tag:blogger.com,1999:blog-2098432983500045934.post2465163577963992172..comments2024-03-12T22:19:32.339-04:00Comments on The New Arthurian Economics: Here's a differenceThe Arthurianhttp://www.blogger.com/profile/16501331051089400601noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-2098432983500045934.post-30049177983766919062014-01-08T21:48:15.459-05:002014-01-08T21:48:15.459-05:00I think there is yet another aspect of finance, po...I think there is yet another aspect of finance, possibly outside the arena of banking, per se. That is the weird world of obscure financial instruments. The last time I looked the estimated notional value of these things is somewhere between 6 and 20 times cumulative global GDP.<br /><br />These things are also highly leveraged [I think] so the actual amount of money involved might only be in the same approximate range as global GDP.<br /><br />But this is pure rentier activity and contributes nothing to real investment, production or consumption.<br /><br />It's a massive misallocation of resources that has to have a significant negative effect on the real world economy.<br /><br />Jazzbumpahttps://www.blogger.com/profile/07337490817307473659noreply@blogger.comtag:blogger.com,1999:blog-2098432983500045934.post-47069590249143771422014-01-08T20:01:30.789-05:002014-01-08T20:01:30.789-05:00Hi Arthur:
I think a better way to think about it...Hi Arthur:<br /><br />I think a better way to think about it:<br /><br />There is a stock of financial assets (claims on real capital or future production which are somewhat roughly the same thing).<br /><br />If a lot of that stock circulates, there's more GDP, more production, more income, more surplus, blah, blah, blah. <br /><br />When more of the stock is held by rich people, it reduces circulation. A pretty straightforward velocity argument. (Though you also have to think about how that stock increases and decreases in toto -- another, related subject.)<br /><br />So rather than saying that rich people "remove" that money (how could they?), it's that they sit on it, rather than spending it on.<br /><br />Key (modeling) concept: "marginal propensity to spend <i>out of wealth.</i>" It's generally discussed vis a vis income. That's very Keynesian -- his consumption function was a function of income only, not wealth. Fatal flaw IMO. Need both in the function.<br /><br />Stopping now...Steve Rothhttps://www.blogger.com/profile/11895481216028771016noreply@blogger.comtag:blogger.com,1999:blog-2098432983500045934.post-27560674103020556052014-01-08T19:05:08.555-05:002014-01-08T19:05:08.555-05:00I suppose Smith would have allocated a chunk of ba...I suppose Smith would have allocated a chunk of bank profits/wages to rent seeking.shtovehttps://www.blogger.com/profile/16109559722715781557noreply@blogger.comtag:blogger.com,1999:blog-2098432983500045934.post-37784442158205320752014-01-08T18:01:01.330-05:002014-01-08T18:01:01.330-05:00"... in a fugue state."
:)
I did a numb..."... in a fugue state."<br /><br />:)<br />I did a number of posts on it some time back, mostly trying to figure out what Sumner might possibly be talking about. With not really much success.<br /><br />But in the above post I am realizing for the first time that *maybe* we can have monetary exchanges with financial accounts, where perhaps the whole transaction takes place within the financial sector and even within accounts other than transaction accounts.<br /><br />I doubt that banks keep funds in a checking account the way I do. They probably "sweep" their money just as they do ours, only moreso. And (being a bank) they can probably transfer money directly from their savings account to my savings account in order to pay me interest.<br /><br />So much or most of what I define as the cost of finance can be transacted without showing up in M1 money at all.<br /><br />M1 being "funds that are readily accessible for spending", it is what I spend for sure. But banks and, probably, high finance people in general can mostly avoid M1... can mostly avoid our "medium of exchange" and instead use snob money, Sumner's "medium of account".<br /><br />Discussing Sumner's view, <a href="http://thefaintofheart.wordpress.com/2012/10/31/two-kinds-of-money/" rel="nofollow">Marcus Nunes</a> wrote:<br /><br /><b>The good kind is “whole money”. That is, it is both the MoE and MoA. Bad money loses its MoA property, but keeps its MoE property.</b><br /><br />I'm saying, people with money can keep it in interest-earning accounts, and still spend it if they want to. Their money has BOTH the MoE (spendability) and the MoA (interest-earning) properties. Their money is whole money. My money is incomplete, "bad" money according to Marcus.<br /><br />Dunno, it was just an accidental connection my mind made without my help. Maybe it's off the wall. Maybe there's something to it.<br />The Arthurianhttps://www.blogger.com/profile/16501331051089400601noreply@blogger.comtag:blogger.com,1999:blog-2098432983500045934.post-40703679799930403552014-01-08T12:06:33.610-05:002014-01-08T12:06:33.610-05:00So I get what "unit of account" is as an...So I get what "unit of account" is as analogous to an inch or an ounce. A unit that serves as measure of value.<br /><br />I get what "medium of exchange" is, a specific money-<i>thing</i> denominated in the unit of account, a financial asset exchanged in a transaction.<br /><br />Where I stumble is "medium of account" which as far as I can tell it's something Sumner invented in a fugue state.geerussellhttps://www.blogger.com/profile/10631984593634015839noreply@blogger.com