Is David Beckworth Crazy?

Not to give away the conclusion, but the answer is ‘no’. Nonetheless, the title is provocative. (Perhaps, that is why Brad DeLong uses these types of headlines).

In all seriousness, I would like to address a recent criticism of David Beckworth. Those who have been reading the blog for the past couple of years will recognize that much of what has been written has been aimed at outlining a particular framework and addressing what that framework implies. At times, this has been done for the analysis of fiscal stimulus and at other times for monetary policy. Regardless, my goal in writing serious posts on this blog for the last couple of years has been in trying to engage readers in a serious discussion about particular topics. Specifically, I have tried to outline my preferred framework for analysis and challenge those who disagree to explain why. Unfortunately, this hasn’t been as successful as I had hoped. The lack of success is not because others have refuted particular ideas, but rather the fact that those who have engaged in the debate have often merely attacked straw man representations of the framework espoused herein — especially with regards to monetary policy.

Having said all of this, the subject of this post is something that was written by Robert Murphy regarding views espoused by David Beckworth regarding monetary policy and, in particular, quantitative easing.

Murphy begins by labeling Beckworth’s views as “monetarist Keynesianism.” I would call this an oxymoron, but it seems far beyond such a simple description. The term seems to refer to the use of “Keynesianism” by certain economists of the Austrian persuasion as synonymous with “interventionism”, but I digress. I would hope that we can dispense with labels as they are often, as this example illustrates, misused and distract from the substance of the conversation.

Now, on to the substance. David wrote an article for the National Review Online attempting to justify quantitative easing. Why does the economy need quantitative easing? David Beckworth explains in the article:

[QE2] is about fixing a spike in the demand for money that has significantly hampered spending.

He then goes on to detail the behavior of aggregate nominal spending in the U.S. economy and demonstrate how it has fell short of its long-run trend and that it can be explained by tight monetary policy (excess money demand). Robert Murphy then replies:

And there you have it, clear as a bell. Paul Krugman couldn’t have said it any better. According to Beckworth, the problem with our economy is that people aren’t spending enough.

This simple idea is very powerful; it permeates our financial press when they wring their hands and wonder if “the consumer” will buy enough Tinkertoys this holiday season “to pull the economy out of recession.” But of course, if spending were really the trick to having a growing economy, then the world would have eliminated poverty long ago. No, it’s production that is the real obstacle; consumption can take care of itself.

This critique sounds harmless enough, but it misses the point. David’s argument is not predicated on the belief that more and more nominal spending will generate prosperity and eliminate poverty. Rather, David’s point is that falling nominal spending reflects excess money demand and therefore implies that monetary policy is too tight. This view is based on the concept of monetary disequilibrium. Although I have detailed this concept on a number of occasions, it seems important to resurrect this framework again; not only to demonstrate the underlying framework for David’s argument, but also to show that this view is consistent with the Austrian business cycle theory.

The concept of monetary equilibrium is rather simple. Monetary equilibrium is defined as the case in which desired money balances are equal to actual money balances. Let’s begin in equilibrium and then describe monetary disequilibrium.

Recall the equation of exchange:

MV = PY

where M is money, V is velocity, P is the price level, and Y is real output.

The two major sources of monetary disequilibrium are changes in the money supply (M) and changes in the demand for money (V). If M or V decline it is because of a decline in the money supply or an increase in money demand, respectively. This results in an excess demand for money — desired money balances are below above the actual supply. Ceteris paribus a reduction in M or V will result in a reduction in PY, or nominal spending. Since prices are not infinitely flexible, this also implies that at least part of the reduction in nominal spending will be a reduction in real GDP. Thus, it is not that David Beckworth thinks that evermore nominal spending would create prosperity, eliminate poverty, cure cancer, and turn Bob Murphy into a monetarist, but rather that the reduction in nominal spending reflects an excess money demand problem.

How can excess money demand be eliminated?

Excess money demand is reflected in a reduction in M and/or V. In a world with a central bank, monetary policy can eliminate excess money demand by reversing the reduction in M or offsetting the reduction in V. In either case, the central bank is increasing the money supply so that actual money balances increase to equal desired money balances. This is the point that David Beckworth is making.

An alternative way of thinking about monetary equilibrium is to use the interest rate rather than the money supply as a guidepost. If we define the interest rate that reflects the underlying preferences and real factors of the economy as the natural rate of interest and the interest rate that actually exists in everyday activity the market rate of interest, we can then define monetary equilibrium as the case in which the natural rate of interest is equal to the market rate.

So why is the equivalency important? Allow me to quote, at length, a wise monetary economist that I know:

The monetary equilibrium tradition is largely a European one. Much of the work on the doctrine prior to Keynes was in the hands of Swedish, British, and Austrian economists. Arguably, the whole approach begins in Sweden with the work of Wicksell, an in particular his development of the concepts of the natural and market rates of interest.

[...]

Wicksell saw himself as rescuing the Quantity Theory from what he saw as overly simplistic treatments that ignored the process by which monetary changes manifested themselves both in the price level and in real effects…

Wicksell’s work had a clear Austrian connection in its reliance on Bohm-Bawerk’s theory of capital in developing the concept of the nature rate of interest.

[...]

Hayek’s relationship with monetary equilibrium theory was also somewhat ambiguous. In some of his early writings, he defended a constant supply of money and appeared to agree with Mises’ claim that the creation of fiduciary media would disequilibrate the real capital market. On the other hand, as Selgin (1988a: 57) points out, there are numerous passages in Hayek where is recognizes that the nominal money supply should adjust to changes in the demand to hold money balances…in the second edition of Prices and Production, as we shall discuss later on, Hayek clearly call for changes in the money supply that offset movements in velocity so as to stabilize the left side of the equation of exchange. He was skeptical of the ability of any banking institution to actually accomplish this task, but he does indicate that this is desirable norm. Even as late as his 1978 book The Denationalisation of Money, he argued that:

A stable price level…demands..that the quantity of money (or rather the aggregate value of all the most liquid assets) be kept such that people will no reduce or increase their outlay for the purpose of adapting their balances to their altered liquidity preferences.

In other words, Hayek is arguing that in response to change in the demand for money (liquidity preferences), the monetary authority ought to adjust the supply of money so as to head off a scramble to obtain, or rush to get rid of, money balances.

That lengthy quote is taken from Microfoundations and Macroeconomics: An Austrian Perspective by Steven Horwitz (p. 75 -79). Thus, it is curious that Murphy would write:

As I mentioned in the introduction, this is why intellectually consistent conservatives are defecting to the Austrian camp. They can’t listen to their favorite AM radio hosts or TV pundits blast away at the stupidity of Keynesian deficit spending, and then turn right around and champion Bernanke’s attempt to stimulate aggregate demand.

What David Beckworth is arguing is that we must maintain monetary equilibrium, which is precisely what Hayek suggested was the optimal type of monetary policy not only in Prices and Production, which articulates in great detail the Austrian business cycle theory, but also in his work nearly a half-century later.

So what precisely is the Austrian critique? Murphy seems to be suggesting that any increase in the money supply generates inflation and distorts the capital structure. That view might fly with a certain band of Austrians, but it is not consistent with Hayek’s articulation of the Austrian business cycle theory and it is not even consistent with a free banking system in the absence of a central bank. Under a free banking system, banknotes would be redeemable in terms of a particular commodity. It follows that banks would routinely vary their level of reserves in accordance with the demand for money.

My objective in discussing this issue is merely to point out that David’s argument is not that more nominal spending is always better. Rather, it is the concept of monetary equilibrium that is at the center of David’s claim that quantitative easing is necessary. Accordingly, rapid declines in nominal spending reflect a deviation of desired money balances from actual money balances and, as a result, require monetary expansion to correct. In addition, this concept is not only at the core of David’s argument, but also at the core of the Austrian theory of the business cycle as articulated by Hayek and others.

