Re: two currencies and Korean war

[Bill Mitchell <ecwfm@xxxxxxxxxxxxxxxxxxxxxxx>]

> Per says:
> Aside from the mix-up of who's saying what, I think in fact that if we were
> to define the concept of 'currency' along the lines of MA, so that
> 'currency' would be virtually synonymous with what ordinary economists call
> 'government debt', then it is not altogether misplaced to suggest that an
> excessive issuance of 'currency' (i.e. 'too big' government debt) may cause
> excess demand and therefore inflationary pressures. I think that's a fairly
> standard stock-flow Keynesian view, to which people like Wynne Godley may
> very well subscribe.
>
> However, I am not altogether comfortable with the terminology of using
> 'currency' to denote government debt/MA. It is likely to cause unnecessary
> confusion.
>
> I hope we got this point straigtened out now.


And what a point to get "straigtened ... (sic)" out! This is double talk in
the extreme.
And why do you regularly try to rope in "names" (this time Wynne Godley)
each time
you want to claim some authority for your own twisted argument.

What is an excessive issuance of currency? Presumably anything that causes
inflation given
that you don't define it in terms of the state of supply (real factors). So
this is the same sort
of logic that underpins quantity theory. assume away the real side and the
institutional factors
and there you have it.
What is "too big" government debt? Well according to you an "excessive
issuance of currency".
Doesn't take us very far. There is of-course only an optional
correspondence between net government
spending and govt debt issuance anyway. You seem to assume it to be a
required correspondence.

The change in net government spending may equal the change in the stock of
public debt but not
inevitably. If it does then the cash position of the system will be neutral
to the change in net
government spending and it is hard to see any inflationary pressures unless
the economy is
incapable of any real expansion. If it does not then there will be downward
pressure on interest rates which may stimulate
private spending and depending on the state of aggregate supply may
generate inflation. You
would call this "too little" government debt. I would just call it an
imbalance between what can
be produced and the level of nominal demand.

anyway,Per, I am glad to see you are continuing to get on with everyone.

best wishes
bill


William F. Mitchell
Professor of Economics
Director, Centre of Full Employment and Equity
University of Newcastle, NSW, Australia
E-mail: ecwfm@xxxxxxxxxxxxxxxxxxxxxxx
Phone: +61-2-4921 5065
Fax:   +61-2-4921 6919
Mobile: 0419 422 410

http://e1.newcastle.edu.au/economics/bill/billeco.html
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