Sunday, May 1, 2016

Ramanan — Kalecki And Keynes


Joan Robinson quote.

The Case for Concerted Action
Kalecki And Keynes
V. Ramanan

10 comments:

Matt Franko said...

" that the rate of interest depends upon supply and demand of the stock of money, "

Gold standard...

Jose Guilherme said...

It's not gold standard thinking at all. Substitute reserves (high powered money) for "stock of money" and interbank rate for "interest rate" and it's pure MMT.

Matt Franko said...

Jose that rate is determined by the CB....

Magpie said...

"This paper examines the decision of the Polish government to adhere to the gold standard during the great depression. The Polish case stands out against the experience of other European countries as can be shown in an econometric framework. Poland did not leave gold until April 1936 and suffered through one of the worst examples of a depression, with massive deflation and a complete collapse of industrial production. I argue that Poland’s monetary policy was largely determined by non-economic considerations, especially attempts of the Pilsudski regime to defend Poland against foreign (esp. German) aggression. I provide evidence that strongly supports this view until about mid-1933. Ironically, just after Poland had joined the gold-bloc there were signs of a broad strategic reorientation, which paved the way for an exit in 1936."

Should I stay or should I go? Understanding Poland’s Adherence to Gold, 1928–1936
Nikolaus Wolf
https://www.wiwi.hu-berlin.de/de/professuren/vwl/wg/economic-history-research/publications/wolf-publications/wolfstayorgo

Jose Guilherme said...

The CB will have to supply reserves in the amount necessary to intersect the commercial banks' demand curve for reserves at a point as near as possible to the CB's target rate.

There is still a market for reserves and a demand and supply curve - but as the monopoly supplier of reserves the CB can set the interbank rate wherever it wants to be.

Simsalablunder said...

Should I stay or should I go? The Clash 1982

Matt Franko said...

We have to acknowledge the effects on system operations of going off the gold...

The analytic framework has to change from a stochastic one over to a deterministic one ... imo should be a key takeaway of MMT... iow 'its about price not quantity...'

Jose here:

"There is still a market for reserves and a demand and supply curve - but as the monopoly supplier of reserves the CB can set the interbank rate wherever it wants to be."

this statement doesnt quite square up logically... the first half is stochastic and the second half deterministic... and now they actually pay the IOR directly ...

Jose Guilherme said...

IOR merely sets a floor to the interbank rate - and the demand and supply schedules for reserves are still there in the background.

Matt Franko said...

Jose c'mon that is straight out of the "bond vigilantes!" meme.... and they pay the ior now anyway...

Maybe here:

https://www.youtube.com/watch?v=epcmHMGeQn4

this is how it is done/analyzed and NO OTHER WAY .... no "supply and demand!" included ... this whole "supply and demand!" stuff from economists is at best gold standard thinking as applied to their "money!" system and at worst ALL FALSE...

prices are determined.... what do we think Apple flipped a coin and came up with $600 for the iPhone c'mon....

Tom Hickey said...

When the cb pays interest on reserves directly, it determines the rate. When the cb targets a rate in the interbank market and adjusts quantity to "hit" it, the rate moves in a corridor, or stays above a floor, depending on how the cb chooses to operate.

In finished goods markets most retail prices and many wholesale prices are administered, generally based on costs where at least some costs are fixed by contract, for instance. In resource markets and most financial markets prices are set by market forces unless some participants exert market power.

For example, in an administered market each transaction takes place at a determined price. In markets subject to market forces each trade is random, that is, the price is above the previous price, below the previous price, or unchanged. In a fair market without asymmetries that is based on market forces, it is not possible to predict the outcome any transaction before it occurs, anymore than one can predict the outcome of a coin toss before it occurs. In both cases each trial is a random event.