me: > > One of the problems is that financial assets are, strictly speaking, > > nothing but claims on real goods and services (now and in the future).
John Vertegaal: > Exactly me: > > You don't want to "double count." John: > Also true me: > > So it's best to keep real goods & services inflation or deflation > > conceptually separate from asset-price inflation or deflation. << John: > Huh? > Isn't asset-price inflation the result of leakages from the current income > circuit? it's true that saving (and other "leakages," i.e., the government surplus (when it exists), and the trade deficit = capital inflow) pump spending power into financial markets. But most of the trades in financial markets involve selling of old (pre-owned) securities and equities (or money) to buy new ones. Financial markets mostly involve buying and selling stock magnitudes, not flow magnitudes. > i.e. the supplement from outside the current income circuit, to > maintain a wages=prices identity; according to Keynes's prescription to > sustain full employment? I have never heard of any wages=prices identity. Please tell me about it. The way I understand economics, the identity would instead be prices = wages + property income + indirect taxes. And what specific prescription of Keynes are you referring to? > An exercised claim from inflated disinvested > assets means an excess of available purchasing power for existing real goods > and services. if you sell an asset (disinvest from it), you can use the cash to buy another asset, including used physical assets (like most housing). That's what day-traders and their kin are doing all the time. > There has to be at least a lagged but direct effect on the > latter's prices. If so, I fail to see the logic of conceptually separating > these two domains, as subject to both inflation and deflation; for that's > exactly where the "double counting" would come in. there's definitely a connection between the (newly-produced) goods & services markets and the asset markets. But the nature of this connection is best understood if we first avoid conflating the two sets of markets. when asset markets have gone up (during the late 1990s & early-to-mid 2000s in the US), the increased wealth seems to have allowed increased borrowing (using assets as collateral) and spending. This is the "wealth effect" of macroeconomics. To the extent that people use paper values of assets (rather than something more fundamental) and over-leverage, this spells trouble, of course. -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
