Williams misses the elephant in the room
TravisV asked me about a paper by John Williams of the SF Fed. The paper is a defense of moderation in monetary policy, and will be seen as a defense of recent Fed passivity. That may be unfair to Williams, as it’s not clear that he opposes more aggressive stimulus.
I can’t imagine anyone favoring moderation in monetary policy more than I do. Yet I was deeply frustrated when reading the paper, as Williams kept missing the bigger picture. He argues the economy was hit by negative “demand shocks” in 2008, then again in 2009, then again in 2010, then again in 2011, and then again in 2012. In a sense that’s true as NGDP growth was below trend during all 5 years. But Williams misses the bigger picture, those “demand shocks” were contractionary Fed policy. More specifically they were caused by the failure of the Fed to do NGDP level targeting. The Fed set the wrong target in each year, and this caused the vast majority of the “demand shocks”. With a policy of NGDPLT along a five percent trend line, the recession would have been far milder, with unemployment probably peaking at 6 to 7 percent.
A digression for people of the concrete steppes. No, it wasn’t just “errors of omission”. After growing at 5 percent per year during the Great Moderation, the Fed brought growth in the base to a sudden halt from July 2007 to April 2008. Yet the Fed saw itself as a valiant knight fighting off recession by cutting the Fed funds rate, as if interest rates were a reliable measure of the stance of monetary policy. They aren’t. But even if they were, the Fed drove real interest rates sharply higher in the second half of 2008, a time when they weren’t at the zero bound. So there were plenty of affirmative actions taken by the Fed to drive us into a deep slump. BTW, the base isn’t a reliable indicator either, only NGDP expectations count.
Williams discusses “moderation” in terms of two “instruments” of Fed policy; the fed funds rate and QE. Williams argues for “gradualism in shifts in the stance of policy” such as QE, but doesn’t really define what that means. Is “tapering” a shift in policy, as the markets seem to believe? Or is changing the Fed’s stock of assets a shift in policy, as Bernanke seems to believe? Any answer is completely arbitrary as neither QE nor fed funds rates are a useful way of characterizing the stance of Fed policy. Only NGDP expectations are informative.
Over the last five years the Fed has been like a slave master relentlessly whipping the economy. At times it eases up, and whips less aggressively. The slaves, I mean the markets, are grateful during those periods of less whipping. But if you read the financial press they see the Fed as a hero giving the lazy, ungrateful economy one shot of stimulus after another. Until we (including the Fed) see the situation clearly, there is little hope for the implementation of sound policies.
PS. In the previous post I referred to an unnamed commenter who discussed the relationship between stock prices and the taper talk. It was probably this excellent post by Andy Harless.
Tags:
12. July 2013 at 08:41
Scott, what do you think of Summer as Fed chief? I’m not sure what to think. Does it matter much?
I’d appreciate an opinion,
Regards
12. July 2013 at 09:23
“So there were plenty of affirmative actions taken by the Fed to drive us into a deep slump.” My only difficulty about this sentence lies in its reliance on the notion of *affirmative action*. I see no way to define this notion that would make it seem important whether a given result was produced by affirmative action or by inaction. As you go on to remark: “Is ‘tapering’ a shift in policy, as the markets seem to believe? Or is changing the Fed’s stock of assets a shift in policy, as Bernanke seems to believe? Any answer is completely arbitrary . . . .” Anything that seems like a case of *inaction* can be otherwise described so as to make it seem a case of *affirmative action*. There are a couple of plausible ways to draw a sharp distinction between (affirmative) actions and inactions (see Jonathan Bennett, *The Act Itself*), but they do not give us anything useful, for assessing Fed policy or for any other theoretical purpose.
12. July 2013 at 09:41
The Fed set the wrong target in each year, and this caused the vast majority of the “demand shocks”.
That’s letting them off easy; they fail to hit their own targets symmetrically and fulfil their legal mandate, and are unable to explain what they would do differently if that mandate were far more contractionary. The Fed has done an appalling job by “objective” standards (a good job by the standard of the ignorance in the economics profession) and it would be the end of the macroeconomy as we’ve known it if people were to finally wise up to that fact.
12. July 2013 at 09:53
Evan had a recent post on the Williams paper and I left a comment on the modeling techniques. In all the discussions of uncertainty, I think Williams omitted any uncertainty on whether the Fed has an interest rate above or below the Wicksellian rate. Yet once we take out this uncertainty, monetary policy doesn’t seem too hard at all.
