tag:blogger.com,1999:blog-2098432983500045934.post2080355253337699044..comments2024-03-12T22:19:32.339-04:00Comments on The New Arthurian Economics: M1 is the money we use for incomeThe Arthurianhttp://www.blogger.com/profile/16501331051089400601noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-2098432983500045934.post-8175709185193098542012-01-10T08:29:44.523-05:002012-01-10T08:29:44.523-05:00"Greg, you know your MMT but you don't kn..."Greg, you know your MMT but you don't know your pre-MMT economics. Economists talk of "final" spending (which counts in GDP, and GDP equals income) to distinguish it from "intermediate" spending, and to avoid "double-counting" when they tally up the GDP or the income of the nation. It used to be standard fare in economics 101."<br /><br /><br />Thanks Art, (I think!) but Im not sure even how well I *know* MMT.<br /><br />One smart ass comment about your second sentence...... Thats why MMT came along because pre MMT economists have all sorts of muddled thinking about accounting........ final spending indeed! What a crock!<br /><br />Here is how I view the final spending thinking.<br /><br />Imagine a neighborhood of 1000 houses. House 1 pays the child of house 2 100$ to mow their lawn and they use a 100$ bill to do so. This continues until house 1000 pays the child of house 1 the SAME 100$ bill... it has come full circle. 100,000$ of activity has occurred and no household is missing any money. The 100$ bill ended up back in house #1 hands. When house 1 gets it back they take the 100$ to bank and put it in a savings account. If they were all honest injuns and reported 100$ of income there would have $100,000 of income made that day/week/period. 1000 transactions (sales) occurred for a GDP of 100,000 and all that happened is everyone now has grass 2.5 inches long. What was the final spending?<br /><br />Now if this same scenario occurred with checks, each transaction would have been recorded within the banking system as transfers between accounts, 100,000$ of activity would have been recorded and each transaction would have counted as final spending, right? The outcome would be exactly the same in A and B but it sounds like you think it is accounted for differently.Greghttps://www.blogger.com/profile/03139782404004492965noreply@blogger.comtag:blogger.com,1999:blog-2098432983500045934.post-21307734680143272142012-01-10T06:09:37.824-05:002012-01-10T06:09:37.824-05:00Greg: "All spending is final you cant ask for...Greg: "All spending is final you cant ask for it back."<br /><br />Oh, I like that!<br /><br />Greg, you know your MMT but you don't know your pre-MMT economics. Economists talk of "final" spending (which counts in GDP, and GDP equals income) to distinguish it from "intermediate" spending, and to avoid "double-counting" when they tally up the GDP or the income of the nation. It used to be standard fare in economics 101.<br /><br />Clonal,<br />Maybe if I was making Milton Friedman's argument about inflation I would want to use MZM.<br /><br />Keynes said <i>we can draw the line between money and debt at any convenient point</i>. MZM is a line much closer to debt than is M1 money. (People earn interest on their money market funds, right? So somebody must be <i>paying</i> interest for the use of that money. So really, it is debt, not money.)<br /><br />The whole point of what I do is to distinguish "money" from "credit" because credit costs more. If I were to adopt MZM it would defeat the whole point of what I do. And I, like the world's economists, would then fail to distinguish between money and credit.The Arthurianhttps://www.blogger.com/profile/16501331051089400601noreply@blogger.comtag:blogger.com,1999:blog-2098432983500045934.post-10780792151910433582012-01-09T22:01:34.261-05:002012-01-09T22:01:34.261-05:00I dont get the use of the word final.
Any spendin...I dont get the use of the word final.<br /><br />Any spending is someones income. All spending is final you cant ask for it back.Greghttps://www.blogger.com/profile/03139782404004492965noreply@blogger.comtag:blogger.com,1999:blog-2098432983500045934.post-71533987061600320282012-01-09T21:20:00.089-05:002012-01-09T21:20:00.089-05:00Art,
These days, instead of M1, you should be usi...Art,<br /><br />These days, instead of M1, you should be using MZM -- this is because you can write checks on savings accounts, and money market funds, which are also include in MZM in addition to what is in M1.Clonalhttps://www.blogger.com/profile/18290009954839887975noreply@blogger.comtag:blogger.com,1999:blog-2098432983500045934.post-10913097246248688362012-01-09T17:51:56.426-05:002012-01-09T17:51:56.426-05:00Income = Final spending. Not the same thing.
More...Income = <i>Final</i> spending. Not the same thing.<br /><br />More to the point, money that is <b>saved</b> is NOT spend and is NOT used for income... Money that is saved is not "readily accessible for spending":<br /><br /><a href="http://research.stlouisfed.org/fred2/series/M1SL" rel="nofollow">FRED</a>: <br />"M1 includes funds that are readily accessible for spending. M1 consists of: (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) traveler's checks of nonbank issuers; (3) demand deposits; and (4) other checkable deposits..."<br /><br />Money in an account that is not "readily accessible for spending" is not in M1.<br /><br />Currency (within limits noted by FRED) is part of M1, so your cookie jar money is included, as are the coins lost under the couch cushions.<br /><br />I never read anything about credit cards and M1. But I think that if I borrow and spend, the recipient receives M1 even if the money I started with was not M1.<br /><br />I don't know if the seller receives money when I use a credit card, or if they receive "receivables"... promises.The Arthurianhttps://www.blogger.com/profile/16501331051089400601noreply@blogger.comtag:blogger.com,1999:blog-2098432983500045934.post-79008637712900166432012-01-09T08:20:48.809-05:002012-01-09T08:20:48.809-05:00I dont get the word "use".
All money th...I dont get the word "use".<br /><br />All money that is spent is used for income. <br /><br />Income = Spending<br /><br />Sometimes I use money in my checking account, sometimes I use my credit card (and that later comes form my checking account) sometimesI take it out of a cookie jar. If I take it out of a cookie jar and buy something form my neighbor it goes un recorded but if I take it form my cookie jar and buy something at the store it goes into THEIR checking account.<br /><br />So thats three types of money used for income, does M1 cover all those?Greghttps://www.blogger.com/profile/03139782404004492965noreply@blogger.com