Real Wages...

In the backdrop of the Monetary Policy pursued by some of the most influential central bank around the world and its probable effect on spending and growth in the time on the global economy which is more dependent on the real wages/incomes/profits, Keynes plus Pigou, both, have stressed on increasing incomes or real incomes to increase demand supply growth during slowdowns.    

Lower money supply would increase interest rates everywherelse... Stoking inflation and depreciation, except the domestic economy... Higher rates would make the US uncompetitive and the exchange rate would soar... A bad trade-off just to increase domestic demand at the cost of global demand which may again reduce exports and increase imports... Globally real wages/incomes/profits would go down...  

Demand Supply Growth Expectations...

Local specialization, since INDIA is culturally rich, must be promoted... Sell the unique INDIA... to create employment...

Food processing in the INDIAN dishes has a scope... Agricultural land and labour are big advantages, too...

Revenue is also dependent on demand supply growth expectations...

More precisely trade cycles are imminent too...

Inflation/deflation or volatility is a problem if it persists or extreme... Prices help adjust demand supply growth expectations through value for money...

The central bank’scommunication might help improve expectations by highlighting long run potential instead of short run dynamics which might change soon...

The lower inflation is a big plus for spending and growth if wages/incomes/profits increase due to lower borrowing cost expectations and higher demand, supply and growth expectations...

It has worked well on inflation expectations...

The GST/VAT on business and capital investment on value addition is not much different from income tax on jobs and labour employment value addition...

Too much discrepancy would increase inequality in the model...

Reservation for any would be inequitable...

One of the stylized facts is that the share of labour and capital would be equal in the long run in a bid to increase empl0yment and investment...

Lower taxes on labour might, again, lower cost and prices thereby increasing productivity and competitiveness... would increase demand supply growth expectations...

Who can spend, does not need State support...

Who can spend, does not need State support... It would be a wasteful expense... Reservations, for labour and capital, are a trade-off to make the worse-off well-off, economically backward and stagnant business should be given cheap skills, so that it increases productivity of the business economy… More spending on education, skills, innovation would help… 

Public-STockholding should be able to curb too much volatility and protect real wages share in the revenue... The problem is that even when productivity has increased real wages have been held back to 70s in the name of competitiveness, by cutting it with inflation, and exports... which is against the ECONOMICS of equality, despite unions... It is against the productivity theory and wage-profit-share and the demand-supply theories... 

The data gap is real... Transactions from bank accounts would help track spending data... Transactions from the bank accounts directly for income and spending would help account money... Not a single paisa should be given space to go lose out accounts... The Spending is important for managing wages/income/profits and demand-supply and growth expectations… 

Two heads won't work... It is true that the Politicians have lost credibility and to extent the central bank, too... Inconsistency raises question against politics... discrimination degrades value... 

The words around money are quite right... that…value of money might increase due to lower borrowing cost and prices... Other things remaining constant, if borrowing cost goes down, it would increase demand supply of credit/debt -- wages/incomes/profits and growth expectations... 

Negative rates or real rates could help increase debt, consumption, investment, employment, demand, then supply and growth and a little positive credit, savings, then investment, employment and consumption and supply, and then demand and growth, both through multiplier, which would result in real trade cycles, between higher real investment and real savings... Other real prices or inflation adjusted prices or real bond yields and prices and real interest rates, real wages and real exchange rate in the economy are free to move according to demand and supply or wages/incomes/profits, consumption and savings and investment...

The Zero Neutral Rate...

The Price-Level or Inflation is expected to increases when employment, real wages/incomes and effective demand increase after slowdown and low prices and interest rates, that is how inflation targeting is likely to work... But, inflation expectations would lower demand, consumption and savings would go down, and would also lower investment, employment and supply, which would exert a downward pressure on the prices, interest rate and wages and that would result in the lower price-level... Since, inflation has a downward bias due to higher interest rate trajectory, itself; it would restrict yet to achieve full employment and the potential growth rate... The higher interest rate expectations have lowered demand for debt and lowered supply and growth and expectations... The assumption of the inflation in the model runs against the fundamentals of the economics and the economy to increase prices and growth and expectations...

