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Positive Money videos

...on serious topics that don't fit anywhere else at present.
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animist
Posts: 6522
Joined: July 30th, 2010, 11:36 pm

Re: Positive Money videos

#21 Post by animist » March 17th, 2018, 12:39 pm

Latest post of the previous page:

Nick wrote:
animist wrote:not driving at anything, I just thought you might explain just why this equation is true and a tautology
Hmmm... I take it you mean tautological in the philosophical sense, not as used in common parlance, ie is always true, as in an equation, rather than a needless explanation ( a blue ball is blue, say).

Well, MV is another way of expressing PT, as both are another way of expressing the same thing, the total expenditure over a given period.

Does that help...? :)
not a lot. Look, it is intuitively obvious that increasing M will increase P in some rough and ready way, other things equal. But how do V and T figure here? What is the difference between them? BTW, a tautology is a tautology (another tautology!) and there is no peculiar philosophical meaning to this word - it just denotes a statement which is necessarily true in virtue of the meaning of its terms. But tautologies can be trivially obvious ("eggs is eggs") and much less obvious, as here

Nick
Posts: 11027
Joined: July 4th, 2007, 10:10 am

Re: Positive Money videos

#22 Post by Nick » March 18th, 2018, 1:35 pm

animist wrote:
Nick wrote:
animist wrote:Well, MV is another way of expressing PT, as both are another way of expressing the same thing, the total expenditure over a given period.

Does that help...? :)
not a lot. Look, it is intuitively obvious that increasing M will increase P in some rough and ready way, other things equal.
Yes, if other things are equal. Which they may or may not be. Thus, an increase in M may result in an increase in T, without increasing P. In practice, it is likely to affect both.
But how do V and T figure here? What is the difference between them?
Using the simplest of models, take two examples.

In the first, supply is inelastic, in the second, elastic.

If M is increased but supply is constrained, there won't be an increase in the number of transactions, but an increase in price. eg A Van Gogh at auction. If bidders have more money available, the price goes up

If M is increased but supply is freely available, the number of transactions will increase without affecting price. eg Music downloads.

What we have seen in practice, is a bit of both. On the one hand, as available money has become cheaper, we have seen an increase in the price of housing (though there are other reasons for this too), because supply is constrained.

We have also seen increases (from where it would otherwise have been) in car sales. If that had not happened, fewer cars would have been produced.


Does that help...? :)

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animist
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Joined: July 30th, 2010, 11:36 pm

Re: Positive Money videos

#23 Post by animist » March 20th, 2018, 11:25 am

Nick wrote:
animist wrote:
Nick wrote:not a lot. Look, it is intuitively obvious that increasing M will increase P in some rough and ready way, other things equal.
Yes, if other things are equal. Which they may or may not be. Thus, an increase in M may result in an increase in T, without increasing P. In practice, it is likely to affect both.
But how do V and T figure here? What is the difference between them?
Using the simplest of models, take two examples.

In the first, supply is inelastic, in the second, elastic.

If M is increased but supply is constrained, there won't be an increase in the number of transactions, but an increase in price. eg A Van Gogh at auction. If bidders have more money available, the price goes up

If M is increased but supply is freely available, the number of transactions will increase without affecting price. eg Music downloads.

What we have seen in practice, is a bit of both. On the one hand, as available money has become cheaper, we have seen an increase in the price of housing (though there are other reasons for this too), because supply is constrained.

We have also seen increases (from where it would otherwise have been) in car sales. If that had not happened, fewer cars would have been produced.


Does that help...? :)
in a way, yes thanks, but what you seem to be talking about are demand and supply in the "real" economy, not about money. When you talk about M, whether for Van Gogh or cars, you seem to be talking about demand for a particular good, and yes of course, if and only if supply is elastic then prices will not increase but sales will. I guess you are using these as examples, but when you talk of "money available" for buying houses, all this means is that there is increased effective demand. Plus which, you have not mentioned V.

Nick
Posts: 11027
Joined: July 4th, 2007, 10:10 am

Re: Positive Money videos

#24 Post by Nick » March 20th, 2018, 2:13 pm

animist wrote:
Nick wrote:
animist wrote:Yes, if other things are equal. Which they may or may not be. Thus, an increase in M may result in an increase in T, without increasing P. In practice, it is likely to affect both.
Using the simplest of models, take two examples.

In the first, supply is inelastic, in the second, elastic.

If M is increased but supply is constrained, there won't be an increase in the number of transactions, but an increase in price. eg A Van Gogh at auction. If bidders have more money available, the price goes up

If M is increased but supply is freely available, the number of transactions will increase without affecting price. eg Music downloads.

