Ext. Links & Notes

This page is literally just a reminder to myself of some good links. Bookmarks are a pain: they're different on every machine I'm at, they're a pain to use (on Firefox) and "organize," and I don't want to go through the process of trying to save them. As an alternative I've often gmailed myself good links (or sets of links) in the past with helpful key words in the email body so I could search for them again later (a poor man's cloud database), but it occurs to me "Why not use this blog for that?" I don't care if it's public... feel free to check them out yourself, but I'm not going to worry about making this page look pretty! ... It's just a quick and dirty (searchable) clipboard, and nothing more:


science tackles economics with "agent based" modeling:
Here are couple articles you may be interested in on agent-based economic models:
here is a wikipedia site: https://en.wikipedia.org/wiki/Agent-based_computational_economics
I believe this is the future of economic modeling.

Nick Rowe's comments on "The supply of money is demand determined." ... Not even not even wrong, and all that. Also some bits about "perfectly inelastic wrt" and perfectly elastic, etc. Basically one of two talking about money being endogenous in the short term (between six week meetings of the BoC or Fed) but not in the longer term (like two years out) where inflation targeting makes it exogenous. (see Nick Rowe's 2012.08.22 comment below)

Links having to do with the division of total Tsy debt into categories. As of today (2013.08.22) Cullen Roche found some good info on that that I tried to square with a pie chart I'd found from a couple years back:

Cullen's discussion of Banking with Krugman (and a little from Sumner, Rowe and Keen too (and Me!: Cullen's figs 1 and 2), and Mike Sax):
more comments between Sumner and Cullen:
Even Steve Keen jumps in a bit.
Here's Rowe (not directly related, but and interesting side bar):
More interesting Rowe comments on Cullen's blog:
Direct from Rowe, and more from Cullen:
Mike Sax:
and Steve Roth:
Now JP Koning too?
This piece he does here on the "convenience yield" is also interesting:

Now Sumner too (linking to Rowe) and Wang? (but now we're talking recessions):
http://www.themoneyillusion.com/?p=23152#comment-271114 (more from Sumner & Nick below this) 
And Waldman too:

More on Tobin from Ramanan and JKH at monetaryrealism.com
The one below Ramanan talks shadow banks "non-bank financial institutions" and he and I had an email exchange about that:
Follow up exchange with Nick Edwards on the above:
Steve Keen too (what Ramanan is writing about in 1st link at concertedaction):
NBFI = non-bank financial intermediary
NIPA = national income and product accounts
http://monetaryrealism.com/krugman-and-tobin-on-banking/#comment-44185 (JKH responding to Fed Up's Rowe link; "macro is hard.")  

Good Cullen quote here, on the diff between MR and MM views of recessions (related to the above, but standalone too):
"Geoff" also has some good statements above there. The quote itself:
"[recessions are caused by] Or said a little differently, there’s not enough income relative to desired saving. That’s a function of bigger problems and not just an excess demand for money." 

Loans create deposits, funding, etc discussion with JKH, Cullen and more recently "anon":
Joe in Accounting too. 

Cullen on gov deficits equal private surpluses with some qualifications and S = I + (S-I) and some accouting with accountant FlimFlam and examples from Cullen etc.: S = I + (S-I) accounting examples:
Log cabin example next:

pragcap, 1930s, FDR, Irving Fisher, debt deflation, "suvy," QE, devalue:

 Cullen talks about daylight overdrafts from the Fed while explaining to "Tom":

Lars Christensen recommended Free to Choose w/ Milton Friedman, QTM, inflation, etc, from Sumner's page:
and Mike Sax & Greg too:

info from Cullen on foreign sector Tsy and Fed deposits & their relation to bank deposits:

Cullen's list of stylized facts about MR:

phil explains to Frances how to make blogger text wider:

hyperinflation & default links:

Sumner qualifies his EMH = no bubbles statements, to say that's only for asset markets (he describes the difference between bubbles and booms and responds to George Selgin):

Sumner talks about MOE vs MOA and addresses Nick Rowe. Bill Woolsey (MMist) disagrees w/ Scott and responds in the comments. Nick is thinking about it, but offers some criticisms. George Selgin in the comments too. Marcus Nunes is linked to about Brazil being an example of MOE and MOA diverging:
http://thefaintofheart.wordpress.com/2012/10/31/two-kinds-of-money/#comment-11355  (Marcus Nunes)
Marcus changes his mind on MOA vs UOA (seems to think Sadowski's use might be better):
Bill Woolsey's comments about electricity as MOA (he uses kw, but should probably use kw-hr). kw = kilowatt:

Sumner explains HPE (hot potato effect) again:
"...a few MMTers in the ditch along the way, still scratching their heads." ... is that supposed to be me? Hahaha 

Fun w/ Sumner:

Sumner approves of Nick's 1st comment (below) about money endogeneity:

JP Koning's medium of accounts post:
JP Koning's answer to my question about Fed finding coins:

Milton Friedman interviewed by Gene Epstein in 1998 re: Austrians Hayek, ABCT harm, etc:

Steve Waldman/Steve Roth/Mike Sax vs Scott Sumner/Mark A. Sakowski/Marcus Nunes on what caused inflation in the 1970s (the great inflation): monetary issues or demographics:

