good pic

jonathankaplan


Onward

...wherever you go, there you are...


Previous Entry Share Next Entry
diametrics
good pic
jonathankaplan
in thinking about all the recent events politically in the US, in some sense, it comes down to two different themes. Centralism v. Federalism. ,Monetarists v. "Keynesians. So, on the second of those two themes, I was just curious where you all fall, simplistically.
Here's an easy poll.


Poll #1768958 Monetarism v. Keynesians.

are you a monetarist or a Keynesian?

Monetarist
7(50.0%)
Keynesian
4(28.6%)
In the Middling area
0(0.0%)
Don't Care
2(14.3%)
Don't Know
1(7.1%)


Comments appreciated.

  • 1
as in many things economic, the theory and the practice differ enough so that it doesn't matter if it should work in theory. Deficit spending in hard times becomes deficit spending in good times out of fear that the hard times will come again. Also, there is no way politicians ever win by proposing what feels like austerity measures. Ever. So they don't. And if you happen to be unconstrained because you are (temporarily) the reserve currency of the world... well... keynesian politics only works in the short run. In the long run, rather than being all dead (which is sort of handy for Lord Keynes so he doesn't have to be embarrassed) the fact is we're all in massive debt.

The debt has weird little spin-off issues. Because debt is loaned into existence we end up giving banks money that they can then lend out 8x over on the reserves. That means that the banks get richer the more in debt the United States get... until the banks are SO rich that they have undo amounts of power for a democracy.

The debt also has the effect of inflating the lifestyle that everyone expects to beyond that which is sustainable. It's not just that people don't know how to live on what they produce, they simply could NOT live on what they produce. They'd die of cancer without massive amounts of health care or die of heatstroke (because of the massive demographic movements to places that require air conditioning). Hardly anyone could feed themselves without access to cheap corn via government subsidies.

I can see Keynes point about the value of deficit spending. He's literally right. But it actually cannot be implemented in real life.

For what it's worth, monetarism is a naive perspective which emphasizes protecting wealth over any other social end. As such, it's not so much an economic theory as an ideology.

And of course, we all know what happens when you put a monetarist in charge of the Fed. Anyone who is a monetarist after the colossal bubble blowing of 1980-2006 isn't really a rational actor.

And as evidence of my claim, it appears that Russian spammers are monetarists. :)

:)....I am sure that monetarism is more simplistic. I am not so certain on the word "naive". That belies millenia of history. Further, both of these economic doctrines are ideologies, it is just perspective.
Funny you picked 1980 as the first number of your date range. Pick 1970 (or 1913) instead, and the results look significantly different.
I prefer long term thinking whenever possible. Generational or more, if possible. In a generational sense, the concepts of Monetarism hold more water imo. Keynes had to rely on "in the long run, we are dead." to buttress is thinking.
IF the bubbles are about to become popped, I'd rather be a monetarist now than a Keynesian, for me.
Thanks!

That belies millenia of history.

I'm not sure what this means. Price instability of currency is nothing new.

Funny you picked 1980 as the first number of your date range.

I'm not sure why that's funny. It's the beginning of the era of the credit bubble.

In a generational sense, the concepts of Monetarism hold more water imo.

I don't know what that even means.

IF the bubbles are about to become popped, I'd rather be a monetarist

How does an ideology promoting price stability of currency help you in a world where all the countries are in a slow motion race to the bottom for the most devalued currency?

I guess some of this comes down to one's definition of currency. My definition is, more and more, NOT pieces of paper but other fungible tangible things.
If you had picked 1970 instead of 1980, then owners of gold would have come out looking much better, in the sense that their holding held value better.
Every so often, every 50-100 years, rarely more, there is a crisis of paper currency and almost invariably, that paper ends up worthless. There is no major currency from more than a hundred years ago that still has anywhere near the value it had then. Except precious metals. If you want to hold real value for more than a decade or two, nothing beats gold or silver or certain types of real estate in stable jurisdictions.
All the countries are in a race to devalue their currencies (in part, to make their debt less onerous). Only one currency is gaining in value. Gold.
Gold (and silver), are the historical foundational stuff of monetarism. The concept that Gold has no fundamental basis in currency, or its transactions, is a foundational element in Keynesianism. imo.
Thanks!

I guess some of this comes down to one's definition of currency.

uh... Better to stick to the classical definitions than to start making up new ones.

If you had picked 1970 instead of 1980, then owners of gold would have come out looking much better

Really? That seems a bit of a stretch. The number of people that bought in the 70s and who did not sell until at least 2006 is probably very small.

Every so often, every 50-100 years, rarely more, there is a crisis of paper currency and almost invariably, that paper ends up worthless.

True enough. That fact of life belies the monetarist premise that currency should be a store of wealth.

There is no major currency from more than a hundred years ago that still has anywhere near the value it had then. Except precious metals.

I guess. This is a function of using a commodity as a currency. A gold standard does not prevent the 50-100 year currency crises you speak of.

