Kimura
VIP Member
- Nov 12, 2012
- 1,497
- 92
Hmmm, yes it is. All other theories are just government propaganda.
This is a variation of the theory that rain creates umbrellas. No. "demand" does not create jobs, and it doesn't create goods and services. If the FED doubles the number of dollars in circulation, no additional flat screen televisions or smartphones magically pop into existence. Printing twice as many dollars means there are twice as many dollars chasing the same quantity of economic output. That means a reduction in what a dollar can purchase.
The "effective demand" is created by printing more dollars. End of story.
What kind of demand doesn't come from dollars in the marketplace? How could you possibly separate them? However, when the government creates more dollars, it reduces the value of each dollar. That's a simple consequence of the laws of supply and demand, which apply to money just like they apply to every other commodity in the market.
By the way, "increased production" is the definition of economic expansion. Your claim that the economy expands to meet increased production is nonsensical.
Haha. Okay, so if the money supply increases, you're saying that's automatically inflationary? You obviously didn't understand what I posted or the definition of inflation we use in economics.
Inflation is defined as a continuous rise in the price level, not an increase in the money supply.
It all boils down to demand pressures, which is why I neglected to mention the supply-driven inflationary nonsense. I only explained inflationary pressures which result from spending (nominal demand) increases exceeding the capacity of the economy to match said increases with output increases. In other words, as long as we have an increase of real goods and services, in addition to the money supply, there isn't an inflationary risk. I neglected to mention supply shocks, such as oil, for example, which is another story.
On a side note, central banks can't control the money supply, which is why they abandoned monetary targeting in the 1980s. It finally dawned on central banks they can only control interest rates, not the actual money supply. After this epiphany, monetary policy boils down to controlling the short-term interest rate through management of the liquidity in the overnight cash markets. Just sayin'....
We already have a "buffer stock" of employees. They're called "the unemployed."
We never have used unemployment to control inflation. That's a Keynesian theory that was discredited by the Reagan administration.
Your abracadabra is based on faulty economics and will never work. Obama just tried it and it was a colossal failure.
No, we don't. We utilize the NAURU regime which controls inflation through tight fiscal and monetary policy, which results in an unemployment buffer stock. This is not a reliable method to control inflation.
A national buffer stock is different. The government utilizes fiscal policy available under our fiat monetary system to reach full employment based on the buffer stock approach. This is where the Job Guarantee comes into play.
With the Job Guarantee, you prevent inflation through an inflation anchor as a fixed wage employment guarantee.
In order to reach FULL EMPLOYMENT, a prerequisite is that there are a sufficient number of jobs available to suck up all of the labor supply. Using NAIRU to reach some politically correct number for unemployment isn't compatible with developing policies to reach full employment.
For example, under our current policy, the government will budget a certain quantity of dollars at market prices. On the other hand, with the Job Guarantee, the government ALSO offers a fixed wage to anyone that is unemployed and wants to work, which lets the market determine the quantity of spending necessary. The price rule would control spending.
The Job Guarantee would let the government absorb the unemployed that lost jobs in the private sector. These people would make up the national buffer stock and would be paid a minimum wage which would would be low enough that it wouldn't effect the private sector, but would provide them with a trained pool of labor and reduce their costs.
Inflation control is built into this model. If the domestic private sector inflates, for example, a decrease in monetary and fiscal policy would move workers into the public (Job Guarantee) sector to obtain inflation stability without the economic, social, and human costs of unemployment. There's nothing Marxist about this.
We learned two things under Reagan: a) the size of deficits really are a matter of policy at the end of the day and b) supply-side was a disaster.
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