New Economic Ideology

[V07768198309]

There are things they call businesses that would build your house and rent it for you either private businesses or businesses that belong to the emitting body but manageg by the people and whose purpose will not to make a profit but employ people and break even.

For example you would receive from the emitting body (taking the role of the Fed) 100000 monetary units to manage. You will have to manage it in a way that it breaks even and maximizes the wages you distribute. As a function of how you allocate that money, the results you will obtain you will receive an income. Because we are in a free market there will be necessarily corporations that will be willing to build your house and rent it out to you. Because of the low price of the rent (interest rate = 0%) and because you will receive a higher saliry (except if you work for a bank) you will be able to accumulate money and buy a house cash.

I believe that the simple idea that you must get indebted or need to buy a house or else you are not going to survive is ludicrous.

I have tried to explained my girl that she can get a credit to buy the candies she must have now she found that ridiculous. If she has the money to buy candies she buys if not she is a responsible person and does not buy.

But I guess you prefer to mortgage your future.

 

[oldreliable67]

This all sounds very Orwellian ("the emitting body"), but with an Alice in Wonderland flavor, as in...

I believe that the simple idea that you must get indebted or need to buy a house or else you are not going to survive is ludicrous.

Well of course, the idea that one must get indebted...or else one is not going to survive is indeed ludicrous. Whether one chooses to get indebted to purchase anything is a personal decision, but one that does not invovlve one's life hanging in the balance.

 

[phattonez]

There are things they call businesses that would build your house and rent it for you either private businesses or businesses that belong to the emitting body but manageg by the people and whose purpose will not to make a profit but employ people and break even.

Why would a business in such an activity if it is not profitable?

 

[V07768198309]

This all sounds very Orwellian ("the emitting body"), but with an Alice in Wonderland flavor, as in...

If our emitting body is Orwellian then what is the Fed? The difference is that although the Fed lends only to the banks we will emitt to everybody in the same way. You will "own" our emitting body like evry other participants and it will operate with clear verifiable procedures.

Well of course, the idea that one must get indebted...or else one is not going to survive is indeed ludicrous. Whether one chooses to get indebted to purchase anything is a personal decision, but one that does not invovlve one's life hanging in the balance.

This is here the remark for which I gave you a well deserved thank you. It gets to the heart of the problem:

First a remark on political philosophy: your purpose must be to live today, it is the job of society (our emitting body) to make sure that your economic future is stable and that you will be able to derive revenues, (although you are responsible for your specific risk you are not supposed to suffer for a risk you can't manage the systemic risk, which we will eliminate altogether.)

Take care of the present society (us) is taking care of your future.

When we owe it to ourselves we are not indebted.

The Fed job is to lend an ever increasing amount of money to banks in order to create investments. It makes sure that it emits enough money so they can pay the interest on past loans and increase their investments.

Now comes the problem. Money reaches you only by trickling down, the problem is the size of the spigot. Because an insufficient amount of money is reaching you you can't buy enough of the products created by those investments and repay your loans. Hence the crisis.

We reached the points where borrowing and lending is not worthwhile although the Fed is lending at 0% no one find it worthwhile to lend or borrow. So they diminished artificially even long-term interest rates (Quantitative Easing)...

In our case part of the money we emit is but giving you money to manage. We don't reward you for profit (why the hell we would want to make a profit the emitting body is not a private institution) but to stay in business and create jobs. So all the money flows to consumers and that creates demand for every businesses. Second as we didn't ask you to make a profit (we don't reward you for that) businesses would be worthwhile even if they had 0% internal rate of return. So we would never be in a position of offering money that nobody would want to invest except if we wanted to.

We will fine tune our system with a great precision: if we want to increase investment we increase the money you manage for us. (The equivalent of monetary policy)

If we want to increase the consumption we increase the amount of money we give you for consumption.

This way we exactly adjust both demand and supply without ever intervening in what is produced or consumed.

Of course anyone will be allowed to establish private businesses whose purpose would be to maximize profit but they can't expect to finance them by loans but by emitting stock to the public.

I hope that you could get a grasp on the way our economy will work. And by the way we are doing are best to unwind the Orwellian tendency which ungulf the world (most of which is done by collecting data in order to build your credit records)

 

[phattonez]

We reached the points where borrowing and lending is not worthwhile although the Fed is lending at 0% no one find it worthwhile to lend or borrow. So they diminished artificially even long-term interest rates (Quantitative Easing)...

