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By how much should the Bank of England increase interest rates in a traditional monetarist economy

Discussion in 'off topic' started by lawrence001, Aug 3, 2022.

  1. stevec67

    stevec67 pfm Member

    In what way is this a misquote?
    "The fact of the matter is that some companies have got too used to paying people low wages and using zero hours contracts, and can’t survive when it comes to paying a decent wage to attract workers."
    My snipped version:
    "The fact of the matter is that some companies have got too used to .......text removed..... using zero hours contracts..."

    We all know that's not a misquote. I've just cut out the bits that are irrelevant, and left a "snip" in there to indicate that I've done so.

    I notice that you still don't have any evidence for your assertions re mass unemployment. If me pointing out my personal experience of 4 different food factories is "trolling" then feel free to report my post.
  2. ks.234

    ks.234 pfm Member

    Nothing authoritarian or doctrinal at all. The fact that our government issues currency is not meaningless at. The fact that our government issues currency means that it cannot run out of that currency. The money that our government issues is what funds it’s spending. That spending is not funded by taxation is true by logic, by definition and by observation.

    If you do believe the monetarist mantra that our tax has a functional role in funding government spending, this is just the place for you to expand on your belief.
  3. Jim Audiomisc

    Jim Audiomisc pfm Member

    I can'r comment on St. However the general answers tend to be:

    In some cases the unemployed persons live too far fron the jobs they are capable of doing.

    In some cases the job may pay them too little to live on when they add in factors like travel expense.

    In some cases there is no useful public transport to get to/from the job, and they can't afford a car.

    In some cases they may have some disability or are a carer, or have some other reason that the local authority or NHS aren't able to deal with in their area.


    So saying that there are milions of 'jobs' on offer doesn't ensure that number can be taken out of the unemployed state.

    Devil in the details.

    The point of Government *investment* 'spending' is to provide training, better transport, lower-priced housing, etc. So helping people to be *able* to get to jobs, and maybe even being fine *working for less* whilst still being happy - good for employers as well as their customers.

    Snag is that it means intelligent 'investment' by Government that generates an economic and social return. This isn't therefore throwing money about, but *generating* wealth, etc.

    But successive (Tory) Goverments simply bleat on...
    IanW, Sue Pertwee-Tyr and Covkxw like this.
  4. ks.234

    ks.234 pfm Member

    I highlighted it for you, it was about mass employment
    I did not make any assertions about mass unemployment. That’s you inventing stuff. What I did do, as you helpfully point to, is say that our current issue is to do with Low pay “"The fact of the matter is that some companies have got too used to paying people low wages and using zero hours contracts, and can’t survive when it comes to paying a decent wage to attract workers."

    Which you helpfully demonstrate by complaining that your company cannot afford to hire people.
  5. matthewr

    matthewr spɹɐʍʞɔɐq spɹoɔǝɹ ɹnoʎ sʎɐld

    I suspect we might be talking at cross purposes, so rather than go over the previous quotes I shall just say what I think as plainly as I can. Some of this therefore might be slightly repetitious.

    Keynes rewrote the understanding of how money and interest rates work in the General Theory. In part he wrote about how we could use monetary financing to fix problems in the economy under specific circumstances. Specifically when interest rates are low and there is a net excess of savings (i.e. a liquidity trap) and this is what he said in the famous quote about paying people to dig up money I quoted above. Note also that even Keynes in the 1930s said it was better to spend it on infrastructure rather than just giving it out.

    Friedman then attempted to ridicule this notion with the helicopter money jibe. Although he did this in the context of a paper where he was arguing that we could control both aggregate demand and inflation by controlling the money supply (i.e. Monetarism) a theory which would then be tried to disastrous effect by the Thatcher government.

    Helicopter money has since become a way to talk about this type of unconventional monetary policy. Mostly this is a colloquial usage, although Bernanke famously used it in connection with policy back in 2003, the point being that it is used as a shorthand and not as a reference to Friedman's critique. In most cases I have come across in the last 20 years people mean it in this sense rather than as a Friedmanesque argument what Keynes's meant about the limits of monetary policy.

    BTW Freidman didn't argue that public spending was always inflationary but rather that *monetary expansion* was always inflationary when it is in excess of the rate of growth of the output of the economy. At least that has always been my understanding. Although it quickly gets more complicated when one starts to think of sectoral balances, crowding out, expected inflation, etc. which is all mostly beyond my knowledge to argue about in any detail.

    In modern times, of course, we wouldn't bother with the paying people to dig up money bit and would just give them money preferably in some way that maximised the chances of causing economic activity and minimised the chances of causing inflation. For example, paying people's gas bills directly instead of giving them money.

    My argument there is those points come directly from Keynes in 1937 and we don't need MMT to make those arguments. We get our understanding of modern money from Keynes, the subsequent abandonment of commodity money and the increasing number of examples where it seems the scope of Keynesian economics is broader than we thought.

    So the two things I never understand about MMT are:

    1) What is it suggesting that is not in Keynes? I mean in practical terms as I thoroughly believe that within the conventional Keynesian thought we have enough scope to address recessions, the green new deal and so on and all that stops us are essentially political choices about where we choose to spend and distribute money. I do not see how the scope of seigniorage from MMT offers much extra scope, especially in the context of a real world experiments where we just spent literally $trillions on QE.