12. July 2013 at 10:08
Oh GOD
“Elizabeth Warren wants Volcker for top Fed job”
http://blogs.marketwatch.com/capitolreport/2013/07/12/back-to-the-future-warren-wants-volcker-for-top-fed-job/?mod=MW_latest_news
12. July 2013 at 10:10
Maybe CBs like holding the whip. Think how much money you could make with an inside line on a CB right now.
12. July 2013 at 10:53
TravisV,
That’s partly fascinating for the endorsement, but more fascinating for the first comment in the comments section, which endorses the old “cost-push” view of the impact of interest rates on inflation. I thought that died a death decades ago…
12. July 2013 at 11:12
Prof Sumner:
What are your thoughts on this explaination for the raise in 10-year yields http://www.newyorkfed.org/markets/survey/2013/June_result.pdf
12. July 2013 at 13:08
[…] Williams misses the elephant in the room (The Money Illusion) – I disagree, but the argument is worth listening to. Yes, monetary policy was the catalyst, but the structural dynamic was too much asset focussed debt/money supply growth and global output’s over dependence on a level of consumption that could no longer be financed from real economic growth and its accompanying income distribution. The problem is, what would have happened to the bubble had the Fed not intervened and was it not of some concern that such a low nominal interest rate should in and of itself trigger such an economic and financial reaction? […]
12. July 2013 at 14:40
The concrete steppes?
Civilization moved out of the urban jungle and onto the concrete steppes.
12. July 2013 at 15:03
Larry Summers, Elizabeth Warren, and Paul Volcker. Three clowns for Obama’s economic circus act.
12. July 2013 at 16:56
Mikio, He’d be a horrible choice, but I’m not really sure how much it matters. Bernanke was a great choice.
Philo, Yes, I meant affirmative in the sense that others use the term.
Saturos, Good point.
Yichuan, Thanks, I’ll take a look.
TravisV, And people keep telling me that the left supports monetary.
Wawawa, The link is broken.
12. July 2013 at 19:18
ssumner,
The link was June’s NYFed survey of primary dealers. One of the questions included “Factors influencing the increase in the 10-yr Treasury yield”. Pretty much pointed to change in perception of FOMC’s view of appropriate policy & heightened uncertainty on FOMC’s view of appropriate policy.
12. July 2013 at 19:28
“More specifically they were caused by the failure of the Fed to do NGDP level targeting.”
In other words we have an explanation for every crisis since the Fed’s beginnings in 1914: wrong NGDP target. Hilarious.
1928? Wrong NGDP target. 1937? Wrong NGDP target. 1974? Wrong NGDP target.
“the Fed brought growth in the base to a sudden halt from July 2007 to April 2008”
So what? The base causes nothing.
We are still waiting for some Granger-causality studies showing that the base causes anything else, like deposits or loans. Of course we will be waiting forever because there no such studies, actually those that exist show the opposite causality.
12. July 2013 at 19:39
Excellent blogging.
But…I am a little disappointed in the economics profession. It has become a world of theories and charts and models–but little discussion of organizational behavior. Especially the Fed’s.
What makes the Fed so unresponsive to a declining economy?
Who or what is the FOMC and its membership?
When Americans went to the polls on Nov 2008 (after the economy had tanked) how could they vote to express their concerns? (It is worse in Europe).
John McCain lost by virtue of Fed incompetence. The R party was voted out of office, without there ever being anything close to a referendum on Fed performance. The Fed got off scot-free.
Then, in 2012 Obama deserved to lose, but the public did not understand his role in the Fed’s boobery (Obama had appointed many FOMC members). This is because “the Fed is independent,” so Obama got a pass.
Now Williams sings the praises of Fed indecision, ossification, callousness, cloisteredness, insularity. It is like a .120 hitter self-reverentially saying he plans only mild variations of his batting style.
Yet the economics profession rarely thinks about the Fed as an organization, and when they do, it is to still assert the virtues of Fed independence.
It could decades more before the Fed, as structured might change, adopt aggressive QE and NGDP targeting. You got another 20 years to wait?
The Reagan Administration discussed moving the Fed into the Treasury Department. That may be a good idea.
Interesting one: Thomas Jefferson said the only thing more dangerous to a prosperous democracy than a standing military was a central bank run by bankers.
Hmmm.
