Category Archives: The Money Supply

Key Concepts of CWL 15, Section 26: The Cycle of Basic Income

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There is sufficient content in this Section 26 to serve as the basis of an impressive graduate thesis featuring explanatory first- and second-order differentiations of interdependent functional activities implicitly defined by their functional relations to one anther.  The set of equations would constitute a significant part of a complete explanatory theory.

  • Part I: Introductory

  • Part II – Divergent Flows of Products and Money; Consequent Inflation or Deflation

    • Case A: The problem of an inadequate rate of saving in a surplus expansion; I”/(I’+I”)

    • A note re stagflation stifling a full surplus expansion

    • Case B: The problem of an excessive rate of saving in a basic expansion

  • Part III – Outline of Traditional Theory’s Lack of Understanding re Artificially Manipulating Interest Rates

  • Part IV – Selected Excerpts and Comments Relevant to CWL 15, Section 26, “The Cycle of Basic Income,”  pages 133-44

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A Greg Mankiw Blog

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Introductory

Our concern, as always, is to understand and verify how money should circulate to meet the rectilinear primary process of production and sale.  We seek a normative theory which scientifically explains, rather than merely describes, the current, purely dynamic economic process.  The scientific explanation will be in the form of the objective relations of explanatory velocities and accelerations to one another.  These explanatory conjugates will be abstract correlations defined by their functional relations among themselves – rather than descriptions – no matter how literary and vivid –  of conditions, states, and events as they are related to us and affect us for better or worse.  Our goal is to achieve a scientific explanation yielding norms to which we must adapt. (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)

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)

Pointers Regarding Interest Rates and Inflation; The Delusion in Manipulation of Interest Rates

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We encourage the reader to consult the following entries.

The Ineptitudes in Central Bank Operations

John H. Cochrane’s Article in the Wall Street Journal, Thursday 8/25/2022

Facing Facts: The Ideal of Constant Value of the Currency vs. the Fact of Inflation

The Road Up is The Road Down; the Mechanism of rising and Falling Prices

Stagflation Demystified

Paul Romer’s “Endogenous Technological Change” in Bernard Lonergan’s Framework

Here are a few brief selections from the above treatments:

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) Continue reading →

The Road Up is The Road Down; The Mechanism of Rising and Falling  Prices

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This post was originally entered on May 30, 2022.  We repeat it now because it remains relevant.

“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 inflationary boom and corrective slump. Continue reading →

Concomitance and Credit;  A New Paradigm for the Federal Reserve Bank; Functional Macroeconomic Dynamics Drives Establishment Economics into the Shadows

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The macroeconomics textbooks feature three key macrostatic models, all three of which are sublated by the purely relational field theory called Functional Macroeconomic Dynamics.  The textbooks’ three featured graphs are two momentary intersections of supply and demand curves plus the Phillips Curve correlation of unemployment and interest rates:

  1. the intersection of the supply and demand curves at a certain price of goods and services (the macrostatic AD-AS model),  
  2. the intersection of the supply and demand curves at a certain interest-rate, rental-price of money (the macrostatic IS-LM model),  plus,
  3. the now-debunked Phillips Curve correlation of unemployment and interest rates.

The key elements grounding the discovery and formulation of the immanent, field-theoretic intelligibility of the organic, unified, whole economic system include: (Continue reading)

John H. Cochrane’s Article in The Wall Street Journal, Thursday 8/25/2022

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The Wall Street Journal of Thursday, 8/25/2022 featured John H. Cochrane’s commentary entitled  “Nobody Knows How Interest Rates Affect Inflation.”  We would say, “In order to understand how interest payments from Smith to Jones should circulate in order to achieve price stability, continuity, equilibrium and realization of the economy’s potential, one must have a unified theory explaining the whole, organic, dynamic, pretio-quantital,economic process.  Then, within that theory one can know How Interest Rates Might Affect Inflation.”  (Click here, and here)  We would also assert that manipulation by the Fed of the rental price of money – the interest cost – can be counterproductive. (Continue reading)

 

A Merely Theoretical Possibility and Simple-Minded Moralists

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(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 →