EclectEcon

The Real Price of Gasoline

Gasoline has a much higher price now than it did in the 1950s, and it has had some big swings, but when you correct for the rate of inflation,...

1950 or so:   $0.27 in 1950 equates to about $3.52/gallon in today’s dollars.

1953-56:  in Omaha, Nebraska, gas was $0.179 per gallon in 1953. That’s about $2.11 in today’s money, while the national average of $0.29 is about $3.40 today.

1956-59: In 1956, the national average was $0.30 per gallon, or around $3.47 today; in 1959, it was $0.31, the equivalent of $3.34 today. 

2024: Depending on where you live, you might have noticed that the present-day dollar equivalents of those 1950s prices are right in line with what gas currently costs. According to AAA, the current national average is about $3.45 per gallon; the U.S Energy Information Administration lists a similar average of about $3.44 per gallon. By those metrics, the price of gas in 1950 was essentially higher than it is today.

Of course in the intervening years, the price of gasoline dropped and then rose dramatically.

Also, for Canadians, the price of gasoline today is about $1.65Cdn per litre, which translates roughly to about $4.55 US per gallon. Why the difference? My guess is that we pay much higher gas, carbon, and sales tax rates in Canada.

The quoted material is from this site.

Long and Variable Lags in monetary policy

Let me ask yet again, what is it about the famous Milton Friedman quip about monetary policy that today's central bankers don't seem to get? According to Friedman, monetary policy had (has?) an effect but only with a long and variable lag. Were all of today's central bankers trained by rational expectations cowboys to believe that all markets always clear instantly?

Here are monetary data from FRED for the Canadian economy:

Fascinating how M1 exploded early in the pandemic and then was followed (with a long and variable lag) by inflation that central bankers seemed surprised by. The last two Governors of the Bank of Canada oversaw this expansion and acted far too late to reduce the inflationary pressures in the economy (and I'm disappointed since both of them got PhDs from UWO).

And look at the money supply data in the past few months! The money supply is actually shrinking in Canada. No matter what the economy is like now, this decline in the money supply strongly indicates we're in for a serious recession, again after a long-and-variable lag.

How long is the lag? Nobody can be sure, which is why Friedman answered the way he did. My guess: 18 months +/- six months.

 

hat tip to David Laidler, who kindly discussed this situation with me earlier this week and who told me that Cdn monetary data are available on FRED.

Inflation? You bet! Hold onto your hats. We're in for one heckuva ride!

I attended a webinar yesterday* in which Christopher Waller, a member of the Board of Governors of the US Fed, said inflation is under control (despite a 4.2% annual rate of inflation measured in the past month) and that overshooting the 2% target is good because they undershot the target in the past. He also allowed, however, that he'd be concerned if the economy experienced inflation rates > 4% for several months running. [update: his views were reported numerous places. E.g. See this.]

Keep in mind that the CPI seriously under-includes asset price inflation, such as houses, stocks, cryptocurrencies, etc. Also keep in mind that current labour shortages in many occupations and industries are leading to rising wages and salaries, raising costs for many businesses.

He also said that the Fed has to be reactive, not proactive. No foolin'. I almost fell out of my recliner when I heard that. If the Fed is to be reactive, that means they will wait until the economy actually experiences inflation before doing anything about it. It also implies that they think their forecasting models are garbage.

Meanwhile, the expected rate of inflation is creeping upward, and as that happens, so will interest rates [very roughly, the nominal or stated rate of interest equals about 1.5% plus the expected rate of inflation -- see the Fisher Equation -- all risk-adjusted, of course.].

And as interest rates rise, commercial banks in the US (chartered banks, etc. in Canada) will have a strong incentive to create new loans (i.e. create more money) based on their massive holdings of excess reserves at the central bank.

And as that happens, then the large increases in the money supply will lead to even more inflation.... not hyperinflation, but I can readily imagine average annual inflation rates of 3-6% for quite some time to come.

As I wrote to some friends earlier this morning,

WTF, eh?

This guy is touted in Business Insider for having said last spring that we'd experience inflation in a year or so.

 

My friend, John H, and I were making similar predictions, but nobody seems to be beating down our doors to pay us for our insights.

 

My most recent four or five posts on it all are here in reverse chronological order:

https://www.eclectecon.net/economics_moneymacro/

 

... Central banks will have their hands full, trying to keep the genie in the bottle.

What still puzzles me, though, is that the implied expected rate of inflation from the TIPS bond rates is still low (though it is rising  and is now up over 2.5% for the long term of ten years -- see the graph below). Quite obviously, money market managers don't agree with my assessment.

 

The 5-year breakeven expected rate of inflation is even higher at 2.65%.

 

Yes, the Fed can dampen these effects by "soaking up" a lot of excess reserves; it can do this by nudging up the interest rate they pay on commercial bank excess reserves held at the Fed, but:

1. That is a potentially very blunt tool. Raising that rate by even 0.05% will soak up a LOT of excess reserves, creating sizable starts and stops in the macroeconomy.
2. As interest rates rise, the interest payments on all gubmnt debts will skyrocket, creating more deficit problems for the future. Yes, all levels of gubmnt will face budget shortfalls (for which most will be only vaguely, at best, prepared).

Hold onto your hats, everyone. We are in for one heckuva ride...

UPDATE: Also see this CBC piece about an interview with David Laidler. He has similar concerns.

UPDATE #2: After I sent this to David (a fellow emeritus from UWO), he wrote back

Yup - in old style movie going, the phrase was "This is where we came in"

UPDATE #3: My friend, King Banaian, devoted an hour of his regular radio programme to this issue, expressing a similar disbelief that two members of the Board of Governors of the Fed plus the president of the St. Louis Fed all said pretty much the same thing.

----

*with thanks to the Global Interdependence Center for inviting me to attend their webinars.

Another Reason for Concern about the FED's Liquidity Vacuum

A few weeks ago I wrote about how the FED is vacuuming up liquidity by making interest payments on US commercial bank excess reserves deposited at the Fed. In that post, I noted that so long as the Fed vacuums up the excess liquidity created when they buy up additional debt (gubmnt and otherwise), I can understand why and how there will be little actual monetization of the debt and only minor inflationary pressure. [It took me too long to grasp this, if it's correct.]

But by doing so, the Fed is also probably slowing economic recovery (to the extent that demand-side restrictions or reductions are playing a role in slowing the recovery from the current supply-side Covid shock).

From the Boston Globe:

Americans are finally saving more money — at exactly the wrong time: In an economy built on conspicuous consumption, Americans never seemed to save enough. But in an economy decimated by coronavirus closures, we might be saving too much.

