Mateusz Machaj on Economists and Inflation
ฝัง
- เผยแพร่เมื่อ 7 มิ.ย. 2024
- Mateusz "Matt" Machaj holds a PhD in economics and is a Fellow with the Mises Institute, who has also won both the Douglas E. French and the Lawrence Fertig prizes in Austrian economics. He joins Bob to discuss his new booklet from Routledge, which explains how mainstream economists have responded to the recent bout of price inflation.
Dr. Machaj's Monetary Policy and Inflation: Mises.org/HAP448a
Bob's Book on MMT, Understanding Money Mechanics: Mises.org/HAP448b
Bob's MisesU Lecture, "Price Inflation: Corona vs. QE": Mises.org/HAP448c
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Chapters
00:00 Introduction
01:50 The Quantity Theory of Money
05:32 Do Increases in Money Supply Always Lead to Inflation?
18:44 Why Wasn't There Inflation in 2009?
24:41 The "Money Multiplier" Model
42:33 What Austrian Economists See that Others Can't
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Mainstream econ for a long time has been not actually about economics as it is about telling politicians what they want to hear and helping dupe the public who has no interest in learning.
31:32, this is important. Volcker and Friedman did NOT concede that the quantity of money is irrelevant; they were talking about the practical issues of monetary policy.
Loved the discussion. Thanks, gents!
Thanks, gentlemen.
I find it strange how the subscriber count for every channel revolving around Anarchism/Austrian Economics/Voluntaryism/Freedom Movement is seemingly “capped” at around 165,000-170,000.
Super interesting video gentleman, just great! Mat is definitely a big brained guy 🧠
Thank you
👍👍👍
It's disingenuous when people say the quantity of money is irrelevant to price inflation. Okay, then just create an unlimited amount of money and send checks to people; of course, prices would skyrocket. Denying this is insane.
They have to hold that line to keep people ignorant of what is really destroying their quality of life.
We were literally told “ordering more stuff from Amazon” was one of the many things causing inflation. It was everything but printing trillions
@@sneakthieve In my jurisdiction the political class are investigating the super market chains for "price gouging" even though their actions obviously caused both cost-push inflation and demand-pull inflation, and those chains only show a measly net profit of less than 2.5%. It's one giant clown show.
Dr Murphy, do we incorporate the DXY or some form of measurement of international demand for the U.S. Dollar into our inflation calculations?
A huge part of Weimar was that everyone outside of Germany sold their currency.
So perhaps in a world where the U.S. has the highest rates, the demand for U.S. currency outside of the country will help prevent the huge increases in the money supply from driving prices as high as we'd think if we were only trying to do the math on demand/velocity within the country?
And perhaps this is another reason that the U.S. gives out so much foreign aid? It's like a drug dealer that gives out some free in order to get people addicted to the product. Just in this case we're getting foreigners addicted to dollar denominated debt.
And it's probably the reason China initiated their belt and road initiative in order to drive up demand for their currency, so they can expand and export inflation like we do?
Would love to hear your thoughts on this.
My reading of history was that the sale of German currency was a symptom of the problem and not what caused the crisis.
@@willnitschke Well printing too much currency for the amount of production is always the root cause. But there are release valves where money can get stored (ie housing and retirement accounts/stock market). So if there's a bubble in an asset class, that can help keep the velocity of money down in the broader economy. Or if there is a demand for the currency itself, as with all reserve currencies.
The question is, how much are the international markets able and willing to suck up to prevent that money supply from being deployed in the local economy and driving up aggregate prices. Even after the initial large drops in the price of the Mark, there were still a fair amount of people buying the currency at the beginning of all the money printing in Weimar because people thought the Mark would regain it's strength, and they could make some money on the future appreciation of the currency.
But after it became apparent that the situation was not going to be fixed, then all the international currency traders dumped their Marks. And then the German people began dumping their paper currency like crazy and it all snowballed.
It's actually pretty eerie how similar today and the beginning stages of their inflation were, with their seemingly "hot economy", while the working class and poor begin to get swallowed up by rising prices.
And when you see the exponential curves starting in the stock market and gold, it almost feels like that's where we're heading sometime in the next 10 years. 10 years because that's about when the critical mass of baby boomers dying off will release a large portion of all that stored up money.
Unless they let the system crash and reset. But I just don't see that happening politically.
Instead, I think they're just going to change the money into all digital and try to control velocity that way. Basically dystopian price controls because you will only be able to spend a certain amount on certain things.
Which means we'll probably see some other sorts of competing currencies start to be utilized. It would seem way more interesting to me if I wasn't worried that it's gonna be harder to buy things.