From monetayrealism article on Tobin & Krugman (JKH):
http://www.palgrave.com/products/title.aspx?pid=512989 (Godley-Lavoie) 
http://monetaryreflections.blogspot.co.uk/ (Nick Edmonds' blog: MR commentator)
http://www.concertedaction.com/ (Ramanan's blog: MR commentator)
http://ritwikpriya.blogspot.com/ (Ritwik's blog: Glasner commentator):
http://uneasymoney.com/2012/05/09/yeager-v-tobin/ (Glasner article I was discussing w/ JKH et al) 

econ blog rankings:

Fed paper on inside vs outside money:

mercantilism & related post by Coppola:

Sept 12, 2013:
O/T: New film about the Fed: I just heard about this on Kai Ryssdal’s “Marketplace” on NPR:
http://www.marketplace.org/ (Kai did an interview w/ the filmmaker, but I don’t think it’s shown up yet in their archive)

Scott's "Are there any Non-QTM theories" article... Japan thing (Greg & Mike Sax) and the 15 to 50 times price level (to base) http://www.themoneyillusion.com/?p=10116

Sadowski vs Roche @ pragcap (Sept 20, 2013 "Matrix"):
more at themoneyillusion:

Nick Rowe says this Bill Woolsey article is good at discussing why they quantity of QE doesn't matter:

Sumner says OMOs (QE?) is "just a swap" (paraphrasing):
"For me an OMO is a roughly equal swap, and the seller of bonds to the Fed is not really richer, if the bonds are sold at market prices. "

Sumner disagrees w/ Sproul:
TallDave disagrees with Sumner (and agrees with Sproul?):

Joe Franzone (accountant) looks at Example #5 in Ask-Cullen and blesses it:

Scott Sumner describes QE as "just an asset swap" but actually uses the words "merely an exchange" (in his battle with hyperinflationist Kotlikoff) (my link is to a follow on article the next day, where I respond to another commenter who noticed this):

Mark A. Sadowski on RBC:
"I've wagered my whole economic life on the defeat of RBC."
"Kydland and Prescott's [RBCers] work is a tough sell to me. You don't seem to get it. As far as I'm concerned they are the dark side. I'll combat with every ounce of energy I have into the darkest corners of hell."

More on Prescott from Mark (horse manure piles comment):
Plus that Sumner article includes the "established scientific fact" quote from Prescott and Scott's view of Prescott: "not a good monetary economist." 
I summarize this at Rowe's (plus one other Sadowski link to Prescott's work):

Sadowski's graph of how long term interest rates went up with QE1, QE2, and QE3, and went down again when they ended.

Fed's new (as of 2014) reverse repo facility they're trying out with explanations by JKH, Sadowski and Cullen, and "Marcin" at pragcap and "Max" at howfiatdies:
"The Fed could at least bring up seignorage to break-even if it borrowed from non-banks, which it's experimenting with:

 " -- Max (at Vincent Cate's howfiatdies blog)

Max, I read through that link a bit more and found a bit that I had a question about: I asked Cullen Roche at pragcap, and he answered. It may be of interest to you:


I'm not sure the following post by JKH is related, but I suspect it is:


Both JKH and Sadowski (the latter in a comment) refer to this paper:


I've been too lazy to read much of any of it except Sadowski's comment. Am I correct that these issues are related?

 BTW, here was Sadowski's comment:

"As a practical matter the fed funds rate is no longer of much importance. Joseph Gagnon and Brian Sacks have argued that the Fed should change its policy interest rate to the soon to be instituted reverse repo rate:"

... I think I first encountered this via this comment at pragcap, which makes a stronger claim than what Cullen explained to me about this facility. I tend to trust Cullen more:


"The Fed doesn’t have to unwind QE before raising rates due to their new overnight full allotment reverse repo facility. With that they will be able to control ST end of the curve while allowing that system to remain in the excess liquidity state."

"Yes, same thing. The fact that only banks are allowed to hold reserves has created an arbitrage (presumably by accident, although the Fed hasn't been in any hurry to fix the problem). Actually the simplest fix would be to just let anyone and everyone open a Fed account. But borrowing overnight on the open market would also work.

Using the established repo mechanism is kind of funny because it involves the borrower posting collateral - as if lending to the Fed were risky! Everyone would be happy to lend to the Fed without any collateral." -- Max at howfiatdies.


My questions about booms, busts, bubbles, recessions, NGDP and "perfect" monetary policy to David Glasner, but answered by Mark Sadowski (I'd also asked Sumner a few weeks back,  but couldn't understand his brief answer):
My question to Glasner (on the Say's Law post that I like to think I inspired):

Mark Sadowski's take:

Tom Brown:
“1. A boom is to a bust as a bubble is to a __________? A popped bubble? A recession?”

A “panic”.
“2. If bubbles did exist, what would distinguish them from booms?”
“Bubbles” refer to irrationally overpriced assets. “Booms” refer to unusually rapid growth in real output in the entire economy, or in a specific sector of the economy.
“3. In your view, if monetary policy were perfect, would there still be booms and busts? If so, then if we had perfect monetary policy but still experienced a boom or a bust, would the NGDP level still keep on trend?”
Yes and yes.
“4. How is a bust different than a recession caused by a modest nominal shock in combination with poor monetary policy?”
If it is an economy wide “bust” then it would manifest itself in a slowdown in the growth rate of one or more factor inputs (labor, capital, or natural resources) or in a slowdown in the growth rate of total factor productivity (TFP). If it is a sectoral “bust” then it simply manifests itself in declining output within the affected sector.