The pandemic has upended consumer habits, with fewer people eating out and traveling and others building a financial cushion. Economists have long worried about Americans carrying too much debt, but ironically the sudden embrace of savings comes at a time when the economy needs consumers to spend more. A prolonged period of parsimony is hampering the recovery and threatening industries that had thrived on our free-spending ways.

In a classical economy, if people try to save more (and save it with financial institutions) those savings become available for others to borrow and spend, and the insane, so-called "paradox of thrift" never materializes. People save, and consumption spending falls; but roughly at the same time, people borrow and business, consumption, and investment spending rise by roughly the same amount. The composition of aggregate demand changes (and the resulting adjustments require time, meaning there are short-term dislocations with unemployment and other losses). However these dislocations cause nothing like what the old-time Keynesian "underconsumptionists" worry about.  The underconsumptionists apparently are still extant and having influence on far too much biz writing and economic policy punditry.

Nowadays, though, there's a new problem. When people consume less and save more, the increased savings still tend to end up in financial institutions. But now, because the financial institutions can earn interest income on their reserves deposited at the Fed, they have a remarkably reduced incentive to create new loans and new money based on their excess reserves when the interest rates they can earn from the Fed compete effectively with the risk-adjusted rates they can receive on loans they grant.

Instead, the gubmnt increases its deficit and the increased debt isn't monetized. The result is that there is only a minimal, if any, impact on aggregate demand.

The problem here isn't that consumers are spending too little on consumption. Rather, the problem is that the Fed is soaking up excess reserves and banks are not using them as a basis for creating new loans.

This reminds me of Fed policy at the beginning of the Great Depression in the early 1930s when the Fed explicitly implemented policies to "soak up" excess reserves and, as a result, made the depression disastrously worse.

Here's hoping the current Fed doesn't go that far... From that link in the previous sentence, we see that a decade ago, the St. Louis Fed understood the problem with the Great Depression. Do they fully grasp the situation now?

But the Fed is in a BIG box of trouble as things stand. Suppose they want to use monetary policy to stimulate aggregate demand a bit. To do so, they reduce the interest rate paid on commercial bank reserves, then what will happen? They have to fine tune this precisely so as not to dump billions of tonnes of liquidity onto the market. If they guess wrong, the excess liquidity will set off a frenzy of borrowing, house buying, business investment, and much more rapid inflation than most people are expecting.

Two questions:

1. I'm not sure my analysis and warnings are correct. I'd love to learn more.
2. I have no idea whether the Bank of Canada pays interest on chartered bank deposits, and my 5-minute Google search was inefficient and/or unproductive.

Finally, please tell me, reassure me, that the criticisms of the standard Keynesian presentation of the paradox of thrift hold sway in today's intro courses [unlike the Samuelsonian Keynesian nonsense they tried to indoctrinate us with when I was an undergraduate].

A Fed-Induced Liquidity Trap (or is it a vacuum?)?

The United States gubmnt has massively increased its indebtedness, and apparently the Fed has bought most of this debt. Why hasn't this monetization of the debt led to expectations (in the markets) of increased inflation rates a year or two from now?

Here's one possible explanation, but I'm open to others. Since I'm an old-skool monetarist, I'm still thinking in terms of the relationship between the money supply and prices: MV=PQ, but it looks as if I'm out of synch with the financial markets. How is all this monetization of debt not leading to inflation and inflationary expectations?

My possible explanation:

1. The gubmnt spends trillions.
2. The gubmnt has to borrow for that spending.
3. If they borrow from the non-bank public, there's no change in Ms or reserves: what's borrowed from the public is taken out of circulation but is put right back in when it is spent.
4. If they borrow from the Fed, the spending increase leads to an increase in Ms because an equal amt isn't removed from the Ms.
5. Ordinarily (well, historically, anyway), when the gubmnt borrowed from the Fed, all the gubmnt spending led to massive increases in Ms because the spending led to increased reserves and a multiple expansion of deposits (see 1976-82).
6. Now, however, since the Fed pays interest to commercial banks on their deposits at the Fed (their reserves), the banks don't create more money based on the gubmnt spending and their increased reserves. There is no multiple expansion of deposits. The Fed, by paying interest on commercial banks' reserves, has created a new type of liquidity trap. 
7. Conclusion: even though the gubmnt borrows from the Fed, the phenomenal increase in gubmnt spending doesn't set off a multiple expansion of deposits; hence there's only a small increase in the Ms, and, therefore, no inflationary expectations.
8. Implications and questions:

• If/when interest rates rise (as they will if inflation expectations increase), commercial banks will stop stockpiling reserves and start lending (i.e. creating money) at a rapid clip.... unless the Fed increases the interest rate it pays on reserves. There's a butt-load of potential liquidity sitting there in the form of reserves at the Fed.
• The major cost of the programmes, given this liquidity trap, is not so much inflation or inflationary expectations, but rather distortions and the deadweight losses from gubmnt intervention in the economy.

Inflation: a Long-Term Outlook

Earlier this month, I wrote a post predicting that we will experience inflation in the 2-3 year long-term. This prediction was based solely on the expectation that central banks will be forced to monetize the massive deficits being created by gubmnts at all levels. Furthermore, even if these are short-term huge increases in deficits, they won't just go away. They are enormous additions to gubmnt debts and will have to be dealt with somehow even if gubmnt deficits return to pre-pandemic levels in the next year or so.

The trouble is, if I'm right and if others agree with me, then long-term interest rates should be higher than they are, and TIPS (inflation-protected bonds) rates should reflect higher inflation expectations. Given that neither the long-term bond rates nor the TIPS yields reflect an expectation of strong inflation, clearly others don't agree with me.

So was I wrong? Am I wrong to hold onto these beliefs?

As a part of a webinar* that I attended yesterday, presented by Dennis Lockhart and David Altig, both affiliated with the Atlanta FED, the question of long-term inflation was addressed.

They mentioned the exploding balance sheet of the FED. They pointed out that although an exploding balance sheet would normally go along with rapid inflation, in this case the velocity of money has shrunk considerably as people are holding onto money, not spending, etc. They continued,

• The FED balance sheets have been growing rapidly and will likely continue to do so, at least in the short run
• Aggregate Demand and Aggregate Supply curves are both shifting to the left, and without much implication about what will happen to overall price levels. When both curves shift to the left, we know output will fall, as it has, but we can't predict much about the overall price level without knowing more about the relative shifts.
• There will be some (or considerable, they weren't sure) structural shifting in the makeup of AD .
• Most of the growth in the FED balance sheet has been in very short-term paper. The FED has mostly been buying up short-term debt, Treasury Bills, and lending money very short-term through re-purchase agreements with major banks. Unlike the financial crisis of 2008, the commercial banking system seems pretty solid and solvent, but providing sufficient liquidity has been the aim of the FED.
• As countries emerge from the pandemic, the FED will gradually scale back its creation of reserves, and the balance sheets will shrink slowly, roughly in sync with the emergence from the pandemic. 

