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  • Why Financial Repression Will Fail [View article]
    Ok I'm starting to get a picture, of possibly a coherent ideology. You are a pragmatist, positivist, and believe strongly in economic equality. You understand the monetary system using a MMT paradigm. You are a demand sider, and are willing to use monetary, tax, and other fiscal policy to meet the ends of greater economic production and wealth. You seem to fear the free market's propensity to concentrate power and wealth at the expense of the working class. You value private property but only insofar as it does not generate excessive economic inequality. Is this close?
    Nov 20, 2012. 06:01 PM | Likes Like |Link to Comment
  • Shadow Banking In The Crosshairs [View article]
    Yes, velocity is way down as compared to the pre-crisis time period. I think this is largely due to shadow banks' contracting credit. As the credit dries up we get a negative money multiplier that must be offset by FED injections of liquidity to prevent deflation. Perhaps the FSB thinks that if they can control the shadow banks, then they can control the money multiplier, and therefore have a better handle on the money supply. This was well-illustrated by Singh and Stella recently.
    Nov 20, 2012. 02:33 PM | Likes Like |Link to Comment
  • Why Financial Repression Will Fail [View article]
    (Because your economic worldview and conclusions are so different than mine I really am trying to understand your view with regard to stagflation.)
    So you aren't really concerned about inflation, and you're not really trying to figure out what has caused inflation "Beats me. It's not my issue." But you think that the CPI is about 2%, which is what the USBLS tells us it is. Correct?
    As for the stagnant economy, you believe that is caused by workers' loss of bargaining power. You don't think government intervention, tax policy, or monetary policy has affected economic growth. So would you advocate for a higher minimum wage? Or would you be in favor of more protection (e.g. higher tariffs)?
    Nov 20, 2012. 02:23 PM | Likes Like |Link to Comment
  • Why Financial Repression Will Fail [View article]
    So, just trying to clarify your position, you think that increasing food and fuel demand in Asia has caused a low supply of food and fuel passing higher costs on to American consumers, mostly workers. This in turn gives the American worker less money to spend on consumption which in turn stagnates the economy?
    Nov 20, 2012. 11:50 AM | Likes Like |Link to Comment
  • Why Financial Repression Will Fail [View article]
    Thank you for the extremely thoughtful response to my question. You wrote, " Stagflation happens when someone (an oil producing cartel, say) gets the power to demand economic rents. When that happens to a product as ubiquitous as oil, the buyers try to raise the price of what they sell."
    I was asking what specific product or products may be causing this stagflation-like scenario today. So, do you have any specific examples for me so I can weigh your position on this issue?
    Nov 20, 2012. 10:43 AM | Likes Like |Link to Comment
  • Why Financial Repression Will Fail [View article]
    "Stagflation happens when someone (an oil producing cartel, say) gets the power to demand economic rents."
    The old supply shock postulate. Of course it has nothing to do with FED policy and over-regulation. What ubiquitous product or products do you suppose is causing stagflation now? I'm assuming you believe it was oil in the 1970s?

    I agree with you that monetary inflation requires inelasticity of supply, AND I agree with you that supply is usually fairly elastic in a recession. However, I don't agree that expansion of the money supply is neutral on inflation. We are having a huge credit contraction, a negative money multiplier scenario. Ordinarily we would be seeing deflation and stagnation destroying excess credit and gradually restoring liquidity. With the FED's easy money policy, we are still seeing some of the stagnation but in light of inflation instead.
    I tend to agree with springfieldlp, that stagflation comes about in a deflationary market economy during times of currency debasement. For instance in the 1970s after coming off the Gold standard, the currency was depreciating in value while the economy was in recession for many reasons, including the high price of oil.
    Nov 20, 2012. 10:25 AM | 2 Likes Like |Link to Comment
  • Shadow Banking In The Crosshairs [View article]
    Do you think the ongoing credit contraction among shadow banks explains, through a negative money multiplier, why we are seeing minimal inflation despite massive stimulus?
    Nov 19, 2012. 07:34 PM | Likes Like |Link to Comment
  • Why Financial Repression Will Fail [View article]
    Government spending limited by "value received" will not keep the lid on inflation, and will promote malinvestment. If the FED spends until inflation goes up and then raises taxes to control inflation, the genie is already out of the bottle. People will be saving and investing in alternate currencies, abandoning the dollar like mad.

