Category Archives: Federal Reserve

A Must-Read: Editors’ Introduction to CWL 15, Sections 5 and 6

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Serious readers – especially graduate students in economics – must do themselves a huge favor.  They owe it to themselves to read carefully two sections of Frederick G. Lawrence’s Editors’ Introduction of CWL 15,

[CWL 15] Lonergan, Bernard (1999), Macroeconomic Dynamics: An Essay in Circulation Analysis, ed. Frederick G. Lawrence, Patrick H. Byrne, and Charles Hefling, Jr., vol 15 of Collected Works of Bernard Lonergan, (Toronto: University of Toronto Press) [CWL 15]

Section 5: Macroeconomic Dynamic Analysis as a New Paradigm of Economic Theory

Section 6: The Systematic Significance of the Fundamental Distinction Between Basic and Surplus Production and Exchange: A Normative Theory of the Pure Cycle

6.1 Profit

6.2 Interest

6.3 Lonergan’s Critique of ‘Supply-Side’ and Demand-Side’ Economics

Eventual mastery by serious readers of these sections plus the main text will help them secure influential professorships, research grants, board seats and other important advisory positions.  They will have the satisfaction of influencing beneficially those with whom they interact professionally and casually.

Two other key works:

[CWL 21] Lonergan, Bernard (1998), For a New Political Economy, ed. Philip McShane, vol 21 of Collected Works of Bernard Lonergan, (Toronto: University of Toronto Press) [CWL 21]

[CWL 3] Lonergan, Bernard J. F. (1957 ) Insight, A Study of Human Understanding, Longmans, Green and Co. Ltd., London; and (1997) Toronto: University of Toronto Press [CWL 3, 1957/1997] 

 

An Einsteinian Relativistic Context: Space and Time Become Space-Time; Price and Quantity become Price-Quantity; An Abstract Set of Invariant Explanatory Relations

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Contents

.I. Relations and Relativity in General

.II. Einstein’s Special Relativity and General Relativity

.III Lonergan’s Double-Circuited, Pretio-Quantital Relativity Theory

.IV. The Basic Price Spread; The Co-ordinated Relativity of Three Major Pretio-Quantital Flows and the Co-operative Relations Within Each Major Flow

.V. The Macroeconomic Field Theory Equations

.VI. Concerning Verification

.VII. Miscellaneous Selections

.VIII. Conclusion

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The Einsteinian Context: Curvature and Relativity

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Albert Einstein, Steven Weinberg, Lillian Lieber, Douglas Giancoli, Raymond A. Serway, Bernard Lonergan, Philip McShane, Peter Burley,

.1. Introductory

Graduate students seeking a thesis topic may expand this treatment of the Einsteinian context of Functional Macroeconomic Dynamics.  It should be of special interest to those having a strong background in theoretical physics and, thus, able to appreciate the analogies from physics.  “Similars are similarly understood.” (CWL 3, 288/313)

Philip McShane alerted us to the resemblances between Lonergan’s context of general macroeconomic dynamics and Einstein’s context of general relativity.

(Part Two entitled Fragments) belongs almost entirely in what I call the Einsteinian context of Part Three, in contrast to the Newtonian achievement of Part One; … [CWL 21, Index, 325]

A new science has emerged.  Lonergan has elevated conventional macrostatics to a macrodynamics explaining economic accelerations. (Continue reading)

The Acceptance of a “New Horizon” in Scientific Macroeconomics; A Spectacle of Insecurity

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… a new scientific theory gets across when the present generation of professors is retired. (Max Planck) (CWL 10, 93)

… a recession of the horizon within the scientific field meets with resistance.  The (human) subject dreads to change, to remodel the organization that is himself, his living in the scientific world. (CWL 10, 93)

Scientists will disagree; they will fight; the period of crisis and reformulation presents a spectacle of insecurity; (CWL 10, 94)

Lister’s discovery, one of the most important advances in medical history, was lightly dismissed. … By 1876, Lister’s steady and astonishing success had silenced nearly all of his detractors at home and in Europe.  The United States, however, remained inexplicably resistant.  … (Candice Millard: Destiny of the Republic (Doubleday, New York, 2011) pp. 14-16)

By ‘scientific development’ I mean development in mathematics or natural science.  The scientific horizon recedes, expands, when there occurs a crisis in existing methods, procedures, theories, assumptions, which are seen to fail.  They cannot handle known results, known observations or data, known conclusions. (CWL 10, 92-3)

It is this (eventual universal acceptance) of scientific development that commands the great esteem in which science is held. (CWL 10, 94)

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The Great Interest-Rate Delusion and Hoax; The Circulation of Principal and Interest Payments

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Readers of this post – especially economists in academe, the Federal Reserve, the Department of the Treasury and the National Bureau of Economic Research – should also read the following posts:

The entities actively constituting the current economic process are still contesting among themselves to restore the normative relations among Outlays-Incomes and Expenditures-Receipts distorted by the government’s recent inflationary flooding of free money into the various channels and pools of the system.   Also, keep in mind that the underlying  context of the excerpts selected below assumes a money supply and interest rates properly calibrated to support the correlation of the magnitudes and frequencies of flows of products with payments.  Unfortunately, the money supply has been bollixed and the monetary flows have been tortured by the government’s recent free-money flood.  The fair absorption of the recent flood is still in process.

