tag:blogger.com,1999:blog-1110014885778996459.post5535325322314066856..comments2024-03-29T00:15:52.716-07:00Comments on Idiosyncratic Whisk: Causality reversal is bad.Kevin Erdmannhttp://www.blogger.com/profile/07431566729667544886noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-1110014885778996459.post-77995240029710077762016-12-16T11:41:49.918-07:002016-12-16T11:41:49.918-07:00On a macro level, our capital surplus indicates mo...On a macro level, our capital surplus indicates more foreign investment in the US than vice versa. Yet the public is focused on cases like Carrier when the reality is that there is more foreign investment in the US than vice versa. I wonder to what extent this misperception is magnified by our federal gov't debt (ie, some portion of the foreign investment in the US is just in debt instruments, not factories (like BMW in SC, etc))?billnoreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-731631372993604912016-12-13T18:16:17.550-07:002016-12-13T18:16:17.550-07:00Well, I don't necessarily disagree, but it see...Well, I don't necessarily disagree, but it seems like there is a difference between liquidity and real consumption that is important here.Kevin Erdmannhttps://www.blogger.com/profile/07431566729667544886noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-83447483402739808742016-12-13T17:23:18.968-07:002016-12-13T17:23:18.968-07:00Well, I think I fall into the spending creates sup...Well, I think I fall into the spending creates supply camp. <br /><br /><br />The experience in Japan in the Great Depression with their brilliant central banker Takahashi Korekiyo certainly indicates that simply printing money to finance government outlays can work to beat a depression.<br /><br />WWII in the US comes to mind also.<br /><br />Sure, too much money can be printed. Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-70278779141990494742016-12-13T17:22:54.974-07:002016-12-13T17:22:54.974-07:00Well, I think I fall into the spending creates sup...Well, I think I fall into the spending creates supply camp. <br /><br /><br />The experience in Japan in the Great Depression with their brilliant central banker Takahashi Korekiyo certainly indicates that simply printing money to finance government outlays can work to beat a depression.<br /><br />WWII in the US comes to mind also.<br /><br />Sure, too much money can be printed. Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-46107700982432790462016-12-13T10:38:19.018-07:002016-12-13T10:38:19.018-07:00You're right. We're probably not going to...You're right. We're probably not going to agree, but your framework does present a nice exercise for me regarding priors and how these ideas come together.<br /><br />Thanks for the comment!Kevin Erdmannhttps://www.blogger.com/profile/07431566729667544886noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-48010439524986979632016-12-13T06:57:16.992-07:002016-12-13T06:57:16.992-07:00Hi Kevin.
Thanks for the response. I suspect our ...Hi Kevin.<br /><br />Thanks for the response. I suspect our starting points are too far apart to reach agreement on much, but for what it's worth, I think you've got my argument right. The key point is, as you say, that spending causes production. We don't live in a world of scarcity, and in particular, we don't live in a world of scarce capital. The investment in labor-saving machinery at McDonald's, or in industry in a developing country, does not deplete a fixed pool of savings that would otherwise be invested elsewhere. I don't expect you to agree with either of those claims, I'm just confirming that they are my assumptions here.<br /><br />In general, I think the best approach is to be prepared to tell a variety of causal stories. In some contexts it makes sense to think of spending driving income, in other contexts it makes sense to think of income driving spending. Old-school development economists used to talk about "three gap" models of development, where investment might be held back by a lack of demand, or a lack of saving, or a lack of foreign exchange. Depending which of those constraints is binding in a given setting and over a given timeframe, it may or may not be right to say that capital deployed in a certain way is necessarily withdrawn from somewhere else. JW Masonhttps://www.blogger.com/profile/14979669866721105903noreply@blogger.com