Two issues where they didn't really face the questions I have:

1. The gubmnt debt is growing rapidly. The FED can't let all the short-term paper expire; they'll have to monetize the debt. This is a potentially serious problem. All that increased debt created by governments at all levels simply won't go away. And as the FED monetizes that debt, there will be inflationary pressures. One possible out might be to increase the interest rate the FED pays on reserves, but neither of them mentioned that possibility.
2. (and this one really bothered me) They argued that the Fed massively increased the balance sheet in dealing with the 2008 banking crisis and we didn't have inflation. My reaction would have been (if it had been a Zoom) don't be myopic:

• • That was when the Fed started paying interest on reserves. The Fed created reserves and the commercial banks saved them. The extra reserves didn't lead to much of an increase in the money supply as a result.
  • They both seemed to think we'll emerge from this depression as quickly as possible as soon as we know we have a vaccine and/or treatments. If so, can the FED shed all those short-term securities just as quickly? 
  • How quickly we can emerge from it will depend on how serious the structural re-alignment will be and has been.

Put differently (or the same way I started), I don't think gubmnts are going to reduce their deficits or debts by cutting spending or increasing taxes much; Central Banks are going to monetize these increases in debt for the most part:

How can Central Banks monetize such extreme increases in gubmnt debt without creating inflationary pressures eventually?

And if I'm right, why aren't markets reflecting higher inflationary expectations?

-----

*I'm grateful to the Global Interdependence Center for inviting me to participate in their sponsored webinar, "College of Central Bankers presentation: Assessing the Monetary Policy Response"

 

How Can I Predict Inflation in the Face of Such a HUGE Drop in Consumer Spending?

Apparently consumer spending declined in March by nearly 8%, by far the largest drop in recent history.

How can I predict inflation when there has been such a drop in demand?

One big reason is that inflation arises when there is too much money chasing too few goods, and the recent drops in GDP have been monumental.

Here's more of an explanation for my predictions:

The drop in consumer spending provides an impressive graph, to be sure! From it, alone, it looks as if a lack of consumer (and undoubtedly business) demand will keep the lid on spending pressures, at least in the short run. 

 

The argument coming from me and other monetarists [channeling Milton Friedman, I hope] is that there's been a massive reduction in output, as well, and it won't get back to 2019 levels for a long time; at the same time there has been and will continue to be a massive injection of spending power (the money supply) as central banks monetize the rapidly growing gubmnt debt. Unless the extra money supply is soaked up somehow as we come out of the depression, it'll create inflationary pressures. 

 

Consider the old quantity equation of money: MV=PQ, where

M is the money supply

V is the number of times each dollar turns over during the year in spending for final goods and services.

When interest rates are low, this number also tends to be low because the cost in terms of foregone interest income tends to be minor. When interest rates are high, people move money into earning assets more quickly and the 'Velocity' of money tends to rise.

P is the overall price level

Q is the rate of real output [i.e. Real GDP]

 

The equation is a tautology, with V being the variable that makes it true by definition.

 

But it's clear that V is pretty low right now (people fleeing to cash for security, hence not turning money over so rapidly; also because interest rates are low). So current increases in M are not having much impact on P despite a falling Q. 

 

As the economy emerges from the depression, Q will grow back to 2019 levels, but V will also grow. And M will be much higher than the 2019 levels, meaning P will have to grow. 

 

When and how much?

As Friedman is famous for having said, "It's a long and variable lag."

 

 

Tiff Macklem, the New Governor of the Bank of Canada

The Globe and Mail has reported that Tiff Macklem has been appointed Governor of The Bank of Canada as of June 2nd . This is great news!

Tiff Macklem (Western Ph.D. 1989) Named as Future Governor of the Bank of Canada

Tiff Macklem (Western Economics Ph.D. 1989) has been named the new Bank of Canada Governor by Finance Minister Bill Morneau. Macklem, former Senior Deputy Governor and Chief Operating Officer at the Bank of Canada, was appointed Dean of the Rotman School of Management at the University of Toronto in May 2014. Macklem has remained closely involved in nearly all of the Bank's major initiatives. He will replace Stephen Poloz (Western Economics M.A 1979, Ph.D. 1982)... 

Tiff was a teaching assistant for me waaayyy back, probably in 1979 or so. He was a kind and diligent student then, and I was both pleased and not surprised when he became Deputy Governor of the Bank of Canada in 2004.

About ten or eleven years ago, we met up again when he was on campus to talk about his role at the Bank of Canada and at the Ministry of Finance during the financial crisis of 2007-8. He was great then, and I'm sure he will be great again.

This new job won't be easy for him.

During the regime of Stephen Poloz, the world and Canadian economies were slowly emerging from The Great Recession. Steering monetary policy was comparatively easy over the past seven years (until this past January), as economic growth continued, inflation rates were kept low, and the unemployment rate dropped to levels not seen in decades (see this).

However, as I have posted before, Tiff Macklem will have to deal with what most economists expect to be a serious world-wide and continent-wide recession. Furthermore, he will have to control (i.e. fight against) intense pressure from the government to monetize all the newly created debt we are seeing.

The government is borrowing now to pay for all their new programmes (in addition to all their previous deficit spending of the past few years), but who can they borrow from? They can't just wade into the money markets and drain all the liquidity from those markets; and foreign investors won't want all of the newly issued Canadian debt. So, as has happened before (see 1977-82), the Bank of Canada will be obliged to step forward to buy up a HUGE percentage of the newly issued government debt.

The government will be injecting billions of spending dollars into the spending stream but their borrowing won't be from the public and won't drain off much of that extra liquidity created by the spending (and transfer payments). Borrowing from the private sector through the money markets would help ameliorate the inflationary pressures, but if the government tries to borrow enough to cover all their increasing deficits from the private sector, it will drive up interest rates and crowd out what little private investment there is right now.

What can Tiff Macklem do in this situation? He's between a rock and a hard place.

If he refuses to monetize the debt, he'll be in the midst of a major clash with the government, reminiscent of The Coyne Affair of 1961. If he does continue to monetize the debt, he'll be in danger of setting off more rapid inflation than would be politically tolerable, once again hurting people who are currently locked into fixed nominal contracts and creating uncertain expectations for the future.