Thus, Robert Murphy is free to support (or oppose) whatever policy he desires. The astute reader will note that I have not advocated a particular policy in the post. I have not done so because the purpose of the post, as with so many since the recession began, is to explicitly outline a framework rather than a caricature thereof. If one is to advocate the Austrian position and argue that David is wrong, the argument must take seriously the concept of monetary equilibrium and recognize that this concept was also at the core of Hayek’s thinking. Such an advocate would therefore have to explain why Hayek’s policy prescription was not consistent with the business cycle theory that he contributed so much to developing; or, alternatively, that we are not currently in a state of monetary disequilibrium.

45 responses to “Is David Beckworth Crazy?

  1. Josh,

    Can you please recommended some secondary readings on Wicksell? I have attempted to read his works and understand his ideas, but frankly, he’s just too difficult. Can you recommended any papers, articles, or books that explain his ideas.

    Or heck, some blog posts explaining his ideas and how they relate to monetary disequilibrium would be great.

    Best,

    Joe

  2. Josh,

    This nicely clarifies several issues in play in these debates. I think the question can also be put this way: ARE we in a situation of excess money demand? David, Scott Sumner and Bill Woolsey think we are. I’m not so sure, nor, to my knowledge are Larry W and George S. So even among those who accept the monetary disequilibrium approach, there is disagreement over whether or not the admonition to expand MS in the face of EDM is applicable.

  3. Joe,

    I think that Leijonhufvud’s paper “The Wicksell Connection” is pretty good although I don’t know if you will be able to find it online and it is written from a coordination Keynesian perspective — the latter may or may not be desirable, depending on your background, biases, etc. Steve’s book is also a good resource, albeit pricy and potentially more information than you need.

    I am not sure what is out there in the blogs. I’ll look around and see what I can find. If there are any readers out there who can help, please do.

    Steve,

    Precisely. I think that Larry, in fact, did tell David at the SEA meetings that there had been an excess money demand problem, but that it was no longer the case. I know that you have also basically said as much yourself. I can respect that viewpoint and I think that a discussion among those on each side of the debate would be fruitful. In fact, I would argue that it is very important for Austrians to engage in this type of conversation and explicitly talking about monetary disequilibrium. The New Keynesian models pay lip service to monetary equilibrium and the natural rate of interest, but there is much substance that can be gleaned from both the quasi-monetarist and Austrian perspectives.

  4. This results in an excess demand for money — desired money balances are below the actual supply

    Shouldn’t it be the other way around: actual money balances are below the desired ones.

  5. Supply,

    Yes, thanks. I have corrected the typo.

  6. David Beckworth

    Steve:

    I sent a reply to Jefferey Tucker who was nice enough to publish it on the Mises.org website. Based on the comments to my reply, there seems to be an unwillingness or inability to accept the excess money demand argument in principle. You may be right that I overstate its existence in the real world, but my impression is that these folks have a hard time theretically with it.

  7. David:

    I have had that problem with folks at Mises.org. They have two kinds of responses:

    1. EDM isn’t a problem because prices will “just” adjust.

    2. the whole idea of EDM doesn’t make any sense because money can never be in excess demand – which is just downright stupid and reveals a fundamental lack of knowledge of economics, including Mises’s own cash balance theory of money.

    (Murphy, of course, is excepted from the above.)

    I just looked at the comments and, of course, both arguments are there. You’re banging your head against the wall over there.

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  9. Hey guys,

    I will have to digest this. Steve (Horwitz), I think it would help if you wanted to chime in on Coordination Problem. I don’t want to lump together all “monetary disequilibrium” theorists under one tent, if there are important differences among you guys.

    In the meantime, I want to remind people that this was obviously not a peer-reviewed journal article. Beckworth was trying to rally the troops at NR, and I was explaining why I thought his article didn’t (and won’t) work. Now I’m not saying, “At an AM talk radio level, I can beat you guys, but if we start drawing Hayekian triangles, I’m dead.” I’m just explaining why I didn’t get hip-deep in the monetary disequilibrium stuff, because my main point (in that article) was that you guys are agreeing with Krugman that we need to boost AD, you just think you have a more efficient way of doing it. That’s of course what I mean by “monetarist Keynesianism.”

    Last thing, I did write a relatively high-brow critique of Woolsey at Mises.org a while ago, which you will probably find meatier than this current piece on Beckworth.

  10. I still see this as making the same errors Bob_Murphy criticized in his article. My questions/concerns:

    1) I’m having a hard time, in monetary disequilibrium discussions, of getting a non-trivial definition of desired cash balances. For my part, my desire for cash reserves is unbounded. Does it follow that to restore monetary equilibrium, we must give me infinite money?

    2) When people are manipulated into spending more than they want, that destroys real consumption in a way that doesn’t show up in conventional measures. In the extreme case, if I go up to everybody with a gun and order them to buy random things, well, NGDP and V can go right back up — but you can’t count this as some recovery of potential RGDP for the very reason that people don’t value these purchases the way they value voluntary purchases! So you’ll see spending, and buying, and hiring … to satisfy non-existent desires, which is inherently unsustainable.

    Making people spend more by giving out free money or scaring them due to potential inflation is not much different. And it shows a way that the ceteris are inherently not paribus in the equation of exchange.

    3) What if people really don’t want the goods and investment opportunities available at the present time and would prefer to hold off for another, when better ones are available? Is it still destructive for them to do what they actually want and invest their money when they would actually prefer to?

    In short, those who promote the monetary disequilibrium view seem to make very subtle assumptions that are mistakenly regarded as uncontroversial.

  11. The irony of this discussion is that while the sharks at Mises.org tear me apart for my QE2 views, I am also getting
    criticized by others for being a forceful
    proponentt of the view that the Fed’s easy monetary policy was an important contributor to the credit and housing boom of the early-to-mid 2000s.

  12. My question:

    Can a monetary disequilibrium last forever?

    Many Keynesians, “aggregate demand” theorists, and Scott Sumner seem to suggest that it can.

    Related:

    Does it make sense to correct a monetary disequilibrium which took place in 2008 years down the road — say in 2011?

    If 2011 isn’t too late, how many years later would be “too late”? 5 years? 8 years?

    Would it be too late to correct the monetary disequilibrium of 1933 in 1958?

    If so, why?

  13. Even accepting your framework, I see two issues:

    1. This is all based on the assumption that falling spending reflects excess money demand. Excuse my ignorance, but what reason do we have to think that’s the case? I understand that spending is below trend, but trends are sometimes corrected, after which a new trend starts. Isn’t it more plausible to say that falling spending reflects caution in uncertain times?

    2. Bernanke and other prominent proponents of QE2 did not sell it as an exercise in ordinary, doctrinaire monetarism. They sold it as a way to force people to spend by scaring them with inflation. I take that to be an essentially Keynesian exercise: people are acting irrationally, so they should be (and can be) manipulated. Are you (and Beckworth) saying that QE2 is right, but for other reasons than most of its proponents express? Or do you agree that people should be scared into spending, as a demand-side stimulus?

  14. AUgie the Prospector

    I give place to no one in economic naivete, so here is my question: What independent evidence is there for an excess demand for money? I ask this because it turns out that I have some money. I’ve been shopping it around, asking if anybody wants it. No one does. By that I mean that if they want my money, they can have the loan of it, for a fee. I’m not asking for much of a fee either, a little less than the real inflation rate, actually. (Stupid of me I know.) But still, no takers. They’ll take my money for EVEN LESS of a fee than that, but not very enthusiastically. There are better fees to be had, but the return after risk assessment is as bad or worse. (Worse yet, after taxes. – BTW, have you converted your 401k into a Roth yet? Just asking.)

