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recaption of the day

Posted by WARREN MOSLER on February 14th, 2011

Gandhi disagreeing with Nehru on how low the unemployment rate can go without generating inflation.

17 Responses to “recaption of the day”

  1. jorgejrl Says:

    Actually Nehru was trying to convince Gandhi to join him in his new shirt company project…Gandhi never liked the concept, Nehru went for it alone, and the rest as we know is history!

    Years later when asked about it Nehru explained that Gandhi was right after all. Because they couldn’t raise prices after some initial success,hey had to shut down and fire everyone…

    Reply

  2. beowulf Says:

    That’s funny! Nice pun.

    “non-accelerating-inflation rate of unemployment” is more accurate, and “NAIRU” (pronounced like “Nehru”) is easy enough to pronounce.
    http://www.oswego.edu/~dighe/lstums7.htm

    Reply

    WARREN MOSLER Reply:

    thanks!

    Reply

  3. Tom Hickey Says:

    FYI: two incoherent attacks on MMT. Zero rationale other than how good it was under the gold standard.

    http://animalspiritspage.blogspot.com/2011/02/comment-on-modern-monetary-theory.html#comment-form

    http://jessescrossroadscafe.blogspot.com/2011/02/modern-monetary-theory-sophistry-of-us.html

    Reply

    Mario Reply:

    yes I came across jesse’s post via other means and came to the same conclusion. What part of bonds do not fund government spending does he not understand!?!? QE2 was suppose to effect the bond curve and not too well at that either plus it effected all the interest it took away from the public as we have discussed at length here. He even mentions zimbabwe and weimar again…oh boy!!

    We of course know that QE2 is not inflationary but actually wouldn’t the fact that all that bond interest money was taken out of the private sector by Fed purchases actually make QE2 somewhat deflationary!?!?

    Cheers!

    MT :)

    Reply

    Tom Hickey Reply:

    Lively discussion on MMT developed over at Animal Spirits link cited above. Here’s the link again.

    http://animalspiritspage.blogspot.com/2011/02/comment-on-modern-monetary-theory.html

    Reply

  4. markg Says:

    “weather or not”, “Nehru”; I can’t wait for the Boehner pun?

    Reply

  5. GLH Says:

    I can imagine the President sitting beside Gandhi saying “Don’t worry I’m going to get a full employment bill through Congress just like my health care bill, everybody will be required to find a job or they will have to pay a fine.” John Boner would just cry.

    Reply

  6. Jason Says:

    Once again, the UMKC blog is out with a purely political post this one titled “Israelis Promoting Eternal War”. It’s a purely one-sided view of Israel as blood thirsty (while completely ignoring Arab commentators), but UMKC is losing all credibility with me. It’s no longer a MMT blog, just a run of the mill left-wing one.

    http://neweconomicperspectives.blogspot.com/2011/02/israelis-promoting-eternal-war.html#comment-form

    Reply

    Tom Hickey Reply:

    Jason, the UMKC blog does not bill itself as an MMT blog. Several of the UMKC profs that post there are not MMT’ers, including Bill Black and Michael Hudson, although they may be “allies.”

    Reply

    Jason Reply:

    With friends like these……

    Reply

    ESM Reply:

    Jason,

    I don’t find the post itself particularly anti-Israel, although I do find it strange that Bill Black is obsessed enough to compose a poorly written and hyperbolic rebuttal (without links!) to two columns penned by obscure journalists in a foreign newspaper, having nothing to do with economics.

    Israeli concerns about giving up the entire Sinai for nothing more than a piece of paper, which is now in jeopardy of being torn up, are certainly rational. My own view is that Israelis probably got a worse deal than they could have had because Sadat charmed them with his dignity, empathy, and bravery. Still, it was worth the gamble, and 37 years of peace is nothing to sneeze at.

    As for Jimmy Carter, I’m sure it will come as no surprise that I am not a fan. I doubt that he played a critical role in the peace treaty, although we can never know for sure. And of course this resource indicates that Carter was actually obstructionist:

    “Sadat’s liaison initiative spoke volumes about his reasons for wanting to make peace with Israel. He wanted an alliance with the American superpower and he wanted to kill Carter’s Geneva initiative.[9] His trip to Jerusalem signaled a major reorientation of Cairo’s place in the global scheme of things, from the Soviet to the American camp.[10] Carter’s acceptance of the proposed liaison scheme would have signaled American backing for Sadat’s unprecedented peace initiative. But Carter said no. However, Carter could not thwart the Israeli-Egyptian peace push. Within days Israeli journalists were allowed into Cairo, breaking a symbolic barrier, and from there the peace process quickly gained momentum. An Israeli-Egyptian working summit was scheduled for December 25 in Ismailiya, near the Suez Canal.[11]”

    My favorite Carter-related quote came from Alan Abelson in Barron’s. Carter apparently tried once to instill confidence in the markets by claiming “If I weren’t president, I would be buying stocks right now.” To which Abelson replied, “If he weren’t president, we’d all be buying stocks.”

    Reply

    beowulf Reply:

    My own view is that Israelis probably got a worse deal than they could have…

    Maybe so, but clearly Egypt got a worse deal than they could have (and it wouldn’t have cost Israel anything). As part of the Camp David Accords, the US promised Egypt $2.1 billion a year in foreign aid ($1.3 billion of which is military aid). Great, except that Camp David was signed in 1979 and there was no inflation indexing (hardly an unforeseen eventuality, CPI rose by 11% in 1979 alone).

    If the Egyptians had insisted on an annual aid $2.1 billion adjusted by CPI-U index, they’d now be receiving three times as much– $6.34 billion.

    Reply

    ESM Reply:

    Beowulf,

    I’m sure that everybody involved in the negotiations was aware of the concept of “present value.” And in 1979, I think they were keenly aware of inflation. I don’t know if Egypt could have squeezed more money out of the US or not, but the implication that the Egyptians didn’t know that the value of their annuity payments would decline over time (and the Israelis too, since they got substantially the same deal, only larger) is ludicrous.

    One more nit-pick since we’re on the topic. Almost everybody uses inflation adjusted numbers to compare money in the past to money today. This is really the wrong metric to use. When speaking about payments or receipts of countries, the right metric is nominal GDP growth adjusted. When speaking about payments or receipts for individuals, the right metric is nominal GDP per capita growth adjusted.

    Using inflation adjusted numbers, you get ridiculous results, like the Iraq war cost was comparable to the cost of the Civil War, or more than the Vietnam War, or some such nonsense.

    WARREN MOSLER Reply:

    and no mention of value of not being at war with each other

    beowulf Reply:

    ESM,
    It wouldn’t have cost Carter anything to include an inflation adjustment to the Egyptian aid package (and presumably to Israel as well), he was running for re-election in 1980 and even if he had won, it still would have been his last election. What would he care in 1979 how much aid Egypt received in 2011?

    I suppose what happened is no one anticipated that Camp David Accord payouts would still being going on 32 years later. Certainly Sadat and Carter (though perhaps not Begin) figured that a two state solution to the Palestinian issue would have been resolved by now and that the Camp David payouts to Egypt and Israel would have been adjusted at that time.

  7. macrosam Says:

    FRBSF says “new normal UE rate will be about 6.7%

    http://www.frbsf.org/publications/economics/letter/2011/el2011-05.html

    Reply

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