What makes you think that no lending is going on and that this is permanent?

 

[V07768198309]

What makes you think that no lending is going on and that this is permanent?

There is no lending because it is the characteristic of the Liquidity Trap. If there was lending (or enough of it) they wouldn't be doing Quantitative Easing would they?

A good measure of the amount of money that gets effectively invested is the component of the money supply M3.

According to the monetarist it is the most important data to assess the effectiveness of the central bank. Conveniently the Fed interrupted its publication in March 2006 as the advent of the Liquidity Trap was already evident to them.

Fortunately several think tanks are reconstructing this figure including John Williams Shadow Governments Statistics.

You see that the growth of the money supply is negative since the end of 2009 which expresses negative investment.

Some might be relieved to see some growth of the curve in the last month (albeit the Year/Year growth of money supply is still negative) the reason is that one year ago the increase of money supply was already heading downward so the growth does not come from a decrease of disinvestment but from the fact that we are starting from a lower basis.

There is a theoretical computation of the short-term yields that would be necessary to return to normal growth. The Taylor Rule says it is -5%. This mean that the Yield on 10 Years US Treasury Notes whose fair value is 3.5% should be brought down to -1.50%. Not even in the dreams of Doctor Ben S. Bernanke! :roll:

 

[V07768198309]

Why would a business in such an activity if it is not profitable?

The profitability is something that is relevant to private owners no to society.

Society wants to maximize the volume of transactions and employ as many people as possible. Profit maximizing individual want to...maximize profit.

That is an essential difference. In order to maximize profit you must restraint output in order to increase price and reach your objective (micro economy 101). In order to maximize output you lower the price till it get to break even.

In our economy private businesses will compete with citizen managed businesses. Citizen will have the advantage of not needing to make a profit but the disadvantage of maximizing the quantity of wages they distribute: it is a free market out there. :roll:

 

[phattonez]

The profitability is something that is relevant to private owners no to society.

Society wants to maximize the volume of transactions and employ as many people as possible. Profit maximizing individual want to...maximize profit.

That is an essential difference. In order to maximize profit you must restraint output in order to increase price and reach your objective (micro economy 101). In order to maximize output you lower the price till it get to break even.

In our economy private businesses will compete with citizen managed businesses. Citizen will have the advantage of not needing to make a profit but the disadvantage of maximizing the quantity of wages they distribute: it is a free market out there. :roll:

Huh? Your whole argument made no sense. Society doesn't act, society doesn't want anything. People act, people want; society is an artificial construction of the intellectual's mind.

 

[phattonez]

There is no lending because it is the characteristic of the Liquidity Trap. If there was lending (or enough of it) they wouldn't be doing Quantitative Easing would they?

You ignored what I asked, so I'll phrase it differently. Prove that there is no lending going on. Prove that the curernt situation is permanent.

Seeing as how I just got a loan, and how people still have credit cards, I see the first claim as being impossible to prove.

 

[oldreliable67]

We will fine tune our system with a great precision: if we want to increase investment we increase the money you manage for us. (The equivalent of monetary policy)

If we want to increase the consumption we increase the amount of money we give you for consumption.

This way we exactly adjust both demand and supply without ever intervening in what is produced or consumed.

[emphasis added]

And just who is this "we" you keep referring to?

 

[V07768198309]

Huh? Your whole argument made no sense. Society doesn't act, society doesn't want anything. People act, people want; society is an artificial construction of the intellectual's mind.

If society didn't exist and act there wouldn't be an economy. If there is an economy it is because there is a currency agreed upon (for example the $) and it is managed. An economy is not, contrary to what people think, a group of businesses. It is organized well or badly but it is. :mrgreen:

Governments is a way society is organized. We will have an emitting body that will emit our currency. If we want to organize an economy it is to maximize economic transaction and employment. The purpose of individual is to maximize profit. There is no way that by aggregating the action of individuals who seek to maximize profit we obtain what is optimal for the society. This is why there must be an organization that embodies the society which set the rules in a way that each individual effectively contribute to the common good. :lol:

What we want to achieve is to modify the behavior of the invisible hand so that each one, as he seek to maximize his profit contribute to our common good. :2razz:

Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.

:roll:

 

[V07768198309]

[emphasis added]

And just who is this "we" you keep referring to?

We is the people participating owners of the emitting body.

 

[oldreliable67]

We is the people participating owners of the emitting body.