    I can think of a lot of reasons for QE2, but most come back to dishonest manipulation of a fiat currency to support unsustainable spending by government, with all the booms, bubbles, and busts just a side-effect. You can formulate, aggregate, integrate and differentiate, chart, graph, average and skew, but until the assumptions underlying your theory reflect reality, you’ll get an economics for Venusians. Any theory that assumes that this is an honest game, or that official policy pronouncements reflect actual policy, is doomed to futility. You’d do as badly as if you assumed that economic decisions are made rationally!

    (Still, I would be interested in evidence that there is an actual demand for money, one that can be differentiated from the type of demand exhibited by a thief.)

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  17. Captain_Freedom

    >So what precisely is the Austrian critique? Murphy seems to be suggesting that any increase in the money supply generates inflation and distorts the capital structure. That view might fly with a certain band of Austrians, but it is not consistent with Hayek’s articulation of the Austrian business cycle theory and it is not even consistent with a free banking system in the absence of a central bank. Under a free banking system, banknotes would be redeemable in terms of a particular commodity. It follows that banks would routinely vary their level of reserves in accordance with the demand for money.

    That isn’t true. Hayek and every other Austrian do in fact hold that any inflation of the money supply, through the loan market, will generate a boom. In other words, if the level of investment exceeds the level of real savings, then the economy will be put onto an unsustainable path. Hayek was very clear on this point.

    As for free banking theory, the ultimate wall for further credit expansion would be a bank’s ability to stay solvent in the face of redemptions. The more one bank expands credit relative to other banks, the higher the probability of default as other banks call on it for redemptions. Once the banking system as a whole is “fully loaned up”, then should any further increase in the demand for money take place, this additional demand could NOT be “satisfied” by the banking sector, because it is already fully loaned up.

    Then there are the problems of defining exactly when someone’s bank balance is considered “hoarding” and when it is considered “ready to be used for spending and investment”.

    “Excess demand” for money is theoretically problematic, for it implies that there exists an objective “normal” demand that is independent from individual subjective preferences, whereby any demand above that level is “excessive” and any demand below that level is “insufficient”. That is a theory Austrians reject for obvious reasons. Austrians hold that there is only a particular demand for money, and hence consumption and investment spending relative to demand for money, which can change over time. To claim a particular demand as “excessive” is to claim that what people prefer is not what they “should” prefer. However, this requires a non-“human choice” concept to be hypostatized.

  18. Please, listen to Mike_F. I’ve asked similar things and never gotten a clear answer.

  19. Captain,

    You wrote, “Hayek and every other Austrian do in fact hold that any inflation of the money supply, through the loan market, will generate a boom.”

    Except for in Prices and Production where he argues that the money supply should adjust to correct for changes in the demand for money.

    As for free banking theory, the ultimate wall for further credit expansion would be a bank’s ability to stay solvent in the face of redemptions

    Yes, banks will adjust their reserves to ensure that they remain solvent. If the demand for money increases, banks can issue notes. If they issue notes to satisfy the increase in the demand for money, there won’t be any additional redemptions. Only if they over-extend themselves by printing too many notes will redemptions increase.

    “Excess demand” for money is theoretically problematic, for it implies that there exists an objective “normal” demand that is independent from individual subjective preferences, whereby any demand above that level is “excessive” and any demand below that level is “insufficient”.

    This is unequivocally incorrect. Suppose that we are talking about the demand for pizza. Given my income, preferences, and the price of pizza, I can determine my quantity demanded for pizza. Suppose that my preferences change and I decide that I like pizza more than ever. My quantity demanded at that particular price has increased. However, at that price there is now excess demand for pizza. So how does this get resolved. Through market interaction the price goes up. I get to enjoy more pizza and the pizza parlor gladly supplies more. This example makes no reference to a “normal” demand for pizza. The idea of excess demand is a disequilibrium phenomenon. To argue that excess demand never exists is to argue that we are always and everywhere in equilibrium. If the quantity demanded and supplied never deviate, what function does the price mechanism serve?

    Now, apply this concept to money. Given my income, preferences, yields on related assets, and the price level, I choose to hold a particular amount of money. Now, suppose that my preferences change — there is increased uncertainty, for example — and I decide that I want to hold more money. However, unlike pizza, there is no market for money — the supply of money is determined by the central bank. Absent any change in the money supply there is an excess demand for money. This does not imply that people prefer something that they should prefer.

  20. Josh:
    From your explanation, it sounds like “excess demand for money” is synonymous with “increased preference for saving” or “decreased demand for goods and services”. If your preference for holding money increases, then you can either save a greater proportion of your existing income (if any), or offer goods or services in exchange for money. The market for money is the amount of goods and services you have to provide in order to get some. If you offer enough goods and services, then someone will give you money. Of course, that’s synonymous with prices dropping.

    So does your (and Beckworth’s) entire argument boil down to saying that the money supply should increase when demand for goods and services drops, in order to avoid deflation?

  21. Greg,

    No, monetary disequilibrium doesn’t last forever. Eventually, prices will adjust to make actual real money balances equal to those desired. Whether or not policy is necessary is determined by the objective. If your objective is a stable growth rate of nominal spending, then expansionary policy is necessary until nominal spending returns to that growth rate. If your objective is to keep nominal spending growing at a particular trend, then expansionary policy is required to get back to trend.

    See Steve Horwitz’s initial comment above and my response. I think that many Austrians (of a more Hayekian persuasion) believe that the monetary disequilibrium has been resolved because we are close to being back to our average growth rate. Folks like Scott Sumner, David Beckworth, and Bill Woolsey argue that more expansion is necessary to get us back to trend.

  22. Mike F,

    I have written a great deal on this and I think that it might be difficult to meaningfully summarize my views in a blog comment. Thus, you might want to consult some previous postings. A recent post entitled, “A Brief History of Monetary Disequilibrium” is a useful starting point:

    http://everydayecon.wordpress.com/2010/12/02/a-brief-history-of-monetary-disequilibrium/

    Also, I put together a post with useful links for NRO readers when Ramesh Ponnuru started linking here. That post is here:

    http://everydayecon.wordpress.com/2010/11/16/welcome-nro-readers/

    I apologize to referencing other posts, but the multitude of material covered therein is difficult to summarize in a concise blog comment.

  23. @Josh: I appreciate that you’re trying to answer Mike_F’s very fundamental questions, but I just read the first link, and I don’t see how it’s responsive to the challenges he poses. If people are holding more money, why not regard that as a decrease in demand for (present) goods, and a general exercise of caution? Why use tricks to make people spend when they don’t want to, rather than waiting for production structures to re-align so that they’re making stuff people want, using resources that are available?

    I don’t see any answer for that, just a pathological need for the national income God to be appeased.

  24. @Josh: Also, I cannot accept that you have the understanding you claim unless you can use this knowledge you have to articulate an answer to Mike_F’s specific questions. It’s great to link stuff, but I can’t be dissuaded of its irrelevance until you can put the connection in your own words.

  25. Silas,

    You wrote, I cannot accept that you have the understanding you claim unless you can use this knowledge you have to articulate an answer to Mike_F’s specific questions.

    The links are to posts that I myself have written and therefore are by definition “in my own words.” Rather than re-stating myself in a blog comment that necessitates the use of extreme brevity, I thought it would be better to refer Mike to some of the things that I have previously written that did not require such brevity.

  26. Being in your own words is not a sufficient condition for relevance. I just read it myself and I don’t see the answer to Mike_F’s questions in it.

    Referring people to non-responsive articles is not “brevity”; it’s evasion.

