Qualifications

Some manic-depressive Critic suggested I may not understand the basic principles of Monetary policy (actually the Individual involved is a very focused and sincere Economist of acute Intellect, but that doesn’t help my Case). I therefore turn to the great Sage, Wikipedia, to prove his Case for him. I believe in the Superneutrality of money, basically because of the sticky nature of both Prices and Wages. The Case for sticky Wages is well-known and discussed, but Prices can be as equally sticky; this because of the ruling Consumption and Credit-extension practices of the time. The later will not be eased for greater Consumption with the rapidity of extension of easy Capital Investment terms. Investment becomes over-financed, while there is a 11-14 month lag in Consumption practices; this later Event evidenced by the increase in number and magnitude of Consumption Retail Sales. Real Risk has been sharply increased, though nominal Risk is assumed to be reduced. The Condition makes Commodity Markets wobble upward, but with amplified swings of Highs and Lows; the general upward movement assured by excess Resource consumption through the over-financed Capital investment. Many Economists would suggest this would be a perfect condition, though I am not one of them.

The generally accepted source of Inflation remains growth of the Money Supply, though I possess a real feeling that contraction of M1 speeds the Velocity of Money, and therefore of the desire to more quickly aggregate funds; i.e., counter-vector pressure on Prices with suppression of Wages and Consumption Credit conditions. All of this detail enters into my Post of yesterday, where I suggested there was a real connection between contraction of M1 and Recessions. Fed release of Cash into the economy, without expansion of the bottleneck of M1 contraction, simply fuels the Inflation; doing nothing to incite Consumption, easier Consumption Credit conditions, or spur added Production. I am beginning to feel like I am somewhere out there beyond Neptune, so it might be time to bring it home!

Relative Events which are determinate and decisive (at least to myself): Lack of attempts to widen any bottleneck of M1; no attempts to ease Consumption Credit terms and rates of Interest; provision of Money growth only to the financial sectors; lack of support for Wages and Employment; unwillingness to suppress excessive Inflationary pressures in Commodity Markets; and no restrictions from domestic dumping of Consumption Product below Production Costs. The study of Economics will always disturb, simply because it is a balance of an excessive number of variables; none of which can be allowed to meander into dangerous territory. lgl