@@geoffgjof OK, you are just affirming the point I made so you answered your own question there. I would caution drawing too many conclusions from the Wiemar Republic hyper inflation if projecting it onto the US. The US is the global reserve currency and high demand for dollars is not going to go away any time soon.
Traditionally money is viewed as something that can be used as a medium of exchange, a unit of account and a store of value. It's becoming clear for various fiscal and geopolitical reasons, the USD is losing its status as a store of value. This is going to be a problem for the USD in the long run, but there are very few asset classes that are sufficiently scalable as alternative stores of value right now.
@@willnitschke No, I didn't answer my own question. I asked if there's an equation for inflation and rising aggregate prices that takes into account when there is high demand for the currency outside of the country. I've only personally heard of people calculating things nationally. Which makes sense when a currency isn't the world reserve currency. But with a high demand of currency outside of a nation's borders, I would think that would drastically alter the equations for trying to figure out if prices were going to rise substantially.
@@geoffgjof You've lost me. Even if you devised such an equation how does one aggregate global USD 'demand' so as to plug that number into the equation? Especially given that shadow banking and Euro-dollar markets are highly opaque.
Fiiiiirst！
If you will understand that bank reserves and bank deposit liabilities cannot act as "money" simultaneously, you will also understand why The Fed cannot create "money." Only banks create dollars used as money. This explains why QE did not expand the money supply as dramatically as expected. Also, as Austrians, you should not commit the error of aggregation represented by the Quantity Theory of Money. "The economy" never moves as a unit, and money does not enter the market uniformly. Generalized price inflation only occurs after market disruptions have occurred in individual transactions.
The Fed issues bank reserves to private sector banks. More bank reserves mean more loans are possible, hence greater money creation. This is not difficult to understand, champ.
@@willnitschke More reserve dollars mean banks can create more money dollars with which to buy assets. Dollars at The Fed cannot be used as "money." The separation is important. Witness how reserves jumped in 2008, but money dollars did not.
@@MengerMania Private banks are highly regulated and can't simply go out and buy any assets they want. For example they are generally prohibited from owning equities, properties unrelated to lending activities, or commodities.
Also nowhere did I say bank reserves could be directly spent into the real economy. I was actually making the opposite point.
@@willnitschke The regulation of banks has nothing to do with my point. Banks cannot transfer reserves to anyone for the purchase of any asset. They buy the assets permitted by regulation by creating deposit liabilities in the name of the entity from which they buy assets (e.g. buying government securities).
@@MengerMania No this is what you wrote:
*More reserve dollars mean banks can create more money dollars with which to buy assets.*
And then I patiently explained that's all wrong. Banks don't "buy" assets, except they may be able to hold what they hope is fairly liquid cash equivalents such as bond. (Gold may also be permitted.) They make loans, they don't buy office buildings, etc.
Everyone can read what you wrote, smooth brain.
The world's per capita refined gold supply is literally about an ounce, and that shows why restoring the gold standard is just not going to work. If you have 100 ounces of gold stashed away, that means 99 other people have *_ZERO_* gold. How are they supposed to pay their bills under these conditions?
Banks can issue coins and paper denominated in gold to allow for as much divisibility as is needed. Either that or we use bitcoin, which is incredibly divisible.
That's not actually how the gold standard works. There's a lot of good videos on monetary theory on this channel with Lucas M. Engelhardt. Great lectures.
The bullet points are this:
1. If there are more people than gold, the demand for gold means that the price per unit will go up. Instead of ounces in your example, you could use half-ounces and so on. Your example assumes an arbitrary floor to the numbers as well as a fixed amount of gold as more is yet being mined.
2. In a gold standard, other metals were used as money such as silver which is more abundant. In fact some nations had a silver standard so the values are broken down even further into other denominations/quantities but each had an equivalent of gold or silver between them.
3. A gold standard is also a metric for value wherein other things can be used as money if accepted.
People take a far too literal view of the gold standard as if it worked like a DnD game. A key thing to understand with the Austrian school is that money should be a commodity and there should be a market of money not just "a singular mandatory money [currency]" like we've grown up with.
A currency doesn't have to have 100% convertibility to gold if you wanted to go down that route. You could just instantiate a peg.
Or let me try to really dumb this down. The CCP tries to keep the Yuan pegged to the USD. This doesn't mean 1 Yuan has to equal 1 USD.
Isn't the real problem the idea that the "price level" is a meaningless metric? You're accepting a false premise and conceding the whole issue. You are talking about meaningless aggregates. What a waste of time.
So you're not a big believer in the usefulness of an average given the right context? Maths confuses you? That's a shame.