tag:blogger.com,1999:blog-8595404115121834255.post5632017305786364367..comments2024-03-28T03:24:05.678-04:00Comments on NAKED KEYNESIANISM: A brief note on Venezuela and the turn to the right in Latin AmericaMatias Vernengohttp://www.blogger.com/profile/09521604894748538215noreply@blogger.comBlogger18125tag:blogger.com,1999:blog-8595404115121834255.post-74991793730216053792018-02-17T04:18:54.168-05:002018-02-17T04:18:54.168-05:00excellent post, very informative. I wonder
why th...excellent post, very informative. I wonder <br />why the opposite specialists of this sector don't notice this.<br />You should proceed your writing. I'm sure, you've a great readers' base already!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-75508164966602273022018-01-24T10:55:13.838-05:002018-01-24T10:55:13.838-05:00I'm still deeply puzzled by this. My impressio...I'm still deeply puzzled by this. My impression (please correct me if I'm wrong) was that countries such as Venezuela and Nigeria have valuable exports (eg oil) that bring in USD and result in them typically running a trade surplus. But because they have USD denominated government debt, the huge cost of servicing that debt results in current account deficits and crisis. If it were not for the USD denominated government debt, they would be able to use the revenue from their exports to amply pay for the inports they needed. I don't understand why some countries such as Singapore managed to avoid the trap and denominated their government debt in local currency and so did great whilst other countries fell into the trap of having USD denominated government debt. I don't get the argument that countries need a diverse economy to avoid this. Norway has a massively oil-based economy and does great. It really looks to me as though denomination of government debt is a root-cause of most of the problems rather than just being a symptom.<br />stonehttps://www.blogger.com/profile/16420341212847543229noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-33665792042249890892018-01-24T10:37:59.080-05:002018-01-24T10:37:59.080-05:00Easier said than done. The origin of borrowing in ...Easier said than done. The origin of borrowing in foreign currency, is that you need dollars to buy intermediary and capital goods (and many consumer goods too in a country like Venezuela), and that is part of the broader problem of diversifying production and exports to be less dependent on borrowing in foreign currency. So the issues associated to the structural transformation of the economy are at the core of these problems.Matias Vernengohttps://www.blogger.com/profile/09521604894748538215noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-63103229135934177912018-01-24T10:29:03.155-05:002018-01-24T10:29:03.155-05:00I thought the root of the problem was that governm...I thought the root of the problem was that government debt is denominated in USD instead of being denominated in the country's own local currency. Could they cure the problem by re-denominating their government debt in local currency?stonehttps://www.blogger.com/profile/16420341212847543229noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-23304912169599558602016-06-26T12:27:00.315-04:002016-06-26T12:27:00.315-04:00first of all i would say that i had a struggle in ...first of all i would say that i had a struggle in my head between the MMT point of view (which expressed for example by bill mitchell in his blog),and post keynesian view which expressed for example by your blog,since my first comment i changed my mind after i researched more about the issue and i support your point of view about balance of payements constraint.<br /><br />but i have to note something <br /><br />i am not exposing mainstream ideas cost push inflation is not exclusively mainstream idea.<br /><br />not to mention that cost push inflation can create class struggle between capitalists and the workers about who should bare the costs and the losses of this cost push inflation.<br /><br />which can be caused by current account deficit shock specially if its related to higher prices of raw materials like the famous stagflation which came after 1973 oil shock,or an opposite shock if the prices of raw materials become suddenly radically lower like with venezuela.<br /><br />or by wages which growing higher than productivity is growing (mostly is conseuqence of long term low productivity growth).<br /><br />both of this factors can create a class struggle which in turn will create inflationary spiral<br /><br /><br />is not mainstream idea is actually somehow marxian and post keynesian,for example people who spoke about that are sidney waintraub in his 1971 paper kaldor in 1951 paper and they are not mainstream economists.<br /><br />also demand led inflation can be caused only in case there is full employment and we both know that neither in venezuela neither in 70-s europe they had full employment.disequilibriumhttps://www.blogger.com/profile/09760922141392402211noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-65201728249255297802016-06-26T10:48:37.669-04:002016-06-26T10:48:37.669-04:00Oh I see. Again freezing wages happened in all LA ...Oh I see. Again freezing wages happened in all LA countries too. And it did not solve high inflation or hyper. Because the source was both depreciation, caused by current account problems with external obligations, and wage resistance. So you needed to resolve the external problem. That is always the case. In Germany in 1923, it was solved with the Dawes Plan. In LA, eventually with the Brady Plan, and a commitment to follow the Washington Consensus policies. Israel has a priviliged relation with the US, which helped resolve the external issue. Then you can hold the exchange rate, and wages, and you control inflation. Again, no relation to printing money or excess demand. As I suggested read my paper on inflation. This is well understood by now, and the mainstream ideas that you expose are completely wrong.Matias