The Fed might include borrowing cost or price to the economy to calculate CPI which affects everybody in the same way like fuel or transport cost or prices... Higher borrowing cost is likely to get transmitted to other prices and inflation, too...

According the article, the Fed might try to achieve zero or neutral monetary policy by adjusting the borrowing cost higher equal to inflation, but that would itself increase the inflation through higher borrowing cost and the price level, and that may end up to be a mirage... Everytime the Fed tries to zero real rates by increasing the borrowing cost, inflation too would go up, commodity prices plus higher borrowing cost...

However, Milton Friedman has too proposed the Optimal Monetary Policy Framework in which he advised nominal interest rate close to zero or deflation equal to real interest rate which also means zero nominal interest rate and zero real interest rate to get the monetary policy neutral...

Lower cost also increases productivity (Rev.)...

Productivity lowers cost and prices and lower cost and prices also increase productivity...

The theory of comparative advantage says that specialize that line of production which uses abundant and cheap factor of production...

The oppourtunity cost should be low...

The US is a capital rich country with higher income and savings and investment, desired saving is higher than desired investment and there is a downward pressure on the nominal interest rate and prices and real interest rate...

The Central Bank is artificial to create scarcity and higher cost of Capital which has reduced loan or debt demand by the blue collar workers, not just for the rich...

In short... for everybody leading to lower demand/supply or economy activity and investment-employment and accelerator and multiplier and the growth rate...

Improved savings and supply have resulted in lower cost and lower nominal and lower real interest rate and further savings and investment... and growth...

The lower cost of capital should be transmitted to lower prices through higher supply and higher real wage and consumption, saving and investment demand, and growth...

There is no scarcity of capital in the US when others are pouring money, too...

Higher cost of the Capital/ist is the higher prices for the Labour/ist too... ... ...

The savings rate has unexpectedly dropped in the past 6 months and so has the growth rate... higher borrowing cost and prices have negatively stroked savings and growth since the first quater of the year ...

In the same period the Fed hiked the most...

Inflation did fall, but has recovered probably due to higher interest cost...,

But growth has fallen in the first half and in the second half recovered little to high growth in 2015 (rev.)...

Both, household debt and debt to GDP ratio has gone down with growth and growth with them...

Accelerator + Multiplier would work...

Economists often argue that higher real interest rates incentivize savings which is true because of lower price-level increase, both, consumption and savings increase depending upon marginal propensity to consume which lowers with higher wages/incomes which inversely means that who earns less saves lower portion of his income and consume more. Higher real interest or lower prices means higher savings/deposits which is sufficient to increase savings and when you discourage consumption to increase deposits in way you divert resource which depends upon trade-off between consumption and deposits that depends on the real wages and less significant for interest rate because consumption and income is fixed or sticky in the short run. Savings and investment work through multiplier, but consumption through accelerator plus multiplier, consumption increases first then it also increases investment and diversion lowers growth and the multiples value and growth expectations.

Suppose in a economy which only incentivizes savings and investment, and not the consumption… so prices would start to fall and would increase unemployment, both, demand through lower consumption (accelerator) first and then supply (multiplier) goes down, in such a economy growth would go down with lower employment and investment, supply-demand and prices…In such an economy more investment at lower borrowing cost and nominal wages due to higher unemployment and less bargaining power of the labour would increase employment and demand and growth.

However, there could be another scenario in which on consumption increase and not the supply… in such an economy inflation would again lower demand and then supply through higher borrowing cost, it would itself increase cost and prices economy wide which would also lower real interest rate and savings and investment, both the value of accelerator and multiplier would again go down resulting in low growth and growth expectations…

Therefore, in both the cases interest rate intervention deviates the economy from its long run trajectory. The economy is one the Knife-Edge...    

It is now a Political Business Economy...

