4 ms·

CPI is determined by M1V , i.e. velocity of M1. Since M1 is already out there, we just have to wait for the V. For now it's parked in the inflated stocks. Most

by cft 6y ago

CPI is determined by M1V , i.e. velocity of M1. Since M1 is already out there, we just have to wait for the V. For now it's parked in the inflated stocks. Most importantly, without high M1, high M1V is not possible.

nabla9 6y ago
That's kind of thinking takes quantity theory of money too seriously (axiomatically). Instead of looking if that has been true, you just assume that it must be true.
- jkhdigital 6y ago
  Except that fiat money can be analyzed axiomatically, because it is essentially just numbers in a balanced double-entry ledger. The difficult part is in translating theorems into practical knowledge about the economy, but just because this is difficult doesn’t mean that the axiomatic approach is wrong.
  - nabla9 6y ago
    > Except that fiat money can be analyzed axiomatically Not in a meaningful way. (meaningful = related to real economy). If you just look at the numbers in a silly accountant fashion, and population doubles, analysis is meaningless. You need want to keep money relatively stable (say 2% inflation) you need to keep adding money to match changes in demand or factors of production.
dragonwriter 6y ago
> Since M1 is already out there, we just have to wait for the V M1 can change day to day without change of the monetary base by behavior changes, and the Fed can reduce monetary base pulling down on M1 through open market policies. M1 is already out there means little, because it's not fixed. > Most importantly, without high M1, high M1V is not possible False. There’s no hard limit on V, so you can arbitrarily high “M1V” with any M1.
- cft 6y ago
  > False. There’s no hard limit on V, so you can arbitrarily high “M1V” with any M1. There's definitely a limit on the number of transactions. V ~ N_transactions_per_day * M1. With the fixed M1 you can up V only by upping N_transactions_per_day. Am I missing something?
  - tylerhou 6y ago
    num_transactions_possible is so high that it’s effectively unlimited. It also doesn’t take into the size of of transactions.

by cft 6y ago

nabla9 6y ago

That's kind of thinking takes quantity theory of money too seriously (axiomatically). Instead of looking if that has been true, you just assume that it must be true.

jkhdigital 6y ago
Except that fiat money can be analyzed axiomatically, because it is essentially just numbers in a balanced double-entry ledger. The difficult part is in translating theorems into practical knowledge about the economy, but just because this is difficult doesn’t mean that the axiomatic approach is wrong.
- nabla9 6y ago
  > Except that fiat money can be analyzed axiomatically Not in a meaningful way. (meaningful = related to real economy). If you just look at the numbers in a silly accountant fashion, and population doubles, analysis is meaningless. You need want to keep money relatively stable (say 2% inflation) you need to keep adding money to match changes in demand or factors of production.

dragonwriter 6y ago

> Since M1 is already out there, we just have to wait for the V M1 can change day to day without change of the monetary base by behavior changes, and the Fed can reduce monetary base pulling down on M1 through open market policies. M1 is already out there means little, because it's not fixed. > Most importantly, without high M1, high M1V is not possible False. There’s no hard limit on V, so you can arbitrarily high “M1V” with any M1.

cft 6y ago
> False. There’s no hard limit on V, so you can arbitrarily high “M1V” with any M1. There's definitely a limit on the number of transactions. V ~ N_transactions_per_day * M1. With the fixed M1 you can up V only by upping N_transactions_per_day. Am I missing something?
- tylerhou 6y ago
  num_transactions_possible is so high that it’s effectively unlimited. It also doesn’t take into the size of of transactions.