On this weekend’s Bloomberg Wall Street Week, Larry Summers is right on the money and right on the money. (sic) In the light of all we’ve said about a) the explanation of inflation, b) the ineffectiveness of the Fed’s tools and the ineptness of the Fed’s actions re money supply and interest rates, c) the distribution of income between the two circuits based on the phase of the objective process, etc, judge for yourself.
Ideally money would be constant in exchange value.
… the dummy must be constant in exchange value, so that equal quantities continue to exchange, in the general case, for equal quantities of goods and services. The alternative to constant value in the dummy is the alternative of inflation and deflation. Of these famous twins, inflation swindles those with cash to enrich those with property or debts, while deflation swindles those with property or debts to enrich those with cash; in addition to the swindle each of these twins has his own way of torturing the dynamic flows; deflation gives producers a steady stream of losses; inflation yields a steady stream of gains to give production a drug-like stimulus. [CWL 21, 37-38]
Traditional theory is not on the money about money and interest rates.
The purpose of this section is to inquire into the manner in which the rate of saving W is adjusted to the phases of the pure cycle of the productive process. Traditional theory looked to shifting interest rates to provide suitable adjustment. In the main we shall be concerned with factors that are prior to changing interest rates and more effective. [CWL 15, 133]
I’ = Σwiniyi (35) [CWL 15, 134]
dI’ = Σ(widni + nidwi)yi (36) [CWL 15, 134].