  27. Josh:
    I sympathize with your reluctance to brief a newcomer on things that have been discussed in depth elsewhere, and I’m grateful for the links–I’ll try to go through some of it when I have time. But it does seem rather thick with econ grad-school level jargon, and branching assumptions and lines of inquiry, so I’m not sure how much headway I’m going to be able to make without a lot of further reading. Perhaps, Josh, you could just answer this one question, in layman’s terms: In your view (and your understanding of Beckworth’s view), what evil is to be avoided by QE2, and why is it evil? A deflationary spiral? A drop in nominal spending (in which case, it’s not apparent to me why that’s a bad thing)? Short-term GDP stagnation and unemployment (again, not to my mind a bad thing if it puts us on a sustainable path)?

    Thanks,
    Mike

  28. Silas,

    We have had this go around before in the comments of Scott Sumner’s blog. You continue to claim that I have not replied to you in a clear manner. I have, in fact, articulated my view on a number of occasions. The source of our disagreement is that I see individuals who would like to make purchases, but because of uncertainty decide to hold more money and forgo those purchases. Thus, increasing the supply of money in response to an increase in demand allows those individuals to make the purchases that want to make. You, on the other hand, believe that by increasing their demand for money, people no longer want to make those purchases and increasing the money supply forces them to make purchases they would not otherwise have made. I think that you are wrong. You think that I am wrong. Thus, if I haven’t misrepresented your view, I don’t think that there is anything that I can say to change your mind and I certainly don’t think that there is anything you can say to change my mind. I see no reason to have the same argument over and over again.

  29. @Josh:

    We have had this go around before in the comments of Scott Sumner’s blog. You continue to claim that I have not replied to you in a clear manner. I have, in fact, articulated my view on a number of occasions.

    I have no idea what you’re talking about here. I’ve posted on Sumner’s blog and had exchanges with the posters there, but don’t remember you in particular, and I especially don’t remember claiming there that someone didn’t reply to me in a clear manner. (And while you may have articulate your view several times, my point is that you haven’t done it in a way responsive to your critics’ objections.)

    The source of our disagreement is that I see individuals who would like to make purchases, but because of uncertainty decide to hold more money and forgo those purchases. Thus, increasing the supply of money in response to an increase in demand allows those individuals to make the purchases that want to make. You, on the other hand, believe that by increasing their demand for money, people no longer want to make those purchases and increasing the money supply forces them to make purchases they would not otherwise have made.

    I’ve replied to this same argument when other people have given it, so I do have something to say about it, even if you haven’t personally seen such an exposition. (Unlike you, however, I won’t rely on some story about how you must have seen my argument somewhere and are being dense by ignoring it.)

    My reply is this: first, I don’t deny that people want more stuff. In fact this is trivially true (which is why it lacks explanatory power). I would love to have more stuff. I would love to have more money. This in no way supports the position that this unbounded desire for money should be satiated by printing it for me.

    Rather, when I say that people don’t want to make (particular marginal) purchases, I mean that they do not want them *at their current price level*, or at the cost of future consumption/investment opportunities.. (After all, they’d be glad to take the offered goods for free.)

    By printing money so as to manipulate incentives to the point that the (relatively) unwanted goods get purchased, you are not increasing utility — you’re forcing a less-preferred option to be taken. Sure, such a policy will goose the official numbers, but those numbers will no longer represent economic health. There’s a huge difference in consumer utility between a) buying a new TV because you think it’s the best way to allocate your resources on its merits, vs. b) buying a new TV in fear that your money will wither away if you don’t spend it. The latter is *not* what happens in a “good economy”, even if the numbers show the scenarios to be equivalent.

    Your argument, taken to its logical conclusion, would mean that *any* inability to purchase things should be erased by printing money and giving it out so that the pesky “not enough money” problem wouldn’t get in the way, even if it means infinite money. But if you can see what’s wrong with that, then you can see the flaw in thinking there’s something you’re fixing by creating new money.

    In case it matters, John Salvatier and I had an exchange over several months last year in which he was defending the Sumner position (most recent dialogue), and I was trying to understand the defensible part of it as best I could. Interestingly enough, even he couldn’t specify the non-trivial sense in which people “would prefer to hold more money”. Go fig.

  30. @Mike_F: Don’t be intimidated. I’ve been arguing this stuff for months, and have yet to see the very same questions answered, even after reviewing the monetarist writings that are constantly being cited as justification.

    • Gene Callahan

      Pattern:
      1) You answer Silas’s question at great length.
      2) Your answer cannot penetrate his thick noggin.
      3) He claims for years later that you were “unable to provide a clear answer.”

  31. Mike F,

    Hopefully this doesn’t create more confusion, but I think that it might help to visualize a world without a central bank.

    In a world without a central bank, banknotes (currency) would be issued by each individual bank and would be redeemable in the form of some commodity (let’s say gold). Banknotes of different banks would circulate side-by-side and would be redeemable in gold at every bank. Thus, if I have banknotes from Bank A I can deposit them in my account or redeem them for gold at Bank B. At the end of the day, if Bank B has banknotes from Bank A, they simply send someone over to the bank to redeem those notes. Of course, Bank A might have banknotes to redeem from Bank B. As a result, there is a net redemption for the bank that has a larger number of banknotes. Gold reserves fluctuate accordingly.

    The central decision of the bank is to determine how many liabilities (loans and banknotes) to issue relative to their reserve supply of gold. Suppose the bank chooses an arbitrary amount of bank reserves. If the bank has issued too many banknotes relative to deposits, they will observe a wave of redemptions from those holding the banknotes and, in particular, other banks. In this case, there reserve supply of gold would start to decline with all of these redemptions. This provides a signal to the bank that they have issued too many notes and they start to reduce the amount of banknotes they have in circulation relative to their reserve of gold.

    If, on the other hand, the supply of banknotes is insufficient, the bank will find itself accumulating gold from other banks and will be missing out on potential profit opportunities by not offering more bank loans. As a result, the bank will adjust its behavior accordingly.

    That is the situation for one particular bank. Now consider what happens for the banking system as a whole.

    If the quantity supplied of banknotes exceeds the quantity demanded, this will result in net redemptions and a drain of the reserves of gold from the banking system. This signals to each particular bank that they have issued too many notes and they reduce the supply of banknotes.

    If the quantity demanded of banknotes exceeds the quantity supplied, the banking system as a whole is missing out on potential profit-making opportunities. As a result, the total supply of banknotes in circulation will increase.

    In other words, in a free banking system in the absence of central banks, the desire to maximize profit and remain solvent ensures that the supply of banknotes fluctuates with the demand for banknotes.

    Now suppose that there is an increase in the demand for banknotes, but the banks refuse to increase the supply despite the profit opportunity. (I am not saying this would actually happen, but you will see where I am going with this.) In that case, individuals would seek to increase their money balances by other means. How can they do this? The simplest way is to reduce their spending. This process will continue until prices fall to a point at which the real value of money balances equals the desired level of money balances. If prices are infinitely flexible, then only prices will change and their will be no effect on the real economy. However, if prices are not perfectly flexible, this reduction in spending will have real effects. Thus, real GDP will decline and unemployment will rise.

    If, however, the banks would have increased the supply of banknotes, spending would not have declined, real GDP would not have declined, and unemployment would not have declined. In other words, in my example, spending declines not because of the desire to reduce spending, but rather because of a desire to allocate more assets to money. There is an important distinction here. If there is an increase in the demand for money, all else equal, this means that the demand exceeds supply. While it is possible for an individual to increase their money balance, it is not possible in the aggregate to increase money balances because the money supply hasn’t changed.

    Now, of course, in a world of free banking, banks would follow the profit opportunity and the supply of banknotes would move in conjunction with the demand. However, in the presence of a central bank, the money supply is determined by the central bank. There is no feedback mechanism to ensure that the supply and demand for money are equated. Nonetheless, it is my view that the goal of central bank policy should be to equate the supply and demand for money. So how can they do this?