12. July 2013 at 20:00
I remain astonished at the economics profession, and how much status quo is accepted without questioning.
Tim Duy has no clue as to what the Fed really intends to do on monetary policy. Duy writes an excellent blog on the Fed.
Tim Duy is highly intelligent, and a Phd economist. Yet reading Duy is like reading Kremlinologists in the 1960s trying to decipher Soviet intentions on the basis of photographs of the Politburo, and opaque excerpts from party speeches.
Maybe, just maybe, in a democracy an organization like the Fed would be required to be transparent and to speak with clarity as regards to plans. Oh, dear, what an exotic idea! And if they did a bad job they could be voted out of office. Oh, dear!
Why is the current Rube Goldberg-constructed Fed, and its mantle of obfuscation and mysticism, tolerated even by the brightest, such as Tim Duy?
As Sumner said, “The way we do it here and now is the best way it can be done.”
13. July 2013 at 04:07
Wawawa, I think it is mostly higher growth expectations.
OhMy, Yes, failure to target NGDP was to blame for all monetary problems in the US.
BTW, there was no crisis in 1928, policy was sound.
And the monetary base is a lousy indicator of the stance of monetary policy, which you would have seen if you had actually read my entire post.
And “Granger Causality?”. Do people still believe in that nonsense?
13. July 2013 at 04:09
Ben, I’m as surprised as you are.
13. July 2013 at 04:14
Ssumner,
The guys who move the market do not agree with you: http://esoltas.blogspot.com/?m=1
13. July 2013 at 04:17
wawawa, Stock investors seem to think so, as stocks are setting records despite future cash flows being discounted at rates almost 100 basis points higher.
13. July 2013 at 04:46
Ssumner,
That’s the thing, we can only assume what equity investors think. There can be numerous interpretations on the reasons for movements in equities. On the fixed income side, we KNOW what the market movers are thinking – no assuming – only believing in the market expectations that are written right before us. Even if you are correct about equities, it doesn’t (neccessairily) account for movements in debt instruments. Many would say that the changing in these 10-year yields are more likely to be directly tied to the FOMC.
13. July 2013 at 05:37
Wawawa, Are you sure it’s dealers who move the market? That wasn’t my impression. In general I’m skeptical that you can ask people why they buy and sell, and get meaningful answers. But I certainly agree that Fed policy is a factor.
Suppose you asked them after EVERY SINGLE bond yield increase to explain the “news” that caused the increase in bond yields that day. I doubt they could point to Fed tightening on more than 20 percent of the days. What do you think?
13. July 2013 at 05:43
So the largest institutional buyers & sellers aren’t market movers? Even if they aren’t, I would say they (hopefully?) have the best insight considering they are closest to the ground and the only participants in the open market.
I agree with your second point. However, I think it’s a bit disingenuous to compare “EVERY SINGLE bond yield increase” to the sizable moves such as the ones that we have seen recently. Even if you are correct that they would point to Fed tightening more than 20 percent of the days (which I agree with you), that does NOT mean it was (or wasn’t) the cause for recent movements.
13. July 2013 at 05:53
Wawawa, I did not know they were the largest owners of T bonds, I had thought it was some place like China and Japan. Maybe you are right. But you misunderstood my 20 percent comment. I was simply referring to the past two months. I’m claiming that Fed news can explain at most 20 percent of the recent rises in bond yields, the rest is some other unexplained factor. What proportion do you think is explained by the Fed?
13. July 2013 at 09:37
[…] Scott Sumner comments, […]
13. July 2013 at 10:00
Do you have better test of causality than Granger? If so, great. Please prove that the base causes deposits or loans with any sensible metric.
13. July 2013 at 10:02
I don’t know which institutions/individuals hold the largest amount of securities. We do know however, that the primary dealers are the only ones with transactions via OMO’s. Thus, their insight has to count for something. Why assume that investors in other nations don’t have the same views as primary dealers? What inside (efficient market debunking) information do they have over the primary dealers?
In regards to your 20% comment, the primary dealers seem to disagree. I certainly wouldn’t have the guts to through out a guess at the percentage the FOMC impacts these rates relative to other factors.
You point to growth expectations – I havent seen any growth forecasts that support anyone is expecting robust growth. Where are these forecasts?
