tag:blogger.com,1999:blog-6704573462403312459.post6488732687685026867..comments2024-03-28T06:53:23.473-04:00Comments on Moneyness: Richard Cantillon on Cantillon EffectsJP Koninghttp://www.blogger.com/profile/02559687323828006535noreply@blogger.comBlogger9125tag:blogger.com,1999:blog-6704573462403312459.post-28454082353413800482012-12-07T11:24:03.054-05:002012-12-07T11:24:03.054-05:00Major Freedeom, if certain prices are sticky then ...Major Freedeom, if certain prices are sticky then I can see relative gains and losses.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-76712921475043427962012-12-06T13:39:10.161-05:002012-12-06T13:39:10.161-05:00If people know, then the market value of the liabi...If people know, then the market value of the liabilities immediately falls. If it's secret, nothing happens. (Except that people don't put their money into such banks in the first place) But given the conditions you state, there is a Cantillon effect.<br />Mike Sproulhttp://www.csun.edu/~hceco008/realbills.htmnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-16178028858261795512012-12-06T11:49:12.599-05:002012-12-06T11:49:12.599-05:00Even if I expect the Fed to create $100 trillion o...Even if I expect the Fed to create $100 trillion of new money next year, which will be injected specifically into the primary dealer's bank accounts, there is very little I can do to offset the depreciated money I will soon own. It's not like I or my employer or his customers have the physical ability to raise our selling prices (for labor, goods, etc) sufficiently to offset it. There <i>will</i> be relative gains and losses from the inflation.<br /><br />Expectations only deals with the specifics of who will relative gain and lose, and when. It cannot eliminate the category "relative gains and losses" from taking place.Major_Freedomnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-73977043158298517322012-12-06T11:27:20.308-05:002012-12-06T11:27:20.308-05:00Nick, it could be that over the years "Cantil...Nick, it could be that over the years "Cantillon effects" have come to mean something different from the effects-that-Cantillon-wrote-about. <br /><br />It seems to me that Market monetarists (Scott Sumner for sure) employ near rational expectations when it comes to financial markets and slower expectations when it comes to goods markets. Austrians seem to employ slow expectations even to financial markets so that they can motivate the interest rate distortion that they like to talk about. Do you think that's a fair characterization? Still trying to dehomogenize everything.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-73470831299840269222012-12-06T10:30:49.945-05:002012-12-06T10:30:49.945-05:00Let's say that a clerk at the central bank set...Let's say that a clerk at the central bank sets half its bonds on fire and they're gone forever. Does the market value of the central bank's liabilities immediately fall? What happens if the clerk keeps it secret but just tells one friend? The clerk and the friend immediately sell their notes. Then the friend tells everyone else about what happened and their price plummets. The Cantillon effect is that the clerk and the friend have enjoyed a relative gain. JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-42664666017033162562012-12-06T09:53:33.844-05:002012-12-06T09:53:33.844-05:00JP:
The effects of a change in monetary policy wi...JP:<br /><br />The effects of a change in monetary policy will depend on whether or not it is anticipated. Yep, that's uncontroversial.<br /><br />The effects of a change in fiscal policy (e.g. a switch from buying one good to buying another) will also depend on whether or not it is anticipated.<br /><br />The anticipated/unanticipated distinction seems to me to be orthogonal to the question of exactly where the new money enters the economy.<br /><br />If "Cantillon effects" really means "the effects of unanticipated vs anticipated money", count me in as a strong believer.<br /><br />Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-67310597822120395032012-12-05T18:01:08.538-05:002012-12-05T18:01:08.538-05:00Since people will make unpredictable errors in gue...Since people will make unpredictable errors in guessing whether/how much the issuing bank underpays/overpays, I wouldn't expect any Cantillon effects.Mike Sproulhttp://www.csun.edu/~hceco008/realbills.htmnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-65497935566075279862012-12-05T17:52:25.609-05:002012-12-05T17:52:25.609-05:00"the creation of new asset-backed money won&#..."the creation of new asset-backed money won't affect prices"<br /><br />What happens if the new paper money is being used to overpay/underpay for assets, and people are slow to realize this?JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-71929716437969262892012-12-05T16:57:32.452-05:002012-12-05T16:57:32.452-05:00The rational expectations view goes a step further...The rational expectations view goes a step further and says that in any given period, people will either overestimate or underestimate how much new gold will arrive. Thus prices will not react to new gold in any systematic or predictable way.<br /><br />But when the focus changes to paper money, the creation of new asset-backed money won't affect prices anyway, so Cantillon effects take on a whole new insignificance. Mike Sproulhttp://www.csun.edu/~hceco008/realbills.htmnoreply@blogger.com