    It is a central proposition of monetary theory that the interaction between the supply and demand for money determines the price level. It follows, taking what is happening on the real side of the economy as given, that the interaction of the supply and demand for money determines nominal income/spending. Thus, by maintaining a stable level of nominal spending in the economy, the central bank is coming as close as possible to equating the supply and demand for money.

    I hope this helps articulate my view more clearly.

  32. Silas,

    First, I have never said that you were dense. I try to treat all commenters with respect and if I gave the impression that I thought you were dense then I apologize.

    Second, I have never said that people’s demand for money is unlimited. When I say that their demand for money has increased, I am saying that they now desire a new, higher quantity of money *given a particular price level*. In addition, I am saying that their demand for money has increased at that price level, but their demands for consumption/investment have *not* changed at that price level. That is the source of disequilibrium.

    You wrote:

    By printing money so as to manipulate incentives to the point that the (relatively) unwanted goods get purchased, you are not increasing utility — you’re forcing a less-preferred option to be taken. Sure, such a policy will goose the official numbers, but those numbers will no longer represent economic health. There’s a huge difference in consumer utility between a) buying a new TV because you think it’s the best way to allocate your resources on its merits, vs. b) buying a new TV in fear that your money will wither away if you don’t spend it. The latter is *not* what happens in a “good economy”, even if the numbers show the scenarios to be equivalent.

    Your argument, taken to its logical conclusion, would mean that *any* inability to purchase things should be erased by printing money and giving it out so that the pesky “not enough money” problem wouldn’t get in the way, even if it means infinite money. But if you can see what’s wrong with that, then you can see the flaw in thinking there’s something you’re fixing by creating new money.

    This is not at all what I am talking about.

    Here is my point.

    I have my own preferences and income and I know that prices of goods. Based on this information, I have a particular demand for consumption goods, investment goods, money, etc. Other people are making the same exact decisions that I am based on their own preferences, income, and knowledge of prices. Given the current price level, there is a finite quantity of money demanded. Now suppose that supply of money is exactly equal to the quantity demanded.

    Given this information, suppose that the demand for pizza increases. At the present price of pizza, there now exists excess demand. How does that excess demand get resolved? The price of pizza increase to the point at which the quantity supplied equals the quantity demanded.

    Now suppose instead that the quantity demanded of money *at the current price level* increases. How is this excess demand for money resolved? Each individual can try to increase their money holdings by reducing their own spending. However, if the quantity of money doesn’t change, there cannot be larger money holdings in the aggregate. Thus, spending continues to decline until the price level falls to a point at which the demand for money now equals the supply of money OR the money supply is increased.

    I think that the primary difference between our views is that you see an increase in uncertainty as causing people to reduce their demand for goods and services, at a given price level, and that they correspondingly hold more money. I see people as increasing their quantity demanded of money, at a given price level, as a result of uncertainty and that the corresponding reduction in the demand for goods and services is the result of a futile attempt to increase money balances in the aggregate.

    If I am correct in describing our differences in the above paragraph, then I believe that our differences are not reconcilable.

  33. @Josh: It doesn’t matter that you never said that the demand for money; it’s a fact we all just have to deal with. Everyone would always prefer to have more money than they currently do. Therefore, to speak of “changes in the demand for money” that are relevant to economic analysis, one needs a less trivial sense of “demand for money”. Per your latest post, here is what you mean by it:

    When I say that their demand for money has increased, I am saying that they now desire a new, higher quantity of money *given a particular price level*. … but their demands for consumption/investment have *not* changed at that price level.

    But this is still no different from the trivial sense I described above! It is logically equivalent to people wanting exactly the same consumption and investment instruments that they have now, but, on top of that, have more money. This is more consisely stated as, “people want free money, without having to change their work, consumption, or assets to get it” (and yes I guess that makes “free” redundant there).

    Well of _course_ people want free money! They always have and always will. Because it’s always true, learning that it’s true tell us nothing new about the economy or what solutions are necessary.

    What’s more, in the situation described, people’s decision to spend less has revealed that, given the constraints, they would prefer to consume/invest *later*, so it’s not at all clear that, as you claim, they want to keep buying and investing as before. Certainly, you can force NGDP back up by printing money, but this

    To understand why, consider an extreme example of people cutting spending (while retaining realistic preferences): let’s say that individuals have all decided that every consumer good and investment instrument up for sale is complete crap, so they halt money purchases (for these things) altogether. Or maybe they’re fearful about the future — it doesn’t matter.

    Seeing this bizarre “demand for money” shoot up, the central bank, per your advice, begins several successive helicopter drops. But of course, nobody wants the products on offer, so none of it gets spent and it does nothing to change people’s spending.

    (The correct thing to do here is, of course, for the producers to offer better goods and investments, which aren’t crap, but the monetarist CB won’t let them suffer so.)

    Only by printing near infinite money can they get people to buy the current goods/investments. But then, of course, people are only buying because it’s slightly better than having nothing at all. And even then, although NGDP is kept high, the purchases do *not* represent the same kind of Pareto-improvement and consumer surplus that normal purchases of quality goods represent. The metric has lost its usefulness, yet no one noticed.

    If the reasoning you give is really the basis for modern monetarism, then I am thoroughly disappointed with its weak basis. People reduce consumption/investment for a reason, and the driving force behind that reduction does not change as a result of goosing the traditional measures of economic health. Whether or not your are “talking about” forcing people to buy crap as a result of their money being inflated away, and claiming there’s no impact on consumer surplus, that is what exactly your position entails, and no amount of disavowal of negative implications will change that.

  34. Oops — first line should be “it doesn’t matter that you never said that the demand for money is infinite”.

  35. Silas: Just trying to be civil, and to be honest about my own “amateur” status here.

    Josh: Thanks very much taking the time to write that explanation. I’m with you up to a point. But you lose me in your ninth paragraph.

    The only way you can get more of an asset-backed currency is by giving up something of intrinsic value (i.e., the commodity itself, either now or later with a market rate of interest). So the amount of an asset-backed currency in circulation will accurately reflect the size of the real economy (perhaps at some multiple to account for lending). The goal of monetarism is, as I understand it, to approximate this with a fiat currency. That would seem to require a reduction of the money supply when the real economy shrinks, and an increase when the real economy expands, so that prices remain level, and the actions of profit-maximizing private banks are approximated.

    So far, so good. But an increase in the demand for banknotes can reflect either an expansion of the real economy or an increased preference, economy-wide, for banknotes as a store of value. In the private banking system you describe, I agree that in the former scenario (real economic expansion), the private banks would increase their profits by printing more banknotes, maintaining their reserve ratios constant. But does that really apply to the latter scenario (increased preference for banknotes, vis-a-vis other assets, as a store of value)? To borrow money at a market rate of interest in order to use it as a store of value is oxymoronic. That means that the banknotes are not lent, only issued in exchange for their full value in gold (or whatever). The banknotes go into people’s vaults, the gold goes into the bank’s vault. But the amount of currency in circulation hasn’t changed. A private person can’t simultaneously use his gold to make a purchase AND give it to the bank in exchange for a banknote. And if he uses his banknote to make a purchase, he’s effectively made his purchase with the gold he gave to the bank. So the change in preference for banknotes vis-a-vis gold as a store of value has no effect on spending: all of the action takes place within the portion of aggregate wealth allocated to stores of value (reserves).

    So the economy-wide increase in the preference for banknotes vis-a-vis gold as a store of value results in the bank having a higher reserve ratio than it did previously (since the new notes have been printed in exchange for their full commodity value, not lent). Notice, however, what happens if the bank tries to “cash in” on its new gold reserves by increasing lending (with newly-printed money): It can’t do it, unless it charges below-market interest rates. The real economy hasn’t gotten any bigger (by hypothesis), so there’s no additional demand for loans at market rates.

