Thoughtful piece as usual by the intellligent Heinz.
BTW the original post on his website is here, for those who don't want to register at SeekingAlpha:
http://www.acting-man.com/?p=22571Interesting comment by Keith Weiner as well:
Keith Weiner:
April 9, 2013 at 16:30
Great Piece Pater!
What Krugman and Keynes miss about hoarding is that there is a difference between hoarding a consumable good like food and hoarding a monetary good. In the case of food, very low stocks are kept. Food is produced in the quantity which is consumed. If all of a sudden some people begin hoarding it, others will starve.
In the case of the monetary good, hoarding does not cause starvation nor deprivation of any other good such as heating oil, clothing, etc. It causes the interest rate to rise. The monetary good exists in huge quantities if one measures total stocks to flows (inventories divided by annual production). The arbitrage between hoarding and saving (i.e. lending at interest) sets the floor under the interest rate.
What would Krugman’s answer be? How does he think the interest rate should be set? By wise and powerful central planners…
Log in to Reply
