RG

@S_Surprenant Also just to say, by "money printing" I mean monetary policy thats too loose...

The Bank of Canada engaged in QE for the first time in March 2020. It adopted inflation targeting in February 1991, intending to reach a 2% target in 1995, and committed to using the policy rate as its main policy instrument in June 1994. So, let's take January 1995 onwards as the "current regime" era. Has inflation ever been above the 2% target since January 1995, but before March 2020? In February 2003, we had 4.7% inflation. Is that also "money printing"? What's going on here is that you're not applying the theory correctly. If the amount of money in circulation increases, it's only inflationary if money demand doesn't offset this by expanding. Similarly, if money demand contracts, you'd actually need the amount of money in circulation to fall to keep inflation from rising: you can create inflation *without* moving the quantity of money in circulation. That's how you can slip things like foreign supply shocks into the conversation about inflation without disagreeing one bit with Friedman: because money demand also moves.

Let me clatify this problem for everyone. MV = PY is an identity. It simply states that you need enough money to cover all transactions. The theory is about how you think money M, velocity V, prices P, and output Y interact. The intuition behind monetarism is often conveyed to undergraduates by saying that if you hold V and Y constant, then changes in M will be reflected in changes in P. That is the simplest way to say that printing money causes inflation. The problem is that this isn't the actual theory and it glances over important nuances. For starters, in the theory behind all of this, 1/V is money demand and that thing varies over time. The grown-up version of V is constant is V is covariance stationary meaning that it fluctuates around a stable mean. That is precisely what people debated in the 80s and 90s, and more recently in the 2010s using a different way to measure money in the US (specifically, the latter research used Divisia indexes). One reason this matters is that if money demand and money supply both increase, M rises and V falls, so there need not be a rise in prices. Intuitively, people have to use the money to bid up prices. Nothing happens if everyone sits on it. The other reason this is important is the nature of the signal you get from variations in M to predict variations in P. What theory gives you is a long-run relationship between M, P, and Y: if V fluctuates around a stable mean, then M, P, and Y have to "grow together" and, if they break apart too much, they get pulled back in. The technical term is that M, P, and Y share a stochastic trend -- they are cointegrated. So, what the theory buys you is what we call an "error correction" mechanism that keeps everything together over long periods of time. It's not nothing. To first order and with some assumptions, it says that 2% inflation and 2% real GDP growth requires 4% money growth over the long-run. But it's not clear that it's a great signal to forecast inflation -- other things besides monetary policy moves stuff in that equation. Now, back to policy. Monetary policy in Canada only engaged in quantitative easing during the pandemic. Otherwise, the Bank of Canada usually works by setting a short term interest rate, not by targetting changes in the money supply. So, it's hard to measure those things just for Canada, but one can try. To do it, you have to ask yourself what happened between March 2020 and the peak of inflation in June 2022 (healine CPI peaked there year-over-year). Can you really attribute all or even most of this to unconventional monetary policy? Because there were massive fiscal expansions in both Canada and the US, lockdowns and subsequent easing of punlic health policy, disruptions in shipping, energy and commodity markets, and the Canadian labor market was extraordinarily tight for a while... Where does any of this figure in your analysis? I am working on a project specifically on that inflation episode for the US and Canada using a model estimated before the pandemic (partly to see if "old" explanations are enough). I don't explicitly treat unconventonal monetary policy like QE and FG, but it would probably show up as demand shocks in my model. And I also have some policy counterfactuals to think about the cost of moving to hike rates earlier when inflation started rising. I'll be sharing preliminary results in two weeks at the SCSE conference in Quebec City. Feel free to follow my work and take a look later this year when we have a full working paper ready.

@S_Surprenant Thanks. & money demand is primarily a function of economic activity/growth, right? So what I wanting to take away is that you effectively can't grow the economy (real growth) with monetary policy that's too loose. Growth has to come from supply side.

@BuddyWells1 Ask the Zim dollar how central bank lending to their government went... Your economic ideology is not only ignorant, it is borderline evil. Read some Austrian Economics school of thought on what interest rates are... They're not just a number that can be thumb-sucked.

@marketsafari47 And this article explains how higher interest outflow net weakens the rand over time. buddywells.wordpress.com/2023/11/27/the…

High inflation plus extreme unemployment is fine though….look at South Africa. No complaints about independence though half the nation lives in misery (42% real unemployment). The SARB has kept the policy rate more than 3% above inflation on average over the last 15 years, despite that it adds to cost push inflation and reduces already insufficient demand, in a nation in which over 50% of the population has more liabilities than assets. “Real economists” think this is acceptable though.

@stayEminent @CodedPromis_ Even if they overtake Spurs, they're still relegated at 18th... They need to overtake Spurs and West Ham, which they no longer can...

@CodedPromis_ You gettt, it makes zero sense

But how are they relegated when they're 11 points behind Tottenham ? What if they win all their remaining 4 matches (12 points) and spurs lose theirs

@BuddyWells1 In small, high-trust, homogeneous & politically-sophisticated societies, most economic systems stand a higher chance of working. But they're not all replicable in other conditions without high risk

Norway has been a welfare state for around 80 years… and its sovereign wealth fund, from nationalised oil revenue, is now equal to around $350 000 per citizen. Thats a lot of time and a lot of money. Norway currently scores amongst the highest in the world in terms of democratic, market and economic freedom. No-one should ever take Ayn Rand seriously.