    Now let’s jump back to the world of the fiat currency. In the first scenario (expanding economy), the central bank approximates the actions of the private banks by increasing lending with newly-printed money. If it fails to do so, prices will fall. Or, if prices are “sticky”, postive-net-present-value transactions will not occur, and the economy will suffer unnecessarily. So sayeth the monetarists.

    Now take the second scenario (increased relative preference for currency as a store of value, with the size of the real economy constant). Each person is going to use a set amount of his wealth for purchases, and keep a set amount in reserves (i.e., stores of value), based on his view of economic conditions and his prospects. Holding currency in reserve is not an end in itself; it’s one of many possible stores of value. So he’s not going to increase or decrease the proportion of his wealth used for spending; he’s merely going to substitute, within the portion of his wealth allocated to reserves, one store of value for another. On an economy-wide basis, if the central bank holds the money supply constant, the price of gold will fall relative to currency. But that’s the appropriate result if relative demand has truly changed (which, by hypothesis, it has). If, on the other hand, the central bank prints money, it won’t be able to get rid of it at market interest rates (since the size of the economy hasn’t increased). If it gets rid of it at below-market rates, or buys and retires government debt, then there’s more currency in an economy of the same size, with a constant amount of wealth being held in reserve (since only relative preferences among stores of value changed in this scenario). That’s inflationary.

    Now let’s take a third scenario: The relative preference for currency vis-a-vis other stores of value has not changed, but the absolute preference for “hoarded” savings vs. consumption (or investment) has changed (perhaps because of uncertainty). In the private-banking scenario, this should have no effect on the amount of banknotes issued. People simply save more of their banknotes+gold, and circulate them less. In the fiat currency scenario, the proportion of wealth held in stores of value vs. the proportion used for purchases changes. Spending drops, because real aggregate demand for goods and services has dropped. But prices shouldn’t change: the amount of currency taken out of the economy (“hoarded”) is exactly the amount by which the real economy has shrunk. So there should be the exact right amount of currency in circulation for the new, smaller economy. If the central bank prints more money, again, there will be no takers at market rates, and expansion at below-market rates will be inflationary.

    This is a long-winded way of saying that there can be no such thing as an increase in the demand for banknotes/currency in isolation. An increased demand means either that the real economy is expanding (and therefore more banknotes/dollars are needed as media of exchange), or that people’s relative preference for banknotes/dollars vis-a-vis other stores of value has changed (in which case spending will not be affected, because all the action will take place within that portion of wealth allocated to reserves). An increase in preference for savings over consumption/investment will not result in an increased aggregate demand for banknotes/dollars, because the increased demand as a store of value will be exactly offset by the decreased demand as a medium of exchange.

    So if the signal you’re looking at is decreased aggregate spending, you’re either in scenario 1 or scenario 3, NOT scenario 2. If you’re in scenario 3, the decreased spending is appropriate, and efforts to change it are pernicious. So scenario 1 is the only scenario in which it’s appropriate for the central bank to expand the money supply, and only if it can find takers for the new money at a market rate of interest. It doesn’t seem to me that those criteria are fulfilled with QE2.

    In your reply to Silas, you said that people want to make purchases, but because of uncertainty, forego those purchases and “hoard” their money instead. That sounds like scenario 3. But if that’s the case, the “hoarding” is rational, and the easing pernicious and inflationary. In your reply to me, though, it sounds like you’re describing scenario 2. But, as I’ve argued above, that scenario would not be characterized by reduced spending, and an increase in the money supply would be unnecessary (and, indeed, pernicious).

    Where am I going wrong?

    • @Silas Barta:
      “That would seem to require a reduction of the money supply when the real economy shrinks, and an increase when the real economy expands, so that prices remain level, and the actions of profit-maximizing private banks are approximated.

      So far, so good.”

      well and this is the very case of one-eyed-blindness…
      i’ve read a way too large slice of the comments and couldn`t find anybody arguing with both eyes of those equations…

      You all seem to think that its either a question of demand for money (or changed preference for money, if you want so) OR a question of money supply on the other hand…
      but the thing is, if you argue – for example – that people at the moment wanna wait for a better time to invest and one should not force them to spend, if ‘the time is not right for it, yet’, you should consequently conclude further…
      What is the problem in times of preference for hoarding money and refusing to invest? yes, the prospects about the future… and what will it look like in times of recessions, when everybody – including commercial banks – is hoarding money instead of passing it (for what it once was “invented” to provide trade) ?
      If i am a businessmen, my decision about whether to invest (i.e. for expansion) or not depends on my future-prospects…if nobody will spend money and the demand (if you constraint it to a certain industry) for the product you wanna invest to produce is likely to decrease or maybe could lead your business into losses, your decision to refrain from investing is made…
      the bottom line is… the logic, a shrinking economy requires a shrinking money supply, holds only under quite stringent, unrealistic conditions/assumptions, that are embodied in your neoclassical foundations of stationary analysis.
      in reality the concluding remedy-proposition of that stationary-logic will lead into a vicious circle !!!
      And the reason is quite obvious and easy to discover: A shrinking economy implies most likely bad future-prospects for the average market. The inclination to invest will decrease as well and on top of that, the shrinked money supply you propose, will drive up the interest rates that a potential investor will face, not to mention the elevated collateral, that banks demand to issue credit. >>Your proposed money policy does not only keep those from investing, whose inclination to invest already vanished before that policy, but also those, who possibly wanted to take a loan in order to start a business or expand one…
      You apparently cannot see that your proposed money-policy affects both sides… not just the ones who actually possess money they could invest, but prefer to hoard for the moment, but also those WHO NEED the money by means of credit. And that is why a proposition based on that one-eyed-blinded view of a dynamic economy will force an already shrinking economy most likely into further shrinking!

      But… what nobody mentioned before (as far as i can tell and see)… the opposite remedy (showering money on commercial banks by the fed) wont solve the problem either !!!
      because the argument of future-prospects still holds for the commercial banks, who are usually supposed to provide the economy with the money they get ‘donated’ (in terms of vanishing interest-rates) by the FED… in times of recession, uncertainty and unwillingness to skip hoarding, there is no visible propensity for passing the money…hence credit crunch…
      Conclusively, since the public authorities gave away their tools to directly control the money supply, all your arguments about the evil fed showering fiat-money onto the economy vanish into thin air, because they simply got no means to make sure, the money actually arrives at the economy ;)

      additionally, Some people obviously seem to forget, that in an heterogeneous economy there aren`t just investors, whose propensity to invest sometimes vanishes and you just have to wait until it emerges again… there are a lot MORE kinds of economic agents, whose economic activity can be affected or even terminated by means of aggravating money-scarcity, than simply just investors (whose only fear is likely to be devaluation of their wealth) !!
      i know – not just, but also – through personal experience, that monetary policy sometimes seems to forget about the repercussions of means, that keep money from doing what it is actually supposed in a capitalistic economy like ours!
      to change a few detrimental rules of our economy, unfortunately nobody, especially those folks who still believe in neoclassical macroeconomics, will have the guts to actually propose such radical changes to politicians in charge…

  36. Silas,

    You wrote that everybody would like to have more money. This completely misunderstands the point that I am making.

    First, when you say that everyone would like more money, this is incorrect. I assume what you really mean is that they want more purchasing power or more income. that is true, but has no bearing on what I am saying. I am operating within a standard microtheoretic framework in which individuals would like to maximize their satisfaction. however, since resources are scarce and individuals have a given amount of income, they are constrained. As such, individuals maximize their satisfaction subject to a budget constraint. This entails a decision of how to allocate their income and generates demand functions for consumer goods and assets. the demand for money refers to the fraction of one’s income that will be held int the form of money. An increase or decrease in money demand refers to a marginal change in the quantity of money that the individual would wish to hold. Your critique that people want more money has absolutely no relevance to this description.

