The Problem With keynesian economics

[Widdekind]

The "Great Society" of the 1960s-70s not only ushered in a new tax regime, of increasing gross taxes, that account for a third of all US spending today, so raising the the AS curve by about 50%; but also the mix of products (goods & services) generating US GDP also was transformed. The "Q" variable plotted on AD/AS charts is actually a complicated "creature", being a complex vector, representing all of the 'widgets' bought and sold in the economy. Most simply, you could represent the mix of products, with a "Q" having two possible components (manufacturing, services). Then, the mix of products in that "Q" has also been radically altered, as the US economy has shifted from an industrial "manufacturing posture", to a health-care "service posture". Thus, the heavy tax burden in the US not only hikes costs 50%, but also "re-orients" the entire economy, away from productive pursuits, towards services, entertainment, etc

The aforesaid "Great Society" social programs have "rotated" the US economy, on its "production possibilities frontier", away from "manufacturing & industry", towards "services & entertainment". Overall spending, measured only in dollars, does not notice, that what those dollars are spent on, is very different today, than what it was yesterday. Quoting a single statistic (spending in dollars per year) masks the profound transformation of the US economy, away from industry, manufacturing, and moon missions; towards health-care, entertainment. Overall spending, by itself, overlooks that some sectors of the US economy have shrunken, even whilst others, taking their taxes in transfers, have grown. In analogy, looking only at the size of the whole pie (GDP) overlooks who winds up with how much (industry losing to entertainment).

 

[usmcstinger]

The aggregate gross tax-rate is 30%. For every $1.00 spent on new final goods & services (GDP), $0.30 is gross tax, of which $0.15 is welfare (transfers), $0.05 is corporate welfare (subsidies), and $0.10 is net tax. Thus, from before taxes ($0.70), to after taxes ($1.00), prices rise by nearly 50%. That is a significant increase in costs, which raises the AS curve. Moreover, the $3T of wealth re-distribution within the private sector implies, that the new AD & AS curves represent radically different mixes of products (goods & services), that cater towards the tastes of the transfer recipients (health-care services), and away from those of the tax payers: Again, not only does "welfare Capitalism" increase costs, raising the AS curve; but also the mix of products represented along the Q axis is radically transformed:

I judge policies not by that they are suppose to do but what they actually do.

 

[itfitzme]

EDIT:
in the above figures, increasing (decreasing) Taxes will only decrease (increase) private-sector spending (AD). If, in the first figure, the Taxes gained are immediately spent, then public-sector spending (G) increases, offsetting private-sector decreases, "one business suffers higher taxes, another gets a government contract". Or if, in the second figure, the Taxes lost require reducing public-sector spending (G), then any increase in private-sector spending is offset by "cancelled government contracts" from the public-sector. Generally, Fiscal Multipliers are about 1, so the trade-off is more-than-less a complete wash. If so, then, actually, increasing or decreasing Taxes (under balanced budgets) would only re-apportion AD, to-and-from the public & private sectors, but wouldn't do much, to the overall AD curve.

Ideally, that seems about right. If the economy were flat, and all savings were recirculating, then fiscal multipliers are about 1. The government simply becomes another company with a specialized product mix and pricing policy.

Some questions arise. Are there products/services that the government is better able to provide, either because it can be done more efficiently by the government or because the private sector finds no short term value in doing so? Are there products/services that are best provided for by a mix of public and private sector where the two provide services that are not direct substitutes but similar yet differentiated?

Consider this question. Can the economy function in a balanced manner if the government taxes and doesn't spent, say 5%, of total private sector GDP = C + I +NX, that is G = 0. That is, if all dollar output were taxed at 5%, and the money supply continuously adjusting accordingly, such that output were at full labor utilization and all private sector income were spent on consumption of that full output?

Then, does is really manner, ideally, if G=.05(C + I + NX), 10%, 20%?

Even if G is entirely spent on otherwise meaningless disaster preparedness, isn't the fundamental issue not the funds but rather the labor and resources that are removed from the private sector economy?

