Care Price Index | -6.0 |
| PCE: Motor Vehicle Leasing Price Index | -6.0 |
| Personal Consumption Expenditures: Cereals Price Index | -5.9 |
| PCE: Flowers, Seeds & Potted Plants Price Index | -5.8 |
| Personal Consumption Expenditures: Fresh Milk Price Index | -5.4 |
| PCE: Food Products, Not Elsewhere Classified Price Index | -5.2 |
| Personal Consumption Expenditures: Window Coverings Price Index | -5.1 |
| Personal Consumption Expenditures: Wine Price Index | -5.0 |
| Personal Consumption Expenditures: Lubricants & Fluids Price Index | -4.7 |
| Personal Consumption Expenditures: Air Transportation Price Index | -4.6 |
| PCE: Nonprescription Drugs Price Index | -4.0 |
| Personal Consumption Expenditures: Social Assistance Price Index | -4.0 |
| PCE: Stationery & Misc Printed Mtls Price Index | -3.9 |
| Personal Consumption Expenditures: Televisions Price Index | -3.1 |
| PCE: Maintenance & Repair of Rec Vehicles & Sports Eqpt Price Idx | -2.6 |
| PCE: Processed Dairy Products Price Index | -2.5 |
| PCE: Cosmetic/Perfumes/Bath/Nail Preparatns & Implements Price Idx | -2.3 |
| Personal Consumption Expenditures: Fuel Oil Price Index | -2.0 |
| Personal Consumption Expenditures: Beef and Veal Price Index | -2.0 |
| PCE: Tax Preparation & Other Related Services Price Index | -1.8 |
| PCE: Misc Household Products Price Index | -1.7 |
| Personal Consumption Expenditures: Other Video Equip Price Index | -1.6 |
| Personal Consumption Expenditures: Physician Services Price Index | -1.0 |
| PCE: Veterinary & Other Services for Pets Price Index | -1.0 |
| PCE: Household Paper Products Price Index | -0.7 |
| PCE: Tools, Hardware & Supplies Price Index | -0.6 |
| Personal Consumption Expenditures: Jewelry Price Index | -0.6 |
| PCE: Major Household Appliances Price Index | -0.2 |
| Personal Consumption Expenditures: Accessories & Parts Price Index | 0.0 |
| Personal Consumption Expenditures: Prescription Drugs Price Index | 0.1 |
| PCE: Other Medical Products Price Index | 0.3 |
| PCE: Therapeutic Medical Equip Price Index | 0.3 |
| Personal Consumption Expenditures: Casino Gambling Price Index | 0.3 |
| Personal Consumption Expenditures: Lotteries Price Index | 0.3 |
| PCE: Pari-Mutuel Net Receipts Price Index | 0.3 |
| Personal Consumption Expenditures: Legal Services Price Index | 0.6 |
| Personal Consumption Expenditures: Prof Assn Dues Price Index | 0.6 |
| PCE: Net Motor Vehicle & Other Transportation Insur Price Index | 0.6 |
| Personal Consumption Expenditures: New Light Trucks Price Index | 0.9 |
| PCE: Motion Picture Theaters Price Index | 0.9 |
| Personal Consumption Expenditures: Used Autos Price Index | 0.9 |
| Personal Consumption Expenditures: Museums & Libraries Price Index | 0.9 |
| PCE: Live Entertainment, ex Sports Price Index | 0.9 |
| PCE: Nonprofit Hospitals' Services to Households Price Index | 1.0 |
| PCE: Proprietary Hospitals Price Index | 1.0 |
| Personal Consumption Expenditures: Spirits Price Index | 1.0 |
| Personal Consumption Expenditures: Govt Hospitals Price Index | 1.0 |
| Personal Consumption Expenditures: Taxicabs Price Index | 1.0 |
| PCE: Intercity Mass Transit Price Index | 1.0 |
| PCE: Financial Service Charges, Fees & Commissions Price Index | 1.1 |
| Personal Consumption Expenditures: Used Light Trucks Price Index | 1.3 |
| PCE: Paramedical Services Price Index | 1.4 |
| Personal Consumption Expenditures: Motorcycles Price Index | 1.4 |
