5 ms·

Or, the economy is a very complicated system, and you can get emergent behavior that is counter-intuitive given the micro behaviour. In particular, most recess

Or, the economy is a very complicated system, and you can get emergent behavior that is counter-intuitive given the micro behaviour. In particular, most recessions in the modern economy are caused by a demand disruption. It is not that we lost our ability to produce stuff, we had to stop producing stuff because we couldn't consume it faster. This (normally) isn't caused because people want to consume less, but rather because they had reduced ability to acquire goods (generally because they have less money than they previously did). That is to say, it is not a problem about our ability to produce goods, or even consume goods. It is a problem with our ability to allocate goods. At a high level, this really is a problem that you should be able to just through money at. Decide who you want the surplus goods to go to and throw money at them until consumption matches productive capacity. Of course, reality has a lot of pesky details to work out since, as I mentioned, the economy is incredibly complicated. This is not to say that you can just inject unlimited money into the economy without causing any issues. But the effects of injecting money into the economy are dependent on how they are injected. Other ways of injecting money into the economy might increase productive capacity, which would have a deflationary effect that may act as a counter balance to the inflationary one. Other ones may quarantine the money in a part of the economy where they have minimal effect on the rest of the economy. For instance, if the treasury department sells bonds on the open market, the federal reserves prints money to buy those bonds, then the treasury department uses that money to pay interest on bonds held by the federal reserve; did anything really happen? Ultimatly, economics is too complicated to try and solve from first principles. You need your thinking to be backed by empirical evidence. Prior to Covid, the Fed was trying to cause inflation by dumping money into the economy, but discovered that the economy simply doesn't work that way. Edit: It is also worth noting that Covid caused an economic shock that is significantly different from the typical shocks we have experience with. If your approach to economics is rooted on empirical evidence, then you would expect to perform worse in such a situation, because you simply do not have as relevent of data to inform you decision making. It is also worth noting that, unlike most economic crises, Covid was not primarily a breakdown in our ability to allocate goods. It looked like it was going to be, but that Governments did what this post suggests and injected money directly to people who lost their fiscal ability to consume.

savant_penguin 5y ago
If you want empirical evidence I suggest you skip to about 10 min in the video and look at the relationship of the money supply to the inflation rate. All different countries with different explanations for their demise but in all cases it's pretty clear that inflation is strongly related to the money supply. "if the treasury department sells bonds on the open market, the federal reserves prints money to buy those bonds, then the treasury department uses that money to pay interest on bonds held by the federal reserve; did anything really happen?" Yes, something did happen, that money created out of nowhere will go somewhere and increase prices. Given that all Americans share the same currency they are on the hook to pay for the interest. And that will either be paid in taxes or inflation
- gizmo686 5y ago
  He is measuring "quantity of money per unit of output". Those units and ratio are doing a lot of work, to the point where I have no idea what the graph actually represents. I don't mean this in a "how should I interperat that" way. I literally mean I do not understand what is being measured. I cannot reproduce his result using my understanding of those terms: https://fred.stlouisfed.org/graph/?g=NbZe https://fred.stlouisfed.org/graph/?g=NbZe > Yes, something did happen, that money created out of nowhere will go somewhere and increase prices. I intended for that example to be a comically obvious one, that is only a thing because of the accounting that results from the treasury and central bank being distinct entities. If they were the same entity, nothing would change, except for how the accounting was done. The combined entity would have simply printed money instead of printing money and debt to itself, and it never would have bothered record any money being created to service the interest on that debt. Consider a more absurd example. The government prints money and stores it next to its gold in Fort Knox. Other than the costs of mechanically printing, transporting, and storing the bills, does this actually change anything? In reality, most money falls somewhere short of this extreme, but still does not spread uniformly to all sectors of the economy.
t0bia_s 5y ago
> Covid was not primarily a breakdown in our ability to allocate goods. It looked like it was going to be, but that Governments did what this post suggests and injected money directly to people who lost their fiscal ability to consume. Lockdowns was most expensive thing that ever happened to economy. No mention about sponsoring of big pharma and then donating massive advertisement of vaccines, masks, antibacterial gels, etc. - https://sites.krieger.jhu.edu/iae/files/2022/01/A-Literature-Review-and-Meta-Analysis-of-the-Effects-of-Lockdowns-on-COVID-19-Mortality.pdf https://sites.krieger.jhu.edu/iae/files/2022/01/A-Literature...

savant_penguin 5y ago

If you want empirical evidence I suggest you skip to about 10 min in the video and look at the relationship of the money supply to the inflation rate. All different countries with different explanations for their demise but in all cases it's pretty clear that inflation is strongly related to the money supply. "if the treasury department sells bonds on the open market, the federal reserves prints money to buy those bonds, then the treasury department uses that money to pay interest on bonds held by the federal reserve; did anything really happen?" Yes, something did happen, that money created out of nowhere will go somewhere and increase prices. Given that all Americans share the same currency they are on the hook to pay for the interest. And that will either be paid in taxes or inflation

gizmo686 5y ago
He is measuring "quantity of money per unit of output". Those units and ratio are doing a lot of work, to the point where I have no idea what the graph actually represents. I don't mean this in a "how should I interperat that" way. I literally mean I do not understand what is being measured. I cannot reproduce his result using my understanding of those terms: https://fred.stlouisfed.org/graph/?g=NbZe https://fred.stlouisfed.org/graph/?g=NbZe > Yes, something did happen, that money created out of nowhere will go somewhere and increase prices. I intended for that example to be a comically obvious one, that is only a thing because of the accounting that results from the treasury and central bank being distinct entities. If they were the same entity, nothing would change, except for how the accounting was done. The combined entity would have simply printed money instead of printing money and debt to itself, and it never would have bothered record any money being created to service the interest on that debt. Consider a more absurd example. The government prints money and stores it next to its gold in Fort Knox. Other than the costs of mechanically printing, transporting, and storing the bills, does this actually change anything? In reality, most money falls somewhere short of this extreme, but still does not spread uniformly to all sectors of the economy.

t0bia_s 5y ago

> Covid was not primarily a breakdown in our ability to allocate goods. It looked like it was going to be, but that Governments did what this post suggests and injected money directly to people who lost their fiscal ability to consume. Lockdowns was most expensive thing that ever happened to economy. No mention about sponsoring of big pharma and then donating massive advertisement of vaccines, masks, antibacterial gels, etc. - https://sites.krieger.jhu.edu/iae/files/2022/01/A-Literature-Review-and-Meta-Analysis-of-the-Effects-of-Lockdowns-on-COVID-19-Mortality.pdf https://sites.krieger.jhu.edu/iae/files/2022/01/A-Literature...