From Keynes, from yesterday:
...the maxims which are best calculated to "enrich" an individual by enabling him to pile up claims to enjoyment which he does not intend to exercise at any definite time.
Savings relative to circulatings:
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| Graph #1: Starts low. Ends high. |
Blue is M2, red is MZM, green is M3, in each case with circulating money (M1) subtracted from it, and the difference shown as a multiple of circulating money.
And, for comparison, the orange line is total debt (TCMDO) with "circulating" money MZM subtracted from it, and the difference shown as a multiple of MZM.
Looking at the red line, non-circulating MZM grows from equal to M1 in 1959, to five times M1 by 2007, when a sharp decline sets in. A five-fold increase.
These non-circulatings are all of them measures of the claims to enjoyment that are not intended to be exercised at any definite time. In other words, they are measures of the absence of aggregate demand.
Our economic policies for the period shown on the graph have propped up aggregate demand by increasing various measures of money, and simultaneously undermined aggregate demand by increasing various encouragements to take those dollars out of circulation, and save them.
8 comments:
Our economic policies for the period shown on the graph have propped up aggregate demand by increasing various measures of money, and simultaneously undermined aggregate demand by increasing various encouragements to take those dollars out of circulation, and save them.
I'm too tired to digest this at the moment, but it strikes me as being fundamentally wrong. Isn't it true that actual savings by most of the population trended down over that time?
Isn't a big part of the debt situation due to people extracting paper value from their properties and using it to buy stuff?
Then the property values went to hell, and took everything else down , too.
JzB
"Isn't a big part of the debt situation due to people extracting paper value from their properties and using it to buy stuff?"
No. What you describe is simply the process by which the problem worked itself out. The *entire* "debt situation" is due to wrongheaded economic policy encouraging the use of credit.
Of course, this post is not about debt. It is about saving or the removal of funds from circulation.
How can there be at once an excess of both savings and debt?
Cheers!
JzB
How can there not?
There is no specific and/or robust correlation between savings and debt.
This is especially obvious now, when banks aren't lending.
You have been saying as long as I have been reading you that debt is the problem. Now savings is the problem.
You need to do better than simply being rhetorical.
Cheers!
JzB
i have been saying since the 1970s that monetary imbalance is the problem. i look at debt relative to money in circulation. i look at savings relative to money in circulation. i look at gdp relative to money in circulation.
Jazzbumpa: Arthur is quite right.
Everybody's savings is somebody else's debt. Therefore an "excess" of saving is an "excess" of debt.
But what does one mean by "excess" and "debt"? If one is an oligarch, "excess" means there is too much evenly-spread-around government debt = money . This means that the peons can extinguish their debts to the oligarchs with this money. So the oligarchs will have a bit more than everyone else, but the peons will not be their debt-slaves.
If one is not a psychopath, then "excess" means the oligarchs have excessive savings in the form of debts of the peons. The oligarchs hoard all the government debt too, as whenever the peons get a buck, it goes to the oligarchs.
When there is a financial crisis, like now, government debt=(base) money becomes hyper-desirable. The oligarchs have been preying on everyone else & each other, so their debts to each other go bad, and they want solid debt, government debt. Everybody wants (the oligarchs - so they can wear the I-am-the-#1-oligarch T-shirt ) or needs (the peons, to pay their debts they cannot pyramid any more) to save up.
But as there is then no base money = government debt, no credit = private debt circulating in the economy, we get unemployment & depression. The peons can't pay their debts to the oligarchs & go bankrupt, land in debtor's prisons, get sold into slavery, and the depression feeds on itself.
...and then you have a Dark Age.
Thanks, Calgacus. Good story.
Jazz: Look at the graphs.
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