    2) How does MMT prevent inflationary spending? Keynesian economics has a bunch of stuff to say about aggregate demand, output gaps, etc. etc. and I never see any of that in MMT other than vague talk of independent spending boards. I would be deeply concerned about the chances of future governments abusing this.

    Ultimately we might well say that how government funding and taxes work is all essentially an elaborate polite fiction but I don't believe (or have yet to be convinced) that this fiction prevents us from doing anything which we could currently do if we had the political will and economic capacity. I also think, at least to some extent, this fiction acts as a constraint about what is possible and if you remove that it would get out of hand quite quickly.

    So explain to me not the semantics of what money means or how it works, but what, specifically, is in MMT that is not in Keynes and exactly how much more and why this allows the government to spend and under what circumstances.

    I have never been any sort of monetarist and my politics and economics are firmly from a Keynesian point of view.

    The only caveat here is that the definition of Moneterism seems to have changed over my lifetime and now means more than just Friedman / Thatcher / Reagan claims that you can control aggregate demand and inflation by controlling the rate of growth of the money supply.
    klfrs, Colin L and lawrence001 like this.
  6. stevec67

    stevec67 pfm Member

    Yes you have. Here and in the past.

    No, 4 different locations. I'm not complaining, I'm pointing out a fact. You're banging on about ZHC too, none of the cases I quote use them. That's just you making a false assumption. Again.
    klfrs likes this.
  7. matthewr

    matthewr spɹɐʍʞɔɐq spɹoɔǝɹ ɹnoʎ sʎɐld

    PS I note that Keynes wrote all this in 1937, two years before the invention of the helicopter and further proof of his genius :)
  8. ks.234

    ks.234 pfm Member

    I acknowledge that I have referred to mass unemployment in the past, I have done many times, but you said it was irrelevant. If it was irrelevant why do you bring it up again?

    As you have helpfully pointed out, your quote was me making it clear what I was talking about. Not mass unemployment, but the poor employment that we currently have. I did not make an assertion that we currently have mass unemployment in response to your ONS data as you claim. You seem to want me to have said something different to those words you quote, which I don’t understand because you yourself keep telling me that your company cannot afford to employ people, that observation confirms my words.
  9. ks.234

    ks.234 pfm Member

    And Friedman didn’t come up with his helicopter bollox until several decades after Keynes death!
  10. ks.234

    ks.234 pfm Member

    Just looked it up, Friedman came up with his helicopter story in 1969, just in time for when Callaghan got all Friedman curious. But then Friedman did always talk about being ready for a disruption of any sort to exploit, sometimes he couldn’t wait and went in for creating Pinochet-like disruption first and then exploiting it.

    Interesting chap Friedman, worth reading up on.
  11. Brian

    Brian Eating fat, staying slim

    Snack time.

    2 aggressive types who don't understand their own posts....
  12. ks.234

    ks.234 pfm Member

    And a troll trying to reignite a fire that had just died down
  13. stevec67

    stevec67 pfm Member

    Hallelujah. Can we make a note of this before you deny it again?

    you raised it here, in a context where it wasn't irrelevant. My replies have all been about the fact that we currently have more vacancies than unemployed, which looks like full employment to me.

    You don't believe the ONS data, apparently, because this is a "Tory measure" but that's up to you.

    I didn't say that my company couldn't afford to employ anyone for one minute. I said that 4 locations are hiring. Full time. So if thefe are all these poorly employed people on ZHC etc, why are they not applying for the full time work at Wren kitchens, or a chicken factory in Wales, Scunthorpe or Norwich, or a bakery in Yorkshire?
  14. ks.234

    ks.234 pfm Member

    I didn’t deny it, I acknowledged it you fool

    Yes…according current data we have the lowest unemployment figures since 1970 something….and….your point is?

    the data is a bunch of numbers that represent the current definition of unemployment. Why would I not believe it for what it is?
    It a measure of unemployment over time, and for the last 50 years or so we have has a Tory monetarist economic model. It’s not up to me at all, it’s just history

    Then they are failing business that have only managed to survive on low wages and obviously need a new business model if they are going to survive in an economic climate where low paid workers clearly need to be paid more.
  15. lawrence001

    lawrence001 pfm Member

    I'll have to pull you up on that one but I give you full marks on the big post earlier :)
    klfrs likes this.
  16. stevec67

    stevec67 pfm Member

    Funny man. Failing businesses? All of them, says you. Hahahahaha. Not sure about Wren kitchens but the others are blue chip, supply a significant proportion of the UK s food and one of them is owned by a self made billionaire. If that's a failing business, who are you, Elon Musk?
  17. Brian

    Brian Eating fat, staying slim

    Not at all, just wondering why you’re bothering to argue. It’s obvious what you’re saying but the other bloke really doesn’t understand what you’re on about and you won’t get it through. Give up. No point in getting angry about it.
    ks.234 likes this.
  18. ks.234

    ks.234 pfm Member

    So….MMT is banned but Keynes is fine, despite some people saying they are one and the same!!??!!
  19. lawrence001

    lawrence001 pfm Member

    I said earlier I've given up on keeping MMT out of the thread.
  20. lawrence001

    lawrence001 pfm Member

    In here. Am hoping for some answers from the MMT experts.

    klfrs and tonerei like this.

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