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#15015046
@Steve_American
On Japan. It bears mentioning that Japan has been dealing with a persistent problem all this time which has countervailing effects to inflation and which has been partial official justification for the quantitative easing regime, namely 'en-daka' (appreciation of the yen, which is damaging to their export base, and has been occurring outside of the government's control--and is broadly related to international currency markets). This is consequence of free floating exchange rates. China doesn't have these, which enables them to artificially depreciate their currency, but Japan, like most countries, does. Currency appreciation leads to deflation. Japan has been using QE in part to effect inflation in an effort to combat currency appreciation, though with only partial success.

I point it out because you used the word 'proof' in the context of Japan, but this presents at best a superficial understanding of Japanese economics and Japanese monetary policy.
#15015055
Crantag wrote:@Steve_American
On Japan. It bears mentioning that Japan has been dealing with a persistent problem all this time which has countervailing effects to inflation and which has been partial official justification for the quantitative easing regime, namely 'en-daka' (appreciation of the yen, which is damaging to their export base, and has been occurring outside of the government's control--and is broadly related to international currency markets). This is consequence of free floating exchange rates. China doesn't have these, which enables them to artificially depreciate their currency, but Japan, like most countries, does. Currency appreciation leads to deflation. Japan has been using QE in part to effect inflation in an effort to combat currency appreciation, though with only partial success.

I point it out because you used the word 'proof' in the context of Japan, but this presents at best a superficial understanding of Japanese economics and Japanese monetary policy.

'm sorry, but I don't understand why you think that the international currency market has the power to reverse the claimed (by mainstream economic schools of thought) that adding any currency (yen or dollars) by creating money will always dilute the value of that currency.

The claim is that deficit spending always causes inflation. I'm claiming that both Japan and the US situations over the last close to 30 years prove that it just isn't always true. In the US close to $15T of new debt has been created over that time and inflation has been low. Most Gov. [even in the EU and the ECB] want or target inflation of about 2%.

Also, please explain to me why the ability of the people of Japan to buy more goods from the world at a cheaper price (in yen) will cause deflation in the Japanese economy. It seems like the Japanese people will have more yen left after they buy the foreign stuff they want and these extra yen should then cause inflation, not cause deflation.
Also, why is the yen appreciating?
#15015075
Steve_American wrote:'m sorry, but I don't understand why you think that the international currency market has the power to reverse the claimed (by mainstream economic schools of thought) that adding any currency (yen or dollars) by creating money will always dilute the value of that currency.

The claim is that deficit spending always causes inflation. I'm claiming that both Japan and the US situations over the last close to 30 years prove that it just isn't always true. In the US close to $15T of new debt has been created over that time and inflation has been low. Most Gov. [even in the EU and the ECB] want or target inflation of about 2%.

Also, please explain to me why the ability of the people of Japan to buy more goods from the world at a cheaper price (in yen) will cause deflation in the Japanese economy. It seems like the Japanese people will have more yen left after they buy the foreign stuff they want and these extra yen should then cause inflation, not cause deflation.
Also, why is the yen appreciating?



Deficit spending(the difference between tax revenues & government spending in any particular fiscal year)adds to the national debt, that debt has to be repaid over the long term, that is it's nature, otherwise a government would raise taxes or cut spending in order to balance it's books, government accounting is the simplets form of accounts.
They are, revenue - spending, no government balances it's books, hence, two outcomes, the more likely, Deficit, or Surplus, which is virtually impossible.

Because of those two outcomes, the former more realistic, due to governments being like women,(they like spending our money)the third outcome is virtually certain. an increase in national debt.

Okay, so, this is the point in why increasing debt is 'wrong', the position is that the fiscal gap creates a requirement to borrow, the cost of that borrowing for however long the period of interest, is being paid each year from the same money pot that is in deficit & is being paid from the very same money that is being borrowed.
So, a government is borrowing money, in order to pay back the borrower, with that same money that the government borrowed from the lender, if that is financial incontenance, then tell me what is.

Now, you may say how is this affecting the currency in terms of it's value & inflation.

Well, the truism, is that 'taxation is theft', it's also true that government's that spend your money, when it has already spent all of it, then borrows more to spend,is engaged in the theft of your money, even if your taxes are not on the surface rising.