 

[itfitzme]

The "Great Society" of the 1960s-70s not only ushered in a new tax regime, of increasing gross taxes, that account for a third of all US spending today, so raising the the AS curve by about 50%; but also the mix of products (goods & services) generating US GDP also was transformed. The "Q" variable plotted on AD/AS charts is actually a complicated "creature", being a complex vector, representing all of the 'widgets' bought and sold in the economy. Most simply, you could represent the mix of products, with a "Q" having two possible components (manufacturing, services). Then, the mix of products in that "Q" has also been radically altered, as the US economy has shifted from an industrial "manufacturing posture", to a health-care "service posture". Thus, the heavy tax burden in the US not only hikes costs 50%, but also "re-orients" the entire economy, away from productive pursuits, towards services, entertainment, etc


The aforesaid "Great Society" social programs have "rotated" the US economy, on its "production possibilities frontier", away from "manufacturing & industry", towards "services & entertainment". Overall spending, measured only in dollars, does not notice, that what those dollars are spent on, is very different today, than what it was yesterday. Quoting a single statistic (spending in dollars per year) masks the profound transformation of the US economy, away from industry, manufacturing, and moon missions; towards health-care, entertainment. Overall spending, by itself, overlooks that some sectors of the US economy have shrunken, even whilst others, taking their taxes in transfers, have grown. In analogy, looking only at the size of the whole pie (GDP) overlooks who winds up with how much (industry losing to entertainment).

This is the mix of goods and services output as a percentage of GDP. I summed the subcategories for consumption, - imports and exports. [Removed comment, didn't add any information]

Titleistribution Of Total Goods and Services in GDP[/}

Doing percentage of GDP is a proxy for real dollar per capita. It basically says that, on a per capita basis, this is the percentage distribution for output.

But, a question that arises is if this is really indicative of actual quantity. If manufacturing is substantially more efficient then service provision, then actual output and consumption per dollar is also equally more substantial. As such, as a percentage of GDP, due to our dollar measure, it would appear that goods are substantially lower where, in fact, in actual product terms they could be perfectly fine and the only real change is that we are able to move additional labor into service provision. I cannot answer the question of whether the dollar amount of goods misses an underlying increase in goods per dollar. I am left to assume not.

Still, with that in mind, consider these graphs, the actual nominal dollar output for goods and services. The GDP dollar amounts are annualized quarterly.

Title:Total GDP Output for Goods and Services.

Title:Consumption Portion of GDP, Goods and Services

Output has continued upward, with services being an ever increasing proportion. If goods have become less expensive, by comparison to services, then goods output would tilt upward more so. The goods curve represents, at the least, a minimum increase.

Per capita and per worker are important views. Consumption per capita is average standard of living. Consumption per worker is roughly average household standard of living. GDP output per worker is efficiency. GDP output per capita is "population efficiency".

Since 1995, the real dollar per capita appear as follows. The first is actual output. The second is just consumption.

Title:Real Dollar per Capita GDP Total Output for Goods and Services

Title:Real Dollar per Capita Consumption Portion of GDP

Since 1995, the real dollar per worker appears as follows. The first is actual output. The second is just consumption.

Title:Real Dollar per Worker GDP Total Output for Goods and Services

Title:Real Dollar per Worker Consumption Portion of GDP

In dollar terms, goods has increased slightly while services has increased even more. Interestingly, though not surprising, for consumption, goods has also increases, but even more so. Obviously, this is imports.

The production frontier then has shifted outward on efficiency, producing more goods while it has also rotated to include substantially more services. I wouldn't say that manufacturing has lost anything to services. It has gained while services has gained even more. Most significantly, this is true real dollar per worker as efficiency has increased.

One might suppose that total production output might be higher is either a) imported goods were not predominant or b) services were less. The former would, though, necessitate the latter. So, it only comes down to supposing that goods production could be higher if not for the services. But the better interpretation is that, as society has with agriculture, we have become sufficiently efficient such that we have begun to satisfy all demand for goods and labor is available for the purposes of services.


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On a secondary note, take a look at how things changed as a result of the recession. Some things were hit more severely than others. The difference between GDP consumption and GDP total is net exports, so there is some information regarding which was hit more severely. GDP total is just domestically produced output. Consumption includes imports. So, if consumption dipped more severely then GDP total, the difference would be imports (right?). We know, after all, that we were running a trade deficit. It could be, I suppose, more complicated, with imports, exports, and domestically produced consumption doing some odd things. I don't think this is the case.

Basically, domestic service consumption and output took a hit along with imported goods. Efficiency continued to increase (though other closer examinations indicate that it fell between the beginning of the recession and peak unemployment.)

 

[VaeVictis]

The real reason the stimulus failed is the money went to prop up state budgets instead of being spent in a way that would have helped.

Why do you continue to wallow in this nonsense? Do you get some kind of perverse pleasure from being wrong?

The stimulus was not a failure. It saved jobs and kept the economy from total collapse.

