The textbooks’ two momentary intersections of supply and demand curves: 1) at a price of goods and services (the macrostatic AD-AS model), or 2) at the interest-rate, rental-price of money (the macrostatic IS-LM model), plus, the textbooks’ now-debunked Phillips Curve correlation, are – all three – sublated by, and driven into the shadows by, the purely relational field theory called Functional Macroeconomic Dynamics.
The key elements grounding the discovery and formulation of the immanent, field-theoretic intelligibility of the economic system include: (Continue reading)
“The road up and the road down is one and the same. (Heraclitus)
ὁδὸς ἄνω κάτω μία καὶ ὡυτή
Archaeologists and scholars have not found the context of this isolated fragment of Heraclitus. What “road” was he referring to, and was he was speaking literally or figuratively? I simply like the statement as an introduction to the ups and downs of distinct price-quantity flows, whether in a pure cycle of expansion or in a distorted cycle of boom and corrective slump. Continue reading →
(In the basic expansion) … There is the same automatic mechanism as before. Prices fall. This has the double effect of increasing the purchasing power of income and bringing about an egalitarian shift in the distribution of monetary income. The increase in purchasing power is obvious. On the other hand, the egalitarian shift in the distribution of income is, in the main, a merely theoretical possibility. The fall of prices, unless quantities increase proportionately and with equal rapidity, brings about a great reduction in total rates of payment. Receipts fall, outlay falls, income falls. [CWL 15, 138-39] Continue reading →
A static building can be blueprinted and, when built, photographed and admired. An electricity flow or a fluid flow in some type of delivery system does not get photographed; its performance gets metered, monitored, and compared against its desired systematic standard. A screen display would indicate whether the flow was aberrational requiring controlled adjustment, or not. Similarly, a set of interdependent economic flows of products and payments should be metered, monitored, and compared to their normative, functional, dynamic interrelationships, and, if necessary, adjusted into the proper dynamic equilibrium. Continue reading →
The economic process, like a motor car, has laws of its own which drivers-participants must respect in order to operate the “vehicle” properly and avoid driving it into a ditch or depression. (Continue reading)
Preliminary note: In this section we are addressing the proper understanding and management of the economic process in normal, non-pandemic times. We affirm that the recent pandemic called for extraordinary measures.
Unwittingly, first out of ignorance, more recently as necessitated by a pandemic, and most recently out of continuing ignorance, some nations, including the U.S., have wandered into the ultimatemenace to the financial system, the spending without constraint blessed and recommended by unscientific. so-called Modern Monetary Theory. (Click here and here) The systematic result of MMT’s unconstrained printing of money, unjustified by corresponding, concomitant production of goods and services, is rampant inflation in prices for a) goods and services and/or b) financial assets. (Continue reading)
Excerpts relevant to the verification of Macroeconomic Field Theory:
… our distinction between analytic propositions and analytic principles is equivalent to the verification principle of the logical positivists. … (their verification principle), however, rests on an identification of the notions of verification and of experience. Yet clearly if the law of falling bodies is verified, it is not experienced. All that is experienced is a large aggregate of contents of acts of observing. It is not experience but understanding that unifies the aggregate by referring them to a hypothetical law of falling bodies. It is not experience but critical reflection that asks whether the data correspond to the law and whether the correspondence suffices for an affirmation of the law. It is not experience but a reflective grasp of the fulfillment of the conditions for a probable affirmation that constitutes the only act of verifying that exists for the law of falling bodies; and similarly it is a reflective grasp of the unconditioned that grounds every other judgment. (CWL 3, 671/694)Continue reading →
On this weekend’s Bloomberg Wall Street Week, Bob Prince of Bridgewater Associates has done a good job of assessing the implications of the recent excessive and distorting flows of money into both the operative circuits and the Redistributive Function of the economic system. Regarding constituent and related issues, see below “The Ineptitudes in Central Bank Operations,” and click here and here and here and here.
Recently the Executive and Legislative Branches, through the agencies of the Treasurer and the Federal Reserve Board, have flooded the economic system with free money. Much of the resulting surfeit of new money is detached from any productive contribution. This free, intrinsically inflation-constituting money has had to sit or go somewhere and constitute an effect in circulations of the basic circuit, the surplus circuit, and the secondary market for stocks, bonds, housing, etc. Thus, in order to understand the present inflationary situation, an explanatory “Essay in Circulation Analysis” is a present need.
Please keep in mind that Lonergan, in his purely theoretical essay, does not treat specifically the actualrecent flooding of the money supply, and the associated ultra-low interest rates, in the two operative circuits and in the Redistributive Function. But one can easily glean from his treatments the inflationary implications of this actual flooding and the manner of its correction. Herein, as opportunity allows we graft onto his orthodox treatment comments regarding recent quantitative flooding. We trust the reader to discern what are graftings and what are the underlying matters under discussion at that point. (Continue reading)