13. July 2013 at 12:21
“Only NGDP expectations are informative”
Low rates don’t accelerate demand. AD = MVt. AD doesn’t = nominal-gDp (or people can only spend their income once). Nominal-gDp is a proxy for all transactions. Demand is money & velocity driven. I.e., Keynes’s liquidity preference curve (demand for money) is a false doctrine. There’s no such thing as a liquidity trap.
Real-gDp has only risen by .03% since its peak in Oct 2007 @ $13,326 trillion -> vs, $13,625.7 trillion today (i.e. over 4 years or 21 qtrs).
Today (vs. 1998), small savings deposits have declined from .33% of total savings deposits to now just .07% of total savings deposits. That’s wealth transfer (from the “have nots” to the “haves”).
13. July 2013 at 12:41
“the rest is some other unexplained factor”
(1) Required reserve balances vaulted by $20 billion dollars from one reserve maintenance period to the next ($106,509b to $126,267b) or from 4/17/2013 to 4/24/2013. In a commercial banking system where bankers buy their liquidity (as opposed to storing their liquidity), that fluctuation created a short-fall.
RRs have not been binding on the upside of interbank bidding & clearing c. 1994, but whenever the FRB-NY drains reserves both CB assets & liabilities still contract.
(2) The rate-of-change in RRs (the 24 month proxy for inflation) rebounded in May coincident with a rise in the demand for loan-funds.
13. July 2013 at 12:51
The new reserve requirement’s simplification process on 7/11/2103 missed the opportunity to report the volume, turnover, & distribution of an individual CB’s demand deposit balances in their District Reserve Banks (CB system).
The most glaring error was the failure to disclose (report separately), the volume of pass-thru correspondent balances utilized to satisfy legal reserve maintenance requirements (historically responsible for the pyramiding of reserves). With this change, the Fed’s research staff has obfuscated the salient differences between liquidity (varied by independently owned & managed BHC’s business plans), & required reserves (a Central Bank’s credit control device).
Since 1942 (until interest on reserves), commercial bank credit creation was a “system” process (our payment & settlement system is significantly interconnected). No bank, or minority group of banks (from an asset standpoint), could expand credit (& the money stock), significantly faster than the majority group were expanding.
When CBs expand credit, reserves ceased to be “binding” c. 1994. But when the FRB-NY drains reserves, it still induces a system-wide, contraction of bank assets & liabilities. Indeed, all economic downdrafts coincide with a contraction (or deceleration in growth rates), of required reserves (based on transaction deposits 30 days prior), & commercial bank credit (e.g., depending upon FASB off-balance sheet accounting).
An individual bank needs clearing balances to lend. These are either stored internally as its liquidity reserves, or if a bank’s balance is insufficient, may be bought in the interbank market (shifting the distribution of reserve balances, & tightening any expansion coefficient).
The BOG’s reconstruction reveals that: “The levels and growth rates of the two series are nearly identical”. I.e., the new figures are skewed more because of the change in lagged applied vault cash (from 2 weeks to 1 week), rather than eliminating contractual clearing balances, as-of-adjustments, or RAM adjustments.
13. July 2013 at 13:01
RonT, I look at market responses to policy news. For instance, current loans and deposits are probably strongly influenced by expected future changes in the base. What’s going to pick that up better, Granger Causality or market responses?
13. July 2013 at 13:11
Wawawa, Markets are not moved by trading, but rather by new information, and the impact that has on the supply and demand. Traders are simply intermediaries.
I don’t think you can assume they’d disagree with my 20 percent comment, unless and until they were asked. Talk is cheap, have they thought through the implications of what they are saying? Do yields go up day after day on the belief that Bernanke will taper? If so, why isn’t it priced in immediately?
You say you don’t see much information suggesting faster growth, and neither do I. But I also don’t see much of the sort of monetary policy information that would make yields rise sharply. I still believe Fed plans to hold rates down for many years. The market seems to disagree with me, but I’m not certain why.
I certainly have an open mind on the entire issue.
One final point. When rates rose on recent news of the strong jobs numbers, I’ve seen people in the financial press suggest it was because this caused expected Fed tightening. Obviously if that’s a widespread view it suggests these guys don’t fully understand the question. Maybe they confuse the growth effect and the tight money effect; recall that stocks also rose on that news.
13. July 2013 at 15:16
“I don’t think you can assume they’d disagree with my 20 percent comment, unless and until they were asked.” -I would say, based on the survey, that unless there are more than four other factors with a weight less than 20% that they’d disagree with you.
