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afraid to say it oh most people say it sure but they leave it at that when things lead to other things sequences arise and patterns emerge in particular if human nature changes little then we are likely to find repeating sequences and repeating patterns throughout history i think if somebody saw a barter coined money credit sequence in history well that fits with things i already know about the cycle of civilization so i am willing to accept that that sequence probably did happen i don t reject it outright as munro seems to do of course barter continues in modern times of course there was coinage in use in the age of barter of course we don t stop using money because it s the age of barter we ll be glad to use money if we can get our hands on it but if we can t well there is still barter we don t rely less on money because it s the age of barter it is the age of barter because we rely less on money so anyway i was going to leave it at that but i can t because i kept reading professor munro s archive page and i came upon this c factors producing the new silver and then gold coinages i greater commercialization of the economy with a vastly increased volume of money payments transactions demand for money see after the age of barter there was a vastly increased volume of money payments less barter more coin there was a change in emphasis a move away from barter a move toward coined money and this e reasons for the resumption of gold coinages in the west i the vast increase in the volume of money payments and transactions demand for money professor munro confirms the view that there was a transition from a less coined money economy to a more coined money economy later of course there was the transition from mostly coined money to mostly credit posted by the arthurian at 4 00 am 0 comments tuesday april 28 2015 from the archives of john munro there are two fundamental causes of madness amongst students sexual frustration and the study of coinage professor karl helleiner posted by the arthurian at 4 00 am 1 comments monday april 27 2015 finance and the ceteris paribus economy while reading kenneth rogoff s vox piece on the debt supercycle i noticed in the sidebar a link to a historical look at deflation with claudio borio s name attached i ve looked at borio s work on financial cycles before so i was interested finishing up my response to rogoff i dove into the deflation article here are the opening paragraphs concerns about deflation falling prices of goods and services have loomed large in recent policy discussions see e g cochrane 2014 muellbauer 2014 the economist 2015 the debate is shaped by the deep seated view that deflation regardless of context is an economic pathology that stands in the way of any sustainable and strong expansion however the almost reflexive association between deflation and economic weakness is not so obvious seen as a symptom deflation need not only arise from an aggregate demand shortfall but also from greater supply which would boost output and seen as a cause while it may be damaging by pushing up real wages and unemployment raising the real value of debt debt deflation or inducing consumers to delay spending it may also be beneficial by raising real incomes and wealth and making export goods more competitive the cost of deflation is ultimately an empirical question five words went off in my brain like fireworks making export goods more competitive i don t know really how that works if deflation makes the dollar stronger that affects exchange rates and makes us exports more expensive i m sure there are trade offs but they use those five words as if there can be no question that deflation makes exports competitive but before i confused myself with the exchange rate consequences of domestic deflation before that unfinished thought diffused itself like a puff of smoke there were those five words and the fireworks in my head when costs are falling borio et al say that s good for exports by extension then when costs are rising that s bad for exports the mind goes to adam smith to of the component parts of the price of commodities to smith s look at factor costs and the principles that regulate them the mind goes to the cost of finance a cost that competes with smith s wages and profits and rent imagine a stable economy a ceteris paribus economy where nothing changes other than the size and scope of finance consider a period of time during which the size and scope of finance begin at a low level but grow persistently so that by the end of the period finance has grown very large ceteris paribus it takes just as many hours after that time period as many as it took before to produce an apple to produce an automobile to produce a skyscraper it takes just as much capital consumption just as much raw material just as much managerial oversight the only thing that has changed is the cost of finance but because the cost of finance increased among producers profits fell and prices rose because the cost of finance increased among consumers there is a chronic shortfall of demand these changes have consequences chronic shortfall aside when the cost of finance increases as a share of output cost it drives up the price of output it makes the basket of goods more expensive it makes exports more expensive i make that argument that the rising cost of finance in the us economy increased the prices of us exports putting the us at a disadvantage and contributing much to our unfavorable balance of trade i make that argument that was the fireworks in my head when i read those five words the u s balance of trade was really pretty stable until after the 1974 recession graph 1 u s balance of trade since 1950 some people attribute our trade imbalance to nixon breaking the link to gold could be nixon took us off gold in 1971 but milton friedman says it was the economic policy of the 1960s the kennedy and johnson administrations that ultimately forced us off gold nixon had to do something because the situation had become very critical in 1971 friedman says according to friedman then even if our trade imbalance was created by breaking the link to gold the underlying causes go back a decade before the link was broken at least a decade i should say posted by the arthurian at 4 00 am 3 comments sunday april 26 2015 rogoff debt cycles and optimism the name ken rogoff ring a bell how about reinhart and rogoff or maybe you remember the notion that once central government debt reaches 90 of gdp economic growth falls off you remember that one right and the name thomas herndon too maybe reinhart and rogoff growth in a time of debt our main result is that median growth rates for countries with public debt over roughly 90 percent of gdp are about one percent lower than otherwise average mean growth rates are several percent lower you might expect ken rogoff to be a man of principle not a man of science you might expect his economic analysis always to come up heads for the right and tails for the left if so you might be surprised by his recent article at vox rogoff writes there has been far too much focus on orthodox policy responses and not enough on heterodox responses that might have been better suited to a crisis greatly amplified by financial market breakdown in particular policymakers should have more vigorously pursued debt write downs that s downright arthurian from rogoff s article has the world sunk into secular stagnation with a long future of much lower per capita income