The reason that taxation is theft, is because it creates inflation, either domestic or imported, one being from increasing domestic cost, the other from currency adjustments on the currency markets which are very efficient at registering & adjusting to real or perceived movements in values.

It's a simple law of mathematics that there is no such thing as a 'free lunch', no more so than when it comes to money markets, where profits(or losses) are not gleened out of thin air, but extracted with each transaction.

Currencies are adjusted on open markets, they look constantly in real time, as well as future, as to what adjustments are needed to balance the value of one currency against all currencies,if traders perceive that a value has been wrongly placed on a particular currency, in market terms, that is what makes a market move & traders will dive in to sell or buy on that basis.

Those market trading positions have positive, or negative consequencies for countries & individuals affected.

That is how, as individuals, we do or should, decide when, or where we spend or save our own money.

With governments, they are constantly attempting to reduce the real cost of the money that they borrow, to that end inflation is a valuable tool, because if you know for any given period when inflation is going to be above trend level, you would want to repay a lot of debt at the far end of that period before the cost of that debt has to be repaid with real money.

Government's that create inflation through borrowing are dishonest government's, those like America have always been able to manipulate investors in the dollar, because it has traditionally been a petro-currency, where trades are done by the dollar, which makes investors more eager to lend their money to the American goverment.
America is fooling itself if it thinks that it can continue doing so indefinitely, that is because at some point that debt will be valued alongside the assets of the country & that creative accountancy can only fool some of the people some of the time-but not all the people all of the time.

There is now a realisation around that a country's GDPPP is not a true measure of the general wealth of a country's population, rather than a measure of the above product, it's the quality of life that really matters,not the cost that has been passed onto other people-animals-plants & the planet in total for the benefit of the few.
#15015116
Steve_American wrote:'m sorry, but I don't understand why you think that the international currency market has the power to reverse the claimed (by mainstream economic schools of thought) that adding any currency (yen or dollars) by creating money will always dilute the value of that currency.

The claim is that deficit spending always causes inflation. I'm claiming that both Japan and the US situations over the last close to 30 years prove that it just isn't always true. In the US close to $15T of new debt has been created over that time and inflation has been low. Most Gov. [even in the EU and the ECB] want or target inflation of about 2%.

Also, please explain to me why the ability of the people of Japan to buy more goods from the world at a cheaper price (in yen) will cause deflation in the Japanese economy. It seems like the Japanese people will have more yen left after they buy the foreign stuff they want and these extra yen should then cause inflation, not cause deflation.
Also, why is the yen appreciating?

I didn't claim that defecit spending doesn't cause inflation. I spoke of two countervailing tendencies, the one inflationary and the other deflationary.

Currency appreciation is the mirror image of deflation. Likewise currency depreciation is the mirror image of inflation.

When the currency appreciates it takes less money to buy the same goods. Prices thus decrease. This is called deflation.

Inflation is defined as prices rising. When prices rise it takes more money to buy the same goods. This is defined as currency depreciation.

The causes for the appreciation of the yen are complex and hotly debated by Japanese economists, and I don't really have a take on it, other than that it is seemingly a result of circumstances beyond the control of the Ministry of Finance in Japan (related to international currency flows). If you're curious you could look it up. I can just tell you that it is a real phenomenon which has been ongoing for quite some time, and is a topic of much discussion and debate in Japan.
#15015201
Crantag wrote:I didn't claim that defecit spending doesn't cause inflation. I spoke of two countervailing tendencies, the one inflationary and the other deflationary.

Currency appreciation is the mirror image of deflation. Likewise currency depreciation is the mirror image of inflation.

When the currency appreciates it takes less money to buy the same goods. Prices thus decrease. This is called deflation.

Inflation is defined as prices rising. When prices rise it takes more money to buy the same goods. This is defined as currency depreciation.

The causes for the appreciation of the yen are complex and hotly debated by Japanese economists, and I don't really have a take on it, other than that it is seemingly a result of circumstances beyond the control of the Ministry of Finance in Japan (related to international currency flows). If you're curious you could look it up. I can just tell you that it is a real phenomenon which has been ongoing for quite some time, and is a topic of much discussion and debate in Japan.

The double negative in your 1st sentence is confusing.
I'm the one who claimed that MS economists claim that deficit spending will lead to inflation.