@verashni Truth: Malema got a fine for discharge of weapon only. He got five years for unlawful possession of a firearm and ammunition - which are not small crimes....

How many years did Oscar Pistorius serve for firing a gun in a Tashas, Melrose Arch? Asking for a friend. Oh, that's right! It was served concurrently with his initial five year sentence for shooting an actually human being, Reeva Steenkamp. #JuliusMalema

The more I study the economy, its processes and what economists have uncovered about it, the more I realize the extent of the error that people make, scholars and laymen alike, by assuming it's a system or machine rather than an evolving organism (to use an analogy from biology).

Laissez-faire capitalism and a constitutionally limited government that protects individual rights. But that requires a critical mass of people who understand that rights derive from man's nature as a rational being. That you have the right to your own life, which means the right to think, produce, and keep the product of your effort. Right now, we're intellectually bankrupt. Universities teach that wealth is theft. Media treats producers as villains. Politicians campaign on punishing success. You don't get capitalism when the culture worships parasites and demonizes achievement. You get cronyism, where government picks winners and the politically connected loot everyone else. The solution isn't more government control. It's separation of economy and state. But first, we need a philosophical revolution. People must grasp that their right to exist doesn't impose obligations on others to sustain them. That you have no claim on the product of another person's mind or effort. Until the culture understands that reason, not force, is man's means of survival, we'll keep lurching toward statism. The battle is philosophical, not political. Win the minds, and capitalism follows. I suggest you read Objectivism: The Philosophy of Ayn Rand by Leonard Peikoff or any of Rand's works.

This perfectly captures the parasite's delusion: that wealth is static loot to be seized and redistributed. Here's what actually happens when you "repossess all their stuff": The producers will rebuild. They'll create new wealth because that's what they do. They identify opportunities, solve problems, innovate, build businesses, and generate value. Their wealth came from their minds, not magic. The looters will consume what they stole at light speed and wind up with nothing. Because they never learned to produce. They only know how to take. Look at every socialist revolution in history: seize the factories, the farms, the businesses. Within years, everything collapses. The factories stop producing. The farms stop yielding. The wealth evaporates. Venezuela. Cuba. Soviet Union. Zimbabwe. The pattern is identical. Why? Because wealth isn't stuff sitting in a vault. Wealth is the ongoing process of human intelligence applied to production. Confiscate a factory and you get the building. You don't get the knowledge, vision, and competence that made it productive. The "rich" you want to loot aren't dragons hoarding gold. They're producers creating value. Rob them and you rob everyone, including yourself. You'll be left with ruins and still blame capitalism.

@captgouda24 So governments and companies and individuals can live off debt and inflate it away over time... Banks make money off lending, and, theoretically, it supports growth. But of course, most of that growth is just inflation and not real growth.

Does anyone have a satisfactory answer as to why?

Some truth to this... But eventually the failures of the race laws will lead to their own end. The joke is, if the ANC just looted *less* the cadres could still have gotten rich and not failed to grow the economy, but they all just had to be billionaires...

Here it is again... Let's not pretend SAfrican black majority aren't racists

There we go... The race-based hatred of white SAfrican individuals out in the open. But no, reverse racism doesn't exist.

@dandolfa Dollar's reserve status allows for deficits to go unpunished, but does that mean deficits are necessary?

Am surprised at the strength of this assertion. It seems plausible to me that reserve currency status at least contributes to persistent current account deficits. Would love to hear the counter argument.

@GitaGopinath @farmerrf @michaelxpettis It doesn't necessitate a deficit, but it allows it without punishment from the market.

(i) Not clear why growth in world trade should create a net demand for dollars. World trade can grow through both rising exports and imports while remaining balanced. (ii) The other commonly cited argument is that the demand for safe assets requires the safe asset issuer to run deficits. This again is theoretically weak. Demand for safe assets is about gross flows. There is no reason this should necessarily lead to net deficits. (iii) Empirically too the reserve currency argument has limitations. As @Brad_Setser points out the relation between fiscal deficits and trade/current account deficits is imperfect. There were 2 previous major episodes of global imbalances: One was in the 1980s where indeed large fiscal deficits (and an appreciating dollar) contributed to growing current-account deficits. The second episode was in the run-up to the GFC in 2008 when fiscal deficits were not the driver (and the dollar was depreciating). (iv) During the years when the British pound was the dominant currency of the world Britain ran current account surpluses. (v) The Swiss Franc is a reserve currency country that consistently runs surpluses. New Zealand, on the other hand, is not a reserve currency country and has consistently run deficits. So, both theoretically and empirically, it is hard to argue that the dollar's reserve currency status is what is behind persistent US current account deficits.

@HeinzZzA It depends to what degree you think shared/collective history matters in defining culture. I'd say it matters, although not sure if to the same degree as the factors you listed.

I don't agree. A black South African raised speaking Afrikaans as their mother tongue, steeped in boeremusiek, braai culture, Calvinist values, rural traditions, and identifying fully as part of that heritage, isn't that person also an Afrikaner? Culture isn't skin-deep. It's lived and claimed. Recognition matters for true inclusivity. @AfrikanerHart