Thursday, May 28, 2020

Proposing Zero Percent, Standardized Loan Documents

I like Brian Romanchuk's work. While I often challenge his thinking, I find his work tantalizing. His latest tantalus[1], entitled "The Incoherence Of Yield Curve Control", was incomprehensible to me and now I think I know why. I needed a key.

Bonds and interest rates meet in the bond market where bonds are bought and sold. Sometimes you even find new loans coming out of this market. Where it gets confusing is how pricing is conducted.

I'll not try to explain pricing today. I am not the expert to undertake such an effort. My mission today is to propose a simpler way to understand market basics. I will propose that we follow the sometimes expressed preference of Modern Monetary Theory (MMT) advocates who want to have universal interest rates set at zero.

Saturday, May 2, 2020

Rethinking the Business Control Structure

This covid-19 pandemic and world wide response has certainly thrown the economy some unexpected economic shocks. Shocks styled in ways that I have never seen considered in economic models. The first shock comes from a division of the economy into essential and non-essential sectors. I wrote about that surprise previously.[1]

A second shock comes from seeing government shut down a large segment of the economy. I guess I knew that government could do such a thing but dismissed it as a meritless concept. In reality, this action should open our eyes as to who controls what in the business sector. We briefly explore the business control structure in this post.

Friday, April 24, 2020

Relief Money Doesn't Just Disappear!

I've been pondering where the money from a massive coronavirus stimulus will go as the weeks and now months pass. After all, nearly $3 trillion in new government spending must go someplace.

Strangely, or maybe not so strangely, government has provided a clue by dividing the national work force into segments labeled 'essential' and 'non-essential'.

$3T doesn't just get spent and evaporate. Someone has title to the new money and more wealth to spend. Who?

Saturday, April 11, 2020

MMT Style Economic Distortions

J.D. Alt has an interesting post wherein he compares government to "the Ouroboros—the mythical snake eating its own tail". He makes the case that MMT should not--as a theory--take an economy to self-destruction but should enable it grow in beneficial ways. I made two comments, the first warning of the dangers of misguided monetary distribution and the second pointing out what I see as being an MMT style economic distortion occurring now due to misguided covid-19 responses. The second comment is reproduced here.

[4/25/20 UPDATE: This second comment seems to have failed moderation. Despite two submissions, I never could find it present. There have been no site updates since April 13.]

Wednesday, March 18, 2020

Where are the Reference Points?

[What follows is rather raw reaction and thoughts scribed in an effort to focus my own thinking. The reader may wish to read the section written March 16 (which follows the March 18 text) first.]

As I write (1:22 PM, March 18, 2020) chaos does indeed seem to be occurring. Congress just passed a $1.3T? relief package and there's panic talk on CNBC (Bill Ackerman). Of course the solution is more money from government.

Or is it?

Friday, February 14, 2020

Toward a Comprehensive MMT

The name Modern Monetary Theory (MMT) implies that we have a comprehensive theory of fiat money and monetary policy. Unfortunately, most MMT authors limit their discussions to the creation aspect of money, thereby avoiding the mundane (but more important) discussion of using money for everyday transactions. To be comprehensive, MMT needs to embrace theory describing both the creation of money and the use of money--two distinctly different monetary events.

Sunday, January 19, 2020

Notating Discontinuities in Long Time Series

Brian Romanchuk post uses math that requires a starting point in a time series. Starting something creates a discontinuity in any temporal display that might appear in a chart. I would like to suggest a better way to notate the time series used by Brian.