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« An-argh-y, the State, and Dystopia | Main | End the Fed? »


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Are you still there?

Isn’t the demand for money ultimately demand for what it could buy? Isn’t demand always that of individuals? Isn’t excess demand simply your idea of how much money somebody else should hold? And doesn’t any increase in the money supply rob savers, and redistribute credit from those who have earned it and are best capable of employing it to those who haven’t and aren’t?


I'm back. And Razerfish is not a persona. I had to pick a name when I registered, and since I use that for other sites, I picked it. No persona change, just using a name I use other places for ease of remembering when I need to log in again.

And no, I wasn't able to follow Horwitz and Woolsey that well, though I appreciate them taking the time to answer. I'll get some reading done of Mises and Rothbard when I get a chance. I happened on Rothbard's The Mystery of Banking by chance and noticed him discussing concepts like 'demand for money' in that book, and I think he illuminated Mises' position there as well, if I recall correctly. I'll give that some study when I get a chance.


Thanks for the response. Can you clarify something for me? You favor a targeting of nominal GDP growth? Why? Is it for purely psychological perceptions that our population holds - that growth is good and decline is bad? Why target a nominal GDP growth rate over a real rate? And how would you expect to achieve this result? Controlling interest rates? Some other way of increasing the monetary supply? How would you expect your plan to work, from start to finish?

And if all agree that the nominal income drop from October 2008 to March 2009 was harmful, can you tell me how you could have prevented that with monetary policy?

Here's an example I'd like you to comment on specifically. I'm in Arizona, probably the epicenter of the housing meltdown. Prices have dropped 40%+ in some zip codes. Housing prices were going through the roof from about '01 (probably before that) to 06 or 07. When it crashed, it took a pretty big sector of what was our economy, from the mortgage brokers, real estate agents, construction workers, etc. to the support industries that supported them with it.

How would your approach have stopped this crash in nominal incomes in states affected by the housing crash like Arizona, California, Florida and Nevada? Would it prop up those jobs that were eliminated with the popping of the credit bubble? If so, how? If not, how would you increase nominal incomes considering a huge swath of jobs in these economies were either directly dependant on this credit/housing bubble or heavily reliant on it? How exactly would this stabilization of nominal income work? Is the idea of a gradual popping of the bubble the hope? If so, do they ever gradually pop/deflate? And if a gradual deflating of the bubble through inflation did maintain nominal income or allow it to decrease ever so slightly, what would economic trade-offs be? Would there be real economic victims in this scenario you're not even considering?

Are you basically arguing for continuous, but almost impercetible, inflation forever? And is this based on your belief (or it could be a fact)that people demand that their incomes either remain steady or rise, even if only in nominal terms, and that this would basically comfort them and help the economy function more smoothly than it otherwise would?

Greg, or swordfish,

You are one hell of an economist.

Sure hope to be hearing from you regularly.

Swordfish? I like that one. A long time ago, whatever name I picked for a Microsoft website was taken, so I kept putting words together that don't belong and it finally accepted 'razerfish.' It wouldn't have let me use swordfish.

I'm hoping to get a reply because I'd be interested to hear how a policy prescription like targeting nominal GDP growth or nominal income growth works down on the micro level on a real problem.

Very interesting debate. I would like to add a second article by Joe Salerno:

An Austrian Taxonomy on Deflation

There is a link here between the hayekian contribution in Prices and Production and what Salerno call´s Growth Deflation.

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