One option I would like at least to see on the table is for the Bank of Canada to pursue nominal GDP targeting, advocated lucidly by Scott Sumner (who blogs at EconLog and The Money Illusion). From the Wikipaedia article about Sumner,

Nominal GDP targeting[edit]

Sumner contends that inflation is "measured inaccurately and does not discriminate between demand versus supply shocks" and that "Inflation often changes with a lag...but nominal GDP growth falls very, very quickly, so it'll give you a more timely signal stimulus is needed".^[10] He argued that monetary policy can offset fiscal austerity policies such as those pursued by the British government in the wake of the 2007 economic crisis.^[10]

Selling that policy, or even trying to do this as a matter of unannounced policy, will be difficult, though. Politicians will continue to want to spend more and more and more, and voters will resent both higher taxes and higher rates of inflation. Macklem has his work cut out for him.

---

As an aside, the continuing influence of PhDs from The University of Western Ontario on monetary policy both in the Bank of Canada, and elsewhere (e.g. the C.D. Howe Institute and the Fraser Institute) is a reflection on the high quality of education provided for students at UWO in monetary economics back in the 1980s. Canadian monetary policy has been highly regarded by all leading policy makers and financial economists around the world for having done an admirable job with monetary policy.

Professors David Laidler and Michael Parkin, in particular, played major roles in teaching and training students like Stephen Poloz (current governor of the Bank), Tiff Macklem, and Timothy Lane (senior deputy governor of the Bank). These students were fortunate to have studied with such scholars before the rational expectations, manufactured-data-general-equilibrium models dominated the field. Canadians are fortunate, too.

- - -

My recent posts about the upcoming recession, inflation, etc.:

https://www.eclectecon.net/2020/04/covid19-despondency.html

https://www.eclectecon.net/2020/04/grocery-prices.html

 

 

Grocery prices During the Pandemic

Have you noticed that grocery prices have risen? Some of my friends have mentioned it, and yesterday I think I saw some prices that are higher now than they were a month ago.

If prices are higher now, are rising, and are expected to continue to rise for the next few months or longer, here are some possible explanations:

I. Microeconomics

Costs are rising:

• Many grocery chains and other retailers have given their employees raises of 10% or more
• Many grocery stores have put down tape or spray painted markers 6' apart inside and outside their store to promote distancing; they have also put up queue-control barriers to keep people distancing in the queues instead of crowding near the front; doing this is not cost-free.
• Many grocery stores have someone at the door to limit the number of people in the store at any given time.
• They also have people wipe down the handles of the baskets, carts, trolleys, etc.
• Some even have sanitizer stations for people to sanitize their hands.
• Restocking shelves isn't cost-free either, and since people are staying at home and eating at home more now, this means they're also buying more at grocery stores rather than at restaurants, hotels, trains, planes, etc. How does this add to costs/unit? see the next item.
• Diminishing marginal product: you can add more product and you can hire more employees (maybe), but it's hard to add more space in the store and in the back storage areas. More people and more product means more congestion and more congestion costs. Also, hiring more workers means digging deeper into the pool of potential workers, and retraining current employees is also costly
• Higher demand typically means stores just try to order more from their suppliers, but there are higher costs for suppliers, too, as they face shortages and rising costs of their own.
• Given that the value of the Canuck buck has declined relative to the US dollar, that means Canadian importers are paying more for everything that might end up on the shelves or might be used to produce things that might end up on the shelves.

Demand is rising:

• As I noted above, people are buying more from grocery stores than they used to.
• As some managers and some suppliers see the increased demand, they raise the prices. Often not in any major or obvious way. Pricing decisions are not simple textbook [find the q/t for which MR=MC] but rather involve considerable trial and error, either at the store or at some regional or head office.
• When people have to queue up to get into stores, and when people read or hear about stores being out of some things, they don't worry so much about paying a few cents more for many of the items on their shopping list. [in econ-speak, the price elasticity of demand is lower in those instances]
• Some stores have fewer sales, and some stores no longer put out flyers advertising sales.

II. Macroeconomics

Aggregate Supply

• The CoVid-19 pandemic has caused a decline in the overall rate of production. Many (probably most) manufacturing facilities are still trying to operate full time, but they are facing increased supply problems for some items, in part due to transportation issues and in part due to bottlenecks.
• The lock-down, quarantine, and isolation policies have primarily affected the service sector of the world economy, but not exclusively. Also, the drop in production of services has led to a major shift to the left of the overall Aggregate Supply curve.

Aggregate Demand

• One would think that with so many people's incomes dropping, Aggregate Demand would decline. However...
• In both Canada and the United States, numerous policies have been implemented to dampen the effect of the pandemic on people's incomes. This is especially important if (1) people expect the support policies to be reasonably lucrative, (2) people expect to be supported if they over-extend, and/or (3) they expect it all to be over in a couple of months or so. Following the Friedman permanent-income-hypothesis, if people consume according to expected income (including gubmnt programmes), consumption may not drop much at the aggregate level.
• What is there to spend money on? People who regularly (or even irregularly) traveled, ate in restaurants, shopped a lot in person, etc. all have less to shop for. They (we) are driving up demand for the things we can still buy.
• Over the next year or so, the gubmnts plan to increase their fiscal deficits astronomically. These deficits will almost surely be monetized to a great extent by the central banks. [in colloquial language, the gubmnt won't raise taxes to pay for all the programmes; instead it will print more money]. The increased money supply will lead to much more rapid inflation over the the next two years unless the central banks try to neutralize that effect. They've shown no indication they intend to so so.

Sectoral Shifts in Demand

• As consumers try to buy more household products in general, manufacturers cannot instantaneously hire and train more employees the products that consumers want more of. As I once wrote (albeit in reverse) back in the late 1970s, "you can't easily transport and train all the workers in the oil patch to some place where they can produce more surgical masks, toilet paper, etc.

On Interest Rates

Here's a simple way to look at central banks, monetary policy, and interest rates.

Interest rates are an effect, not a cause.

1. If central banks increase the rate of growth of the money supply, ceteris paribus, initially interest rates will fall.

Call that effect "the liquidity effect". The central bank floods the money markets with liquidity and people try to make loans, offering favourable terms.

2. If the central banks maintain a higher rate of growth of the money supply over time, this will lead to higher rates of inflation. Eventually, higher rates of inflation will lead people to expect those higher rates of inflation, leading them to offer and demand higher interest rates in market for lendable funds. Call this effect "The Fisher Effect" (after the famous economist who first wrote about it, Professor Effect).

In general, central banks cause interest rate movements by what they do to monetary reserves and the money supply, not by what they say about interest rates.

