The method of circulation analysis … involves a minimum of description and classification, a maximum of interconnections and functional relations. … Analytic thinking uses classes based on similarity only as a springboard to reach terms defined by the correlations in which they stand. [CWL 21, 111]
… the introduction of the notion of the monetary function… takes a further step towards defining a circulation of money……..not a rotational movement……. rather a circular series of relationships of dependence of some flows of payments on other flows. Money moves only at the instant of payment or transfer. Most of the time it is quiescent. … it may also be dynamically quiescent, and then it is held in reserve for some definite purpose. … Money held in reserve for a defined purpose will be said to be in a monetary function. Five such functions are distinguished: basic demand, basic supply, surplus demand, surplus supply, and a fifth redistributive function. (CWL 15, 48)…….
Volume 15 of Collected Works ofBernard Lonergan is entitled Macroeconomic Dynamics: An Essay in Circulation Analysis. Lonergan analyzes and explains the economic process as a circulatory process; that is, as a dynamic organic process of interdependentcirculatory flows of goods and services and their functionally-congruent payments. It is to be understood and verified as a coherent set of flowsimplicitly-defined by their functional relations to one another. 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)
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)
A first task thereafter will be to correlate the need for more or less money in the productive process with the magnitudes and frequencies of their turnovers. On that basis it will be possible to distinguish stable and unstable combinations and sequences of rates in the three main areas and so gain some insight into the long-standing recurrence of crises in the modern expanding economy. [CWL 15, 53-4 and 177]Continue reading →
In the Wall Street Journal of Thursday, 12/2/2021, Senator Tom Cotton had an article entitled ‘No’ on Jerome Powell at the Fed. Senator Cotton was correct regarding a) the possibility of worst-case and less-catastrophic scenarios of inflation, b) the possibility of inflation wiping out wage gains, and c) that the result of the Fed’s policies is to boost prices in both the basic consumables (point-to-point) circuit and in the Redistribution Function’s secondary stock and bond markets.
Senator Cotton, as always, is to be admired for his courage; but he and all in government and the private sector must learn the principles and laws of how the objective economic process actually works. A lot depends on a knowledgable government acting in the best interests of the entire populace of free people. Some would say it’s a matter of the survival of human liberty.
The non-Euclideans moved geometry back to premises more remote than Euclid’s axioms, they developed methods of their own quite unlike Euclid’s, and though they did not impugn Euclid’s theorems, neither were they very interested in them; casually and incidentally they turn them up as particular cases in an enlarged and radically different field. Continue reading →
In their article in the 10/21/2021 Wall Street Journal, John Greenwood and Steve H. Hanke evoked an image with which we are all familiar, water flowing into and out of a bathtub. The simple image was to be representative of monetary flows. The image attracted attention, which was a good thing; however, Macroeconomic Field Theory finds it more instructive to put forth a more adequate representative image of flows.Continue reading →