tag:blogger.com,1999:blog-8897997766931633186.post2786003352785071586..comments2024-02-14T03:21:37.506-05:00Comments on Monetary Freedom: Changes in the Quantity of Money and Changes in DemandBill Woolseyhttp://www.blogger.com/profile/06330232724290161369noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-8897997766931633186.post-65275786916275427582017-01-28T12:17:30.500-05:002017-01-28T12:17:30.500-05:00It’s really hard to answer these questions, but we...It’s really hard to answer these questions, but we should not worry if we are not certain. We just need to work with good plans and right strategy; I believe that’s enough to bring rewards. I always work with planning and right money management in trading, it’s helped by getting 50% bonus from OctaFX broker, as they allow us to use the bonus as well which makes it so much easier and far more comfortable thing for everyone especially for newbies.Jonesnoreply@blogger.comtag:blogger.com,1999:blog-8897997766931633186.post-74058252776656375622010-11-16T14:34:40.436-05:002010-11-16T14:34:40.436-05:00In both scenarios of your thought experiment, the ...In both scenarios of your thought experiment, the desire of some (perhaps all) people to hold money increases, being exactly offset by their reduced desire for the products of industry A which, accordingly, must contract, at least temporarily. In the first scenario, during an unspecified time-period and by an unspecified mechanism, the monetary system increases the quantity of money, which should allow the economy to return to its former pattern of expenditure once the would-be holders of the extra money have build up their balances to the desired level. But you add: "The [extra] money is all spent on the products of industry E . . . ." I thought the extra money was going to be *held*--*hoarded*--rather than *spent*. My interpretation of the first scenario is that the shift in demand from A to (acquiring) money (to hold)--perfectly accommodated by the monetary system--has been followed by a (possibly quite unrelated) shift in demand from (acquiring) money (to hold) to E. Not only do the would-be hoarders initially accumulate their extra money by cutting back their expenditures on A, but *even after they have increased their money balances to the desired extent* they continue to shun A while (at this point) increasing their expenditures on E. (Well, *society* increases its expenditures on E; it makes for a simpler story if we make it the new-hoarders whose attitude changes while everyone else's stays the same.) So A continues in its contracted state, while E quickly expands to meet the new demand. (But, you add, this may be a temporary phenomenon; the old pattern of demand may re-emerge.)<br /><br />In the second scenario the quantity of money is rigidly fixed, but people's psyches mirror what they were in the first scenario. This second scenario seems potentially much more complicated, though your very abstract description makes it quite simple. If we assume that all prices suddenly, smoothly, uniformly fall by 17% to accommodate the sudden 20% rise in the demand to hold money--and you do not explicitly specify otherwise--we should not accept your remark that sectors B, C, and E get *negative market signals*. They have to lower their prices 17% to maintain sales, but simultaneously the prices of all their inputs fall 17%, so they feel no pain. (Why think they would misperceive the situation?) I think your point is, or should be, that the adjustment in the first scenario would, in practice, be easier and smoother than the adjustment in the second. But it would require a more realistic and pragmatic, less abstract, discussion to clinch the point. You need to say more about how price-stickiness would adversely affect the adjustment in the first, but not the second, scenario. And this would be no mean feat: price-stickiness is not well understood.<br /><br />A curiosity of your thought experiment is that the sector that expands in the first scenario, after the adjustment in money balances, is different from that in the second scenario (E in the first, D in the second). This evidently reflects the difference between the adjustment mechanisms in the two scenarios--in particular, the fact that in the second scenario anyone who was holding a lot of money when the new demand set in reaped a large real capital gain that was absent from the first scenario. This might (though it need not) produce different social patterns of expenditure post-adjustment in the two scenarios.Anonymousnoreply@blogger.com