The stimuli or the lack there of was a complete failure, I guess you didn't get that Soros funded memo?

Is inherent stupidity and being a congenial liar the norm for being a leftist? Does anybody on the left have any brains? or Do they just lie about having brains?

 

[Widdekind]

fiscal multipliers are about 1. The government simply becomes another company with a specialized product mix and pricing policy.

Employing the apparently common terms "guns & butter" and "swords & plowshears"; an untaxed economy w/o government would have some AD, and some AS. That AS would be relatively efficient and cost-effective, so that the AS curve would be lower.

With taxes and government, taxes increase costs, making AS less efficient & less cost-effective, so that the AS curve becomes higher. But, the magnitude of AD (measured in monetary terms) remains more-or-less the same. Thus, one main effect of taxes is simply to make the economy less efficient, less cost-effective, with a higher AS curve. That will tend to increase prices, and reduce quantities.

Now, the "Q" measured along the x-axis is the magnitude of aggregate output. In detail, Q is a (huge) vector, whose (myriad) individual components are the (myriad) individual quantities of the (myriad) individual products (goods & services) transacted in the economy, per year:

Q = [apples, bananas, cherries, dates, exasketches, figs, garage-door-openers, hamburger, ice-makers, jewelry, kudos, lemons, mangos, nectarines, oranges, peaches, quality-assurance-certifications, raisins, steel, tapioca, Union-training-certifications, Volkswagons, watches, x-ray-machines, yams, zippers....]

|Q| = "Q"​

Likewise, the "P" measured along the y-axis is the magnitude of aggregate price-levels. In detail, P is a vector, matching the above, representing the prices of all those quantities, in each year:

P = [$1/lb., $0.50/lb., $2/lb., $3/lb., $4 ea., $5/lb., $6 ea., $7/lb., $8 ea., $9K ea., $0.10/lb., $0.11/lb., $1.20/lb., $1.30/lb., $1.40/lb., $1.50/lb., $1.60/lb., $170 ea., $1.80/lb., $190/ton, $20/lb., $2100 ea., $22K ea., $23 ea., $24K ea., $0.25/lb., $0.26 ea....]

|P| = "P"​

On the AD & AS chart, only the magnitudes "P", "Q" are plotted; but the other main effect of taxes & government, is to change the mix of products transacted, in the economy, per year. Over-simplistically, "butter becomes guns" & "plowshears become swords" (and "Fords become Sherman-tanks"). Mathematically, the magnitudes "Q", "P" don't change much; but, as the mix of products changes, those vectors "rotate" (in a huge dimensional mathematical space). Over-simplistically, the economy "rotates", along a production-possibility-frontier (PPF), from "butter" towards "guns".

Inexpertly, i identify two main effects of taxes & government:

1. increasing costs, raising the AS curve
2. transforming the economy, changing the product-mix, "rotating" the "Q" axis, along a PPF, away from whatever private-sector products are dis-incentivized through taxes, towards whatever Public-sector products are incentivized through government expenditures

the magnitude of the rise in the AS curve reflects the economic inefficiencies, of de facto employing government force, to "twist arms" and coerce & compel people, to spend their money, on what the Public-sector wants (via taxes), instead of on what they would have wanted themselves. "Government Guns" in the market-place doesn't increase the amount of money available, or increase spending (AD). Instead, Government "gets in the way", "picking everybody's pocket". The more Government imposes on people, the higher the tax burden, and the higher the AS curve, reflecting that economic inefficiency. Meanwhile, the economy "shifts" away from the private-sector, to the Public-sector, along a PPF, of roughly constant magnitude.

For Public goods, private incentives, in the private-sector economy & market-place, do not reflect the collective Public interest. Cp. Prisoner's Dilemma, nobody privately has any incentive to cooperate, but they all do collectively. For such Public goods, private-sector market forces will "mis-orient" the economy, "pointing" the P,Q vectors in socially inefficient "wrong" directions. When, then, collective action & bargaining is beneficial, taxes & government can "re-orient" the economy, "re-pointing" P,Q towards (enough) more "guns, swords, & tanks" to be beneficial, in net (pros less cons).