Democracy is about listening to others and ascetics to your self... Internet would help... with stomach full... maintain balance in mind and in the material world... and enquire about the TRUTH... all lead to the same... happiness... It is true for all the politicians... but everybody is a unique politician, too... Modi’s style of functioning is followed by the best...The problem of duality is hard to overcome, it is the difference of perspectives context background and the cause and effect identification, we are often faced with the problem of chicken and egg... Economics and statistics cannot include time, especially the future time or chain of events because it cannot identify why something happens, you may also be victim of politics yourself which is the cause of confusion... politics is based on opposition which is also not time consistent... regimes might change fast under uncertainity... there is a difference between an astrologer and politician........Everybody is naked in the bathtub... Politicians try to ditch even people who try to help them... They spit on the face of the common people who vote for them just for money and the super power of the demons... What happened to the second best in the ruling party... Today inexperience and taken over the experienced when there has been an underlying style of functioning... We have lost confidence of our elders... and respect for them... Modi will soon start working like Manmohan Singh... more and more spending... people watch it... in the name of productivity and in the name of achche (aur mehehge) din expectations... inflation might increase again... Government is maximising the economies of scale.................................... Gujarat police did not let congress rally happen in Ahemedabad................................... and let Punjab fire spread... very interesting....  20 years of Gujarat were ascetics...

Growth has improved as a result of higher economic activity and prices and wages expectations, lower borrowing cost had helped tackle higher cost and price expectations and increase spending... Nonetheless, Government has helped better supply and could do more and also by incentivizing imports and curbing exports especially the food items... Lower borrowing cost would make import cost and prices go down...Lack of data, information asymmetry, false expectations, decisions, .... and above all security... are some of the biggest risks... The inflation expectations increase interest rate expectations which would further fuel inflation and interest rate and expectations... inflation might increase several rounds... The RBI governor is like others too... not hopeful for the economy... it does not believe in good... but half data... god help...  NPAs are a sign that regulation has not paid-off which is the apex bank duty... Loans with out analysing the growth expectations of firms, merely based on past figure has back fired... inflation expectations resulted in lower spending and higher savings, both, but not exactly translated in lower rates... which created bottlenecks in the economy... it directly struck the supply side through lower borrowing cost which negatively affected debt growth, consumption and investment... RBI like the stocks could use algorithmic to determine rates...

Use of Bitcoin to work as a medium of exchange across the Globe would decide its demand... Money from it could be used to increase supply and business... Too much volatility must be controlled to avoid too much loss... Price should move within in band in a time frame...Prices would increase with demand till all the supply is consumed and the market clears and there are no more bit-coins to offer... More investment at dips would increase returns... Investors would be at mental loss if they buy high and the BTcoin falls too much because not everybody would be able to invest more and have patience...

China is a market economy now, and not a communist regime... Everybody should exploit fake Chinese ideals and ambitions... in the same way China does...  are good at business now... we should learn from them... Chineseare reaping the economies of scale... INDIA could benefit from Chinese moves and do the same... Everybody should restrict Chinese capital... especially the dollars... in their economies... china has not liberalised its capital market yet then why we allow Chinese investment and share profit in growth...

Public Stock-holding for Competitiveness...

The developed countries have at one side depressed agricultural income shares by subsidizing price movements or volatility and real profits by restricting agricultural income, but also cutting real wages by letting inflation in the other sectors to grow due bottlenecks after the trade off which is like reservation and manipulation, double loss to the economy in terms of demand supply and growth expectations, which has restricted investment and employment in the economy, despite free access to the Capitalist to commodity stocks and other stocks which are only benefited by price volatility, but not lone farmers and the lower class. This is all done in the name of exports… This is also true for the Labour Class or Industry; their nominal wages are cut by the Central banks due to inflation through higher rates after full employment which also curbs supply. Capitalist is also at loss in terms of higher nominal interest rate and labour because of lower nominal wages. At zero interest rate supply would catch demand faster even after full employment through imports or redistribution of labour to the other Productive sectors which could lower cost in the economy, also due to higher price and wage expectations, and other prices are expected to increase real wages and profits too, because borrowing cost and prices have come down which is significant for higher supply expectations in the future… Lower value of money due to inflation affects everybody in the sameway and reduces demand and supply for the economy in the face of falling population growth rate and the potential growth rate and slow innovation. The above is true for the Global economy, too…….. Lower value to money has reduced investment and employment everywhere… It is not true that inflation cuts real variables to increase competitiveness, but it reduces demand by lowering savings and investments and increasing interest rate hikes which starts a vicious DEBT cycle which increases volatility between high demand and high supply creating DEBT or TRADE CYCLES…  

