Re: Article in the Chronicle of Higher Education

[pdavidso <pdavidso@xxxxxxx>]

>===== Original Message From Warren Mosler <mosler@xxxxxxxxxxxxxx> =====
>--- pdavidso <pdavidso@xxxxxxx> wrote:
>> >===== Original Message From Warren Mosler
>> <mosler@xxxxxxxxxxxxxx> =====
>> >'Full Employment AND Price Stability'
>> >explains unemployment as the evidence that
>> >govt. isn't spending enough to satisfy the
>> >desire to pay taxes and the desire to
>> >net save financial assets.
>> >
>> >How may axioms is that, etc???
>> >
>>
>> Yes, Warren but you must explain why people want to
>> accumulate paper
>> (electronic)financial assets rather than real
>> duables (assets) with their
>> savings.
>
>Why?  In 'theory' that desire to net save can be 0 or
>even negative.
>
>However, once we observe it to be positive,
>for example, then we can attempt to expain why.
>Most likely for a feeling of 'security,' etc.
>
>

Now you are zeroing in on the right question.  Why do securities  (i.e.,
pieces of paper that involve legal titles to equity or debts)provide
"security", more security than buying real goods and services (i.e., the
products of industry)?

Once you raaise this question you are closing in on the question of why does
LIQUIDITY provide security?  Why do some legal titles provide security and
others do not ?-- e.g., my the sales receipt proving my ownership of my $1000
refrigerator in my kitchen does not provide the security that ownership of
$1000 government bond does.

To explain a theory of liquidity in an economic system that produces goods and
services for people who "know" what they wwould spend their income on, one
must overthrow the axioms of ergodicity, gross substitution and the neutrality
of money!!

Paul

Paul Davidson
Editor, Journal of Post Keynesian Economics
University of Tennessee
SMC 503
Knoxville, Tennessee 37996-0550
phone # (561)369-1951; fax #(561)369-1951;
email pdavidson@xxxxxxx
http://econ.bus.utk.edu/davidsonextra/Davidson.html