 

[Widdekind]

For the US, about a third of every dollars spent (on new final goods & services, i.e. GDP) is taxed. Thus, the ratio of Public-sector money-flows to private-sector money-flows is about 1/3 : 2/3, or 1:2. Over-simplistically, heavy taxation in the US has transformed the economy by about "a half", which can be (crudely) visualized as a 30-degree "rotation" of the Q-vector, in the AD/AS chart (Tan(27)=1/2, and that's about 30-degrees):

 

[Widdekind]

I judge policies not by that they are suppose to do but what they actually do.

what politicians do do may as well be what they willed to do

 

[itfitzme]

Inexpertly, i identify two main effects of taxes & government:

1. increasing costs, raising the AS curve
2. transforming the economy, changing the product-mix, "rotating" the "Q" axis, along a PPF, away from whatever private-sector products are dis-incentivized through taxes, towards whatever Public-sector products are incentivized through government expenditures

the magnitude of the rise in the AS curve reflects the economic inefficiencies, of de facto employing government force, to "twist arms" and coerce & compel people, to
spend their money, on what the Public-sector wants (via taxes), instead of on what they would have wanted themselves. "Government Guns" in the market-place
doesn't increase the amount of money available, or increase spending (AD). Instead, Government "gets in the way", "picking everybody's pocket". The more Government

imposes on people, the higher the tax burden, and the higher the AS curve, reflecting that economic inefficiency. Meanwhile, the economy "shifts" away from the private-sector, to the Public-sector, along a PPF, of roughly constant magnitude.

For Public goods, private incentives, in the private-sector economy & market-place, do not reflect the collective Public interest. Cp. Prisoner's Dilemma, nobody privately has any incentive to cooperate, but they all do collectively. For such Public goods, private-sector market forces will "mis-orient" the economy, "pointing" the P,Q vectors in socially inefficient "wrong" directions. When, then, collective action & bargaining is beneficial, taxes & government can "re-orient" the economy, "re-pointing" P,Q towards (enough) more "guns, swords, & tanks" to be beneficial, in net (pros less cons).

I get what you are suggesting as a possibility. I don't see any data to back it up.

What is the magnitude of this effect compared to the simple maxing out of consumption of goods and the increase of services to the total consumption basket?

We do have things like GDP-G/GDP which gives us the percentage of government expenditures to the GDP. I am to wonder how food stamps are separated out. Are they in the consumption portion of GDP or in the Government portion? Surely,. it isn't double counted.

Has the government expenditures increased substantially enough, compared to simply private consumption, to account for the shift?

Haven't taxes decreased with any increased in gov't expenditures done primarily on deficit spending? Just as well, the majority of the changes have been on defense spending.

Clearly, given the data I've posted on consumption and production, goods and services, nominal total and real per capita and per worker, the apparent change in proportions for goods and services has NOT been do the detriment of goods and production. It has been a proportional shift as production of goods has increased while services increased even more so. There has been no dis-incentivizing through taxes of private-sector products. There has been no re-orienting of the product mix based on government imposition. The markets and production efficiency alone account for the appearance of a shift, only in that production has become so efficient, in combination with the advantage of imports, that the service sector has grown considerably by comparison to the modest growth in production of goods.

To even begin to suppose otherwise will require examining the percentage contributions of goods, services, and government expenditures. And, these would have to be compared to the per capita, per worker, and total changes. We would also need to differentiate out the government expenditures for discretionary welfare spending (including the identical socialist Veterans Admin), defense spending, and mandatory spending.

I am all for the concept of government taxation and spending shifting the economy. I am all for the concept of government efficiency begin less then the private sector. It's well established that efficiency goes down as a) organization size increases and b) available funds increases. Still, there remains a question of proportion.

And, in fact, if food stamps or government welfare falls under GDP-G, and GDP-C is entirely private consumption, then it is apparent that the private sector consumption has shifted on it's own, substantially increasing services.

You need to back up this statement with actual data;

"For such Public goods, private-sector market forces will "mis-orient" the economy, "pointing" the P,Q vectors in socially inefficient "wrong" directions. When, then, collective action & bargaining is beneficial, taxes & government can "re-orient" the economy, "re-pointing" P,Q towards (enough) more "guns, swords, & tanks" to be beneficial, in net (pros less cons)."

With some data. And there are three parts to be proven; a) that there has been any reorienting b) there is a lack of efficiency c) that this reorientation has been "in socially inefficient "wrong" directions" and d) that "more "guns, swords, & tanks" is beneficial.

 

[Widdekind]

GDP-G/GDP ... gives us the percentage of government expenditures to the GDP.