And how do we the people come to be owners of the emitting body? Is everyone automatically an owner? Or are there admission standards to be met? How is this emitting body organized, that is, how do we, the participating owners, assure ourselves that the emitting body is doing what we want it to do? What happens if it doesn't? If some participating owners want one thing, and other participating owners want something else, what happens?

 

[V07768198309]

You ignored what I asked, so I'll phrase it differently. Prove that there is no lending going on. Prove that the curernt situation is permanent.

Seeing as how I just got a loan, and how people still have credit cards, I see the first claim as being impossible to prove.

What I am saying is that there is no enough lending in aggregate to sustain the economy and the society at large is dis-investing as proved by the chart of M3 I have provided.

I also said that the level of the yields of 10 Years US Treasury Bonds that would be necessary to start return to a normal situation would be -1.5% as by the Taylor Rule which says that given the present situation short-term yields should be at -5%.

Once you are persuaded that the conditions for getting out of the crisis can not mathematical;ly be met you will have understood that the situation is if not permanent a very long-term situation (20 Years)

There is a way to make thinks shorter a World War. But you might not like it either.

 

[V07768198309]

And how do we the people come to be owners of the emitting body? Is everyone automatically an owner? Or are there admission standards to be met? How is this emitting body organized, that is, how do we, the participating owners, assure ourselves that the emitting body is doing what we want it to do? What happens if it doesn't? If some participating owners want one thing, and other participating owners want something else, what happens?

Are owners those who will have registered a 5 euro note at Innovative Credit Free, Free Market Post Crash Economy. when the system will be jump started. I will post there on 10/10/10 a video describing the registration voting process. The system is anonymous so there is no way we can treat one owner differently then the other. As far as the decision of how to allocate money supply to investment or consumption it will be a matter of mathematical model the purpose being to reach as fast as possible a 0% rate of involuntary unemployment. Mainly the decision is a matter of mathematics rather then taste. I believe the best way is to operate in a consultative way but always keep a small managing team which will have no way of favoring one group of person over another. The fact that the system is anonymous contributes greatly.

This is markedly different from the Fed who lend your money to the banks who decide whether you will or not receive credit and in what amount.

 

[phattonez]

What I am saying is that there is no enough lending in aggregate to sustain the economy and the society at large is dis-investing as proved by the chart of M3 I have provided.

What is enough lending in aggregate to sustain the economy? When are you going to try and prove that the current situation is permanent?

 

[V07768198309]

In order to sustain the economy you need to have growth in M3. The growth of M3 is according to monetarist equal to the growth of GDP. Experience proves that it is much bigger. If you don't have growth or insufficient growth of M3 you don't have growth of GDP.

I gave you a chart that proves that Year/Year you have now and since the end of 2009 a decrease of M3.

In order to have growth you must have according to Taylor rule an interest rate of -5%, which is impossible. The 10 Years US Treasury Note has a fair yield of 3.5% in order for Quantitative Easing to generate growth you must then have a Yeld on 10 Years US Treasury Note of 3.5% - 5% = 1.5% for obvious reasons that is impossible. No Growth of M3, in order to create growth you need to have short-term interest at -5% or 10 Years at -1.5% It is impossible hence the recession is PERMANENT

If you don't understand that excuse me I can't explain it more clearly

 

[phattonez]

In order to sustain the economy you need to have growth in M3.

Apparently all of your views depend on this. So then, my prompt to you: prove it.

 

[V07768198309]

Apparently all of your views depend on this. So then, my prompt to you: prove it.

No. That just proves that it is the case right now but I proved since 1994 that it would happen eventually using another proof.

The idea on the relation of M3 and GDP is one of the very few things that no economist dispute. :shoot

 

[oldreliable67]

=VoxI also said that the level of the yields of 10 Years US Treasury Bonds that would be necessary to start return to a normal situation would be -1.5% as by the Taylor Rule which says that given the present situation short-term yields should be at -5%.

Well, no. You are mixing things up a bit. The Taylor rule refers to nominal short-term rates (e.g., the fed funds rate), not the rate on 10-year notes. You seem to be saying that the rate on 10 year maturities should be the same as an overnight maturity. Do I interpret your comments correctly?

Moreover, there are no such things as "10 Years US Treasury Bonds." [emphasis added] 10-year notes, yes; 10-year bonds, no. This is a fairly common mistake among those who have little or no capital markets experience. If you are going to make such a big deal about the Taylor rule and it's application, one would expect you to know this.

