tag:blogger.com,1999:blog-582368152716771238.post4017021017944931537..comments2024-03-28T14:41:03.793-05:00Comments on The Grumpy Economist: Journal graphics in a bygone eraJohn H. Cochranehttp://www.blogger.com/profile/04842601651429471525noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-582368152716771238.post-74288723130363882132017-11-18T21:52:57.455-06:002017-11-18T21:52:57.455-06:00M as the volume of money, he has. let's chang...M as the volume of money, he has. let's change that to M is a set of volumes, each with a relative frequency V/Y set of {f[i]}, the relative frequency of volumes m[i]. he products m*f, are the significance, the price of trade for that particular m at frequency f. In this casting we get a value added channel, a designed flow of m such that the channel is full and there are no backups. If the m are chosen properly, the system appears to be an optimally queued network. The m[i] should be -log(f), f being the relative frequency, less than one. Like he egg industry, from chickens, farms, pick ups, cases; the whole channel would obey the law, so two eggs most likely appear on the breakfast table.Matt Younghttps://www.blogger.com/profile/08404998406161097199noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-34210756668846124282017-11-18T18:48:47.758-06:002017-11-18T18:48:47.758-06:00Some help in reading the graph from the article:
...Some help in reading the graph from the article:<br /><br />The smaller weight at the left (represented by a purse) represents money in circulation (M). The distance to the left from the fulcrum represents the velocity of circulation (V) for that money in circulation.<br /><br />The larger weight at the left (represented by a bank book) represents checkable deposits (M'). The distance from the fulcrum represents the velocity of those deposits (V').<br /><br />The weight on the right side represents the total volume of goods that are bought and sold (T). The distance from the fulcrum to the right represents the price level (P).<br /><br />And so:<br />M * V + M' * V' = P * T<br /><br />Later in the article, Fisher makes the connection between money (M) and gold and between checkable deposits (M') and credit. He also attributes a significant portion of the rise in prices from 1896 to 1899 not from the increasing use of credit / checkable deposits (M' / M) but instead from the ease with which checkable deposits are spent versus their hard money brethren ( M' * V' / ( M' * V' + M * V) ).<br /><br />Fisher doesn't specifically identify the difference between hard money and checkable deposits, but I think I can take a stab.<br /><br />1. Exact amount transactions are more convenient and more easily achieved with checkable deposits / credit. (Time and effort wasted making change).<br /><br />2. Monetary transportation costs are significantly smaller for checkable deposits than they are for hard money. (Time and effort wasted physically transporting money).<br /><br />What Fisher hints at is that checkable deposits can circulate through an economy with higher velocities than hard money can. Meaning a significant portion of the price level increase from 1896 to 1899 was a direct result of higher velocities achieved with checkable deposits.<br /><br />-- Milton Friedman now rolls over in his grave. --<br /><br />Of note, Fisher (1911) in this article had this to say:<br /><br />"So extensive a use of checks must certainly tend to aggravate those periodic collapses in credit which follow a crisis."<br /><br />The Federal Reserve Act was passed in 1913 (2 years after this publication).<br /><br />https://en.wikipedia.org/wiki/Federal_Reserve_Act<br /><br /><br />FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-76427817898588763682017-11-15T15:58:22.399-06:002017-11-15T15:58:22.399-06:00Cool! Abstract formula made intuitively clear! Nee...Cool! Abstract formula made intuitively clear! Need more of that stuff in Economics. David Seltzernoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-64284965934499158342017-11-15T12:39:58.959-06:002017-11-15T12:39:58.959-06:00Another Nostlalgia in the same week :)Another Nostlalgia in the same week :)Ninahttps://www.blogger.com/profile/14185021888855340322noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-49482030353633109422017-11-15T08:53:31.319-06:002017-11-15T08:53:31.319-06:00Oh my goodness Professor, you are going to make me...Oh my goodness Professor, you are going to make me cry of nostalgia... I already have tears in my eyes... :-)Manfred the mamoothhttps://www.blogger.com/profile/07516724901598949627noreply@blogger.com