viernes, 30 de marzo de 2012
Money Circulation on the Eurozone- 'Banks’ Deposits' under the lens
Análisis monetarista de la situación europea usando MV=PY
"...This premise, which recalls the gold standard days, assumes a static relationship between money supply, prices and money velocity as per MV=PQ, but with a V set in concrete, which explains how the ECB ended up impaling itself on the Great Financial Crisis. It sparked the crisis in Europe by hiking key rates in July 2008, due to its total inability to understand that the collapse of the securitisation market would also collapse V!
...
If there is one thing that we can learn from the study of the functioning of a modern monetary system, it is that a central bank actually has no control whatsoever of money supply creation. Of course, it can increase the size of the “monetary base” by buying private-sector held securities on financial markets and replacing them with pure electronic money, as per quantitative easing. But the only way it can increase “real money supply” is for it to engage in a famous “helicopter drop”, which has never been tried by any of the major modern central banks.
The operational truth of today’s financial systems is that only commercial banks create money when they grant loans (as in “loans make deposits) and they can do so without the slightest size limitation, because even in the case of required reserves ratio restraints, the central bank to which it is dependent will have to provide it as much as these same reserves as it needs, because otherwise it would totally lose control of its benchmark interest rates!
The ECB’s insistence that it can navigate M3 money supply via adjustments in benchmark interest rates is in reality a subterfuge to avoid admitting that its interest rate moves have no impact on the cost of money. Since this is one of the major variables in determining investment projects and consumption via the credit cost channel, its real aim is to modulate the growth rate of the real economy. We can even say that that, when it hardens monetary policy, it is trying to increase the unemployment rate of the active population (decline in payroll costs), one of the key variables of its neo-classic bias, as illustrated by the famous ISLM curve.
"...This premise, which recalls the gold standard days, assumes a static relationship between money supply, prices and money velocity as per MV=PQ, but with a V set in concrete, which explains how the ECB ended up impaling itself on the Great Financial Crisis. It sparked the crisis in Europe by hiking key rates in July 2008, due to its total inability to understand that the collapse of the securitisation market would also collapse V!
...
If there is one thing that we can learn from the study of the functioning of a modern monetary system, it is that a central bank actually has no control whatsoever of money supply creation. Of course, it can increase the size of the “monetary base” by buying private-sector held securities on financial markets and replacing them with pure electronic money, as per quantitative easing. But the only way it can increase “real money supply” is for it to engage in a famous “helicopter drop”, which has never been tried by any of the major modern central banks.
The operational truth of today’s financial systems is that only commercial banks create money when they grant loans (as in “loans make deposits) and they can do so without the slightest size limitation, because even in the case of required reserves ratio restraints, the central bank to which it is dependent will have to provide it as much as these same reserves as it needs, because otherwise it would totally lose control of its benchmark interest rates!
The ECB’s insistence that it can navigate M3 money supply via adjustments in benchmark interest rates is in reality a subterfuge to avoid admitting that its interest rate moves have no impact on the cost of money. Since this is one of the major variables in determining investment projects and consumption via the credit cost channel, its real aim is to modulate the growth rate of the real economy. We can even say that that, when it hardens monetary policy, it is trying to increase the unemployment rate of the active population (decline in payroll costs), one of the key variables of its neo-classic bias, as illustrated by the famous ISLM curve.
Marx at 193
Aca
"Marx’s model works like this: competition pressures will always force down the cost of labour, so that workers are employed for the minimum price, always paid just enough to keep themselves going, and no more. The employer then sells the commodity not for what it cost to make, but for the best price he can get: a price which in turn is subject to competition pressures, and therefore will always tend over time to go down. In the meantime, however, there is a gap between what the labourer sells his labour for, and the price the employer gets for the commodity, and that difference is the money which accumulates to the employer and which Marx called surplus value. In Marx’s judgment surplus value is the entire basis of capitalism: all value in capitalism is the surplus value created by labour. That’s what makes up the cost of the thing; as Marx put it, ‘price is the money-name of the labour objectified in a commodity.’ And in examining that question he creates a model which allows us to see deeply into the structure of the world, and see the labour hidden in the things all around us. He makes labour legible in objects and relationships.
The theory of surplus value also explains, for Marx, why capitalism has an inherent tendency towards crisis. The employer, just like the employee, has competition pressures, and the price of the things he’s selling will always tend to be forced down by new entrants to the market. His way of getting round this will usually be to employ machines to make the workers more productive. He’ll try to get more out of them by employing fewer of them to make more stuff. But in trying to increase the efficiency of production, he might well destroy value, often by making too many goods at not enough profit, which leads to a surplus of competing goods which leads to a crash in the market which leads to massive destruction of capital which leads to the start of another cycle. It’s an elegant aspect of Marx’s thinking that the surplus theory of value leads directly and explicitly to the prediction that capitalism will always have cycles of crisis, of boom and bust.
"Marx’s model works like this: competition pressures will always force down the cost of labour, so that workers are employed for the minimum price, always paid just enough to keep themselves going, and no more. The employer then sells the commodity not for what it cost to make, but for the best price he can get: a price which in turn is subject to competition pressures, and therefore will always tend over time to go down. In the meantime, however, there is a gap between what the labourer sells his labour for, and the price the employer gets for the commodity, and that difference is the money which accumulates to the employer and which Marx called surplus value. In Marx’s judgment surplus value is the entire basis of capitalism: all value in capitalism is the surplus value created by labour. That’s what makes up the cost of the thing; as Marx put it, ‘price is the money-name of the labour objectified in a commodity.’ And in examining that question he creates a model which allows us to see deeply into the structure of the world, and see the labour hidden in the things all around us. He makes labour legible in objects and relationships.
The theory of surplus value also explains, for Marx, why capitalism has an inherent tendency towards crisis. The employer, just like the employee, has competition pressures, and the price of the things he’s selling will always tend to be forced down by new entrants to the market. His way of getting round this will usually be to employ machines to make the workers more productive. He’ll try to get more out of them by employing fewer of them to make more stuff. But in trying to increase the efficiency of production, he might well destroy value, often by making too many goods at not enough profit, which leads to a surplus of competing goods which leads to a crash in the market which leads to massive destruction of capital which leads to the start of another cycle. It’s an elegant aspect of Marx’s thinking that the surplus theory of value leads directly and explicitly to the prediction that capitalism will always have cycles of crisis, of boom and bust.
jueves, 29 de marzo de 2012
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