Re: DeLong on Friedman and Keynesianism

["John O'Donnell" <jackodonnell@xxxxxxxx>]

"J. Barkley Rosser, Jr." wrote:
>
> John,
>       This will be my only response to this, so expect
> that if you send another message about how
> "economists" don't know their asses from a hole
> in the ground, I shall not respond.

Such language! But I should also note that I didn't say what
you say I said and you didn't demonstrate just how a Taylor
rule ignores all but interest rates as you said originally.

>       No, the Fed does not control "the money supply."
> For one thing, there is no such thing as "the money
> supply."  There are many measures of this alleged beast,
> including M0, M1, M2, M3, ...M8.  The Fed does
> control base money (oh, I know, that was what you
> meant!), but the relationship between that and these
> various measures is not stable and not known.

Yes, the fed does directly control base money, a quantity
that is included in all the other measures of money supply
and therefore a change in base money affects all those
measures. However, that was not the issue. The issue was and
remains the routine failure to distinguish between the
control used [increasing or decreasing the quantity of
money] and the measure used to determine how much of that
control to use, a point you choose to ignore.

> Furthermore, it depends on the details of the repo
> operations that the Fed carries out.

Whatever the details, a repo is nothing more than a
temporary purchase of an asset that has the same effect on
money supply as buying for as long as the repo is held. The
only "detail" in which a repo differs from simple purchase
and future sale is that the repo specifies the time,
purchaser and price of the future sale at the time of the
purchase.

--
			-- jbod

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