A slightly off-center perspective on monetary problems.
Not much time for blogging today, but here’s a great slideshow on market monetarism by Yichuan Wang.
HT: Saturos
PS. Saturos sent me a link to a category called “Scott Sumner,” which has about 100 items at The Economist that discuss my blog. Cool.
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11 Responses to “Yichuan Wang explains it all”
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9. October 2012 at 06:01
the website of the category on Economist is pretty cool. But I find the first link is unaccessible. Is it because of the mistake of the link or because I am in China?
9. October 2012 at 06:41
Yes, his blog was not available in China when I visited. I’ll try to embed later.
BTW, I checked on the Qing dynasty, and as you said it was Manchu. They did say the Manchu allied with the Mongols when they conquered the Ming dynasty. So there may be some ethnic Mongols in Beijing, but perhaps you’d know more than me. My wife says they look a bit different from the Han. I believe today most Manchurians are Han, so I’ve never been too clear on the distinction.
9. October 2012 at 06:54
I actually support NGDP targeting from a Post-Keynesian/Austrian perspective. If we target NDP above the nominal interest rate, we can systematically wipe out the level of debt by reducing the debt/income ratio.
Not only that, but inflation targeting really doesn’t make sense because money is not neutral and different goods are effected differently by inflation. NGDP is a much better target and makes way more sense.
9. October 2012 at 07:49
I noticed that after being stable at just under 100,000,000 for thousands of years, China’s population soared from 100 million to 400 million between 1650 and 1830. Does anyone know why? Obviously that was before the scientific revolution brought modern technology to China. So what happened? Even if there was a period of peace, those had occurred earlier in Chinese civilization, with no population surge. Any land acquisition would have been thinly populated areas to the north and west.
http://webarchive.iiasa.ac.at/Research/SRD/ChinaFood/data/pop/pop_21_m.htm
9. October 2012 at 08:07
Suvy, what kind of Austrian supports hyperinflating away debts?
Scott, see here: http://answers.yahoo.com/question/index?qid=20110212162509AA7YvmU
China was importing maize and sweet potatoes from America, as well as new rice varieties from (future) Indochina, during the Ming Dynasty.
9. October 2012 at 08:10
They imported the crops, I mean, not ongoing trade.
9. October 2012 at 08:52
Scott: It seems that the population growth in China was brought by agricultural revolution caused by two main factors:
1. During early 18th century there were new rice strains developed, that were more resistant to drought and that ripened earlier enabling double or multiple crop system
2. At the end of the 16th century Portuguese traders introduced new agricultural plants from America that enabled to use land not suitable for traditional plants.
9. October 2012 at 09:10
That’s an interesting irony. The Portuguese (plus Columbus) opened up the globe around 1450-1600. As a result 40 million native Americans died from European disease, and 100 million Chinese peasants were given the gift of life. Would the world have been a better or worse place if they’d stayed home?
Too late for a Columbus Day post, maybe next year.
9. October 2012 at 09:26
“Would the world have been a better or worse place if they’d stayed home?”
Don’t worry, I’m sure Utilitarianism has the answer…
9. October 2012 at 09:56
Saturo,
Hayek supported NGDP targeting. Austrians view the problem as too much total debt(both public and private)–NGDP targeting allows a systematic way to wipe out debts when struck with a large debt overhang without inflation becoming too high. NGDP wouldn’t cause hyperinflation at all. Hyperinflation would be around 50%; we’re talking about 4-5%–the amount we had in the late 1980’s (with an NGDP target of 4-6%). Effectively, the economy is allowed to grow its way out of the debt overhang. It’s much better than saying inflation(calculated by a horrible metric) should be 2% all the time.
9. October 2012 at 10:27
Slide 44:
Serious question, does advocating market monetarism require one to be delusional? Or is it unintentional?
1. A central bank that centrally plans:
a. the money supply (note that the market doesn’t determine this, because it is the Fed that decides when to print and when not to print and by how much. It doesn’t matter what the criteria the Fed uses, just like I cannot say “the market” decides how many hits over the head people get if a central head hitter decides on a policy of “I will hit however many people in the head as there are purchases of T-bills in the market”. That head hitter cannot claim “the market” is deciding how many hits to the head take place);
b. aggregate spending
c. nominal interest rates (even if this is completely unintentional from the central bank’s perspective)
NGDP targeting IS in fact an advocacy for central planning. Centrally planning money production in the hands of the state is a form of central planning. The “market” in “market monetarism” is an Orwellian redefining of common terms, so as to make them more accepted by those who would otherwise reject the program. The socialists did the same thing with the term “liberal”, when they took the term “classical liberal” and changed it from night watchmen minarchism, to cradle to grave welfarism.
2. NGDP targeting is in fact discretionary. The Fed has to decide on the following discretionary items:
a. An NGDP target rate;
b. Which time frame such a target is to be made good;
c. Who to send their inflation checks to;
d. What to “buy” (if they will buy anything that is) from those who receive the checks;
e. When to send those checks (does the central bank target a 5% annualized NGDP made good per month? Or per week? Or per year?).
There is discretion all over the place. It is not true that just because there is less discretion than an alternative policy, that somehow there is no discretion in the new rule. If Wang isn’t advocating for discretion, then somebody else must, if NGDP targeting is to actually be put into practise. It would be like me saying “I am not advocating for central planning or discretion, all I am asking for is for the state to enforce a particular rate of head beatings rate of increase per year. The market will decide how many heads get hit in accordance with how many T-bills are bought. See? No explicit mention of any central planning or discretion.”