Wednesday , September 22 2021
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Tag Archives: Economics

A Currency’s Command over Real Output in a Nutshell

In principle, a currency’s command over any category of real input or output can be considered in terms of a suitably defined price index. The present focus is on the aggregate level and, in particular, a currency’s command over real final output. Earlier posts explore the topic in greater depth (links below). This is a crib notes version. A currency’s command over real final output – loosely, the amount of real stuff a currency unit can purchase – will remain stable so long as the average...

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Econometrics — a second-best explanatory practice

Econometrics — a second-best explanatory practice Consider two elections, A and B. For each of them, identify the events that cause a given percentage of voters to turn out. Once we have thus explained the turnout in election A and the turnout in election B, the explanation of the difference (if any) follows automatically, as a by-product. As a bonus, we might be able to explain whether identical turnouts in A and B are accidental, that is, due to...

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MMT and the deficit myth

MMT and the deficit myth .[embedded content] What Modern Monetary Theory (MMT) does is more or less what Knut Wicksell tried to do more than a hundred years ago, when he in 1898 wrote on ‘pure credit systems’ in Interest and Prices (Geldzins und Güterpreise). The difference is that today the ‘pure credit economy’ is a reality and not just a theoretical curiosity — MMT describes a fiat currency system that almost every country in the world is operating...

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A Brief Q&A on Three Aspects of MMT

First acquaintance with MMT can bring clarity on key aspects of the monetary system that may previously have seemed unclear, yet likely also calls other questions to mind. For instance, if taxes do not finance a currency issuer, why are they necessary? And if banks create deposits ex nihilo (“out of nothing”), how is it that (other than the central bank) they are financially constrained and subject to risk? Or, considering that issuance of the currency is essentially costless to the...

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Markets are Creatures of Government

This is not just a matter of markets requiring a system of enforced property rights, which presupposes government, at least in rudimentary form. In monetary economies, functioning markets also require a viable currency, one that is generally accepted in exchange. Government ensures a currency’s acceptance when it imposes and effectively enforces taxes that are payable only in that particular currency. This is true not only of exogenous taxes but of taxes on consumption, income and wealth...

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Kan Magdalena Andersson släppa den nyliberala modellen?

Kan Magdalena Andersson släppa den nyliberala modellen? Trots att ingen längre säger sig vara nyliberal, så dominerar de neoklassiska ekonomiska modeller som nobelpristagaren Milton Friedman skapade nyliberalismen av, den verkställda ekonomiska politiken. Det vill säga att ”marknadens” kollektiva visdom är den bärande bjälken som politiken har att förhålla sig till. Inte ens Socialdemokraterna, med finansministern och den sannolika partiledaren Magdalena...

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European growth positive but weak

It’s Wednesday, so just a few items that have passed me by this week. Eurostat published the latest national accounts data yesterday (September 7, 2021) that reveals that key Eurozone states are still lagging behind where they were before the pandemic. In some cases (Italy and Spain), they hadn’t even got back to pre-GFC levels of activity before the pandemic stuck. So a double hit to these nations in the space of a decade or so. That damage will be immense and demonstrates once...

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Analytical bias

The world is made up of systems.  Our body is a system, or in fact a system of systems.  What we call “society” is another system of systems, as is the natural environment … But these systems are very complex, difficult to explain or predict.  One successful strategy, which has had a revolutionary impact on how we live, is analysis … By biting off chewable portions of a much larger world, science makes it possible to achieve progress in our understanding of how things work...

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