| PCE: Other Purchased Meals Price Index | 1.5 |
| PCE: Video Cassettes & Discs, Blank & Prerecorded Price Index | 1.5 |
| Personal Consumption Expenditures: Beer Price Index | 1.5 |
| Personal Consumption Expenditures: Pleasure Aircraft Price Index | 1.6 |
| Personal Consumption Expenditures: Pleasure Boats Price Index | 1.6 |
| PCE: Other Recreational Vehicles Price Index | 1.6 |
| Personal Consumption Expenditures: Bicycles & Acc Price Index | 1.6 |
| PCE: Pets & Related Products Price Index | 1.8 |
| Personal Consumption Expenditures: Watches Price Index | 2.0 |
| Final Consumptn Exps of Nonprofit Instns Serving HH Price Idx | 2.0 |
| PCE: Alcohol in Purchased Meals Price Index | 2.1 |
| PCE: Amusement Parks, Campgrounds & Related Recral Svcs Price Idx | 2.1 |
| PCE: Garbage & Trash Collection Price Index | 2.1 |
| Personal Consumption Expenditures: Package Tours Price Index | 2.1 |
| PCE: Owner-Occupied Mobile Homes Price Index | 2.2 |
| PCE: Rental Value of Farm Dwellings Price Index | 2.2 |
| PCE: Owner-Occupied Stationary Homes Price Index | 2.2 |
| Personal Consumption Expenditures: Recreational Books Price Index | 2.2 |
| Personal Consumption Expenditures: Spectator Sports Price Index | 2.3 |
| PCE: Other Household Services Price Index | 2.3 |
| PCE: Standard Clothing Issued to Military Personnel Price Index | 2.6 |
| PCE: Tenant-Occupied Stationary Homes Price Index | 2.7 |
| PCE: Tenant-Occupied Mobile Homes Price Index | 2.7 |
| Personal Consumption Expenditures: Group Housing Price Index | 2.7 |
| PCE: Other Personal Business Services Price Index | 2.8 |
| PCE: Hairdressing Salons & Personal Grooming Estab Price Idx | 3.0 |
| PCE: Membership Clubs & Participant Sports Centers Price Index | 3.1 |
| PCE: Luggage & Similar Personal Items Price Index | 3.2 |
| Personal Consumption Expenditures: Communication Price Index | 3.5 |
| PCE: Shoes & Other Footwear Price Index | 3.5 |
| Personal Consumption Expenditures: Domestic Services Price Index | 3.7 |
| PCE: Food Supplied to Military Price Index | 3.7 |
| PCE: Elementary & Secondary School Lunches Price Index | 3.7 |
| PCE: Food Supplied to Civilians Price Index | 3.7 |
| PCE: Higher Education School Lunches Price Index | 3.7 |
| PCE: Elementary & Secondary Schools Price Index | 3.8 |
| PCE: Outdoor Equip & Supplies Price Index | 4.0 |
| Personal Consumption Expenditures: Fish and Seafood Price Index | 4.1 |
| PCE: Motor Vehicle Maintenance & Repair Price Index | 4.3 |
| Personal Consumption Expenditures: New Domestic Autos Price Index | 4.3 |
| Personal Consumption Expenditures: New Foreign Autos Price Index | 4.3 |
| PCE: Parking Fees & Tolls Price Index | 4.3 |
| PCE: Net Household Insurance Price Index | 4.5 |
| Personal Consumption Expenditures: Pork Price Index | 4.7 |
| Personal Consumption Expenditures: Child Care Price Index | 4.8 |
| PCE: Day Care & Nursery Schools Price Index | 4.8 |
| PCE: Corrective Eyeglasses & Contact Lenses Price Index | 4.9 |
| PCE: Water Supply & Sewage Maintenance Price Index | 5.2 |
| Personal Consumption Expenditures: Housing at Schools Price Index | 5.3 |
| Personal Consumption Expenditures: Dental Services Price Index | 5.3 |
| PCE: Audio-Video, Photographic & Info Processing Svcs Price Index | 5.5 |
| Personal Consumption Expenditures: Life Insurance Price Index | 5.7 |
| PCE: Water Transportation Price Index | 5.7 |
| PCE: Prerec/Blank Audio Disc/Tape/Digital Files/Download Price Idx | 6.1 |
