Richard Murphy says:
September 1 2022 at 9:59 am
Show me how that relationship has created inflation?Taking V into account, show me where and increase in M has resulted in inflation
Given that it’s MV that is inflation what does taking V into account actually mean here?
I think this is an MMT theory (Needless to say it’s one I profoundly disagree with) but my understanding is the equation is MV = PY (P = Price Level and Y = output of goods)
so for an MMT advocate M can NEVER cause inflation (and that is Murphy’s position)
so if I use the following examples:
Weimar Germany (Caused by excessive V not M)
Zimbabwe/ Venezuela (Caused by a fall in Y unrelated to M)
US Confederacy – (caused by a fall in V unrelated to M)
You have to recall beyond the obvious commentary around Murphy that in his eyes all classic economics is bunkum – and not relevant to the matter at hand
Since V is unobservable, is it simply a fudge factor to make it look like the quantity theory works, but in reality prices are capricious noise?
Vanker.
Professor of Malpractice in Economics
@Is V like
V is observed (defined) as PY/M.
For this identity to be useful, M has to be determined independently by eg the central bank, and V has to be stable or at least broadly predictable.
M then drives PY, probably with a lag. If Y is limited by eg full employment of resources (or government lockdown), then M drives P.
I don’t think that MMTers disagree with this in principle. But in practice they have a Neanderthal view of full employment, which means that most of the time they attribute what is really M-driven inflation to capitalist greed and the like.
Post 2009, M (defined as broad money held by the non-bank public) did not grow very quickly in the US or the UK, and neither did P.
Post pandemic, M did grow very quickly, and so now is P.
Even while making due allowance for lockdowns, Putin etc the general idea seems useful
OT: Anyone else getting the adverts down the right side of the page in the wrong language?
I’m sitting in London and the adverts are all in Dutch. Tim’s advert server seems to think I’m in Belgium. Every other website is acting normally.
In the meantime the Evening Standard continues its move to the Extreme Left with an editorial describing Murphy, Sikka and Blanchflower as ‘learned’ and calling on the government to adopt their policies wholesale.
ANNRQ; I’m getting an advert that invites me to “knock out my backlog” – which should probably appear on another post…
The Eeny Stannit is now little more than a comic and has about 4 pages. Luckily, we have a robust conservative government who take no notice of the media at all.
Has Danny fallen out with spud?
https://twitter.com/D_Blanchflower/status/1565391672351014913?t=1XyCx35PMtL0PyFhBuiMAQ&s=19
M is inflation or deflation. V links to average price rises. M should be reclassified as GFT, government fucking thieving. Maintenance of price level stability is just slight of hand inflation, though they never manage to even achieve that. Cunts.
Has Spud got Pnis MV?
Cadet
《V is observed (defined) as PY/M.》
In other words, doesn’t V absorb the error in what you really want to say, i.e. P = M? But since that obviously doesn’t hold, are you just adding fudge factors that mathematically absorb wild data divergences from quantity theory predictions?
RSM/Newmania – your random word generator is on the blink.
@Can we just agree
No. As I said, V needs to be broadly predictable, and it is.
This means that inflation can be noisy, but it is not “just noise already”.