Lars Christensen's similar quote about RBC that mimic's Rowe's quote about Say's Law:
...that Sadowski echos here:
Tom Brown,
In most RBC models stochastic changes in TFP are the main source of business cycles. Needless to say reality is very different. Perhaps NGDPLT will make RBC true someday 


Sadowski's summary of MM evidence:


Sadowski tears John Williams and ShadowStats a new one (arguing w/ "Willie2"):


Cullen' & Glasner's bubble definitions (Sadowski's is above):
“A bubble is an environment in which the market price of an asset has deviated from the underlying asset’s fundamentals to an extent that renders the current market price unstable relative to the underlying asset’s ability to deliver the expected result.”
“Tom, As far as I am concerned, there is no clear distinction between boom and expansion and bust and recession. That doesn’t mean that there is no way of making a distinction, just that I don’t have one at the tip of my tongue. I don’t believe in EMH, but I don’t have a good definition of a bubble, but if the value of an asset implies a flow of revenues that are extremely unlikely to be realized, that seems like a bubble.”

Sadowski, Yellen, and Don Gellin explain why 2% inflation target:

From the comments:
“The mechanism I think is simple. Contractionary monetary policy reduces total spending and income. Debts are fixed in nominal terms. Contracting nominal income implies that fewer debts fixed in nominal terms will be repaid. See my post on Hawtrey’s account of financial crises in Good and Bad Trade.”
So that’s a tie-in with the debt deflation BSR concept, isn’t it?

One of Cullen's favorite sayings:
"spending is a function of income relative to desired saving"

Mark Sadowski and I discuss the money multiplier, the BoE paper on endogenous money, how there's no "exogenous school" and the (1+c)/(r+c) form of the money multiplier, and an interesting post buy Nick Rowe on "supply determined" quantity of money:

Case in which Sadowski says Sumner and Coppola are close in substance. Plus Mark complains about FRED and what they did to his plots, and where he sounds mildly annoyed with Scott about the existence of both potential RGDP and NGDP data from the CBO.

Why Sadowski doesn't have a blog:

Cullen, Rowe, Koning and others chime in on the money multiplier. Rowe talks "asymmetric redeemability" and "The Law of Reflux" again. Glasner comes up. Endogenous vs exogenous comes up. JP Koning posts link to Lavoie and his take on Reflux.:

From Sadowski:
“The Monetary Base is Special”:


Matheus, of the Fields Institute  (Steve Keen contributor) and "accounting police" (JKH, Ramanan) complaining:

Sumner's personal favorite post (having to do with nickels & the great depression?):

The time I helped Sadowski with something: (corrected him?)
Also "Philippe" has a nice "fairytale" in there he tells MF. 
Definitely corrected in the case of Glasner:

More from Nick Rowe on endogenous vs exogenous (also a continuation of the Rowe vs Glasner money multiplier / reflux issue):
"We take the central bank’s target as exogenous, and anything which depends on that target is endogenous. Unless the central bank has an M target, M is endogenous." 

Nick gets back to me on perfect reflux between bank money and bank assets (so n-2 other markets instead of n-1, was my hypothesis). He says "false" but qualifies it in such a way that it COULD be true I think, given we remove the exceptions he's identified:
Also, more there Glasner's take on Sadowski's take on Mishkin's take on "reserve ratio," "currency ratio," and MB and who chooses what. I propose added a 4th chooser: "borrower" as distinct from depositors. money multiplier = mm = (1+c)/(r+c), etc. 

"Peter N " and I discuss closed loop systems in the context of a "gain" for the money multiplier in the comments to one of Nick Rowe's articles. He gives me a link to a reference: (feedback control Euler equations, Z^-1, poles, characteristic polynomial, LTI, stable systems, roots, characteristic equation, open right half plane, unit circle, etc.):
Peter N provides me four more links here (these appear to be more clear):

Sumner draws rectangular hyperbolas:

complements and substitutes and cross price elasticity (Nick Rowe's piece on reflux & money multiplier)

Sadowski lists the goodness and badness of various kinds of taxes:
In other words taxes can be ranked according to their effect on long run growth in the following fashion:
1) Capital taxes (very bad)
2) Labor Taxes (slightly bad)
3) Consumption (moderately good)
4) Property (very good)

More from Sadowski on Sax's site:
Consumption could be luxury and it could be progressive. Capital gains falls under Property on Mark's list, not Capital taxes:
I think he had some works with Mike Sax about that time too on Mike's blog. That's where he brought up the idea that 3) is a luxury tax. And obviously "Property" is not restricted to land (since capital gains would fall under that).

March 2014: I revisit the Krugman "Banking Mysticism (Update)" quotes (Sadowski brings it up criticizing Cullen), on Rowe's blog. Rowe tends to agrees with my updated criticism of Krugman. Philippe criticizes me. And I point the whole thing out to "Kristjan":
I recently criticized those same bits from Krugman here: http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/03/alpha-banks-beta-banks-fixed-exchange-rates-market-shares-and-the-money-multiplier/comments/page/1/#comment-6a00d83451688169e201a73d9ae024970d
Nick Rowe comments on my comment (a few lines down):
“Tom: I tend to agree. Given the amount of miscommunication over the “loans create deposits!” issue, it really needed a very carefully written piece.”