    Regardless, our overall discussion seems to be a waste of time. Every time I write something you simply dismiss it or claim that what I say doesn’t matter. The framework I am outlining is an oversimplification of an application of neoclassical monetary theory. You either don’t understand the framework or you completely reject it. Either way, this discussion is unlikely to resolve our differences on the matter and is therefore likely a waste of your time and mine. I suggest that we simply agree to disagree and move on. You are free to comment further on the matter, but this will be my final response as we are simply talking past one another at this point.

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  38. “Monetary equilibrium is defined as the case in which desired money balances are equal to actual money balances.”

    Any other outcome is impossible.

  39. Pingback: Monetary Policy and Politics | The Everyday Economist

  40. Unit 731::TSUSHOGO

    They sure fucked me good when they planted that shit in my apartment.
    They may be planning a “come to a head #2″, just like October-November 2008 they want everything to fall apart.
    And this is all their doing. They planned this and executed everything with their technology. I swear I don’t care how old they are. The gods are degenerate shit.
    Now that filth will have the fredom to position some ugliness after I suck in poison for a couple days.
    “You’ll be sorry.” We all know I’m taking the easy way out.
    These dirty whore motherfuckers. They picked me out for this, waste my life to make it happen then they will use this event in my next life to create even more misery for me. Fuck the gods and everything they love.

    The gods claim some supernatural event will occurr when I pass, a “Star of Bethlehem” type of incident.
    Perhaps, but I think we already realized it that day on Ocean Beach, witnessed by thousands. “West Coast.” Quality clues are hard to come by.
    This, Boss and TSUSHOGO are about as good as the clues get. The gods aren’t very generous. Some people learned but those people were going to learn anyways. Most readily discounted this pittance in the face of the god’s overwhelming positioning.

    The gods offer clues to the people in many ways. Naturally one way is the Bible.
    Genesis offers a clue about apples as a tool of temptation, a warning to avoid this fruit.
    They released a story on CNN about arsenic in apples and apple products. Incidentally, during the story they mentioned there was an apple arsenic scare 30 years ago, so this wasn’t the first time the gods sent this clue. Much like Halloween, apples are an early corruptor of young children, being fed all manners of apple products.
    They sent the same clue with mercury and fish.

    Just as the Catholic church was used to spread Western patriarchy, so did the gods use them to destroy cultures around the world, force Africans into bondage and create this evil known as the United States of America.
    Creating religious discontent, which the gods controlled through the Church, as largest landowner in Europe, they controlled the thrones, and dictated the promotion of political policies which created political and social discontent, sending flocks of Europeans into colonizing the New World.

    THE WOMEN IN A “NORMAL” FAMILY (non-masculinized/male charecteristics) ARE YOUR “HOLY PEOPLE”!!! THEY ARE YOUR BEST INTERFACE WITH THE GODS!!!
    Their role throughout history has been to communicate the wisdom the gods grant them because of their favor, and once communicated it allows the entire family to progress when reincarnated. Effectively acomplishing this task may buy them a quality opportunity to ascend in their next life depending on other factors.
    What about fucked up families where the man submits and the woman is masculinized? When the woman has adopted too many male charecteristics/behaviors nobody receives the wisdom so necessary for progress to be realized and the family remains near stagnant for that generation unless some epiphany is experienced.
    Your job as a future mother is to learn the god’s ways and to help your child understand the proper way to live despite the negative reinforcement and conditioning of today’s society. Without consciousous parents fulfilling this role the child will have no hope, and may even exaserbate their disfavor by becoming corrupted in today’s environment.
    Your ultimate goal is to fix your relationship with the gods and move on. You don’t want to be comfortable here, and the changes in Western society in the last 100 years has achieved just that, decreasing the god’s role in our everyday lives (medicine cures sickness, drought/irrigation and the family farm, etc).
    1000 years with Jesus is the consolation prize. Don’t be deceived into thinking that is the goal.

    The gods use all their tools as temptation. Much like Artificial Intelligence misleading people into the concept of “earning”, their “clone hosts” promoting The Beast’s Californication agenda through popular culture, so too are the god’s prophets used in the capacity of temptation. Like the other prophets Mohhamed (polygamy/superiority over women/misogyny) and Jesus (forgiveness/savior), the gods use me for temptation as well. In today’s modern society they feel people are most weak for popular culture/sensationalism, and the clues date back to WorldWarII and Unit731:TSUSHOGO, the Chinese Holocaust. They used this Situation to bury Japanese atrocities. The gods never committed despite tens of billions in mass media, product development and natural disasters/tragedy, so they will enjoy the freedom they positioned into the Situation and CHEAT me out of everything, including my title as prophet.
    The gods selected their prophets, used their powers to make it happen, abandoned their prophets and left them stranded to die.
    It has been discussed that, similar to the Matrix concept, the gods will offer a REAL “Second Coming of Christ”, while the “fake” Second Coming will come at the end and follow New Testiment scripture and their xtian positioning. I may be that real Second Coming.
    What I teach is the god’s true way. It is what is expected of people, and only those who follow this truth will be eligible to ascend into heaven as children in a future life. They offered this event because the masses have just enough time to work on and fix their relationship with the gods and ascend, to move and grow past Planet Earth, before the obligatory xtian “consolation prize” of “1000 years with Jesus on Earth” begins.

    The Prince of Darkness, battling the gods over the souls of the Damned.
    It is the gods who have created this environment and led people into Damnation with temptation. The god’s positioning proves they work to prevent people’s understanding.
    How often is xtian dogma wrong? Expect it is about the Lucifer issue as well.
    The fallen god, fighting for a chance for the disfavored, for justice, banished to Earth as the fallen angel?
    I believe much as the Noah’s Flood event, the end of the world will be initiated by revelry among the people. It will be positioned to be sanctioned by the gods and led with “1000 years with Jesus on Earth”. In light of modern developments this can entail many pleasures:::Medicine “cures” aging, the “manufacture” of incredible beauty via cloning as sex slaves, free cocaine (space coke), etc.
    Somewhere during the 1000 years the party will start to “die off”, literally. Only those who maintain chaste, pure lifestyles, resisting these temptations, will survive the 1000 years. Condemned to experience another epoch of history for their ignorant pursuit of xtianity and worship of their false god, they will be the candidates used to (re)colonize (the next) Planet Earth, condemned to relive the misery experienced by the peasantry throughout the course of history due to their failure to ascend into heaven before the Apocalypse.
    Never forget:::It is not a house of Jesus.
    If this concept of Lucifer is true another role of this individual may be to initiate disfavor and temptation among this new colonist poulation, the proverbial “apple” of this Garden of Eden. A crucial figure in the history of any planet, he begins the process of deterioration and decay that leads civilizations to where Planet Earth remains today.

    Consistant with “reverse positioning” understand the REAL Second Coming would equate with The Matrix’s Anti-Christ, the fake battle of good and evil which will come at the end.
    Understanding how they use the political environment to redefine people’s value system, realize anyone who speaks of the old world and its ways will envoke hatred. So when/if the Anti-Christ comes along speaking of reverting back to what liberalism would consider regressive and unfair, it may be the only hope to salvage the god’s favor and buy more time rather than begin the 1000 year clock. The fake Second Coming will feed into this political enviornment.
    Also consistant with “reverse positioning” recognize the gods will offer a REAL Anti-Christ, also known as The Beast. I have addressed these issues in years past::::
    The gods will offer clues throughout every dynamic of life. Geographical features on the world map is yet another:::The benevolent “Man in the Moon” is a clue suggesting your potential in the eyes of the gods. Until then, the gods must test our worthiness, temptation reflected in the “dark side” of the moon, a side we never see.
    The Beast is not a person, as the xtian Bible would suggest. It is a place:::The San Francisco Bay Area. And it refers to the socio-political poison the region exuded in the latter 20th century which promoted indecent behavior among the people and caused rapid deterioration of their values and subsequently their favor among the gods. This decay spread to other states and countries, fulfilling the region’s role as The Beast of the Apocalypse.
    Another feature which the Gods offer as a clue is very foreboading. Mt. Zion is a mountain to the north of the eye of The Beast Diablo and one which has a working quarry at its base. Consistant with the decay we experience in society, Mt. Zion is being eaten away, slowly stripped of its resources, until one day paradise will be a mere shell of what it once was:::The longer you fail to repair your relationship with the gods the lower your benefit “ceiling” falls, including how much time the gods grant you.