What we have seen in practice, is a bit of both. On the one hand, as available money has become cheaper, we have seen an increase in the price of housing (though there are other reasons for this too), because supply is constrained.

We have also seen increases (from where it would otherwise have been) in car sales. If that had not happened, fewer cars would have been produced.


Does that help...? :)
in a way, yes thanks, but what you seem to be talking about are demand and supply in the "real" economy, not about money. When you talk about M, whether for Van Gogh or cars, you seem to be talking about demand for a particular good, and yes of course, if and only if supply is elastic then prices will not increase but sales will. I guess you are using these as examples, but when you talk of "money available" for buying houses, all this means is that there is increased effective demand. Plus which, you have not mentioned V.

Nick
Posts: 11027
Joined: July 4th, 2007, 10:10 am

Re: Positive Money videos

#25 Post by Nick » March 20th, 2018, 2:14 pm

animist wrote:
Does that help...? :)
in a way, yes thanks, but what you seem to be talking about are demand and supply in the "real" economy, not about money.
And there's no money in the "real" economy? :shrug:
When you talk about M, whether for Van Gogh or cars, you seem to be talking about demand for a particular good, and yes of course, if and only if supply is elastic then prices will not increase but sales will.
Well, yes, I am talking about effective demand, but that is directly effected by the amount of money available. If there is more money in the economy, then people will be able to offer more money, so effective demand increases.
I guess you are using these as examples,
Yes, I am using models to illustrate economic principles, trying to isolate individual influences.
but when you talk of "money available" for buying houses, all this means is that there is increased effective demand.
You seem to have this the wrong way round. It is the increase in money which has increased the effective demand. If no lender will advance money to buy a particuar type of property, then the value falls.

Remember we are just looking at a simplistic model here. We are not talking about a switch from one product to another such as a swith from diesel cars to petrol ones, which would tend to raise the price of petrol at the expense of diesel, without there being a change in the overall price level.
Plus which, you have not mentioned V.
Poor V! Is he a mate of yours...? :wink: OK, let's look at V. If V decreases, (money put under the bed, say, ) then M does not vary, but V does. In times of hyper inflation, people would rush out and buy anything, just to secure a store of value. To take an imagined example, if the price of of a tin of beans doubles every week, then it is wise to buy beans, so that they can be swapped in future for other things. This will inflate the price of beans.

Are we still making progress....? :)

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animist
Posts: 6522
Joined: July 30th, 2010, 11:36 pm

Re: Positive Money videos

#26 Post by animist » March 22nd, 2018, 11:14 am

Nick wrote:
animist wrote:
Does that help...? :)
in a way, yes thanks, but what you seem to be talking about are demand and supply in the "real" economy, not about money.
And there's no money in the "real" economy? :shrug:
I am not saying that myself, but it seems to be how people distinguish between the financial system and the economy as a whole[/quote]
Nick wrote:
When you talk about M, whether for Van Gogh or cars, you seem to be talking about demand for a particular good, and yes of course, if and only if supply is elastic then prices will not increase but sales will.
Well, yes, I am talking about effective demand, but that is directly effected by the amount of money available. If there is more money in the economy, then people will be able to offer more money, so effective demand increases.
agreed, but I think that it may be confusing to explain things this way
Nick wrote:
but when you talk of "money available" for buying houses, all this means is that there is increased effective demand.
You seem to have this the wrong way round. It is the increase in money which has increased the effective demand. If no lender will advance money to buy a particuar type of property, then the value falls.
ah, this is what I mean about confusing the issue (or confusing me, anyway!) I don't think I have got this the wrong way round because I was not denying that increasing M is likely to stimulate demand. But the two things are not same, are they? Demand might be stimulated by other means than increase in M; eg, there might be a fashion in art which favoured Van Gogh, so that demand for his pictures increased - nothing to do with the supply of money
Nick wrote:
Plus which, you have not mentioned V.
Poor V! Is he a mate of yours...? :wink: OK, let's look at V. If V decreases, (money put under the bed, say, ) then M does not vary, but V does. In times of hyper inflation, people would rush out and buy anything, just to secure a store of value. To take an imagined example, if the price of of a tin of beans doubles every week, then it is wise to buy beans, so that they can be swapped in future for other things. This will inflate the price of beans.
OK - of course, the motive might just to be secure in one's beans supply! So what you are saying is that a sudden increase in V will increase P if M is constant? Yet - P has already increased, and that has caused the increase in V, so the causation is not that clear? (And reverting to a barter economy is a pretty extreme situation). Or do you mean that V has fallen? In which case, with M and T constant, P should fall. Can you not just DEFINE V rather than giving these "examples"?
Nick wrote: Are we still making progress....? :)
not really. I asked why this equation was a tautology, and I still don't know. And though you have suggested a meaning for V, I am still not clear on what V is as opposed to T; they both seem to concern the use of money to buy and sell. I assume that what is a tautology, if there is one, is about percentage CHANGES in these four variables, since obviously they are in different units and therefore cannot in themselves appear in an equation