“Do yields go up day after day on the belief that Bernanke will taper? If so, why isn’t it priced in immediately?” -Do yields go up day after day on the belief that each day brings new info on robust growth?
“But I also don’t see much of the sort of monetary policy information that would make yields rise sharply. I still believe Fed plans to hold rates down for many years. The market seems to disagree with me, but I’m not certain why.” -The info is the confusion. I find it funny that you mention the market here (and everywhere) except when it doesn’t agree with your stance.
Doc, I am pretty much with you on the majority of what you post. However, sometimes your posts remind me of the Chris Rock routine about prescription medicine (they keep naming symptoms ’til they get one that you ******* got. Are you sad, are you lonely, you got athlete’s foot, are you hot, are you cold, what you got? You want this pill don’t ya mother******?). Macroeconomists sift each possible data point in perpetuity until they find something to match their views. And literally anyone can sift through literally any macroeconomic data and find “evidence” to support their view(s). You can talk about changes in rates or stocks here and there and their relation to new releases, news, whatever. What I can’t understand is how anyone is able to ignore the precipitous increases in intraday rates on June 19 – the timing with BOTH the FOMC release and Bernanke’s presser was impressive. However, I suppose a group of billionaires in China received info exactly @ 2:00pm that future US growth was ready to explode and a mere 30 minutes later relayed the info to their billionaire buddies in China. It’s like you (drug manufacturer) are reaching in the depths for any data (symptom) that supports your view (sickness) and ignoring any other data (health/tests) that opposes what you are selling.
13. July 2013 at 16:02
“But Williams misses the bigger picture, those “demand shocks” were contractionary Fed policy. More specifically they were caused by the failure of the Fed to do NGDP level targeting.”
Nothing is caused by an absence of something. Cause and effect always include existents, namely, things that actually exist.
To argue that X was caused by a “failure to do Y” still leaves open the question of what actually caused X. The statement that X was caused by an absence of Y doesn’t address what exists that caused X to then exist.
If someone’s leg broke because they failed to do “X”, or if someone became ill because they failed to do “Z”, we still have to answer what actually caused X and Z respectively.
This ridiculous attempt to ignore every actually empirically existing event, and focusing on the Fed’s failure to do something, is an example of willful ignorance if I have ever seen one.
13. July 2013 at 16:03
Argh, meant to say
“If someone’s leg broke because they failed to do “X”, or if someone became ill because they failed to do “Z”, we still have to answer what actually caused that person’s leg to break.“
13. July 2013 at 16:27
2012-12 ,,, 0.154 ,,, 0.511
2013-01 ,,, 0.169 ,,, 0.594
2013-02 ,,, 0.154 ,,, 0.603 price spike
2013-03 ,,, 0.156 ,,, 0.488
2013-04 ,,, 0.150 ,,, 0.498
2013-05 ,,, 0.136 ,,, 0.539 price spike
2013-06 ,,, 0.098 ,,, 0.512
2013-07 ,,, 0.106 ,,, 0.426
2013-08 ,,, 0.071 ,,, 0.283
Rates are now headed lower.
14. July 2013 at 04:00
Wawawa, I would suggest reading my comment again, as you clearly misunderstood what I said. There is nothing inconsistent in my view of “the market”. If you think there is then you misunderstood me. I’ve said many times that the recent rise is yields is partly a reflection of tighter money. That’s clear from the rise in yields following bearing statements by Bernanke.
However the poll you cite proves nothing about “the market.”
And It’s clear from your response to Doc that your reading comprehension skills are below first grade levels.
14. July 2013 at 04:45
I suppose that you could have said kindergarten level – so, thanks?
16. July 2013 at 19:48
“RonT, I look at market responses to policy news. For instance, current loans and deposits are probably strongly influenced by expected future changes in the base.”
“probably”? How would you check? How would you prove wrong someone who thinks this is nonsense? (like moi, I have never seen anybody making a borrowing decision based on expectations of the base).
“What’s going to pick that up better, Granger Causality or market responses?”
Do you know? How would you find out?
17. July 2013 at 00:26
“I have never seen anybody making a borrowing decision based on expectations of the base”
And I’ve never seen anybody making a house-buying decision based on expectations of the quantity of houses, so the quantity of houses clearly has no relation to the buying and selling of houses.
17. July 2013 at 06:33
W Peden,
I actually have seen people making a a house buying decision based on expectations of quantity of houses.