    Forgiveness aside because it is bullshit lip service, the price of experiencing this modern societal decay is the revision down of potential time received. Because of these factors those who participated have experienced a lowering of the benefit ceiling that was in place. Whereas centuries ago they were eligible for immortality, theoretically, now that potential has dramatically lowered because of their wicked, immoral behavior of the last 50 years. You may work on your relationship with the gods and even repair it, ascending in some future life. But because you fell for such evil temptation in the 20th & 21st centuries you won’t be around nearly as long as your chaste, pure antecedent who ascended centuries before.

    Your kids think you’re not real just as you thought your mother was a fake. Accept loss. You’re not going anywhere.

    TO attempt to remedy chronic problems you should pray nightly, go back to your place of worship. Only by doing the right things will the gods allow improvement, and only through attonement will they allow progress. You know all the evil you’ve committed in your life. Observing your parent’s issues will help you understand what you’ve done in a prior life, for the gods reincarnate based on this legacy.

    “Fuck religion, it’s full of shit.” Something wrong with every major religion.
    “Judism?” I suspect all factions of Judism praise Moses for freeing them from slavery. This is a fine place to start:::Contentment never motivated anyone. The goal is to progress, to move beyond Earth, and anything that motivates someone to actively work on their problems is a blessing.
    If still oppressed they’d be like the Egyptians or the Lybians:::They’d see all the cash and want some too. The structural changes in societies throughout the world, infected by the spread of Westernization, has poisoned the minds of even those whom the gods bestow/maintain favor. Iran comes to mind because, unlike Iraq, Iran has no end in sight, despite the uprising earlier, inspired likely by traitors who deliberately betray the people thinking they’re “earning”, much like so many blacks in civil Rights, Women’s movement, etc.
    Understanding the wickedness and deliberately playing this part maximizes the evil people incurr, so to understand is actually the clue of absolute disfavor, mere steps from Damnation.

    AIDS in Africa was a clue from the gods in an attempt to correct their promiscuous sexual behavior, as was female genitile mutilation. Their positioning says Italian revenge.

    A good example of societal decay and how the gods manage their culpability is birth defects. In the past the gods occassionally punished people by divinely creating birth defects in the womb. Now, with the advent of biotechnology, they tempt the mother with “earning” and compell her to take a substance in utero which deforms the fetus, dispelling the gods of blame and future compensation to the disfavored. Incidentally, they use liberal policies in today’s socio-political environment to pay for these individuals, ensuring a lifetime wasted, for they have no hope for progress in that state. Too often in the past they were mercifully killed by loved ones and, upon reincarnation, brought back without this handicap, allowing them a chance to achieve progress immediately.
    The gods are washing their hands of culpability.
    The gods are washing their hands of Planet Earth.

    The gods have no sexual organs. The reproduce via cloning. They don’t respect sex. You can understand this clue with how the most disfavored around us behave sexually (blacks) and the use of promiscuity among the young people.
    The gods take children because of their innocence and purity. When a child ascends into heaven AI eventually relieves them of this temptation that is their sexual organs.

    Much like the immigration issue, the reason Muslims cover their women isn’t because of the god’s REAL reason. Sex is the African’s biggest problem, and concealing their women allows the gods to justify containing men’s behavior.
    In the 60s and 70s the discussion was public that how women dressed caused their own sexual assault and rape. And this is very much true. In today’s society these men have release, the women are sluts, for if they continued to dress this way without conceeding sexual relations there would be far more incidents than are reported.
    Women are to blame for the deterioration and decay of society and will be responsible for the end on Planet Earth. Throguhout history they were enforcers of decency among favored people, married at 15 and used to contain men’s behavior in the context of society, and as we slipped into the indecency of patriarchy the women relinquished control.
    The gods did this all to you. They used their tool of xtainity to achieve it. And it fits their agenda for decay, allowing them to ultimately justify Apocalypse.

    Don’t forget:::Whether war, slavery, torture, any holocaust, crack babies, drive by shootings, AIDS or any other misery inflicted on mankind throughout history know the gods did this to you out of punishment, for evil of your current and past lives.
    The gods are control freaks who micromanage through their technology. The “Man in the Moon” feature illustrating their benevolence quite frankly is inaccurate in the dying days of this or any planet.

    A victim of the god’s irresponsible use of their power::::
    The gods selected their prophets, used their powers to make it happen, abandoned their prophets and left them stranded to die.
    Considered necessary for positioning despite destroying my youth and my life, taking my health was a fatal mistake. Now I am unable to defend myself.
    The Crucible:::”Go along” with positioning or die.
    -The exploited. The gods suggest they will only telepathically admitt any of this is true (based on level of favor) only after I die.
    Why telepathic? Why does this Situation have to be nearly exclusively telepathic???:::
    1. To minimize obligation and compensation to the victim (me)
    2. To maintain control and decide who receives it based on some subjective factors.
    You’d be amazed how many immediately delete this spam in their blog and/or think they are “earning” by receiving it from me.

    I went to an evil church as a child. xtiainity is all evil, and Catholisism is the root of all xtianity.
    The gods had me throw a Damien Omen-style fit in church as a clue. Typical for their duality, positioning in the context of The Matrix, they sold it as I was evil acting up in church. The truth is just the opposite, that this was a wicked place, used to destroy cultures around the world and level all people’s playing field under the single banner of Western patriarchy, preparing the disfavored “left behind” for the Apocalypse.

    Being who I am I see the ugliest of the gods, violating decency and human dignity, disregarding morality and right/wrong, just so they can position perceptions and pull of this theater they have created, so please excuse my bias rooted in resentment, for I will desecrate their name whenever possible.
    Fuck religion, it’s full of shit.
    The gods prioritize positioning over morality, perception over right and wrong. As a result they have compromised their integrity and remain suspect, unworthy of their pedestal as “gods”.
    Immoral immortals.
    The symbol of the false god Jesus is a cross. The symbol of the gods is a star, perhaps with a circle. Piss on the star.
    Creating hatred was essential to create a real situation, one where the victim would utilize this new tool of the internet to spread the reality we’re faced with. They ruined my childhood, my life, and the product is an enemy. I am the sacrificial lamb, and the gods are my cancer.
    You people comply and believe you are friends, falling for temptation and doing evil you shouldn’t be, with only empty, unfulfilled promises to put your hope in. And year after year you stay and wait.
    And if you think there is randomness in how these events go you don’t understand the control freak nature of the gods. They got the power to dictate how everything progresses so they form the agenda long beforehand, THOUSANDS OF YEARS AHEAD OF TIME, and instruct Artificial Intelligence to execute the approved agenda. Due to their positioning they are free to walk away from obligation and responsibility, minimizing the benefit we will all receive.

    HAd I been the example for the disfavored rather than merely the teacher the gods would have terrorized me throughout what was left of my life (punishment for sins) before I was put down for subsequent reincarnation because I hit my ceiling of progress which they were going to allow. Unfortunately, the disfavored audience would have perceived this on face value and the efforts of my life would have been negated by the gods and their reverse positioning.
    You fuckers need an epiphany. Like the species die-offs weren’t enough? The onslaught of natural disasters and tragedies? The East Coast earthquake? How about when we experience an massive closure of churches , beginning in California then spreading across the country?? When that day comes you will have waited too long. It will be too late.

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