Nick
Posts: 11027
Joined: July 4th, 2007, 10:10 am

Re: Positive Money videos

#27 Post by Nick » March 22nd, 2018, 12:42 pm

animist wrote:
Nick wrote:
animist wrote:in a way, yes thanks, but what you seem to be talking about are demand and supply in the "real" economy, not about money.
And there's no money in the "real" economy? :shrug:
I am not saying that myself, but it seems to be how people distinguish between the financial system and the economy as a whole
People say all sorts of things! Not all of them right!
Nick wrote:
When you talk about M, whether for Van Gogh or cars, you seem to be talking about demand for a particular good, and yes of course, if and only if supply is elastic then prices will not increase but sales will.
Well, yes, I am talking about effective demand, but that is directly effected by the amount of money available. If there is more money in the economy, then people will be able to offer more money, so effective demand increases.
agreed, but I think that it may be confusing to explain things this way
I do what I can. :)
Nick wrote:
but when you talk of "money available" for buying houses, all this means is that there is increased effective demand.
You seem to have this the wrong way round. It is the increase in money which has increased the effective demand. If no lender will advance money to buy a particuar type of property, then the value falls.
ah, this is what I mean about confusing the issue (or confusing me, anyway!) I don't think I have got this the wrong way round because I was not denying that increasing M is likely to stimulate demand. But the two things are not same, are they? Demand might be stimulated by other means than increase in M; eg, there might be a fashion in art which favoured Van Gogh, so that demand for his pictures increased - nothing to do with the supply of money
:laughter: Here I am trying to isolate different influences, and you promptly mix them up again! I'll try again :)

Suppose the art market is worth a billion pounds. And tastes dictate that this is split equally between Impressionists and Old Masters. Then (for whatever reason, it doesn't matter) there is a change in taste, in favour of Impressionists, then the price of Impressionists will rise, but the price of Old Masters will fall. There has been a change in the value of its component parts, but not in the price of art in total.

If however, M increases (or if more money comes into the market, people prefer art to property, say) then the price of Impressionists coud rise without that of Old Masters falling.

Does that make sense to you...? :)


Nick wrote:
Plus which, you have not mentioned V.
Poor V! Is he a mate of yours...? :wink: OK, let's look at V. If V decreases, (money put under the bed, say, ) then M does not vary, but V does. In times of hyper inflation, people would rush out and buy anything, just to secure a store of value. To take an imagined example, if the price of of a tin of beans doubles every week, then it is wise to buy beans, so that they can be swapped in future for other things. This will inflate the price of beans.
OK - of course, the motive might just to be secure in one's beans supply! So what you are saying is that a sudden increase in V will increase P if M is constant? Yet - P has already increased, and that has caused the increase in V, so the causation is not that clear?
There's no reason why such things couldn't be mutually reinforcing.
(And reverting to a barter economy is a pretty extreme situation).
In times of hyper-inflation, this is what we see. It also occurs when printed money is not available. In prisons ciggies count as money. Money is as money does, it doesn't have to be notes and coins. The example is at the extreme end, but the direction of travel is clear.
Or do you mean that V has fallen? In which case, with M and T constant, P should fall.
Any of the variables M,V,P or T can alter, for external reasons. But if there is a change in one of them, it will cause a variation in one r more of the others. In practice, all four are changing because of external factors, but they will still affect each other.
Can you not just DEFINE V rather than giving these "examples"?
My examples were trying to make it easier to undrstand. :sad: OK, well V can be defined as the speed with which M moves through the economy. Better...?
Nick wrote: Are we still making progress....? :)
not really. I asked why this equation was a tautology, and I still don't know. And though you have suggested a meaning for V, I am still not clear on what V is as opposed to T; they both seem to concern the use of money to buy and sell. I assume that what is a tautology, if there is one, is about percentage CHANGES in these four variables, since obviously they are in different units and therefore cannot in themselves appear in an equation
On reflection, and because of your challenges, I think I've made a slight boo-boob. :redface: T is not the number of transactions, but rather the aggregate total of transactions. Thinking it through, that makes much more sense! :laughter:

Any help...? :)

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