I contest your assumption that appreciation of the yen internationally will automatically cause prices inside Japan to fall. Yes, imported goods may be cheaper. But, why would Japanese made goods be cheaper? And rent and house prices?
#15015218
Steve_American wrote:The double negative in your 1st sentence is confusing.
I'm the one who claimed that MS economists claim that deficit spending will lead to inflation.

I contest your assumption that appreciation of the yen internationally will automatically cause prices inside Japan to fall. Yes, imported goods may be cheaper. But, why would Japanese made goods be cheaper? And rent and house prices?

It's not really a double negative. And I'm merely talking about very basic economics. I explained it pretty sufficiently. Read it a few more times, or maybe do some reading on the relationship between currency rates and inflation.

It might seem strange to you that an appreciation of currency, ceterus peribus, leads to deflation, but it is the case. It is moreover logical. Less money buys the same goods. In other words, prices go down.

This is the opposite to inflation, which causes depreciation of currency. This may be easier to grasp: think currency debasement.

This is merely the obverse of currency appreciation/deflation. The value of currency and the price of goods move in opposite directions.
#15015238
Never mind.
You are right, I'm too stupid or ignorant to not see that the international market and a local national market are really just one big market.
For me, I need to be convinced that they are just one market.
I don't remember ever seeing any daily change in prices as the dollar got stronger or weaker back in the day when I still lived in America. Yes, those changes effected the price of oil, but what else?
It seems to me that you just reasserted your original assertion. Does this usually work for you with other people?
#15015254
Steve_American wrote:Never mind.
You are right, I'm too stupid or ignorant to not see that the international market and a local national market are really just one big market.
For me, I need to be convinced that they are just one market.
I don't remember ever seeing any daily change in prices as the dollar got stronger or weaker back in the day when I still lived in America. Yes, those changes effected the price of oil, but what else?
It seems to me that you just reasserted your original assertion. Does this usually work for you with other people?

You wouldn't see a daily price change as there tends to be a lag. That's basically the only reason monetary policy even works at all. If prices changed in real time (and always in direct ratio) monetary policy would really be moot.

I actually sought to clarify my original statements.

And I would have opted for the word 'ignorant' had I wanted to insult you, but you said it and not me (referring to your opener).

It can't be that diluting the currency causes inflation if the opposite is not true. This is really just fundamental economics.

Local and global markets are pretty closely linked. They are not the same, but the global markets certainly greatly effect the local ones, and this includes for so-called non-tradable goods like haircuts or paint jobs (though the effect is somewhat less). That's the nature of the modern world we live in.
#15015268
Crantag wrote:You wouldn't see a daily price change as there tends to be a lag. That's basically the only reason monetary policy even works at all. If prices changed in real time (and always in direct ratio) monetary policy would really be moot.

I actually sought to clarify my original statements.

And I would have opted for the word 'ignorant' had I wanted to insult you, but you said it and not me (referring to your opener).

It can't be that diluting the currency causes inflation if the opposite is not true. This is really just fundamental economics.

Local and global markets are pretty closely linked. They are not the same, but the global markets certainly greatly effect the local ones, and this includes for so-called non-tradable goods like haircuts or paint jobs (though the effect is somewhat less). That's the nature of the modern world we live in.

So, you assume that diluting the currency will always cause inflation.
As you know, I'm attracted the MMT. MMTers say that diluting the currency does NOT cause inflation. That it only will when the economy is already using all the resources the nation has or can buy. MMTers say that Japan proves that diluting the currency doesn't always cause inflation, for 30 years or so now.
I think that is where we disagree. I like MMT and you mostly don't buy it.
.
#15015413
Steve_American wrote:So, you assume that diluting the currency will always cause inflation.
As you know, I'm attracted the MMT. MMTers say that diluting the currency does NOT cause inflation. That it only will when the economy is already using all the resources the nation has or can buy. MMTers say that Japan proves that diluting the currency doesn't always cause inflation, for 30 years or so now.
I think that is where we disagree. I like MMT and you mostly don't buy it.
.

I didn't say that currency dilution always leads to inflation. I was speaking in generalities. I agree that new currency issue which is spent on productive measures can have an effect as you mentioned. This is basically Keynesian fiscal policy. But the contemporary conventional monetarist approach tends to focus more on pumping up the 'supply' of money through the financial system.