… and Philippe adds some critiques of my critique in between

I ask Nick an important question about the title of this post: "The sense in which the stock of money is "supply-determined:""

Rowe and Sumner discuss targeting 0% inflation rate. This ties into Woolsey and Kimball proposals on this. You have to be an "extreme socialist" to want to do it. Sumner uses that to rib his conservative pals who want a 0% inflation rate.
comment to Johnny Evers on pragcap tying all this together:

DOB's "Catalyst of Growth" blog with "construction of a fiat currency" with two targets: MB & inflation rate, using two levers: FFR and IOR.

Mark Buchanan: physics guy does econ:
Sadowski's not a fan. But I did find another guy named Jason Smith he's more favorable about:
Jason discusses the limitations of physics in econ:
So does Chris House:
And Noah Smith mentions it too:

Martin Feldstein does a piece in the WSJ which Sadowski says amounts to crying "fire in a flood" about inflation worries (April 2014). I point it out to Vincent Cate and he and Sadowski have an interchange in which Sadowski pulls out all kinds of facts about high debt interest rates high inflation, etc. Showing that Weimar is really really rare. His date goes back to early 1800s. Marcus Nunes and Scott Sumner do pieces on the Feldstein piece about this same time:

Now it's JKH's turn to be alone against the world, but this time regarding "asymmetric redeemability"
Nick Edmond's blog:
But mostly Nick Rowe's (several posts in this time period):

Nick Edmond's explains how he does simulations in Excel:
thoughts on Keen reviewed by Thomas Palley:
And thoughts on Nick's "the sense in which the stock of money is "supply-determined"":

More on Keen vs Palley from JKH, Ramanan, Peter N, Nick Edmonds, Cullen, Coppola:
(they give me some good tips on Keens problems and modeling difficulties)

Sadowski's rant about the BoE "endogenous" money paper (w/ pictures of balance sheets etc.).. in which he says the supposed "exogenous money school"  is a straw man that doesn't exist, and that the argument about a causal money multiplier is made up straw man too. reserve ratio, currency ratio, Mishkin's textbook, etc. He posted in Sumner's bog too, but this is the Rowe version:

Nick Edmonds blog posts of interest. His take on Rowe's "the sense in which the stock of money is "supply-determined"":
This also ties into to the idea of whether or not commercial banks can force an excess of their money into the public's hands:
Here he discusses Keen vs Thomas Palley:
Which comes up here too:
And then this on how he does his simulations/models using Excel:

Frank Restly brings this Lars Christensen quote to attention:
"If the NGDP target is 100% credible the correlation between growth in M and growth in V to be exactly negative 1."  
Sumner objects:
Nick's post itself is about how MMists should complain that expectations are not part of the money multiplier story. 


Glasner v Rowe debate of April 2014 (on reflux and whether or not there can be a sustained excess supply of commercial bank deposits)
JP Koning:
David Glasner:
Nick Rowe:
Nick Edmonds:
Jason Smith:
JW Mason's take:
A H and stone too:


Jason Smith on hyperinflation, Nunes, and Sumner, and inflation in general:
Jason's modified quantity theory of money (QTM)
Nick Rowe refers to the lesson we learned in Weimar:

Start of thread between HJC (Nick Rowe commentator) and myself about MOA, UOA, and MOE and he has Jurg Niehans' book, so that made it interesting. I bring up Bill Woolsey and his electricity example. No resolution though.

Nick Rowe and I squabble about his claim that the relation between the size of Hn and Hb helps determines whether or not dPY/dRd < 0. Also I think he was wrong about the definition of M0 in the US (it should be currency in circulation and not in bank vaults). Although I noticed that Wikipedia seemed to have a discrepancy in their article, and Investitopia has a totally different definition, and I couldn't find one on the Fed's website. I left a question for Mark Sadowski here about it:
http://www.themoneyillusion.com/?p=26552&cpage=2#comment-328753  (also see my comments above and below).
I also ask Mark about Jason Smith's view of expectations:
Mark answers those questions in the thread.

Physicist Michio Kaku on programming mice brains, etc.:

Mark Sadowski: more on hyperinflation as a monetary phenomena:

What percentage of vault cash is used to satisfy the reserve requirement (from Sadowski):
Sadowski talks about IOR on vault cash and when banks were allowed ot count vault cash as reserves:
JKH disputes that:
JKH digs up a paper on how banks model vault cash:
Also a nice summary from EconCCX:
http://monetaryrealism.com/thomas-palley-on-steve-keens-model-of-aggregate-demand/#comment-109869Interesting Flow5 comment on the money multiplier and vault cash
pliu412 seems to have solved the IOR on vault cash mystery, "no" is the answer (see #11):
Also of interest (e.g. #10) (name for bank Fed deposits which are neither required nor excess reserves):
"Clearing balances will continue to receive earnings credits" ... rather than IOR.
To Sadowski & JKH:

JP Koning talks about durable assets and perishable assets in his Rowe v Glasner article:
"durable assets (i.e. gold, houses, stocks, and bonds)"
Which makes me wonder if loans are also durable assets.

