Re: What is Creditary Economics?

["Gunnar Tomasson" <gunnar.tomasson@xxxxxxxxxxx>]

Mat:

[What I thought would be a brief response evolved into something more!]

At the outset of his section on 'Saving and Investment; (Ch. 6), Keynes
writes:

"Amidst the welter of divergent usages of terms, it is agreeable to discover
one fixed point.  So far as I know, everyone is agreed that *saving* means
the excess of income over expenditure on consumption."

Of course, as Keynes notes, this follows from his definition of *income* as
equivalent to *value of output* defined as the sum of *consumption* and
*investment* - hence, the *investment* and *savings* equality is an IDENTITY
and not a FUNCTIONAL relationship where one can be said to "determine" the
other.

There is a BIG problem with Keynes' ACCOUNTANT's view "that *saving* means
the excess of income over expenditure on consumption" - a problem which is
immediately brought into focus if *investment* is assumed to be constant
between two or more periods of time.

For then *income* is equal to *consumption* in each successive period and
NET *saving* is zero - hence Keynes' contention in parts of the General
Theory that the "value" of the economy's "work in progress" can ONLY
increase if there is NET FACTOR INVESTMENT therein.

That is to say, the essence of the *investment-saving* identity resides in a
view of *savings* which equates it with NET FACTOR INVESTMENT.

This REAL aspect of the concept of *savings*, which is of the essence in the
Creditary View of things, has no place in the academic economics (Economics
101) which informs The Washington Consensus.

Moreover, it seems to me that NO brand of economics - be it mainstream,
monetarist, or Post Keynesian - in which the interest rate mechanism is
viewed as an integral part of a (supposedly) logically coherent conceptual
scheme can be squared with Keynes' final word on the subject matter in the
General Theory:

"Interest to-day rewards no genuine sacrifice..." (Ch. 24)

In this respect, Creditary Economics is pure Keynes!

Gunnar



----- Original Message -----
From: "Forstater, Mathew" <ForstaterM@xxxxxxxx>
To: "Gunnar Tomasson" <gunnar.tomasson@xxxxxxxxxxx>
Cc: <pkt@xxxxxxxxxxxxxxxx>
Sent: Tuesday, April 15, 2003 3:35 PM
Subject: RE: What is Creditary Economics?


Gunnar - Doesn't Keynes say in the General Theory that if investment
determines savings, and if low interest rates stimulate investment and
high interest rates deter investment, then we get a relationship between
interest rates and savings that is the exact opposite of the loanable
funds model? Mat

-----Original Message-----
From: Gunnar Tomasson [mailto:gunnar.tomasson@xxxxxxxxxxx]
Sent: Tuesday, April 15, 2003 12:22 PM
To: Warren Mosler; pkt@xxxxxxxxxxxxxxxx
Cc: Gang8
Subject: Re: What is Creditary Economics?

Warren:

The point at issue is Economics 101.

For Interest denotes (a) the PRICE of Credit, and (b) the RETURN on
Savings.

Gunnar



----- Original Message -----
From: "Warren Mosler" <mosler@xxxxxxxxxxxxxx>
To: <pkt@xxxxxxxxxxxxxxxx>
Sent: Tuesday, April 15, 2003 8:50 AM
Subject: Re: What is Creditary Economics?


>
>
> > >Surely, mainstream, monetarist, and post Keynesian
> > scholars all agree (a)
> > >that raising interest rates will increase "savings"
> > and reduce aggregate
> > >demand,
>
>
>
> > Not for this Post Keynesian.
>
> Me neither.  Nor anyone who thinks it through who can
> tie their own shoes...
>
>
> warren
>
> >
> > Paul
> >
> >
>
>
> =====
> Warren Mosler, www.mosler.org
> c/o James River Capital Corp
> 5007 Chandler's Wharf, Suite 201/202
> Christiansted, USVI  00820
> 340-719-8813 office phone
> 340-719-8804 Fax
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>
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