Re: Uncle Miltie, he dead
On Nov 16, 2006, at 10:23 PM, boddi satva wrote:
I know, Doug, that you are so against Monetarism that you might not even agree that there IS a thing called the money supply, but let’s face it:
A) There is.
There are four, five, many money supplies! MZM, M1, M2, M3, L (until
the Fed stopped publishing the last two). Here’s a correlation matrix
for the annual growth in Mn since 1960:
M1 M2 M3
M1 1.000 M2 0.278 1.000 M3 0.077 0.851 1.000
So take your pick, which M do you use? Velocity measured with M3 is
in a long downtrend; M2, in a long uptrend. Actual experience
oscillates wildly around the trendline. There’s no way to explain the
relative influence of money on price versus volume changes.
B) That we’re discussing it is largely due to Friedman.
Another strike against him!
But Friedman looked at the Great Depression and he saw something that had to be explained - idle workers, idle factories, homeless people, empty homes. He came to the conclusion that what was keeping those people from doing jobs that needed doing and paying rents and mortgages for those homes was a lack of money. And I think that’s obviously true.
Marx sneered at people who thought the problems with capitalism were
the result of a shortage of the circulating medium. Friedman’s
monetary theory of the depression ignores all the real sector
problems - e.g., the rapid growth in productivity vs. incomes in the
1920s. Friedman wants to exempt capitalism from any systemic
responsibility for the depression and blame the state, in the person
of the central bank, instead. The Fed probably fucked up in the late
1920s, but fuckups don’t explain mega-disasters like the 1930s.
Doug