Morgan Warster's three player game:

Very first to think of NGDP targeting and/or NGDPLT? From a reference on Marcus Nunes' site:
from Mark Sadowski:

John Taylor rule as a special case of NGDP targeting (Sadowski):

Engineer from the past that Glasner brought up: Thorstein Veblens
Talking about HTF and efficiency

Sadowski's views on inequality:
Scott's views under that in a subsequent comment: biggest diff is Scott likes subsidies for low pay rather than min wage.

Sumner & Sadowski are critical of hyperinflation view (not a hyperinflationsit though):
also " Rajan is a very good economist"
Mark find's fault with Jason Smith's view of expectations:
Sumner says Hayak came up with NGDP (but not NGDPLT) earlier than James Meade in  1978:
Holbrook Working (1923), didn't advocate NGDP targeting, but price level targeting.

Jim Glass has a good soviet era joke here concerning losing eyes:
Also there is a link in there from me to Nick Rowe's "Moaist phase" (as joked about by W.  Peden) 

Sadowski describes how inflation reached it's peak of 14.6% in March 1980, its post war (WWII or WW II) high when the debt to GDP ratio was near its post war low and base money as a % of GDP was also near its low:
I point Vincent Cate and Max to this interchange w/ Sadowski too. Argentina also comes up as "not part of the developed world."

Small disagreement between Sadowski and Sumner?

Noah Smith on the "Finance Macro Canon" of false beliefs:
"...the canon goes against the bets of the finance industry itself - inflation expectations, as measured by TIPS breakevens, are around 2%, even in the long term."
"MMT is a great halfway house for recovering Austrians." It wasn't long after this that Smith tweeted that MMT and PKE were "cults" akin to Scientology.

flow5 counts banks, S&Ls and CUs:

Sumner says he distrusts empirical studies in macro, excepting Sadowski's of course:

Max on why the Fed won't have a problem with rising [IOR?] rates:

Mark Sadowski's rebuttal to Vincent Cate where he mentions the Japanese and US deficits are falling as a % of GDP and expected to go into surpluses soon (April 2014):

Nick Rowe talks about monetary policy being 99% a social construct of reality and 1% about balance sheets in a comment on JKH's article about Market Monetarism:
Nick Rowe also gives a speech about communications strategies and why he thinks that that rate setting is a terrible one at the ZLB, and why something like monetary base is much better.

Sumner's reaction to investor article about long term bond prices/yields:

Great MM discussion at monetaryrealism.com with Nick Rowe, JKH, Nick Edmonds, Jussi, AH, Cullen, winterspeak, Fed Up and me:

David Beckworth on endogeneous money (about this time: just prior, he Frances Coppola and me discuss "envelopes" and degrees of endogeneity/exogeneity at pragcap):
Here's probably my best comment on measuring endogeneity/exogeneity with rho the correlation coefficient:''

Jason Smith on Walras' Law:

Great comment here by Alex Godofsky on Nick Rowe's "Monetary monarchy" post:
Also plenty more below that and on the previous page, like from Nick Edmonds and JKH. Very good! The spend a lot of time on my 1-alpha / 1-beta, cashless hypothetical, which was nice. Even Rowe chimes in again. 

My question to Information man Jason Smith about my attempt to explain Walras' Law to SS:

Glasner promotes the "bubble" concept in regards Bitcoin, and also the idea that taxes make fiat money valuable (thus distinguishing it from Bitcoin... which I was a bit surprised at, since Philippe repeated that assertion recently in the comments to Nick Rowe's "Monetary monarchy" post... and a bit further down JKH says that view is a bit too narrow and explains why).:
Of course Sumner disputes that in the comments (sumnerbentley is  his name there). Also comments form JKH, JP Koning and Mike Sproul under Glasner's post. Ramanan too. 

Mark A. Sadowski lists what the Fed can buy (gold, municipal bonds, etc):
http://www.themoneyillusion.com/?p=26587&cpage=1#comment-331997 (the trick is to get the latest!) 

stone's store of value vs MoE quote and post:

In the quest to determine if IOR is paid on vault cash the issued of "clearing balances" and (a kind of bank held Fed deposit, the required portion of which is not considered to be "reserves") and their associated "earnings credits" came up. Pragcap commentator pliu412 and Mark A. Sadowski both contribute to an answer:
More in both threads with David Andolfatto, Daniel Thorton (both of St. Louis Fed) and on pragcap, and much more from Sadowski:

Brad DeLong's "smackdown" of Sumner about 2008 and financial crisis:

Sumner's old article "The monetary base is special" with a photo of a $100,000 bill/reserve note/large denomination note,  that Sadowski found for me twice:
drug dealers, cashless economy and Tyler Cowen are all discussed.