(G/Y) is the "overt" effect of government spending; but transfers & subsidies are a "covert" effect of taxation, re-distributing money, within the private-sector, from "Peters" to "Pauls", behind the scenes. Those "Pauls" spend money, as individuals (from transfers) & businesses (from subsidies), which otherwise would have been spent by "Peters". That, too, transforms the economy, to reflect "Pauls" more than "Peters". Thus, the total impact of government, is "overt" expenditures (G), plus "covert" welfare-Capitalism (transfers & subsidies). Now, G = (net Taxes) + (deficit) = T + (G-T). If we call transfer & subsidies (t+s), then we want:

G + (t+s) = (G-T) + T + (t+s) = (deficit) + (total taxes)​

Assuming that local & state deficits are negligible, then "Federal Surplus/Deficit" plus "Government Current Receipts" has been about a third, for decades:

how food stamps are separated out. Are they in the consumption portion of GDP or in the Government portion? Surely,. it isn't double counted.

welfare Capitalism takes money from "Peters" and gives it to "Pauls". Those "Pauls" could spend it, or save it (or, spend the welfare, and save more of other incomes, which accounts, economically, to the same). And, money saved at banks can be reborrowed. Thus, "Peters" could wind up borrowing back "their own money", having to pay interest to spend money that had been in their pockets, previously.

the apparent change in proportions for goods and services has NOT been do the detriment of goods and production. It has been a proportional shift as production of goods has increased while services increased even more so. There has been no dis-incentivizing through taxes of private-sector products.

supply & demand -- as prices rise, quantities demanded fall. Taxes hike prices (in the US by a third), thereby reducing quantities demanded. By definition, Taxes represent a "Government Frown" upon the activity taxed -- hence "sin taxes" on alcohol are so high, because the same society that once Publicly Prohibited alcohol, in fact "Scowls" at booze, and people buy less booze (at grocery stores) because prices there are hiked.

Thus, private-sector activity is actively "Frowned On" by government taxes. Then, in addition, those taxes are spent (G) or re-apportioned as welfare (transfers, subsidies), to other parts of the private-sector. So, the Public sector grows; and the private sector is transformed. Overall, the whole economy "shifts", "rotating" along a PPF, away from "Peter's guns, swords & tanks" and towards "Paul's butter, plowshears & cars".

if food stamps or government welfare falls under GDP-G, and GDP-C is entirely private consumption

welfare (transfers, subsidies) is not accounted as government expenditures (G). Instead, the money is re-distributed, in the private-sector, from "Peters" to "Pauls". Yes, "Paul" now has more money to spend. But, "Paul" didn't get that money "on his own" -- he "got" given that money, by "his Big Brother". That is not a shift, of the private-sector, "on its own". Instead, that's politics impacting economics, from the outside, into the marketplace.

 

[EdwardBaiamonte]

You can unload it[treasuries] anyway.

sure you can but the Fed intervenes specificially to change
the price at which you can unload it thus distorting the market or freeing it from the the normal capitalist constraints that you would want to correctly allocate our limited resources.

 

[EdwardBaiamonte]

Besides, short term interest rates are stuck around zero. The Fed can't increase the government's ability to issue bonds

what on earth do you mean?? Half the world is urging the liberals to borrow at the low rates the liberals have artificially created. Further, if the Fed had no influence it would not be doing QE 3-5. Even if the influence holds rates at 0 that's significant. Now you know why a new car company will advertise the resale value of its cars.

 

[EdwardBaiamonte]

The point is obvious if you'd continued reading. The Fed's responsibility is monetary stability, not sabotaging government borrowing.

of course if the government is $16 trillion in debt, has no ability to repay, and you are are making it easier for them keep borrowing without any capitalistic restraints you are not contributing to monetary stability, but rather monetary chaos.

If the interest rate needs to fall, the Fed should lower it, irrespective of the fact that it'll make borrowing easier for the government. It's the voters' job to constrain budgets, not the Fed's.

thats absurd, if the voters are not doing their job then the Fed has a responsibility to discourage them, not enable the next depression.

 

[EdwardBaiamonte]

The same way as always. Increasing the rate of growth in the monetary base by buying assets.

well there is the helicopter method, QE, and interest rates.

Interest rates is by far the best since then the money is disciplined by capitalist constrants. So I don't understand by Friedman, of all people, would
have picked Qe for Japan when it is so famous for a 200% debt and 10000 bridges to no where and no recovery.

Ah, no man. The helicopter method (direct household credits) isn't available for the Fed. That's not legal.

And the Fed doesn't "set interest rates". The Fed has the one special tool available to it: it's the only thing allowed to issue base money. The Fed doesn't order banks to use certain interest rates. It buys government bonds with created money (or sells them) until the Fed Funds rate is at the desired level.