Only one currency is gaining in value. Gold.

That's just an issue of supply and demand. When the global currencies finish their decline, demand for them will go up, and the value of gold will go down.

The concept that Gold has no fundamental basis in currency, or its transactions, is a foundational element in Keynesianism.

I'm not sure what you mean by "foundational" here. Anything of value can be used to barter. If everyone agrees to use the same thing for bartering, that thing can become a currency. There is no requirement that currency have an underlying value.

The monetarist view that things of marginal value (like paper and coin) should not change in "value" is a silly one. The view that the world should be on the gold standard only creates a situation where the relative value of the gold backing for such a currency would be marginal with respect to the presumed value of the currency.

There's just not enough gold out there to back currency at anywhere near a 1:1 ratio.

Global gold reserves are worth on the order of $2T. Try running a $75T economy on $2T and you're not going to get very far, unless you back each dollar of currency by 2.5 cents.

Note, global money supply is actually somewhere around $50T, not $75T, so I guess we might get a bonus 1.5 cents of gold when we cash in our dollars, for a total of 4% of the face value.

when I look up "currency" HERE, I don't know that I have said anything wrong, in fact, it looks to me like gold might have a much longer and deeper definition as currency than anything else the world has endured.

Perhaps there are few individuals who managed to own gold from the time Nixon closed the gold window until now, but then again, I am sure there are some family, religious, and other types of trust funds that did it for sure. You aren't willing to say that the Ford Foundation has had a time in that 40 years when they didn't own some gold, in some form?

I don't disagree with anything else you say, actually. I dont say that gold shouldnt change in value, perhaps i am not a classical monetarist then. I DO say that currency, if it wants to be a more stable form of currency/exchange, should have more of a backing than just words from far away, that the medium of exchange should be connected in some way to something difficult to produce, limited in supply, and of value to many people. At the moment, and throughout history, that something has traditionally be gold. I think free-floating our currency is a problem now.
But then I also see it is true, if we had remained on a gold standard all the way back to when it mattered, FDR's time (cause Nixon's closing the gold window was aftermath), anyway, if we had kept our currency tied more directly to gold like the gold certificates from before FDR, then our economy would have grown MUCH MUCH slower, with much less of all the positives we accrued during that long period, particularly after the credit boom you reference. So now, we are going to have to pay for all that growth, imo, instead of having a much lesser percentage of it in the first place.
You talk directly about the issue, 2.5 cents "backing" to each current USD? That IS absurd. But that same USD, only 100 years ago however, was backed with approx. 1/20 an ounce of gold. Would we better or worse off if we had left it that way? I don't know, probably there would be far less consumables, the economy would be much smaller, many lives would be much different.
And I wouldnt know how to tie the USD to something tangible at this point, it is too late to try.
One thing I am saying. I would rather own precious metals (that have millenia of being useful currency) than pieces of paper that really only have a few centuries. And that is a different question than I originally posed.
Thanks, as always.

"I DO say that currency, if it wants to be a more stable form of currency/exchange, should have more of a backing than just words from far away"

Given that value is subjective, fashion is whimsy, and needs are changing, stability will always be ephemeral. Sure you could back a dollar with a dollar's worth of gold. But what backs the gold? What guarantees that gold will remain stable and will neither become so scarce as to make backing impossible (as it has), or become so plentiful that it's value drops to less than water (all we need is a modern midas to perfect fusion).

In the end it doesn't matter if a currency is backed. It's just turtles all the way down.

"One thing I am saying. I would rather own precious metals (that have millenia of being useful currency) than pieces of paper that really only have a few centuries. And that is a different question than I originally posed."

True enough. That is not a monetarist position at all. In fact, it shows a rational distrust of the premise that currencies should be stable over the long term.

Maybe. It happens to be in a bull market.

Currency is whatever people say it is. Gold just happens to be the default that everyone goes to when they don't have any other bright ideas about what money should be.

It does have advantages as money. You can only extract so much of it from the ground in any given year, it's pretty hard to extract it, there's energy and risk associated with mining gold.

Once it's in a reasonably pure form, it's highly unreactive to most things, it's easily workable. The only downside, is that it's heavy. If one of the lighter metal elements was reasonably rare, light and ductile, I'd be in favor of using that as money instead of gold, if you asked me.

But gold in and of itself doesn't have any more value that what people say it does.

Frankly I don't think a gold standard is that great an idea, like some people would say. I think that it's what we're gonna get by default through lack of leadership though. Call me a very very cynical monetarist, if you have to call me something.

For me, it's all a question of "is it in a bull market?" and "is it a good deal?" and when gold stops being those things, you'll see me scaling out of it and looking for another asset class to play with.

Whether I like exponential debt growth via government action or exponential debt growth via private/central banking action.

You might as well ask me, am I a Maoist or a Leninist. To which I would answer "neither".

Or can we solve these bean counting problems - with more bean counting?

  • 1
?

Log in