17. July 2013 at 12:42
RonT, When the base started growing much faster in the 1960s, inflation expectations gradually rose, which led people to be more inclinded to buy houses at any given interest rate.
19. July 2013 at 02:59
SS,
In an edogenous money system when inflation rises (eg due to energy prices going up) the base will rise as the volume of deposits created by the banking sector correspondingly rises. So inflation causes the base not the other way round. You have no way to prove your case if you refuse to measure causality.
19. July 2013 at 03:35
RonT: you are spurting nonsense. First, base money (M0, high powered money etc.) is central bank money. Even in “endogenous money system” base money is controlled by Central Bank and therefore is automatically exogenous.
Second, since base money is used as medium of account it would be quite surprising to see any “endogenous money” (e.g. bank notes) not to react to changes of supply of medium that they are pegged to. It would like saying that under gold standard it was inflation that caused increase in supply of gold.
Long story short, since central bank has complete control over base it may make money seem like being endogenous. If central bank decides that it ties money supply (in a roundabout way) to the price of goods in consumption basket, then consumer will have “control” over money supply by affecting things in the basket.
So if for instance there is some genius who will invent some cheap ways to create energy (or more likely some mad dictator who decides to take torch to oil fields providing energy for large part of the market) you may say for a brief time that this guy gain control over money supply.
19. July 2013 at 06:04
J.V. Dubois,
You don’t know what you are talking about. CBs target *price*, not *quantity*, so no, they do not control the base. They control the price. Controlling the base cannot be achieved, Volcker learned as much. So the CB cannot control to what it “ties the money supply”, because it cannot tie it to anything, it can only decide on the price.
There is no such thing as a “medium of account”. There is a unit of account and medium of exchange. You just define that prices only react to the quantity of base money, because you named it “medium of account”, but prices can react to the sum of all risk free assets (reserves+treasuries) that can be always traded between. Like SS you believe you can define reality and never worry about measuring if what you says makes any sense. Unfortunately econometric studies belie the faith that the base is exogenous, sorry.
19. July 2013 at 07:25
OhMy: Let me give you some examples of monetary regimes
True Comodity Standard (like using gold bars as money): The only way to create more base money is to dig up some more gold (no-one knows about gold treasures existing on yet undiscovered continent). Therefore base money supply is controlled by owners of gold mines.
Fiat Money (like using green papers depicting dead presidents as money): The only way to create base money is by Central Bank printing them (either physically or electronically). One day central bank may print enough money to target unemployment, next day it may target inflation and in a few years it may be coerced by government to print enough money to pay for government debt. Therefore Central Bank (and in extension government) controls base money.
19. July 2013 at 07:44
“CBs target *price*, not *quantity*, so no, they do not control the base.”
The Post Office sets the *price* of stamps, not the *quantity*, so they obviously do not control the supply of stamps.
19. July 2013 at 09:26
J.V Dubois,
Typically for monetarists are confused about monetary and fiscal operations. Just printing money and spending it is a fiscal act, has to be ordered by Congress and the Fed acts as an agent of the Treasury in this role. Other than that the Fed simply swaps various risk free assets: reserves and treasuries as a way to hit its policy targets, interest rates. So Congress controls the total amount of government assets (reserves+treasuries) (not really, since the existence of automatic stabilizers means that Congress allows this quantity to float in response to the state of the economy, and rightly so). But the Fed can only swap between what has been created by acts of spending by Congress. It can’t successfully target the quantity of treasuries or reserves, but it doesn’t need to, targeting interest rate doesn’t take that much trading.
W. Peden,
Correct, the Post Office cannot hit a goal “we will sell 1.7M stamps this week”, but has been hitting price targets since inception.
19. July 2013 at 09:53
The medium of account is the thing that defines the unit of account: gold, a foreign currency, a price index, etc. Some people say that the medium of account of the dollar is dollars, but that doesn’t make sense to me. Well, it makes sense to this extent: dollars are the MOA from the point of view of the banking system, since bank money is redeemable in dollars. But dollars are not the MOA from the point of view of the public.
19. July 2013 at 10:17
OhMy,
“Correct, the Post Office cannot hit a goal “we will sell 1.7M stamps this week”, but has been hitting price targets since inception.”
What do you mean, “cannot hit”?
What is the theory whereby a monopolist can set the price but not the quantity?