My response to PeterN on pragcap about MMists and fiscal policy. I give Sumner and Rowe examples. Helicopter comes up, as well as conterfeiting, Say's Law, Brad DeLong, Mike Sax, Mark Sadowski, Keynes' views, "dancing on Keyne's grave" etc:
Rowe does say in a sense its’ ALL fiscal in that link above:
“But either way you could always claim it is “fiscal”. Because giving it away is a money-financed transfer payment, which is “fiscal”. And buying something is ‘fiscal”. What is *not* “fiscal”?”
Back to “efficiency”: I was correct he used that word. Here’s my question (regarding counterfeiting)
and his answer:
“Tom, It’s better to buy the bonds, counterfeiting makes the economy less efficent, as taxes must rise to cover the cost.”
And his response to Beckworth’s helicopter drop ideas:
“I’m opposed to the helicopter drop idea, for several reasons. First, it’s less effective than people think. No country has been doing more “helicopter dropping” over the past 20 years than Japan. ”
But he brings it up several times, even taking Krugman’s side against Rowe once. Here’s several:
Regarding Rowe’s view, he has a couple of interesting quotes here:
 If I were a Big Government guy, I would still want (the government’s) central bank to make Say’s Law true in practice. Especially since it would free up the rest of the government to do all the other big things I would want the government to do, without the constraint of managing AD:
and this:
Tom: “I think he’s worried that if MMists are right [I'm talking about Mike Sax], that this will eliminate the justification for having a gov with an expansionist fiscal policy, …”
Remember as well, it would also eliminate the justification for having a government with a contractionist fiscal policy: “Aggregate Demand is too high! We must cut government spending!”
Fiscal policy is not about the average size of government over time; it is about volatility in the size of government over time.

Sumner: "If I was a socialist my views on monetary policy would be exactly the same"

US notes or "United States Notes" are not subject to the Statutory Debt Limit:
Approximately $239 million in Treasury liabilities as of the end of 2013

JKH on the fiscal / monetary vocabulary debate (it being a "mug's game"):

Free econ textbooks:
http://digilib.mercubuana.ac.id/manager/file_ebook/Isi5255073448113.pdf (chapters 24-end+glossary of McConnell & Brue macro)

More on asymmetric redeemability from Nick Edmonds, ATR, Nick Rowe, etc.:

Sumner favors taxing "rents". Germany, Piketty, etc:

pliu412 shows document about NIPA and Z1 flow of funds:
He's got some suggestions below too.

Nick Rowe says that his argument in the "Temporary vs permanent money multipliers" argument could be applied to his "There can be an excess supply of commercial bank money" which affects the whole "Rowe v Glasner round #33" post that JP Koning put up I think.

Sadowkski's opinion of Woodford "brilliant for a Neo-Wicksellian"
We also talk about FedCoin (electronic MOA (for the average citizen?)), Tyler Cowen's version of FedCoin, and right above he gives his opinion of Dan Thornton. 

Rajiv, Robert Waldman, Mark Sadowski on hyperinflation/deflation Weimar and targeting a fixed interest rate:

Scott on Noah and the Neo-Fisherites:
Also I've got a link in there asking Mark more about Weimar and why they held the rate at 5% for 8 years when inflation was always much higher than that. Also I ask Scott again about the power of expectations (related to Neo-Fisherites) and point him to my question to Nick Rowe on this.
Ryan Avent responds to Noah: I like his answer because he also answers one of my questions to Scott And Rowe on expectations here, and rejects Neo-Fisherites, but admits expectations could overcome the "mechanics" of the situation:

Marcus Nunes and David Beckworth also have articles up with cause me to ask about expectations (Marcus puts up a chart showing that expectations *have* been there all along, so I ask "what's missing then? David says less money injections if there'd been expectations, but you show there *were* expectations? Marcus answers me:

Noah vs the neo-reactionaries on "modernity"
weird example of a neoreactionary:
Sadowski discovers there unconventional economic thinking:

Nick Edmonds, stone, Sadowski, Tony Yates and Sakir on teaching post-2008 "bubbles" and "panics" in Manchester, UK (England):

Also stone has some interesting links to PK types disputing the validity of "loanable funds" but Nick Edmonds says that they're not saying that loanable funds violates accounting constraints, just that an accounting perspective can help to see what's wrong with loanable funds:

Example of Sadowski in an econometric battle? On Beckworth's blog, "Granger Causality" etc.:

Nick Rowe's inverted pendulum balancing a broom in your hand analogy on Wiliamson's site, plus some fun stuff about Stephen Williamson, and Edward Lambert, Angry Bear, etc:

And some stuff on neoreactionaries:
That last one also is one of two in a series on Sumner criticizing those who think capital "income" taxes are a good idea (he's for a progressive consumption tax). 

A very clear post from Scott Sumner on MM vs Neo-Fisherites:

My pracap forum summary of recent (as of late April 2014) exchanges with MMs (mostly) on "expectations":

More on Noah's Neo-Fisherites and expectations, this time from a link to a Simon Wren-Lewis piece on another .pdf paper that Noah links to, attempting to explain the new zero interest rate steady state (not many comments, but a collection of high power ones: Nick Rowe, David Aldofatto, and Stephen Williamson himself):

Nick Rowe's original late 2013 reaction to Stephen Williamson's Neo-Fisherite ideas (here he claims he's pretty sure he's more right wing than Steve is):
Krugman  agrees:
Brad DeLong too (link in Krugman's)
Also links to Williamson's and this guys (I think on the Minneapolis Fed?) Narayana Kocherlakota 
Brad links to a an interesting title by  Franklin Fisher:

Sadowski talks about how Yellen convinced Greenspan that 2% was a good inflation rate target during FOMC meeting (he provided link to the minutes). Year: 1996
Yellen’s remarks are on pages 42-45.
Miles Kimball discusses the possible benefits of a positive inflation target here in the sections entitled "The Possible Benefits of Inflation":
Also interesting quote here regarding too low of an inflation rate in the Netherlands (from ):
"The Netherlands is still positive at 0.1pc, but this level is already so low that it is causing debt-deflation trauma for Dutch households struggling to cope with loans near 250pc of disposable income. Dutch house prices have dropped by a fifth. A quarter of mortgages are in negative equity."

