Originally posted by crazy canuck
I skimmed the article you linked. Isn't the point of the article that the neo-keynsian model has some significant problems or at least to point out that the keynsian analysis has to some extent fallen out of favour?
Neo keynesianism has some problems, but it doesn't seem to have fallen out of favour if you look at current gov't policies from all over the world. However it still has some prediction power in the short term. I'm quite surprised that his school/uni seems to rely so heavily on keynesianism. Or is that just my (wrong) perception.
I'll answer from the pov of a monetarist:
Originally posted by Our_Job
Well money is actually gold, in those days you would have gold coins as money. Hoarding gold causes the social gold ammount to increase this causes the circulationspeed of the gold to decrease. And since this gold is being seen as a resource without being used the effective demand goes down and so the producers are forced to increase there prizes to still make maximum profit and finally this causes the inflation to rise.
Hoarding gold takes it out of circulation, that means less money chasing available goods (demand curve shifts to the left). The result is ceteris paribus lower price and lower quantity sold. If producers facing lower demand increased their prices they would sell even less.
Originally posted by Our_Job
Yes but it also proves that simply hoarding money is one of the things that will only make the situation worse. I gave that link because snall seems to look at inflation in a way that the follower of the theory of Say look at it.
The central bank fights inflation by increasing interests/reducing money supply. That's pretty much the same as hoarding (less money chasing goods) and after some time inflation usually decreases.
If you want to say that inflation initially increases through the higher interest rates that's true, but only in the short term. Then the reduced money supply reduces inflation.
Originally posted by Snall
Of course money is gold...but it isn't anymore..thats the problem and why inflation IS a problem, there is no gold standard, at least not in the US and I don't know about other countires. And you seem to be talking about rich ppl hoarding cash and not spending it, but like i said this is gold and it is nothing like todays monetary systems.
The gold standard isn't such a good idea actually. In the 16th century huge amounts of gold and silver arrived to Europe but there still were only so many goods to buy. Result: high increase of price level.
Other example: If we take a prosperous country (or the whole world for that matter) but the supply of gold doesn't increase, the supply of money will remain the same and prevent the economy from growing. More goods produced but same amount of money available decreases prices ->deflation.
Of course today's monetary system is much more complex than in the middle ages (for about half the timespan of CK barter trade was far more common) but basic rules still apply.
Originally posted by crazy canuck
fair enough. I once read a very good analysis of why the French fuedal economy suffered from such exetreme hyper inflation. I can't recall the details now. Are you familiar with it?
If it's prior to the 16th century it will probably have to do with the king minting "bad" copper coins to pay for his expenses. IIRC Charles VII did this during the HYW to pay for his coronation, and there are many other examples.
