Re: Mosler seminar

[Warren Mosler <mosler@xxxxxxxx>]

John Vertegaal wrote:
>
> Since I've had my discussion with Mosler already quite a while ago,
> I hoped someone else would have brought this up:
>
> If H(nfa) increases cause unemployment, and H(nfa) decreases cause
> inflation; as Mosler states, and I agree with; why take as datum
> something that is "bad" either way, and propose to ameliorate its
> effects?  Why not try to negate an already untenable level of H(nfa)?

I think you left out the word 'desired' in front of H(nfa), but let me
answer this nonetheless, as this is a point key to understanding a
currency in general.

This gets to the nairu question, of course.  I have stated that by
allowing all prices paid by government to be at market prices,
the govt must constrain spending (and lending) to prevent the
value of its currency from falling (inflation).  I turn to simple
monopoly analysis, founding most micro books, for the concept and the math.
However, little time is devoted to analyzing the monopolist who
chooses this path- setting q and letting p float at market.

Therefore postponing consumption requirements, whether by increasing
savings incentives, confiscation, or any other means,
will indeed likely increase desired H(nfa), and put a downward
pressure on prices.  It does this by maintaining excess capacity,
of course, which is unemployment.  (If I recall, one of your points was
that this build up of H(nfa) is a potential inflation time bomb,
which is correct, of course.  If for example, desired H(nfa) of the
private sector suddenly dropped to 0, that means the private sector is
rushing to spend the entire $5 trillion + of current H(nfa).  Currently,
however, the opposite is in progress, as it appears that desired H(nfa)
is probably increasing, perhaps in response to the aging population
and the myriad of savings incentives in place.  In a sense, which
needs more exploration, the elr goes a long way to make money 'neutral'
on a continuous basis.)


What I am saying is that any level of desired H(nfa) or actual H(nfa),
will face the same reality- excess capacity is necessary for price
stability- if the govt lets all prices paid be at market determined level.
Even if there was no leveraged money, as I believe you proposed,
this would be the case.

Nairu follows with any 'pure' monoopoly when the monopolist lets
market determine the value of his product.

With the elr, the monopolist uses the more common method of setting
price, and letting q float.

>
> Isn't this just catering to "fallaciously" derived opinions of what
> nfa's are capable of doing? i.e. ...to at least inflation free
> postpone one's consumption requirements".  Seems like a null set
> to me; and Mosler's version of ELR, a "supply side" argument in a
> demand constraint economy.  His partiality to NAIRU is telling in
> that respect as well.
>                               ---
>
> The first step to solving unemployment and inflation problems is
> to recognize; that, at least when viewed from the perspective of an
> aggregate standard of living potential; there are NO determinate
> "funds" of any kind.
>   As a consequence of this, savings are NOT required for continuous
> prosperity; and adequate investments will be the automatic result
> (given: the propensity to invest laying in profitable current
> returns) of depreciation receipts embodied in the cost of output.
>
> Hence: The answer lies in appropriate taxation.  All IMHO of course.

This is true, of course, as far as it goes.  Savings are not required.
But if there is a DESIRE to net save the unit of account that is not
met by the govt (the monopoly issuer of the currency) then this will
be manifested by unemployment and excess capacity in general.  Of
course, the govt could attempt to outlaw the ability to net save,
which means, for example, that if someone in the private sector wanted
a job and there wasn't one, he would not be allowed to express this
desire, for that is the desire of the private sector to net save.

Warren
>
> John V.