growth driven significantly by a chronic deficiency in global demand or does weak post crisis growth reflect the post financial crisis phase of a debt supercycle where after deleveraging and borrowing headwinds subside expected growth trends might prove higher than simple extrapolations of recent performance might suggest i will argue that the financial crisis debt supercycle view provides a much more accurate and useful framework for understanding what has transpired and what is likely to come next all in all the debt supercycle and secular stagnation view of today s global economy may be two different views of the same phenomenon but they are not equal the debt supercycle model matches up with a couple of hundred years of experience of similar financial crises the secular stagnation view does not capture the heart attack the global economy experienced slow moving demographics do not explain sharp housing price bubbles and collapses it s an important topic and because i think in terms of debt as cause of problem and problem that fits a cycle of civilization rogoff s debt supercycle catches my eye in the introductory paragraph above rogoff s vox article we read unlike secular stagnation a debt supercycle is not forever i like the clarity in that secular stagnation is long term stagnation by contrast we expect a cycle to have its ups and downs the introductory continues after deleveraging and borrowing headwinds subside expected growth trends might prove higher than simple extrapolations of recent performance might suggest so if we think in terms of a cycle or no but if the economy actually moves in a cyclic pattern of sorts then we have reason for optimism rogoff says simply because of the cyclical pattern good times are bound to return secular unexplained stagnation offers no reason for optimism unexplained yes rogoff observes the view that the world is suffering from long term secular stagnation due to a chronic shortfall of demand well that s circular for sure a shortfall of demand is stagnation but if the problem is a debt supercycle it s the pattern that s circular not the argument and if it is a debt supercycle then we can be pretty sure the problem arose with debt with overall economy wide debt to use rogoff s phrase he s knocking at my door but one doesn t adopt cyclical thoughts because they allow for optimism good grief have we reason for optimism again rogoff writes the us appears to be near the tail end of its leverage cycle near the end of the leverage cycle i don t think so look at the start and end levels for the previous blue and current red depression scale peaks of private debt on this graph graph 1 comparison of debt growth around the 1929 and 2008 debt peaks see my decline from peak debt 2015 update spreadsheet on google drive previous version of this graph 17 december 2012 private debt rose much more quickly in the 2000s than in the 1920s but the deleverage was much less in the recent period this time private debt has been reduced almost not at all it s not that the period of deleveraging is almost over it s that the deleveraging never really got under way that leaves little room for baseless optimism posted by the arthurian at 4 00 am 0 comments wednesday april 22 2015 an interesting detail i quoted from some of the notes on fred series for yesterday s post i didn t need this part from the small time deposits total series yesterday but it is too significant to pass up the small denomination time deposit component of m2 excludes individual retirement account ira and keogh balances at depository institutions because heavy penalties for pre retirement withdrawals make them too illiquid to be included in the monetary aggregates they are too illiquid to be included in the m2 measure of money posted by the arthurian at 4 00 am 0 comments tuesday april 21 2015 the components of m2 money one more time i just want to be comfortable with the fred datasets on savings so i feel like i know what they show if one is a stock and i think it s a flow obviously i have something wrong i want to be able to talk about these datasets without wondering what i have wrong so i look i googled total savings the first hit was total savings deposits at all depository institutions fred fred s notes on that graph say the savings deposits component of m2 consists of passbook type savings deposits as well as mmdas at banks and thrifts that got my attention i started looking at economic data in the late 1970s i started with the bicentennial edition of the historical statistics that was before a lot of the financial innnovation so they didn t have the money measure mzm and other newer measures and they didn t have retail money funds and other newer things to do with money at least i don t think they had those things yet but i don t know maybe they did maybe i was just trying to simplify things enough to understand the economy i know they had the m1 and m2 money measures m1 counted money people spend m2 counted money people have whether they spend it or save it the distinction was between money people ordinarily spend and money people ordinarily don t spend it still is fred s notes on m1 say m1 includes funds that are readily accessible for spending m2 starts with m1 and adds things like total savings deposits at all depository institutions anyway when i read the notes on that savings series and saw them describe it as the savings deposits component of m2 i had a thought if i can find this component of m2 money maybe i can find the others also so i went to fred for the notes on m2 m2 consists of m1 plus 1 savings deposits which include money market deposit accounts or mmdas 2 small denomination time deposits time deposits in amounts of less than 100 000 and 3 balances in retail money market mutual funds mmmfs here are the fred series i came up with m2sl for m2 money m1sl for m1 money savingsl for savings deposits stdsl for small denomination time deposits and rmfsl for retail money market mutual funds i started with fred s savings series but switched to savingsl when i noticed the other four end with the letters sl for the record the stdsl series notes say the small denomination time deposits component of m2 includes time deposits at banks and thrifts with balances less than 100 000 and the rmfsl series notes say the retail money funds component of m2 is constructed from weekly data collected by the investment company institute so both these series are at least in the ballpark if we re looking for components of m2 money here are those series all shown separately graph 1 m2 money dark blue and components a bit messy same data series shown as percent of m2 graph 2 components as percent of m2 oh that s not any better get rid of the m2sl series and look at the components as percent on a stacked area graph graph 3 components of m2 money a little easier to see now posted by the arthurian at 4 00 am 1 comments monday april 20 2015 how much money is in savings posted by the arthurian at 4 00 am 10 comments sunday april 19 2015 historical federal workforce googling payroll of the federal government turned up a link to a table of total government employment since 1962 from the u s office of personnel management shows executive branch civilians uniformed military personnel legislative and judicial branch personnel and a totals column that google search also turned up this hit which i didn t bother to click the era of big government has returned with a vengeance in the form of th...
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