Morning Caffeine: 2-27-2012

  • Ramanan helps to clarify how savings works and what it means. “It’s a mountain, then it’s not a mountian, then it’s a mountian.”

  • Great story about how money works. The title of the blog is excellent as well. Mass Production requires Mass Consumption. I think this very much implies Trickle Up economics is a path we should support.  I’ve used this phrase several times over at Traders Crucible and

  • That pesky Long Depression, from blogger Lord Keynes

  • PKer Louis-Philippe Rochon on policy targeting output and capacity utilization.

  • I’ve been thinking something quite similar. This move in the Yen is huge, and seems to be quite timely.  It’s a low level currency war.

  • This is a great take on why the values right is so worked up lately. The demographics facing the current republican coalition are terrible. In 4 years, there won’t be enough republicans to make a serious challenge for the white house.  Of course, this is a good thing – they will be forced to make the message more appealing to people currently alive. It’s pretty clear about 30% of the population respond almost exclusively to thinking like this: “But boiled down to political sound bites and served up to the voters, they blend into an indistinguishable stew of racial, religious, cultural, and nationalistic identity.” This doesn’t mean we should steamroll these people, but rather find a way to harness this energy and direct to ideas which actually benefit our society. It’s tough because it’s an us vs. them mentality every step. “me against my brothers. my brothers and I against my cousins. My family against other families. My neighborhood against other neighborhoods. My town…” But they are people too.

  • We’re finally starting to hear about the details. Someone wired over $300m on the morning MF global filed bankruptcy.  That’s a lot of money to wire out the day of a bankruptcy. The entire company was only worth $100m or so on that day.

  • Chris Cook says we’re going to see $60/barrel very soon. I agree with the supply analysis but I’ve seen this for the last 12 months are we’re still at 100 a barrel. it seems to me the Commodity Funds are in buy mode. Dunno how it will shake out.

  • Highlinghts a crucial dilemma, it makes sense from an individuals standpoint to transform maturity because it’s profitable, but on a country scale it only adds risk. This is related to Mosler’s “The Natural Rate of Interest is Zero” paper. (P.S. I think Warren uses the words “natural rate” differently than the common meaning) But is the solution to this dilemma to ban all Maturity Transformation?  From the post: “Thus it makes no sense for a country to allow or encourage the banking system to economise on the stock of money the banking system holds if in doing so any sort of risk is entailed. Thus what is required is to ban MT, or at least to drastically curtail MT –  to the point where the risks deriving from MT are next to non-existent.” This seems extreme.

Posted from Diigo. The rest of my favorite links are here.


Expert in business development, product development, and direct marketing. Developed strategic sales plans, product innovations, and business plans for multiple companies. Conceived the patent pending Spot Equivalent Futures (SEF) mechanism, which allows true replication of spot and swap like products in the futures space.

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6 Comments on "Morning Caffeine: 2-27-2012"

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5 years 3 months ago

Nice post by Ramanan.

But shouldn’t overlook the fact that the definition of saving is income driven, and therefore NIPA driven in a macro financial statements context.

The flow of funds version is a reconciliation of flow of funds accounting back to NIPA input, with adjustment for two alternative treatments of durables.

As such, the flow of funds version should be viewed as an asset-liability reconciliation back to the source concept – which is saving as a residual of income. The FF version should not be viewed as a primary source of the definition.

5 years 3 months ago

As an institutional matter, NIPA is the from the Bureau of Economic Analysis in the Dept of Commerce (at one time it was in the Dept of the Air Force… but that’s another story), Flow of Funds is from the Federal Reserve. If their numbers ever matched exactly, it would be purely by coincidence. :o)

5 years 3 months ago


Excellent point JKH.

IMO WS doesn’t see it that way and it has been difficult to move ahead in the discussion @WS.

5 years 3 months ago

thanks R.,

re latter, again, conserve your energy


5 years 3 months ago

Ok will take that advice.

5 years 3 months ago

Will be interested to see why Rochon disagrees with the “Kansas City Rule” despite the results of his initial model. Cool stuff. Nice to see math and modeling being used here. (Something absent from core MMT lit.)