And more on Sweden and the deflation there currently (April 2014) from Lars Svensson:

Sumner's take on taxing the rich (at 80%):

Sumner's take on Sweden (as of 4/2014), but first some from Sadowski:

Friedman's optimum quantity of money rule:
Josh Hendrickson shows this whole "Neo-Fisherite" thing was all just a big misunderstanding:
But then Willianson says something weird here:
Also Edward Lambert links to his stability analysis on the Fisher Effect in the comments there. 

Marcus Nunes debates Vincent Cate about inflation (hyperinflation) in Japan and makes a prediction:
Also talks about "out of control budgets" and "high" money growth "relative to demand." 

Nick Rowe summarizes what's wrong with IS/LM:

Frances Coppola on scott not realizing woods are made of trees, and also a summary of my interaction with Rowe, Sumner, and Sadowski on Rowe's post about the stock of money being supply-determined, exogenous, endogenous, "in conjunction" etc.:

The time I told Nick Rowe that banks buy everything by crediting bank deposits: computers, donuts, salary, etc: 
"Tom: I *think* I agree with that"

Super interesting Nick Rowe post on loanable funds vs liquidity preference (LF vs LP). A teaching post, but full of great comments from JKH, HJC and Nick Edmonds
pliu412 has a mathematical ISLM "pun" to go along with that:
Also, Cullen's post there discusses his criticism of ISLM.

Nick Rowe and David Beckworth tell stories to explain balance sheet recessions and excess demand for money recessions:

More on Sweden from Mark Sadowski:

When Nick told me about "rectangular hyperbolas" and 
 "Tom: economists normally put price on the Y axis, and quantity demanded and supplied on the X axis. (Yes, I know we are weird about that, and it violates all standard conventions, but there are historical reasons why we do it the "wrong" way, and now we are stuck with it.)"

Sadowski has another hyperinflation fact: large fiscal deficits neither necessary nor sufficient for hyperinflations:

Loose to tight money spectrum and counter-intuitive result: tight money leads to over-leveraging? (Sadowski on one):

Nick Rowe declares his support for NKers quest to make Say's Law true and RBC theory, and economies at equalibrium... interesting post (also good link to Simon Wren-Lewis, Krugman, and Thomas Palley):
Cullen's take on Palley's criticism of the mainstream:
More on the heterodox vs orthodox wars, folding in the Cambridge Capital controversy of the 1960s:
Salt water, brackish water, and fresh water.  

Matthew Yglesias on DSGE modeling:

Krugman on 100% FRB advocated by Wolf and Cochrane and also discussed by Nick Edmonds:

Krugman complains that Chris House is drawing a false equivalence between types like him and Ed Prescott (RBCer):

Nick did the inverted pendulum and double pendulum thing back in 2011... he did beat me to it:

Jason Smith takes another look at expectations, and claims they "destroy information" in general (wrt the "maximally ignorant" case). This also ties into the EMH and to the Neo-Fisherite story too, oddly enough:
Jason's Neo-Fisherite post:
Jason's "expectations destroy information" post:
Also in his "light to no blogging" and car accident post:

Nice chart that Sadowski points out showing ZIPR, 10 year yields and the S&P 500:
From Mike Norman Mark says:

Nick Rowe has a bunch of great posts, some with comment threads between physicist (turned quant) Avon Barksdale and Karsten which are good:
Say's law, RBC, etc (NK conspiracy):
women manicures, hairdressers and massages, and link to Beckworth's story with $100 and prostitute:
Teaching loanable funds vs liquidity preference:

Sadowski gives data on bank bailouts per country. US doesn't look so bad:

What Nick Rowe had to say to Sadowski once:
"you are the best econoblog commenter out there." Not "World's Greatest" like I though.

Sadowski and Vincent Cate discuss hyperinflation and debt and deficits at Beckworth's:

Jim or James Caton is a blogger/economist that had a theory of the value of fiat money I found interesting:
Look for him on Glasner's and JP Koning's blogs.
Shoot, maybe it was this guy instead: Mike Freimuth:

David Glasner's concrete plan as head of the Fed (or CB):


  1. Tom: thanks, but that's not quite right. Under inflation targeting the quantity of money is endogenous in both the short run and the long run. It's the nominal rate of interest that is exogenous in the very short run (6 weeks or less, for the Bank of Canada anyway), but endogenous in the long run.

    1. Thanks Nick... I'll think about that. That makes sense on first thought... but I swear I've seen Sumner and Glasner say what I wrote above. Difference in opinion (between you and them), or was I not reading them right? I think Beckworth has also said similar (to Glasner)... in fact just this month (see my MMist Please Explain! post).