For more detailed descriptions and analyses see this by The Grumpy Economist.

So why do we have low interest rates now? because the US Fed pays interest on reserves, sucking tonnes of reserves out of the monetary system, offsetting all their grandiose efforts at quantitative easing.

Describing the Fed

Scott Sumner does a good job of describing the Fed:

In the past, "unusually severe and persistent recessions" tend to occur when the economy is at the zero bound. Even worse, these recessions are almost certainly caused by a failure of monetary policy. The Fed persists in viewing itself in a role similar to a fireman, rescuing the economy when it goes off course. But that's not at all the right metaphor. They are more like a ship captain, steering NGDP or inflation, and if the ship is off course it's because they've done a poor job in steering it.
[emphasis added]

 He also continues to emphasize that low interest rates are NOT necessarily a sign of monetary easing. I really like reading his blog posts.

I Guess I Have Always Been a Market Monetarist

It's probably confirmation bias but I have always enjoyed Scott Sumner's blog posts. Here is one recent example , in which he re-emphasizes his mantra "Never reason from a price change." Instead, try to figure out what caused the price change. And in this blog post he also emphasizes, "never reason from an interest rate change," but instead ask what caused the interest rate change. Scott's salient paragraph,

The market monetarist view is that easy money leads to higher inflation, and easy money sometimes lowers interest rates and sometimes raises them. Any reductions in interest rates tend to occur in the short run, whereas higher interest rates tend to result in the long run. In addition, it's more useful to think in terms of causation as going from inflation to interest rates, rather than interest rates to inflation.

The way I used to address this issue when I taught money-macro was to use this true-false exam question as an illustration:

[T/F/Explain]  An increase in the money supply causes interest rates to fall.

[Answer] It all depends (That's always a good economist's answer!).

• If the increase in the money supply is unanticipated (or more than is anticipated), there will be a short-term liquidity effect. The supply of lendable funds will have increased more than expected, putting downward pressure on interest rates.
• If the increase in the money supply is believed to be longer-term, people will experience and then (through adaptive expectations) come to expect higher rates of inflation.
• Through the Fisher Effect, when people in general come to expect higher rates of inflation, they will drive up the nominal interest rate.

Most students seemed to understand this material, at least for the exams. Whether it stayed with them is another question altogether.

Related articles

The Sad Chronology of Too Many Price-Control Programmes

A framework for understanding Tunisia's economic crisis

No Shortages When Prices Are Free to Fluctuate A Good Egg-zample

Is Currency Instability a Problem for Canada?

Short answer: no.

An article in today's Financial Post suggests some economists think that currency instability is "now a serious concern" for Canada. They are wrong.

The rapid drop has been exacerbated by crumbling oil prices and monetary divergence, as a strong American labour market and solid economic growth led the U.S. Federal Reserve to increase interest rates in December.

Well, of course crumbling oil prices have had an impact on the US price of the Canuck Buck.

This all seems like hooey and empty hand-wringing to me:

• The Loon is a petro-currency and moves with the price of oil. A year ago, nobody but nobody predicted the price of oil to go below $30/bbl. People aren't buying as much of our oil, and they're paying much less for what they do buy. It should come as no surprise that the demand for the Canuck buck has dropped off the shelf and that hence the foreign value of it has also dropped precipitously.
• The US Fed announced a raise in the interest rate, and that has led short-term capital flows to move toward the US. That part is correct. But by a lot of measures (especially real growth and labour-force participation rates), the US economy isn't doing all that well itself. The Canadian economy seems healthier in many ways (aside from all that massive gubmnt debt and aside from what looks like ridiculous fiscal mismanagement in Alberta and Ontario).
• Businesses trading internationally can and do hedge against currency fluctuations. Those that don't sometimes win and sometimes lose. I have a friend who runs a small-ish manufacturing business, and he hedges all his US dollar transactions in the forward market through his small-town bank. I expect he has taught the bankers there a few things. If people don't want to gamble about the short-term swings in a currency, they can hedge against those swings in the forward markets.
  

Great Hallowe'en Decoration

Too bad no one has been able to drive a stake through its heart!

From Cafe Hayek:

… a crisis that, regrettably, helped to breathe unwarranted life into the corpse of Keynesianism.  The results are spooky.

 

Great comments following the post, too.

Macroeconomic Policy: New Keynesianism vs Market Monetarism

Ever since Scott Sumner began blogging, I have been enjoying his posts. They are rich and careful, and they have probably had a big impact on the thinking of many policy-makers. I hope so.

His recent post at Econlog is a four-point comparison of Keynesian macro policy with what has come to be known as Market Monetarism. He begins with a quoted passage from Paul Krugman:

Paul Krugman has a new post that summarizes Keynesian economics:

I would summarize the Keynesian view in terms of four points:

1. Economies sometimes produce much less than they could, and employ many fewer workers than they should, because there just isn't enough spending. Such episodes can happen for a variety of reasons; the question is how to respond.

2. There are normally forces that tend to push the economy back toward full employment. But they work slowly; a hands-off policy toward depressed economies means accepting a long, unnecessary period of pain.

3. It is often possible to drastically shorten this period of pain and greatly reduce the human and financial losses by "printing money", using the central bank's power of currency creation to push interest rates down.

4. Sometimes, however, monetary policy loses its effectiveness, especially when rates are close to zero. In that case temporary deficit spending can provide a useful boost. And conversely, fiscal austerity in a depressed economy imposes large economic losses.

This looks pretty much like the Keynesian macro that I learned as an undergraduate and that was mainstream economics still when I was in graduate school despite the emergence of monetarism and the beginnings of rational expectations.

The thing we all need to learn is that point #4 is incorrect. That's where Scott Sumner has done everyone a huge favour. Let us wish  him continued success.

His response, using these same four points, describing market monetarism:

If I were to do the equivalent for market monetarism, it might look something like the following:

1. Economies sometimes produce much less than they could, and employ many fewer workers than they should, because there just isn't enough spending. Such episodes occur because monetary policy is too contractionary, causing NGDP to fall relative to the (sticky) wage level.

[As an aside, economies can also produce too little due to real shocks, such as higher minimum wages. That's also true in the Keynesian model.]

[EE: Sometimes there can be unanticipated major sectoral shifts in demand which, with sticky wages, can cause things that look like supply shocks too].

2. There are normally forces that tend to push the economy back toward full employment. But they work slowly; a hands-off policy toward depressed economies means accepting a long, unnecessary period of pain.

[Notice this one is identical.]

3. It is often possible to drastically shorten this period of pain and greatly reduce the human and financial losses by "printing money", using the central bank's power of currency creation to boost M*V, i.e. NGDP, via the "hot potato effect".