Furthermore, the Taylor rule, in its vox populi form typically disregards one of the principal inputs specified by Taylor: the output gap (the difference between the log of actual GDP and the log of potential GDP expressed as a linear trend). Did you take this into consideration?

 

[oldreliable67]

The idea on the relation of M3 and GDP is one of the very few things that no economist dispute.

Ah, are your sure about that? Asserting an absolute like "no economist dispute" seems pretty heroic. I'm not going to go looking for one to hold up as an example, but just the fact that the Fed is full of economists and the Fed discontinued publishing an estimate for M3 is highly suggestive that at least one economist among the many on the Fed staff believes that M3 and GDP have a relationship other than that which you have so boldly asserted. I'm guessing that one might find a couple of others among non-Fed econs as well.

 

[V07768198309]

Well, no. You are mixing things up a bit. The Taylor rule refers to nominal short-term rates (e.g., the fed funds rate), not the rate on 10-year notes. You seem to be saying that the rate on 10 year maturities should be the same as an overnight maturity. Do I interpret your comments correctly?

Moreover, there are no such things as "10 Years US Treasury Bonds." [emphasis added] 10-year notes, yes; 10-year bonds, no. This is a fairly common mistake among those who have little or no capital markets experience. If you are going to make such a big deal about the Taylor rule and it's application, one would expect you to know this.



Furthermore, the Taylor rule, in its vox populi form typically disregards one of the principal inputs specified by Taylor: the output gap (the difference between the log of actual GDP and the log of potential GDP expressed as a linear trend). Did you take this into consideration?

If you want to get the equivalent of a -5% short-term interest you must get the long term interest to its fair value compared to that short-term interest so you must subtract 5% to the fair value at 0% which yields my result.

About that sharp semantic mistake I have nothing to add.

Yes I took in consideration the fact that the Taylor rule might not apply. But other considerations like the sharp decrease of M3 and increasing income/wealth disparity tells us that the level of marginal return necessary to reach a normal growth must be very low probably negative. Moreover the slower we get to that rate the lower that marginal return.

I used the Taylor rule as it is the only one available in these uncharted territory. The Federal Reserve uses a document referring to that rule and that rate.

I must add that because the default premium for businesses is very high it is possible that the long-term yields necessary to reach the objective is even much lower.

Everything might not be exact but I'd rather be approximately right than exactly wrong.

 

[V07768198309]

Ah, are your sure about that? Asserting an absolute like "no economist dispute" seems pretty heroic. I'm not going to go looking for one to hold up as an example, but just the fact that the Fed is full of economists and the Fed discontinued publishing an estimate for M3 is highly suggestive that at least one economist among the many on the Fed staff believes that M3 and GDP have a relationship other than that which you have so boldly asserted. I'm guessing that one might find a couple of others among non-Fed econs as well.

They simply stopped to publish it because people might be unsettled by the result. If they don't publish it it does not mean that they don't have the data.

I believe that the relation between GDP and M3 is less solid than what monetarists believe as the amount of money that trickles from investments to consumptions is low and getting lower. Experience shows that the growth of M3 must be much higher than the growth of GDP and that proportion is increasing. I personally take hence the rate of growth of GDP as a minimum. I pretend that if 100% of M3 trickled to consumption long term interest rates wouldn't be going down and we would never get in a recession or a depression.

 

[oldreliable67]

They simply stopped to publish it because people might be unsettled by the result. If they don't publish it it does not mean that they don't have the data.

I believe that the relation between GDP and M3 is less solid than what monetarists believe as the amount of money that trickles from investments to consumptions is low and getting lower. Experience shows that the growth of M3 must be much higher than the growth of GDP and that proportion is increasing. I personally take hence the rate of growth of GDP as a minimum. I pretend that if 100% of M3 trickled to consumption long term interest rates wouldn't be going down and we would never get in a recession or a depression.

Because "people might be unsettled by the result?" No. The Fed is simply not in that business. That is simply not how decisions are made at the Fed.

 

[oldreliable67]

=VoxIf you want to get the equivalent of a -5% short-term interest you must get the long term interest to its fair value compared to that short-term interest so you must subtract 5% to the fair value at 0% which yields my result.

So you simply disregard all concepts of the time value of money along the yield curve? Or maybe your determination of "fair value compared to that short-term interest" rate involved some such calcs that you simply didn't mention?

Mostly, I must say, all of this sounds like a lot of guess-work accompanied by very little other than approximations, heroic assumptions, urban legends, and other rather fuzzy thinking.

Just my opinion. Others mileage may vary.