This is basically an old debate about monetary vs fiscal stimulus. I am speaking more so against economic orthodoxy with its preference for monetary policy (and this is orthodoxy in Japan as well), rather than your points in your last post specifically; I've noticed MMT does have a strong fiscal policy component (fiscal policy is basically direct government spending--as well as transfer payments, I.e. increasing S.S. payments, etc.--on the expansionary side).

But we are back full circle. I merely questioned the veracity of the Japan 'proof', provided their difficulties over the years with checking the rise of the yen, and the fickle results of their monetary policy which has sought to check this.

Mind you I'm not dogmatic here, I'm just raising some questions. I certainly have more in common with MMTers than the Freidmanite monetarists (who have commanded the mainstream and the policy levers for the past 40 years or so).

I am skeptical as others though with respect to the indifference to deficit, although that isn't what I've been talking about in this thread.
#15015451
Steve_American wrote:
So, you assume that diluting the currency will always cause inflation.
As you know, I'm attracted the MMT. MMTers say that diluting the currency does NOT cause inflation. That it only will when the economy is already using all the resources the nation has or can buy. MMTers say that Japan proves that diluting the currency doesn't always cause inflation, for 30 years or so now.
I think that is where we disagree. I like MMT and you mostly don't buy it.
.
Crantag wrote:I didn't say that currency dilution always leads to inflation. I was speaking in generalities. I agree that new currency issue which is spent on productive measures can have an effect as you mentioned. This is basically Keynesian fiscal policy. But the contemporary conventional monetarist approach tends to focus more on pumping up the 'supply' of money through the financial system.

This is basically an old debate about monetary vs fiscal stimulus. I am speaking more so against economic orthodoxy with its preference for monetary policy (and this is orthodoxy in Japan as well), rather than your points in your last post specifically; I've noticed MMT does have a strong fiscal policy component (fiscal policy is basically direct government spending--as well as transfer payments, I.e. increasing S.S. payments, etc.--on the expansionary side).

But we are back full circle. I merely questioned the veracity of the Japan 'proof', provided their difficulties over the years with checking the rise of the yen, and the fickle results of their monetary policy which has sought to check this.

Mind you I'm not dogmatic here, I'm just raising some questions. I certainly have more in common with MMTers than the Freidmanite monetarists (who have commanded the mainstream and the policy levers for the past 40 years or so).

I am skeptical as others though with respect to the indifference to deficit, although that isn't what I've been talking about in this thread.

crantag, you wrote, "It can't be that diluting the currency causes inflation if the opposite is not true." From this I understood that you are willing too assume that diluting $$ leads to inflation. It seems pretty clear to me.

There is a double negative. If I remove the 2 "nots". I get.
It can be that diluting the currency causes inflation if the opposite is true.
"It can be that diluting the currency causes inflation ..." --- Doesn't this part imply an assumption that diluting the currency causes inflation? The rest of the sentence makes it clear that it isn't a question. It is a forceful statement.

Another point I just thought of ---
MS economists say that running deficits will make "money people" not want to have anything to do with your currency, at least "someday". Or some claim that amounts to this.
Japan's total debt has reached 240% of its GDP and not because its GDP has shrunk.
To increase its debt this much Japan must have a deficit every year, a large deficit.
And yet, foreign 'money people' have bid up the yen to record highs.
There seems to be a contradiction here.
#15015622
Steve_American wrote:crantag, you wrote, "It can't be that diluting the currency causes inflation if the opposite is not true." From this I understood that you are willing too assume that diluting $$ leads to inflation. It seems pretty clear to me.

There is a double negative. If I remove the 2 "nots". I get.
It can be that diluting the currency causes inflation if the opposite is true.
"It can be that diluting the currency causes inflation ..." --- Doesn't this part imply an assumption that diluting the currency causes inflation? The rest of the sentence makes it clear that it isn't a question. It is a forceful statement.

Another point I just thought of ---
MS economists say that running deficits will make "money people" not want to have anything to do with your currency, at least "someday". Or some claim that amounts to this.
Japan's total debt has reached 240% of its GDP and not because its GDP has shrunk.
To increase its debt this much Japan must have a deficit every year, a large deficit.
And yet, foreign 'money people' have bid up the yen to record highs.
There seems to be a contradiction here.