[EE: and paying interest on commercial bank reserves on deposit at the the Fed was a major mistake here since it led to the opposite of printing money]

4. Monetary policy remains highly effective at the zero bound. As a result, demand-side fiscal policy is mostly ineffective in countries with an independent monetary authority---offset by monetary policy. Fiscal actions that shift the aggregate supply curve, however, can be effective.

This last point really needs explication. It is consistent with the older monetarism of Milton Friedman et al. The central bank can affect the money supply and aggregate demand by printing money, by buying things in the marketplace. That is what Quantitative Easing was all about.

And it appears to be working, albeit with a "long and variable lag".

Is the Fed Really Pursuing Expansionary Policies? Probably not much

I just saw this. It is spot on.

An excerpt:

Banks are lending the Fed about $3 trillion worth of reserves, reserves the banks could go out and lend elsewhere if the market were producing great opportunities. Spreads of other rates over the rates banks lend to or borrow from the Fed are very low, not very high. Deposits are flooding in to banks, not loans out of banks.

If you just look out the window, our economy looks a lot more like one in which the Fed is keeping rates high, by sucking deposits out of the economy and paying banks more than they can get elsewhere; not pushing rates down, by lending a lot to banks at rates lower than they can get elsewhere.

I thought it had been well-settled that it's what the Fed does with reserves and about reserves and about the monetary mechanism that matters, not what it does about interest rates. As Scott Sumner often says, "Never reason from a price change", and that's what people do when they look at the Fed and the overnight lending rate.

Maybe the rate announced by the Fed has some "announcement effect" but probably not much given everything else it does that is nowhere near so expansionary as too many financial writers think it is.

What the Fed has been doing since 2008 seems eerily similar to what the Fed did in the 1930s when it "soaked up the excess reserves" and put the economy back into a tailspin. It doesn't seem so bad this time around (thankfully) but it could be so much better.

Related articles

Economic Outlook

Your Mama is SO Keynesian....

[via Ted Frank]

Prescience? EclectEcon on the Euro 10 Years Ago

I did a Google search on EclectEcon+2005+Euro and was directed to this posting, written over a decade ago. The timing was all wrong in my piece (what's new?) but the nuggets of truth and prescience were there, too:

The continued success of the Euro as a world currency depends crucially on the fiscal discipline of each of the constituent gubmnts. If only a couple of the member country gubmnts run prolonged, serious fiscal deficits, those countries will put inordinate pressure on the Euro and/or threaten to withdraw from the common currency.

The countries will naturally claim that they want the flexibility to address short-run macro weaknesses in their economies. And that is exactly what is happening now.

European finance ministers are meeting in Brussels on Sunday to discuss changes to the Growth and Stability Pact governing the euro.
The agreement limits the size of a nation's budget deficit and has been criticised for not letting governments boost economic growth by spending more.

.... If France, Germany, and Italy are successful in getting the Pact relaxed, the growing individual country debts will put increasing pressure on the Euro. It might not happen for quite a few years, but the seeds are being sown for the coalition to break down. The Euro is, after all, the result a coalition with no single entity having the power to enforce it. Such coalitions can be unstable over time. As BrianF, who sent this to me, adds,

I think this is what's known in macroeconomic theory as a time-inconsistency, precommitment problem. Which in general parlance means that a committment from a politician is not worth the paper it's written on.

If this trend continues, the Euro will not be a good candidate to replace the U.S. dollar as a world currency reserve; foreign central banks, especially in Asia, will continue to hold U.S. dollars, but only because there is no good alternative, thus staving off the decline in the U.S. dollar that we might otherwise expect.

It is interesting that a decade ago, economists were more concerned about the lack of fiscal discipline in France and especially in Italy. Greece was under the radar for most economists, apparently. And yet the fiscal "instability" [aka bankruptcy] in Greece was already beginning to develop.

As I wrote back then, profligate nations had little incentive to rein in their borrowing and spending.

Related articles

Greece, a Brief Explanation

Seven Things about Greece

If you want to catch up on what is happening in Greece, what led to the financial debacle, and what some possible implications are, this is a pretty good piece. It is long, but then the situation is not all that straight-forward either.

One fascinating point that I often try to make about bailouts is that it is usually the lenders, not the borrowers, who are bailed out from bail-outs.

This last part is the original sin of Europe's bailouts. See, back in 2010, policymakers were petrified that the euro zone was like a line of dominoes just waiting to get knocked over by the weakest link. If Greece defaulted on its debt, the French and German banks that had lent it money might go bust, and the banks that had lent them money might, too, and, well, you get the idea.

 

Related articles

Where Was the "Due Diligence"?

Let's Face it: Greece IS Bankrupt

Greece, a Brief Explanation

Greece and Puerto Rico: Speculating on Bailouts

Greece Again, My Predictions

Where Was the "Due Diligence"?

This chart from the BBC shows who owns how much of Greece's debt.

 

No wonder Germans are concerned about the size of their loans to Greece and about Greece's inability to even meet the interest payments on those loans.

Repaying the loans is not the issue. So long as a borrower can obtain new financing, the loans can be rolled over in perpetuity.

But when lenders begin to suspect/fear the borrower cannot or will not be able to obtain new financing to re-fund the debt, when borrowers reach a point at which they can no longer service the debt (i.e. meet the interest payments on the debt), default is inevitable.

Now let's see if, like some major financial institutions in 2007, Greece is too big to fail. Will Greece be treated like Bear Sterns or like Lehman Brothers? My guess is Lehman Brothers. The major lenders fear that if they bail out Greece, that will create incentives for Portugal, Italy, and Spain also to resist austerity programmes.

The rosiest possible scenario is one that I tried out on Facebook last evening:

Prime Minister Tsipras will use the "No" vote as a bargaining tool. Greece will end up re-negotiating a deal that is nominally less austere but not much less. Tsipras will hail it as a new beginning for Greece, and Greek voters will hail him as a new hero. Meanwhile creditors will get most of what they offered last week.

The trouble with this scenario is that Tsipras and his gubmnt are basically and fundamentally redistributionist interventionist socialists. They will not cut pensions; they will not reform labour legislation; they will not implement supply-side reforms that will permit and encourage economic growth. And in the end, they will renege on their financial commitments.

And possibly seeing this problems, the lenders will not strike a deal with them.

Related articles

Let's Face it: Greece IS Bankrupt

Greece and Puerto Rico: Speculating on Bailouts

Greece and Puerto Rico: Speculating on Bailouts

When people are bad credit risks,

• banks stop lending to them, or
• they require collateral for the loans, collateral that hasn't already been used to secure other loans, or
• they require that borrowers induce someone else more credit-worthy to co-sign the loan.