The UPA government back in power never curbed export of cereals which could control cost to the economy and increase real wages and demand and growth and which also increased nominal interest rates too much which stifled the Supply-side too resulting in a downward spiral of growth and rising NPAs… However, exports increased little, but at cost of huge domestic demand which destruct the economy post the faster growth after the Recession and Stimulus 2008. Despite all the supply side constraints on the economy and gross mismanagement with the data gap on major variables like unemployment and inflation the previous government was targeting growth in a black hole…….. It transmitted higher food inflation to others by increasing the rate hike cycle instead of providing food supply security and other supply side reforms… Lower borrowing cost could have helped, but government diverted resources for other productive sectors, again… increasing costs and prices the ECONOMYWIDE…

True, the developed countries have cut on real wages to increase competitiveness which has reduced demand for INDIAN exports and other counties, too... In short, the rest of GLOBE and that has also cut demand in the developed counties... EVERYBODY DEMAND GOES DOWN JUST TO IMPROVE EXPORTS OF JUST THE DEVALUING COUNTRY... It has reduced the share of the Peasant Class everywhere... Means lower demand for the other INDUSTRY'......

Public capital and labour stockholding should be used to lower prices by optimizing supply through investment and employment and increase productivity and competiveness of the economy by lowering interest rate, wage demand and exchange rate to increase demand and growth expectations...

Just Expectations and Unjust Estimates...

It is unnecessary and not good to estimate for more than three months because it lowers long run expectations which have a significant effect on investment/un/employment/price-level/demand/supply/growth... The RBI estimates have been falling short and are less certain beyond a quarter... Economy might turn in a month if not a day in terms of spending on debt...

Any spending whether by people, private sector and by the government which increases productivity, competitiveness and demand and supply and growth through investment and employment is quite welcome...

Prices would increase with demand till all the supply is consumed and the market clears and there are no more bit-coins to offer... More investment at dips would increase returns...

True expectations and not estimates are important... If the common man is aware or conscious of it duties as an economic man with growth in real income he has every reason to be hopeful and would also rationalize expectations, spending too...

Excessive higher cost and prices and expectations which reduce demand and supply and expectations would also lower growth and expectations leading to low savings and investment and employment and expectations through multiplier, and again growth/expectations...

Not Expect too much...

The Government’s attempt to increase the share of real income to the agriculture has been unsuccessful due to too much players in the seller’s market with least pricing power due to the practice of setting MSP or price for their productivity or product despite huge inelastic demand... which led to poor incomes and point to mismanaged demand for the whole economy...

Agriculture is 70% of the economy in terms employment which has multiplier effect on the investment and supply and unemployment and demand and growth of INDIA...

Higher employment and lower real income of the farmers point to lower investment and higher inflation and risk for jobs...

Growth is a concerted effort of the Government and the RBI... to increase competitiveness... and demand and supply both... by gainful investment and employment by increasing productivity of the mass... through innovation... to increase the real economy growth rate...Prices, interest rate, wages and the exchange rate...

IT is true expectations and not estimates are important... If the common man is aware or conscious of it duties as an economic man with growth in real income he has every reason to be hopeful and would also rationalize expectations, spending too...

If the Central Bank lowers inflation expectations through lower cost of capital and that would help increase spending and use any capacity investment and unemployment... Under equilibrium zero nominal rate of interest rate would converge to zero real rate of interest which would neither centivize or crease demand nor supply and help achieve price stability and full employment and full growth... Any spending whether by people, private sector and by the government which increases productivity, competitiveness and demand and supply and growth through investment and employment is quite welcome...

Time and Uncertainty

Edited by Paul A. Harris and Michael Crawford

The essays in this volume all originated at the 2001 conference of the International Society for the Study of Time. The theme 'Time and Uncertainty' sounds redundant, but the contributions try to come to terms with the irreducible openness of time and the impermanence of life. The essays from various disciplines have been grouped around 'fracture and rupture' (grappling with time and uncertainty as a breach) and 'rapture and structure (solving uncertainty into pattern).