    2. Here's what I mean Nick. This from Beckworth a week or two ago:

      "I suspect you view all changes in the monetary base as endogenous. I only view short-run changes for a given interest rate target as endogenous. Over longer horizons the Fed is changing interest rates according to something like a Taylor Rule. These policy changes in target interest rates mean exogenous changes in the monetary base."


      Glasner here:

      "So while I think that bank money is endogenous, I don’t believe that the quantity of base money or currency is endogenous in the sense that the central bank is powerless to control the price level."


      And Scott Sumner here:

      "In the long run banks are constrained, as the Fed will adjust the monetary base to prevent economic overheating. The endogenous money folks, who are right about the period between Fed meetings, overlook this longer run problem with their theory. Six weeks is not a long enough period to have major macroeconomic consequences. But in the very short run the banks are not constrained by a lack of reserves, if the Fed is targeting the short term interest rate. The base is endogenous during that period."


    3. David Glasner is explicitly using "endogenous" in a different sense than normal. I agree with David there, once we take that into account.

      I disagree with David Beckworth on this bit: " These policy changes in target interest rates mean exogenous changes in the monetary base." (Unless he too is using "endogenous" in a different sense that normal.)

      I don't disagree with anything Scott actually says there, but he maybe implies something about the long run I might disagree with.

    4. Ah... now how do you know **I** wasn't using "endogenous" in Glasner's sense? (other than the fact that it's clear to anyone that I barely know what it means in any sense) :D

      But seriously, what are these two senses?

    5. ... and how can I tell them apart?

    6. Nick, on a slightly different topic, what do you make of this interchange I had w/ Sumner:

      "OK, so if you agree with David [Beckworth] here, and HPE is “very weak” when we’re at “zero rates” then why not ditch the QE and the ER > 0, and just promise that base money will be made available when needed. And then… if we do that, how is that different than what we have been doing prior to 2008? Except that now there’s an explicit NGDPLT?"


      (The above was my "last point" BTW)

      "And I certainly agree with your last point [above]. In a sensible system the base money is endogenous. You set the NGDP target, and the public tells you how much base money they want to hold. I’m all for that. But we don’t have a sensible system, the Fed uses QE to signal its target. That’s why it’s such a mess."


      So... in a "sensible system" just have the Fed do what it's always been doing: providing exactly whatever "base money" the system required: no need for a "very weak" HPE at the ZLB... just carry on as it has prior to 2008, no need for extra asset purchases to push base money stocks (reserves) past their required levels... just set an NGDPLT, and that's all you need. Correct? I don't know how much more explicit I could have gotten. My only question here... the one caveat is ... what do we need to do to get a "sensible system?" Anything other than what I've laid out here? Is there something else preventing it from being "sensible?"

    7. Have you read Woodford's "Methods of Policy Accommodation at the Interest-Rate Lower Bound" paper (http://www.columbia.edu/~mw2230/JHole2012final.pdf)? It's long and wordy but pretty easy to follow.

    8. Max, no I haven't. I've looked at it before ... like at some of the charts, but I haven't tried to read it. He talks about "expectations" in there, right? Plus looking through it now I see a Sumneresque plot: NGDP taking a step below trend line. There was some thought this paper may have inspired the last "open ended" QE announcement, correct?

      What do you like best about it? Does it shed light on some of Sumner's statements (like I've quoted above)?... How about distinguishing between senses of the word "endogenous" vs exogenous like Nick brings up here?


    9. "What do you like best about it?"

      The discussion of QE. It's consistent with what you're saying; Woodford doesn't think QE, especially "pure" QE, does much.

      Basically if the central bank can lower interest rates, then it doesn't need to perform OMOs. And if it puts a floor on interest rates, then OMOs won't work.

    10. Really? Wow... I guess that will teach me to read for myself. From the way that paper was discussed by Sumner et al, they sure made it sound like it inspired QE3 or QE4-ever or whatever they called it.

      They definitely weren't 100% on the paper or what the Fed did, but they called it a "useful half measure" ... something like that.

      But it sounds like your interpretation is that it (the paper) could hardly be said to have inspired more QE.

      OK, well thanks for that.

    11. Wow! So Nick would have sided with me in the debate with Beckworth in regards to the endogeneity of the base? I'm really surprised by that.

      And I bet Beckworth would be too!

    12. Jared... I'm not sure... he sprung a new one on me there: I didn't know that "endogeneity" had two senses. (see above)

    13. Oh well, I guess you're right! Nick says so pretty explicitly there doesn't he?

  2. "New Keynesians believe that the economy has zero self-equilibrating tendencies. But they want the central bank to make it look like the economy has powerful self-equilibrating tendencies."

    It sounds a little like using feedback to control an unstable system.

    Here's the theoretical classical economy (first 12 seconds) left on its own. Here's the actual economy with no central bank. Here's the economy with a theoretically perfectly run central bank. Now instead of the computer deciding how much voltage to apply to accelerate that little cart, imagine that the Board of Governors of the Federal Reserve System (or any other CB leadership) do that instead: that's the real economy with a real central bank. :D ... I'm joking!... kind of.

  3. http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/05/the-new-keynesian-conspiracy.html?cid=6a00d83451688169e201a511aec630970c#comment-6a00d83451688169e201a511aec630970c

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