    "The economics says that we should be cutting taxes and printing money to DO things that need to be done."

    That sure seems like MMT to me, a prescriptive part of MMT at that. Perhaps a government job guarantee a la Warren Mosler?

    As an Austrian, my problem with central banks, money printing, and large deficits have to do with malinvestment. The planners just don't have the knowledge necessary to adjust the money supply, and so it gets misallocated. Credit is tight now for a reason, we need deflation and creative destruction of our market inefficiencies so our economy can be rebuilt on REAL savings and investment. But perhaps that concept is too concrete and not abstract enough for you to grasp?
    Nov 18, 2012. 06:42 PM | 2 Likes Like |Link to Comment
  • Why Financial Repression Will Fail [View article]
    The frustrating thing is how close you MMTers are to getting it right, but for all the wrong reasons. I do know 1 MMTer who advocates to, "Just put an asset column on the national balance sheet and call the budget "balanced" when the money spent equals the value created, not the "revenue" received, which isn't revenue at all but just money destroyed to protect a currency that right now does not need protecting." That sounds an awful lot like unlimited governmet spending, unbalanced by tax reveneue; that will lead to inflation and not to mention, the worst side effect of government spending, malinvestment.
    Nov 17, 2012. 06:19 PM | 1 Like Like |Link to Comment
  • Why Financial Repression Will Fail [View article]
    The only thing about MMT that eludes me is how many people have bought into this "theory." It is utter nonsense. I don't care that every asset (private or govt) has an equal and opposite liability, that govt debt = private savings; G -T = S - I, where govt spending minus taxes = private savings - investment. Govt spending = increases bank reserves. Govt taxing decreases reserves. All of this is DESCRIPTIVE ACCOUNTING! Who cares?? Just because you can push numbers around and get bigger numbers here and there with the accounting doesn't mean this should be our POLICY for producing economic growth. These MMTers are nuts! Their solution is for the govt to spend, spend, spend, because as long as they tax in the same currency there is no limit on spending! Somehow we can spend ourselves to prosperity and have this job guarantee. WRONG!
    Resources are limited and finite.
    Competition and cooperation in the free market creates wealth.
    The market is self-correcting if left alone because only individuals have the knowledge necessary to promote efficient allocation of capital.
    Nov 17, 2012. 04:32 PM | Likes Like |Link to Comment
  • Why Financial Repression Will Fail [View article]
    I brought MMT up in response to your statement, "If nobody spent, no one would invest in making things to sell. So some spending is necessary for capital to be formed."

    I said MMT has nothing USEFUL to say prescriptively, and I stand by that. MMT has plenty of prescriptive NONSENSE that they bring to the table in ignorance of how wealth is actually created.
    Nov 16, 2012. 08:33 PM | 1 Like Like |Link to Comment
  • Why Financial Repression Will Fail [View article]
    Here we go again. Once again you've got it all backwards my friend. MMT is a great accounting method, and a good descriptive paradigm for understanding the flow of money through the economy and central banks. But MMT has nothing useful to say prescriptively for producing wealth in an economy. The central bank doesn't have to SPEND money into existence for capital to form. On this account the Austrians are correct, economies and capital is spontaneously formed by individuals trading in the free market for mutual benefit.
    Nov 16, 2012. 03:07 PM | 2 Likes Like |Link to Comment
  • Inflation Update [View article]
    read, and understand
    Nov 16, 2012. 02:01 PM | Likes Like |Link to Comment
  • Peter Schiff: Dollar Collapse Before Obama's Out [View article]
    what? Where did you find that definition? The money multiplier is the amount of credit/loans a financial institution can make or leverage based on their existing reserves. If you look at credit expansion since the 1980s the US's financial institutions have increased the money supply by over 700% with pretty constant reserves (up until recently).
    Conversely, if credit in the financial industry is shrinking, and the money multiplier is negative, then QE/stimulus will just be replacing lost reserves without much of an effect on inflation.
    Nov 15, 2012. 06:08 PM | Likes Like |Link to Comment
  • Weekly Unemployment Claims: Don't Panic, It's Hurricane Sandy [View article]
    until they all figure out they qualify for 99 weeks on the doll and decide not to go back to work!
    Nov 15, 2012. 04:42 PM | Likes Like |Link to Comment