| Personal Consumption Expenditures: Bakery Products Price Index | 6.4 |
| PCE: Telephone & Facsimile Equip Price Index | 6.5 |
| PCE: Calculators/Typewriters/Othr Info Processing Eqpt Price Idx | 6.5 |
| Personal Consumption Expenditures: Musical Instruments Price Index | 6.5 |
| Personal Consumption Expenditures: Tobacco Price Index | 6.7 |
| PCE: Funeral & Burial Services Price Index | 7.0 |
| PCE: Processed Fruits & Vegetables Price Index | 7.0 |
| PCE: Social Advocacy & Civic & Social Organizations Price Index | 7.9 |
| PCE: Religious Organizations' Services to Households Price Index | 8.2 |
| PCE: Laundry & Dry Cleaning Services Price Index | 8.2 |
| PCE: Tenant Landlord Durables Price Index | 8.3 |
| Personal Consumption Expenditures: Sugar and Sweets Price Index | 8.5 |
| Personal Consumption Expenditures: Educational Books Price Index | 8.7 |
| Personal Consumption Expenditures: Poultry Price Index | 9.1 |
| PCE: Carpets & Other Floor Coverings Price Index | 9.3 |
| PCE: Proprietary & Public Higher Education Price Index | 9.8 |
| PCE: Nonprofit Pvt Higher Education Svcs to Households Price Index | 9.8 |
| PCE: Nonelectric Cookware & Tableware Price Index | 10.3 |
| PCE: Labor Organization Dues Price Index | 11.2 |
| Personal Consumption Expenditures: Other Fuels Price Index | 11.4 |
| PCE: Railway Transportation Price Index | 11.5 |
| PCE: Clock/Lamp/Lighting Fixture/Othr HH Decorative Item Price Idx | 11.7 |
| PCE: Men's & Boys' Clothing Price Index | 12.2 |
| Personal Consumption Expenditures: Household Linens Price Index | 13.0 |
| PCE: Repair of Household Appliances Price Index | 13.8 |
| PCE: Repair of Furn, Furnishings & Floor Coverings Price Index | 13.8 |
| Personal Consumption Expenditures: Electricity Price Index | 14.0 |
| PCE: Commercial & Vocational Schools Price Index | 15.1 |
| Personal Consumption Expenditures: Audio Equipment Price Index | 16.8 |
| PCE: Women's & Girls' Clothing Price Index | 17.4 |
| Personal Consumption Expenditures: Intercity Buses Price Index | 18.0 |
| PCE: Other Road Transportation Service Price Index | 18.0 |
| Personal Consumption Expenditures: Hotels and Motels Price Index | 18.0 |
| PCE: Clothing Repair, Rental & Alterations Price Index | 18.4 |
| PCE: Repair & Hire of Footwear Price Index | 18.4 |
| PCE: Misc Personal Care Services Price Index | 18.4 |
| Personal Consumption Expenditures: Pension Funds Price Index | 20.5 |
| PCE: Small Elec Household Appliances Price Index | 21.6 |
| PCE: Games, Toys & Hobbies Price Index | 21.8 |
| Personal Consumption Expenditures: Fresh Vegetables Price Index | 32.2 |
| PCE: Newspapers & Periodicals Price Index | 37.6 |
| Personal Consumption Expenditures: Dishes and Flatware Price Index | 66.2 |
| PCE: Motor Vehicle Rental Price Index | 78.6 |
| PCE: Food Produced & Consumed on Farms Price Index | 124.4 |
who's skin 's in the game ?
equity holders are rubes too
its all about inside/outside
paper type can be customixed to fit the tower trolls and vulture venturers specifications
for rational pillage
legaloid fraud
and
the ever present
" too little too late " 7th cavalry arrival horizons
its all about inside/outside
paper type can be customixed to fit the tower trolls and vulture venturers specifications
for rational pillage
legaloid fraud
and
the ever present
" too little too late " 7th cavalry arrival horizons
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