RATIONAL GROWTH EXPECTATIONS....

JOURNAL OF ECONOMIC THEORY 7, 53-65 (1974)

Uniqueness of the Price Level in

Monetary Growth Models with Rational

FISCHER BLACK*

Graduate School of Business, Uhevsity of Chicago, Chicago, Illinois 60637

Received September 11, 1972

INTRODUCTION

Almost every model of a monetary economy assumes that individuals

and firms behave irrationally. They buy and sell goods at prices other than

equilibrium prices, or they count the money the government gives them as

wealth but ignore the fact that everyone else is getting money Tao, or they

continue to expect zero inflation when the rate of inflation has been increasing

for several periods. Monetary growth models1 have moved in the

direction of assuming rational behavior, but they have generally continued

to assume that expectations about the rate of inflation are formed in an

irrational manner. Following Cagan [4], they typically assume some form

of adaptive expectations, even when some other rule for revising expectations

would give more accurate results.

In a model that does not include uncertainty in some explicit form, a

straightforward way to put in rational expectations is to assume that

individuals and firms have perfect foresight. One can then look at the set

of paths for all economic variables such that each individual is maximizing

his utility and each firm is maximizing its value, at every point in time, in

the light of the current and future values of all the variables. Each such

path is a “competitive equilibrium” consistent with rational economic

behavior.2

In a world with well-developed financial markets, it is not easy to

describe a mechanism by which changes in monetary policy or changes in

the money supply itself will lead to changes in the price Level or rate of

* I am grateful to William Brock, Stanley Fischer, Milton Friedman, Arthur Laffer,

Merton Miller, David Ranson, Thomas Sargent, Charles Upton, and a referee for ideas

and comments on earlier drafts. Special thanks go to William Brock.

1 For example, see Sidrauski [13].

* This approach has been developed most completely by Brock [Zj.

53

Copyright 0 1974 by Academic Press, Inc.

All rights of reproduction in any form reserved.

ECONOMICS AND POLITICS MUST OVERLAP...

Mass society as an ideology can be seen as dominated by a small number of interconnected elites who control the conditions of life of the many, often by means of persuasion and manipulation.^[3] This indicates the politics of mass society theorists- they are advocates of various kinds of cultural elite who should be privileged and promoted over the masses, claiming for themselves both exemption from and leadership of the misguided masses.

"As technological innovation allowed government to expand, the centralized state grew in size and importance." "Since then, government has assumed responsibility for more and more areas of social life: schooling, regulating wages and working conditions, establishing standards for products of all sorts, and providing financial assistance to the elderly, the ill, and the unemployed." "In a mass society, power resides in large bureaucracies, leaving people in local communities with little control over their lives. For example, state officials mandate that local schools must meet educational standards, local products must be government-certified, and every citizen must maintain extensive tax records. Although such regulations may protect and enhance social equality, they also force us to deal more and more with nameless officials in distant and often unresponsive bureaucracies, and they undermine the autonomy of families and local communities."

Mass society theory has been active in a wide range of media studies, where it tends to produce ideal visions of what the mass media such as television and cinema are doing to the masses. Therefore, the mass media are necessary instruments for achieving and maintaining mass societies. "The mass media give rise to national culture that washes over the traditional differences that used to set off one region from another." "Mass-society theorists fear that the transformation of people of various backgrounds into a generic mass may end up dehumanizing everyone.

Sociologist C. Wright Mills made a distinction between a society of "masses" and "public".

As he tells: "In a public, as we may understand the term,

1. virtually as many people express opinions as receive them,
2. Public communications are so organised that there is a chance immediately and effectively to answer back any opinion expressed in public.
3. Opinion formed by such discussion readily finds an outlet in effective action, even against – if necessary – the prevailing system of authority.
4. And authoritative institutions do not penetrate the public, which is thus more or less autonomous in its operations.