If you want to play prose police here you are doing a pretty poor job of it. Double negativs are problematic when applied to a common object. The way I wrote my sentence was correct because removing the negatives does not present the same meaning for the sentence.

There's no contradiction because economics is complex. Economists often construct models by freezing variables so as to construct theoretically testable cases for their thought experiments. When analyzing real-world cases it is necessary to consider the multitude of factors.

Japan has sought to pursue inflation-based growth, and inflation-based export stimulation, but the policy has been only partially effectual. It may be primarily the result of the actions of the 'money people', but there are other potential factors, such as the relative movements of foreign currencies, the domestic price movements in Japan (which could be owing to various factors, including weakening domestic consumption and cost-saving domestic production methods), input prices, the ineffectualness of Japan's monetary policy, etc. Among these, weakening domestic consumption, ineffectual monetary policy, and indeed the actions of the 'money people' are all seemingly present at the surface level.

So to return to my original (and basic) point, the case of Japan is not a 'proof' of anything really, given the complexities. Japan has been suffering from weak growth for going on 30 years, and this is sort of the background to everything else.

Demographics also has something to do with it, Japan's population is aging and shrinking.

If anything Japan demonstrates a failure of monetary expansion as a means of growth.

The function of debt for a government is supposed to be like that of a business, which borrows to expand production. In Japan it hasn't worked out exactly, but the government is still left with the debt. Over the long term debt can be an inhibitor of growth. Hence in Japan they have also been using austerity, including proposals to reduce pension payments, etc. Austerity is the opposite of fiscal-led expansion, and reducing transfer payments and other government spending inhibits aggregate demand and hence economic growth.

As such Japan is a superficial example, which does not withstand scrutiny.
#15015642
@Crantag,
I apologize for seeming to be the grammar police.
My point was that you're sentences confuse me. If you aim is to communicate your thoughts to me, those sorts of sentences confuse me.
On the other point, for economists to wave their hands around and claim that it is complicated, in that case, but simple in this other case; doesn't cut it with me.
If it is complicate for 'that case' I can claim that it is also complicated in 'this case'.
Since economists have not provided any facts about reality that relate to why "this case" is not complicated; then I claim that I won.
To be clear, i'm not saying you are wrong; I;m saying that Main Stream economics (of both sorts) is wrong.

I do like chatting with you.
#15015666
Steve_American wrote:@Crantag,
I apologize for seeming to be the grammar police.
My point was that you're sentences confuse me. If you aim is to communicate your thoughts to me, those sorts of sentences confuse me.
On the other point, for economists to wave their hands around and claim that it is complicated, in that case, but simple in this other case; doesn't cut it with me.
If it is complicate for 'that case' I can claim that it is also complicated in 'this case'.
Since economists have not provided any facts about reality that relate to why "this case" is not complicated; then I claim that I won.
To be clear, i'm not saying you are wrong; I;m saying that Main Stream economics (of both sorts) is wrong.

I do like chatting with you.

I'm not into mainstream economics and I don't like their simplistic narratives too much. Sometimes it's sort of necessary to borrow from it, though. Or perhaps mainstream theories are simply a fall back because it's typically what's taught. Theories are just tools really.

But I share your dissatisfaction with oversimplification and it's often a sign of laziness, imo (on the part of the economists).

Yeah economics is rather imperfect. The old addage holds: get 6 economists together and you'll get at least a half-dozen opinions.

I take your posts seriously. Rereading there might have been minor miscommunication from me in spots, that's the internet.

Just throwing out ideas. I lived and studied in Japan for years. Doesn't make me an expert. But I said I'm not mainstream and to me that largely means questioning and having a critical perspective, so as to try to get closer to the truth.
#15015771
Steve_American wrote:@ Crantag,
I have provided links to Bill Williams blog on MMT. He is a core MMTer.
If you invest some time reading his older posts you can get a good overview.
Or just wait a few days and I will post a good summary of his ideas from MMT.

Maybe you can post the link again? I don't know where you posted it and I tried googling the blog to no avail.

You don't mean Bill Mitchell perhaps, do you?

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