So why have investment banks, hedge funds, etc. been willing to lend money to Greece and Puerto Rico (and California and Illinois, for that matter)? These entities have nothing to pledge as collateral for the loans, and so it must be related to co-signers or some expectation of a bailout (which is, de facto, what having a co-signer for a loan provides).

During the various Latin American debt crises of the early 1980s, I asked Grant Reuber, then COO of the Bank of Montreal (and former Dean of Social Sciences and Academic VP at UWO), about BoM's apparently perilous exposure to that debt. His response then was, "All they have to do is service the debt." What he meant was  that so long as the countries could make the interest payments on the debt, the Bank of Montreal and many others were perfectly happy to keep re-funding the debt.

The big debt crises arise when major lenders become concerned about whether

• the big borrowers will be able to continue to service their debt, and hence
• the big borrowers will be able to borrow more and borrow again to re-fund their debt.

Three or four years ago, I'd have been willing to consider taking a flyer on some short-term Greek debt. I figured something would work out for repayment of the Greek gubmnt debt. I might have done ok if I had -- then. During the last year or two, I wouldn't have paid more than ten cents on the dollar (so to speak) for Greek bonds.

Nevertheless, during the past year, why have people been buying the Greek (and other) debt? In general it must be because they expect someone to bail them out, whether it be the IMF, the ECB, or the US gubmnt. In other words, buyers of the debt of these debt-ridden political entities are speculating that somehow those entities will be bailed out.

And so, in the end, who is being bailed out? In far too many instances it is the lenders, not the borrowers, who are being bailed out. It is the owners of the bonds who get bailed out if some other entities pony up the money to repay the debt. The present situation is not unlike the farm "crisis" of last decade in which farmers were ostensibly being bailed out, but it was really their creditors who were the beneficiaries of the bail-outs (at least in large measure, usually [There -- did I hedge that assertion enough?]).

In the case of Greece, that isn't likely to happen. They have already made it clear that lenders must provide concessions (i.e. seek less than full repayment of their loans). Similar noises are being made by Puerto Rico. When a borrow seeks "concessions", they are in fact negotiating what to do about impending bankruptcy.

At this point, Puerto Rico (and California and Illinois) can probably count on US gubmnt aid, which means that buyers of their debt can probably count on being bailed out. But one wonders how long this situation can persist.

 

Related articles

Student Debt and the Value of Higher Education

Puerto Gyro

In honour of today's twin announcements of likely financial defaults by Greece and Puerto Rico, Ms Eclectic and I have decided to get take-out gyros from a food truck.

#carbsbedamned

Go Liquid!

According to this article [via Jack], interest rates are very likely to start climbing soon (I agree). And as that happens, financial investments like stocks and bonds lose value (standard Economics 020 stuff).

The first week of June recorded the highest interest rates since December. Bond prices are down about 12% since the end of January.

The stock market, meanwhile, follows the bond market’s direction — except by a much wider margin. A multiple of 2.0 is conservative. A 2x multiplier figured against the recent 12% plus loss in bonds prices would generate a 24% decline in stock prices. ...

So pay attention to rising actual rates. The “actual” bond market is already into a bear market, with declining tops and lower lows since the end of January. The stock market is vulnerable here. The first week of June saw interest rates spike, with bond prices losing 2.5% of their value. This is comparable to around a 7 1/2% loss in stock prices in one week.

The pressures are increasing exponentially since the decline in bond prices has not resulted in a stock market slide [EE: yet]. And the greater the pressure, the greater and quicker will be the downward move.

In preparation, I recommend that people beat the drop/crash/whatever and go liquid now (T-bills, money-market instruments, etc.). Of course if everyone agrees with me (and with this article [and others -- see the links below]), the drop/crash should have occurred already. So either the articles and I are wrong, or the efficient markets hypothesis ain't all it's cracked up to be; or both.

JR (my favourite drug dealer) and I have already gone liquid, specializing in scotch.

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Which Way will Bond Prices Move? | Jason W Galanis

COOPERMAN: Four signs that we're entering a bear market

A Much Bigger Threat Than Our National Debt

Bear Market Signaled

Myron Scholes to Visit UWO Next Week

I will definitely be making an effort to see/hear this. I expect it will be jam-packed.

Another Area Where Economics Has Gone Wrong: its inability to dispel the inaccuracies of Keynesian macroeconomics

I have been following Scott Sumner's blog, The Money Illusion, intermittently pretty much since he started writing it. I mentioned him here and here back in 2009.

I was ecstatic when he joined EconLog, along with regulars Bryan Caplan and former student David Henderson. His insights and his energy contribute to making  EconLog one of my favourite blogs.

His recent posts about how the Keynesians [typically of the Alvin Hansen type: spend big and forget about the deficits] had it all wrong are persistent in demonstrating how awfully incorrect the Keynesians have been. This one from a couple of days ago says it all best, I think, with his criticism of the Congressional Budget Office's forecasts using what are basically Keynesian models.  His concluding remarks:

Two grand Keynesian experiments and two abject failures. Followed by two times where the Keynesians started crowing about how they'd been right about everything. You can't make this stuff up.

PS. Some people ask me; "If the Keynesian model is so bad then why do experts like the CBO use that model?" Good question.

To see his explanations in detail, follow the link. It's clear and careful.

And what the Keynesian models invariable miss or mis-estimate is the importance of money, monetary policy, and central bank behaviour.

 

The Truth about Macroeconomics

I have a friend who recently wrote,

I knew this day would come... [A university] wants me to teach Principles of Macroeconomics. And I'm all outta bird entrails.

The Folly of SNKM (The Simple, Naive, Keynesian Multiplier)

For decades Keynesian-type economists and the promoters of big gubmnt have argued that injections of spending by the gubmnt into the spending stream lead to additional rounds of spending, economic growth, and more jobs. I actually used to teach this stuff myself back in the late 1960s and early 1970s, having been raised on Keynesian macroeconomic models.

But by the mid-1970s I had doubts. The models didn't seem to be predicting very well. And by the 1980s I would teach the models only to show how ridiculous their assumptions were. And I always said, "If you want more spending during downturns of the business cycle, then you should also strongly and vocally support gubmnt spending cuts during upticks in the cycle; but that rarely happens."

The Great Recession of 2007-10 has, unfortunately, reignited interest in using gubmnt spending to alleviate the severe problems faced during recessions. Scott Sumner at EconLog puts this nonsense to rest (I hope), linking to this comment by Mark Sadowski:

[R]egressing RGDP growth on CAB change for the non-Euro Area countries, we find the R-squared value is 0.0% (you can’t make this stuff up) with a slope coefficient of 0.05 ...