In a mass,

1. far fewer people express opinions than receive them; for the community of publics becomes an abstract collection of individuals who receive impressions from the mass media.
2. The communications that prevail are so organised that it is difficult or impossible for the individual to answer back immediately or with any effect.
3. The realisation of opinion in action is controlled by authorities who organise and control the channels of such action.
4. The mass has no autonomy from institutions; on the contrary, agents of authorised institutions penetrate this mass, reducing any autonomy it may have in the formation of opinion by discussion".

1.  McQuail, 2005, p. 449.
2. Jump up^ Hartley, 1982
3. Jump up^ (Macionis, J. p. 498)
4. Jump up^ (Macionis, J. p. 498)
5. Jump up^ C. Wright Mills, on Democracy in The Power Elite (1956)

RBI Monetary Policy...

RBI has done nothing to improve expectations to increase slow spending and growth... except government spending which has a very space limited... Pause on rate cut would have almost no effect on growth except inflation expectations and low demand due to increased government spending which directly increases employment, demand and inflation without productivity gains... It is true that private spending is growing slow which public spending could cover, but for that too lower borrowing cost is important... At worst demand could increase with lower unemployment and increase supply which would contain the price level and increase real prices means more supply/demand/growth even after full employment, people would demand/supply which means more growth... Lower borrowing cost would also reduce unemployment increase economic activity or demand/supply, both through lower prices and increased competitiveness with sticky wages, lower cost of capital would increase its productivity and lower prices, in the absence of wage competitiveness...

Inflation expectations in the Monetary Policy are not supported by the tax side or measures taken by the Government due to low Corporate Tax and GST which is also likely to boost supply and demand and revenue due to lower prices, and, is based on adaptive expectations and not on rational expectations generated by supportive and growth oriented policies by improvement in productivity and competitiveness of the supply side to further increase investment and employment in the economy. The economy is on the glide path, in the words of Rajan who introduced inflation targeting, in terms of prices and on the flight path of demand and growth, and revenue expectations, there are still glitches and time to reap the fruits of a low, good and simple tax structure which could move within band to fine tune demand and supply, and increase growth.

The RBI expects higher oil inflation due to cut in excess capacity in the sector, but due to competition in the global oil industry it is little uncertain what the sellers could do when there is scope to increase market share by lowering prices in the presence of excess capacity which could increase investment and employment and profit due to increased demand for oil due to lower prices. The Shale oil is mainly responsible for excess capacity in oil which puts a ceiling on the oil prices because at higher prices investment and employment in the US would become more viable and would further add to supply and contain oil prices.  The Government has plans to imports Shale gas and Shale oil from the US at lower prices. Moreover, the Government has capacity to lower oil inflation due to shift from VAT to lower GST; it would help lower oil inflation and the economy wide transport cost and the general price level or CPI.

The policy makers decided for the MPC and inflation targeting few years back to increase the Government participation in rate setting through the committee and reduce the friction between the Governor and the Government mandate on the inflation targeting within a band which is targeting the upper side of the target, means more inflation and inflation expectations compared to the down side and low inflation and inflation expectations which means the committee has missed chances of rate cuts, lower the borrowing cost, increase capital productivity, competitiveness, investment, employment, supply/demand or the economic activity and growth to the country’s potential, and is stuck at seasonal inflation.

The RBI says interest rate is not significant for food inflation when informal lending and higher shadow rates have increased cost for the sellers and loss of commercial banks business due to low penetration in the daily retail market and rural economy. The lower borrowing cost would add to the sellers’ profits which could not take advantage of volatility due to capital shortage, even investors in the stock market could use Margin and Margin Plus or Flexi-Cash which is considered to be more risky than a business. Credit has hardly been easy to promote local business and dependent on money lenders.

The commercial banks often do not want to lose savings or deposits which is also a function of the general price level and lower inflation and are likely to increase deposits because of lower borrowing cost and debt and increase in actual business and household savings which means more investment employment growth. Lower borrowing cost and increased savings/deposits would further boost investment. In the run borrowing cost could go as low as zero nominal interest rate which would converge to zero natural real rate of interest ie zero change in the prices at the natural rate of unemployment or the non accelerating rate of unemployment or NAIRU ie the potential or the highest growth rate in the time frame.