Re: Keynes on "sinking funds" and Economic Policy Inst. and

[Colin Danby <danbyc@xxxxxxx>]

2 quick notes on this thread

To Rakesh: re

> What  then is the relationship, if any, between the quantity of money
and  changes in the price level?

I'd stress first of all the PK should not be a dogmatic set of
statements about how aggregates always affect each other but an
institutionally-sensitive way of investigating real economies.  That
said, in the kind of economy Keynes is talking about in the material you

cite, what's most likely is that the supply of money accommodates to
changes in the price level.  A search of the archives for "endogenous
money" will produce a lot more stuff; you might also want to look for
Wray's _Understanding Modern Money_ and this online piece
http://f.students.umkc.edu/fkfc8/VH.htm and the many fine working papers

available at the Jerome Levy Institute website.


Re Clifford's question, the basic issue is still the one Paul stated:
you have to think about how, down the road, in the aggregate, output is
moved to people who are not earning incomes from labor.  Gov't could
state any kind of benefits it wants.  The question is what will have to
happen to make them effective.

Obviously the notion of gov't lending to itself is silly -- it's no more
than
a way of telling a story about a future gov't obligation.  But however
odd the cultural/political meanings given it, the underlying logic of
pay-as-you-go is sound.  The only sensible argument for gov't purchase
of private securities I can think of is that it would promote faster
aggregate output growth over time.  Not an easy argument to make, and
there are drawbacks.

Best, Colin