It's special tool is changing the quantity of base money, which it does buy buying government bonds in the open market. If interest rates are at zero, they can't fall any further. But that doesn't change anything, the Fed can still keep creating money and buying bonds.

you were not paying attention. Our subject was, why would Friedman encourage QE in Japan when Japan already has 10000 bridges to no where. Are you saying QE, in the end, imposes the same capitalistic constraints as lowering interest rates?

 

[DSGE]

You can unload it[treasuries] anyway.

sure you can but the Fed intervenes specificially to change
the price at which you can unload it thus distorting the market or freeing it from the the normal capitalist constraints that you would want to correctly allocate our limited resources.

It can't. Yield's are stuck near zero. They can increase the price and lower yields when not at the zero bound, increasing the ability of the government to borrow; but not when yields are stuck near zero.

 

[DSGE]

Besides, short term interest rates are stuck around zero. The Fed can't increase the government's ability to issue bonds

what on earth do you mean?? Half the world is urging the liberals to borrow at the low rates the liberals have artificially created. Further, if the Fed had no influence it would not be doing QE 3-5. Even if the influence holds rates at 0 that's significant. Now you know why a new car company will advertise the resale value of its cars.

If the zero interest rates were "artificially" low we'd be seeing accelerating NGDP growth and inflation. Since those things are not accelerating, they're growing at roughly constant rates, then clearly the interest rate must "naturally" be that low.

I didn't say the Fed has no influence (though it's choosing to not to use much influence), i'm saying the Fed has no influence over government borrowing at the zero bound.

 

[DSGE]

The point is obvious if you'd continued reading. The Fed's responsibility is monetary stability, not sabotaging government borrowing.

of course if the government is $16 trillion in debt, has no ability to repay, and you are are making it easier for them keep borrowing without any capitalistic restraints you are not contributing to monetary stability, but rather monetary chaos.

That's not monetary chaos. That's fiscal chaos. Not the Fed's problem. That's our problem.

If the interest rate needs to fall, the Fed should lower it, irrespective of the fact that it'll make borrowing easier for the government. It's the voters' job to constrain budgets, not the Fed's.

thats absurd, if the voters are not doing their job then the Fed has a responsibility to discourage them, not enable the next depression.

Hahahah. How idiotically authoritarian. Again, you think the Fed should **** everybody in the economy over with excessively tight money just to stick it to the government. So stupid.

 

[DSGE]

well there is the helicopter method, QE, and interest rates.

Interest rates is by far the best since then the money is disciplined by capitalist constrants. So I don't understand by Friedman, of all people, would
have picked Qe for Japan when it is so famous for a 200% debt and 10000 bridges to no where and no recovery.

Ah, no man. The helicopter method (direct household credits) isn't available for the Fed. That's not legal.

And the Fed doesn't "set interest rates". The Fed has the one special tool available to it: it's the only thing allowed to issue base money. The Fed doesn't order banks to use certain interest rates. It buys government bonds with created money (or sells them) until the Fed Funds rate is at the desired level.

It's special tool is changing the quantity of base money, which it does buy buying government bonds in the open market. If interest rates are at zero, they can't fall any further. But that doesn't change anything, the Fed can still keep creating money and buying bonds.

you were not paying attention. Our subject was, why would Friedman encourage QE in Japan when Japan already has 10000 bridges to no where. Are you saying QE, in the end, imposes the same capitalistic constraints as lowering interest rates?

QE and lowering interest rates are the same thing. They're structurally identical. Both involve the same thing: Open Market Operations. The Fed creates base money, it uses that money to buy government securities in the secondary market, that increases the quantity of bank reserves.

The difference between QE and lowering interest rates is that QE is this same process, except instead of setting an interest rate target to decide how much money should be created, interest rates are already at zero; so they decide a quantity of money to create rather than its price. Hence, quantitative easing.

 

[EdwardBaiamonte]

Again, you think the Fed should **** everybody in the economy over with excessively tight money just to stick it to the government. So stupid.

excessively tight? Friedman didn't care that base money dropped 6% in 1929 he cared that the peoples money disappeared from their pockets when they had made no poor economic decisions. So, he wanted to print as much as necessary to keep them whole. He wanted to isolate national problems from individual problems.

 

[EdwardBaiamonte]

The difference between QE and lowering interest rates is that QE is this same process, except

are you saying that either way the same amount of money will make its way into the economy through bank loans