We begin with seven brief excerpts extracted from, thus pointing to, our subsequent treatment, Continue reading →

John H. Cochrane’s “The Federal Reserve Deserves a Pat on the Back”

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The Wall Street Journal of 12/26/2023 featured an article by John H. Cochrane (Hoover Institution) titled “The Federal Reserve Deserves a Pat on the Back.”   Continue reading →

Bloomberg Wall Street Week: “Economics Has No Good Theory of Inflation.”

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This is a companion-piece to Facing Facts: The Ideal Of Constant Value Of The Currency vs. The Fact Of Inflation.  Please read both.

This past weekend, 11/4-5/2023, Cecilia Rouse, future President of The Brookings Institution, appeared on Bloomberg Wall Street Week with moderator, David Westin.  Under the pressure of scant time, they briefly, but inadequately, discussed the notion of a “theory of inflation.” It was opined that

“The reality is that in economics there’s not a fabulous theory and one theory of inflation.”

“…economics doesn’t have one solid and established theory of inflation.”

Also, commenting on the same topic, David mentioned that the Phillips Curve “correlation”, which is a staple of of the Fed’s thinking and decision-making, and which has been supposed by many economists to be a valid correlation of fluctuating wage rates and their resulting pressure on inflation with unemployment, has not been proven valid and reliable.  That is to say that its two main variables are not directly correlated and inextricably linked; that the supposed reliability is bogus; that no matter how often it is considered and bandied about internally among supposedly-expert economists and externally to the truth-seeking public, the Phillips Curve theory is simplistic, insufficiently nuanced, and has been debunked.

Lonergan’s Macroeconomic Field Theory is a comprehensive general theory. It has many aspects and relations, all of which can be grasped at once in a unified whole.  Also, this unified whole virtually and implicitly contains a set of terms and relations constituting a unitary theory of inflation.  So, obviously we disagree with the two opinions quoted verbatim above, but left hanging on Bloomberg Wall Street Week.

It is the viewpoint of the present inquiry that, besides the pricing system, there exists another economic mechanism, that relative to this (other) system man is not an internal factor but an external agent, and that the present economic problems are peculiarly baffling because man as external agent has not the systematic guidance he needs to operate successfully the machine he controls. [CWL 21, 109]

In the mid-70’s, economists were mystified by stagflation, the combination of stagnant production and rising prices. According to the Phillips Curve, the correlation of inflation with unemployment, stagflation should not happen. … the U.S. economy was experiencing the phenomenon of ‘stagflation’ – a clearly discernible overturning of the conventional economic wisdom about the tradeoff between inflation and unemployment so neatly expressed in the Phillips curve. So-called ‘Keynesian fine tuning onto the neoclassical track’ was not working; and forms of socialist planning only promised to deepen rather than resolve the anomalies of welfare economics. … (Lonergan) believed he had an explanation for what, in a statement from the essay we are editing, he described as a “situation – sometimes thought mysterious – in which consumer prices continuously inflate, new enterprise is evaded, unemployment becomes chronic, and despite inflation the value of stocks declines.” [CWL 15, Editors Introduction, xli]

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Alan S. Blinder’s Article, “Team Transitory Had a Point About Inflation”

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Alan S. Blinder (Princeton) had an article in The Wall Street Journal of Thursday, 7/20/2023 entitled Team Transitory Had a Point About Inflation

Prof. Blinder was concerned to relate the recent and current inflation to a) supply shocks, and b) the speed and extent of the manipulation of interest rates. Our concern is rather to explain the recent and current inflation as formally caused, and thus explained rather than merely postulated, by a) the recent flooding of the economic system – given its capacity, state of productivity, and phase of expansion – with trillions of dollars of free money, and b) the circulation of those inflation-causing trillions of free dollars throughout a) tiers of income and propensities to consume, and b)  two productive operative circuits and the unproductive Redistributive Function, in which sit the stock and bond trading operations. Continue reading →

Recommended WSJ Interview of Paul Singer

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The Saturday-Sunday Wall Street Journal of 4/8-9/ 2023 featured an Interview by James Freeman of Paul Singer, founder of Elliott Management.  P. Singer’s past predictions are notably congruent with the consequences systematically necessitated by the deviations in policy of the executive and legislative branches from the norms of Lonergan’s Scientific Functional Macroeconomic Dynamics.

First, we quote some sections of Freeman’s interview of Singer; then we’ll quote brief sections to preview the treatment to follow.  From the Interview: (Continue reading)