Asymptosis: Always Approaching

Category: Economics

  • A Surfeit of Dearth Revisited: The Global Shortage of Safe Assets

    David Beckworth: global economic growth over the past few decades has outpaced the capacity of the world economy to produce truly safe assets Really? The U.S. could have just deficit-spent more, crediting people’s/businesses’ checking accounts and thereby increasing the global stock of the world’s safest asset: U.S. dollars. It could (by U.S. law is required…

  • What Will Be the New Economic Paradigm?

    Matt Yglesias has a great post over at Moneybox (paragraph breaks added): The need for regime change. … The Depression discredited the gold standard and a whole set of related notions. The Great Inflation discredited ideas about the Phillips Curve … We had, until recently, the Great Moderation Consensus that … the Federal Reserve has…

  • Why Economists Don’t Understand Accounting, or Business

    I just searched Harvard, U Chicago, and a few other top econ departments’ course offerings and major requirements. The string “account” barely appears. Chicago says quite explicitly: Courses such as accounting, investments, and entrepreneurship will not be considered for economics elective credit. Much less requirements! No wonder so many economists: • Have such profound misunderstandings…

  • How Accounting “Constrains” Economics

    There’s been a running discussion of this on various blogs (sorry if I missed linking some!), inflated simultaneously by Krugman and by magisterial and mysterious commenter JKH’s “paradigm riff,” here. That discussion has brought me to the following conclusions. Assuming you have a coherent and accurately representative System of National Accounts*: • Accounting, and accounting identities,…

  • Full-Reserve Banking, the “Right” to Earn Interest, and “Financial Repression”

    Nick Rowe replies to Richard Williamson re: full-reserve banking (emphasis mine): The key reading here (even though it appears to be about a different subject) is Milton Friedman’s “The optimum quantity of money”. Foregone nominal interest payments is a tax on holding currency…. 100% required reserves mean you impose the same tax on chequing accounts ……

  • Full-Reserve Banking and Loanable Funds

    Richard Williamson asks a sensible and straightforward question: If, as Modern Monetary Theorists propose, banks’ reserve levels put no significant constraints on their lending, why don’t we have 100%-reserve banking — and presumably no runs on banks as a result? First an explanation — I hope simple, clear, and generally accurate (if simplified): Say you…

  • Why This Time Is Different

    A while back I pointed to (and demonstrated with not very pretty pictures) Randall Wray’s rather stunning observation: every depression in American history was preceded by a large decline in nominal federal debt. And I puzzled about why this wasn’t true of our latest little…event: We saw a decline leading up to 2000, but federal…

  • Financial Markets Are the Real Barter Economy

    As (mis)conceived by most economists, money (which they confute here with currency) emerged as a solution to the time problem of barter economies: my spinach is ready now, but your apples won’t be ripe for months. How can we trade? Answer: you give me money for my spinach, and I give it back to you…

  • Saving Equals … Inventory?

    I’ve noticed that many others, like me, are puzzled by the mechanics of the Saving=Investment accounting identity. How do household savings get instantly and perfectly intermediated, in a period, into investment spending — the purchase/creation of long-term productive fixed assets? An Aha! for me: According to Krugman’s textbook, they don’t (click for larger): First a…

  • American Exceptionalism #238: Opportunity (Not)

    I don’t usually link to Paul Krugman because everyone reads him anyway, right? He doesn’t need my google juice. But I have to make an exception here because he adds to my trove of graphs demonstrating how America today — after thirty years of Reaganomics policies that were supposed to be all about freedom, liberty, and economic…

  • John Galt, “Genocidal Prick”

    John Scalzi: …in Ayn Rand’s world, a man who self-righteously instigates the collapse of society, thereby inevitably killing millions if not billions of people, is portrayed as a messiah figure rather than as a genocidal prick, which is what he’d be anywhere else. Yes, he’s a genocidal prick with excellent engineering skills. Good for him.…

  • An MMT Thought Experiment: The Arithmetic and Political Mechanics of Net Financial Assets

    Imagine that over the next week (in a closed American economy — the rest of the world has never existed) everyone sold all their financial assets, paid off all their debts, and deposited the remaining money (and any currency they have) in their checking accounts. No money-market funds, even. Just banks with reserve accounts at…

  • The Most Important Econoblog Post This Year: The Steve Keen/MMT Convergence

    Neil Wilson has done yeoman’s duty to (perhaps) achieve a convergence that has been too-long delayed. A Double Entry View on the Keen Circuit Model. Steve Keen is, to my knowledge, the only person who is actually encoding a Godley-esque, MMT-style, accounting-based, stock-flow-consistent dynamic simulation model of how economies work. But many MMTers have been…

  • The Upper Bound in the Fed’s Head: Inflation

    Continuing with one of my current hobbyhorses: Ryan Avent reports on the American Economic Association meeting, with special attention to a presentation by Robert Hall: Monetary policy: The zero lower bound in our minds | The Economist. Mr Hall argued that: A little more inflation would have a hugely beneficial impact on labour markets, And…

  • Answers: Taking IOR to Zero

    I want to thank all the commenters on my last post — at Angry Bear, at Asymptosis, and at Mike Norman’s blog. You’ve provided me with exactly the education I hoped to achieve. Here’s hoping others benefited similarly. I asked: what would happen if the the Fed cut the interest rate on reserves from its…

  • Question for Market Monetarists and MMTers: What Happens if IOR Goes to Zero?

    For the non-cognoscenti: “IOR” is interest on reserves. Banks keep money in their accounts at the Fed. In October, 2008 the Fed started paying .25% interest on those accounts. The Fed’s also engaged in “quantitative easing,” a.k.a. open-market purchases on steroids, creating new money and using it to buy $1.6 trillion dollars worth of bonds…

  • Menzie Chinn Explains it All for You: Demand Inflation Now!

    Whether it’s Market Monetarist NGDP targeting (a.k.a. Damn The Inflation Rate; We Need Growth!) or Menzie’s recommendation of Conditional Inflation Targeting with a notably higher target, everything tells us that somewhat higher inflation is the current path to greater and more widespread long-term prosperity. Raising the expected inflation rate will lower real interest rates and…

  • The Great Ricardian Equivalence Debate of 2011: Do Mainstream Economists Agree on Anything?

    Krugman started it, in response to Lucas. Everyone piles on. Plutocracy Files has the list of links. (Plus don’t miss Nick Rowe’s, which includes a long comment thread.) Here’s what wows me: all these world-classical economists are accusing each other of contradicting “textbook economics,” and circling through extraordinary contortions in their efforts to reconcile that school…

  • New Year’s Tax Wishes: If I Was Dictator of America

    Based on the notions of economic efficiency that I laid out here, if I could do whatever I wanted I would make the following changes over a ten-year period. (Some faster, some slower, some phased in, some implemented instantly on a given date.) The appropriate amounts in each case require a better calculator than I…

  • Casey Mulligan Wonders Why People Use Unemployment Insurance

    Casey Mulligan is curious: what could have caused the big uptick in the uptake on unemployment insurance in recent years? It’s a mystery. Or, maybe not: Sorry, the JOLTS data only goes back to 2001. Which directly addresses Mulligan’s basic assertion: People are lazy. They don’t like to work. Well yeah. (People especially don’t like…

  • This Time Is Different: Federal Debt Didn’t Dive Before the Depression

    Randall Wray made a fascinating observation a while back: Since 1776 there have been six periods of substantial budget surpluses and significant reduction of the debt. … The United States has also experienced six periods of depression. The depressions began in 1819, 1837, 1857, 1873, 1893, and 1929. And I confirmed it (graphs): Every depression in U.S. history was…