Or, in plain English, when countries each have a unique monetary policy, THE FISCAL MULTIPLIER IS ZERO! [EE: read the full link to see the entire flow of the argument; this is just the summary.]

 That's right. Injecting spending into the economy in countries that have unique monetary policies in general adds nothing to RGDP [real gross domestic product], and hence does nothing to create jobs.

Addendum: Given that increased gubmnt intervention seems to reduce overall RGDP (see pre-Thatcher UK, pre-Pinochet Chile, Venezuela, Argentina, the USSR, China, etc.), there is a very strong case to be made that the long-run Keynesian multiplier for gubmnt spending is often negative.

Does Canada Have a Dirty Float? If Not, Why Else Has Our Dollar Depreciated So Much So Quickly?

We purportedly have a freely floating exchange rate in Canada. And this exchange rate has floated downward considerably over the past six months.  Here is one chart showing the trend over time. This graph shows the inverse, namely that the Canadian price of a US dollar has markedly increased recently:

I have several superficial, ad hoc observations about this phenomenon.

• The usual: unless and until prices adjust to account for the changing exchange rate, this change helps exporters and hurts importers (including retailers and consumers), ceteris paribus.
• Interest rates in the US have edged upward, and the Bank of Canada has signaled that it will likely try to keep interest rates lower. To the extent that financial capital flows back and forth in nanoseconds, relatively higher interest rates in the US may have reduced the demand for the Canuck buck (and increased the demand for the US dollar) somewhat.
• The price of gold has continued to plummet. But prices of other heavily traded resources have not. The drop in the US price of a loonie (or the rise in the Cdn$ price of a US $) probably has little to do with what is happening in the commodities markets.
• So what is left as a possible explanation?

Steve Polos took over as Governor of the Bank of Canada last spring. Steve has a long history of trying to help exporters (he was head of the Export Bank before becoming Governor), and it is quite clear that one way to help exporters is to depreciate the domestic currency (see this very clear piece by Scott Sumner).

I have read absolutely nothing indicating that there is a formal Bank of Canada policy to slightly depreciate the Canadian dollar. But it wouldn't surprise me at all if it is happening, especially since the change seems to have caught many people by surprise. And if we are experiencing a dirty float, so much for "forward guidance".

Addendum: I realize it doesn't have to be an explicit dirty float (i.e. direct interventions in the foreign exchange markets) to get this result. Just announcing that we're going to keep doing whatever is necessary to keep interest rates low while interest rates are rising in the US will have the same effect. It won't look exactly like a dirty float, but it will have the same effect.

Update: Called it.

 

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Bank of Canada to Signal Lower Rates Bias, Societe Generale Says

Loonie on cusp of falling to 90 cents US ahead of Bank of Canada decision

Three reasons why the Bank of Canada is not trying to drive down the loonie

Another Reason I Like Reading Arnold Kling

His cynicism about macro-economics:

[T]he conventional wisdom at time t always seems to be that the conventional wisdom at time t-1 is wrong. Yet if you think about what this model implies for the conventional wisdom at time t as viewed in time t+1, it is quite subversive.

Ferguson on Keynes

All six of Brian Ferguson's papers from his lectures on Keynes' General Theory are now in the top ten of the SSRN category. Indeed five of them are in the top six downloads. 

RECENT HITS (for all papers announced in the last 60 days) 
TOP 10 Papers for Journal of ERN: Keynes; Keynesian; Post-Keynesian (Topic)  
July 24, 2013 to September 22, 2013

Rank	Downloads	Paper Title
1	165	Capital-Based Macroeconomics: Austrians, Keynes, and Keynesians  John P. Cochran,  Metropolitan State College of Denver,  Date posted to database: August 13, 2013  Last Revised: August 13, 2013
2	56	Lectures on John Maynard Keynes’ General Theory of Employment, Interest and Money (1): Chapter One, Background and Historical Setting  Brian S. Ferguson,  University of Guelph - Department of Economics,  Date posted to database: August 19, 2013  Last Revised: August 19, 2013
3	47	Lectures on John Maynard Keynes’ General Theory of Employment, Interest and Money (2): Chapter 2, 'The Postulates of the Classical Economics'  Brian S. Ferguson,  University of Guelph - Department of Economics,  Date posted to database: August 22, 2013  Last Revised: August 22, 2013
4	38	Lectures on John Maynard Keynes' General Theory of Employment, Interest and Money (3): Chapter 3, 'The Principle of Effective Demand'  Brian S. Ferguson,  University of Guelph - Department of Economics,  Date posted to database: August 22, 2013  Last Revised: August 22, 2013
5	32	Lectures on John Maynard Keynes' General Theory of Employment, Interest and Money (5): Chapter 6, The Definition of Income, Saving and Investment; Appendix to Chapter 6, Appendix on User Cost; Chapter 7, The Meaning of Saving and Investment Further Considered  Brian S. Ferguson,  University of Guelph - Department of Economics,  Date posted to database: August 22, 2013  Last Revised: August 22, 2013
6	30	Lectures on John Maynard Keynes' General Theory of Employment, Interest and Money (4): Chapter 4, 'The Choice of Units'; Chapter 5, 'Expectations as Determining Output and Employment'  Brian S. Ferguson,  University of Guelph - Department of Economics,  Date posted to database: August 22, 2013  Last Revised: August 22, 2013
7	29	From 'A Treatise on Money' to the 'General Theory': John Maynard Keynes’ Departure from the Doctrine of Forced Saving  Ho-Po Crystal Wong,  University of Washington - Economics Department,  Date posted to database: September 5, 2013  Last Revised: September 5, 2013
8	28	A Note On: What Keynes (1936) Intended to Show - And What Became of It  Rudolf Richter,  Saarland University,  Date posted to database: August 22, 2013  Last Revised: August 23, 2013
9	27	On the Laffer-Keynesian Synthesis  Vladimer Papava, Iuri Ananiashvili,  Ivane Javakhishvili Tbilisi State University - Department of Econometrics, Georgian Foundation for Strategic and International Studies,  Date posted to database: August 5, 2013  Last Revised: August 5, 2013
10	27	Lectures on John Maynard Keynes' General Theory of Employment, Interest and Money (6): Chapters 8, 9 and 10: Keynes' Theory of Consumer Behaviour  Brian S. Ferguson,  University of Guelph - Department of Economics,  Date posted to database: August 22, 2013  Last Revised: August 22, 2013