Vernengohttps://www.blogger.com/profile/09521604894748538215noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-92088866595010053162016-06-26T10:40:56.215-04:002016-06-26T10:40:56.215-04:00 its about how israel dealt with hyperinflation wh... its about how israel dealt with hyperinflation where they froze salaries of unions and put strict price controls in order to deal with hyperinflation.disequilibriumhttps://www.blogger.com/profile/09760922141392402211noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-39631404871417578872016-06-26T08:39:25.855-04:002016-06-26T08:39:25.855-04:00Salaries have not been frozen as far as I know. In...Salaries have not been frozen as far as I know. Indeed Maduro has, as all the other left of center governments in the region, aggressively increasing the minimum wage.Matias Vernengohttps://www.blogger.com/profile/09521604894748538215noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-13551315961170466432016-06-25T10:37:26.454-04:002016-06-25T10:37:26.454-04:00of course they freezed unions salaries while they ...of course they freezed unions salaries while they put price controls.<br /><br />its classic class struggle.disequilibriumhttps://www.blogger.com/profile/09760922141392402211noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-31824177258663439852016-06-01T13:08:49.647-04:002016-06-01T13:08:49.647-04:00Easier said than done. Floating will not magically...Easier said than done. Floating will not magically de-dollarize the economy. And domestic stimulus is complicated with the current account situation. There are no good options when you hit the external constraint. But in principle you're right that de-dollarization and domestic stimulus are needed.Matias Vernengohttps://www.blogger.com/profile/09521604894748538215noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-77512043597543662502016-06-01T13:04:00.689-04:002016-06-01T13:04:00.689-04:00Hi Paul. Actually money tends to lag, and the velo...Hi Paul. Actually money tends to lag, and the velocity of circulation changes significantly. The problem with all these conventional stories is that inflation caused by money printing implies that there is too much demand, and the economy is supply constrained. It must be, by definition, close to full employment. And no economy with a hyper is at full employment. Actually output and employment are often collapsing. The constraint is often external, which forces the need for contraction to control imports, and depreciation, which fuels inflation.Matias Vernengohttps://www.blogger.com/profile/09521604894748538215noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-44972340467639771072016-06-01T13:00:51.181-04:002016-06-01T13:00:51.181-04:00Hi Daniel. If you read the entry cited above you&#...Hi Daniel. If you read the entry cited above you'll see that heterodox models emphasize relative price shocks (exchange rates, food prices, etc.), class conflict (wage resistance) and inertia. So inflation is not driven by excess demand. Matias Vernengohttps://www.blogger.com/profile/09521604894748538215noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-27553682616932319952016-05-29T18:58:28.009-04:002016-05-29T18:58:28.009-04:00I wouldn't argue that money creation always le...I wouldn't argue that money creation always leads to inflation. Clearly, it won't if the increase in money /credit puts to productive use which increases output. However, if you increase the money supply when your productive capacity or ability to earn income is severely impaired , or you do it to pay for a war or a pay off a foreign debt, you very likely will have hyperinflation. Money printing is necessary for hyperinflation, no. Venezuela wouldn't have such a high amount of inflation if it wasn't increasing money supply without a commensurate increase in output. <br /><br />Thank you for responding and the link. Will take a look. Cheers. paulonlinehttps://www.blogger.com/profile/13079102591337104024noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-16868761570973404782016-05-29T05:10:10.312-04:002016-05-29T05:10:10.312-04:00Undollarise the currency and go to free floating.t...Undollarise the currency and go to free floating.the currency peg has created the hyperinflation by lowering demand for domestic currency and increasing demand for foreign currency.<br /><br />And stimulate domestic production.jakenoreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-16571274987230769972016-05-27T17:26:26.335-04:002016-05-27T17:26:26.335-04:00Well i read another explanation which says its abo...Well i read another explanation which says its about a struggle between labour and capital for who will lose more in terms of wages (labour) and in terms of profit (capital).<br /><br />Since someone have to lose but nobody want its create afterwave shocks which rose into hyperinflation.<br /><br />Anyway i have interesting wikipedia article about this case.<br /><br />Israel in the 80-s suffered 450% hyperinflation as well.<br /><br />Thats how israel solved this.<br /><br />https://en.m.wikipedia.org/wiki/1985_Israel_Economic_Stabilization_Plan<br /><br />I believe that this plan worked because its freezed union salary rises while imposing strict price control on products.<br /><br />This 2 steps together stopped the rising inflation.<br />disequilibriumhttps://www.blogger.com/profile/09760922141392402211noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-67638396846254762832016-05-27T08:03:25.996-04:002016-05-27T08:03:25.996-04:00Yes, depreciation is the initial shock, and the pr...Yes, depreciation is the initial shock, and the propagation mechanism is the increase in wages and and margins of of those that use imported goods as inputs. The result is a price-exchange rate spiral. There is a reason why Purchasing Power Parity works well in high inflation environments. Mainstream authors suggest it goes from money to prices and from prices to the exchange rate. Causality is most likely in reverse, from the exchange rate to prices, and from that to money (which is accommodated by the central bank). I suggest you read this https://www.academia.edu/2634094/Money_and_InflationMatias Vernengohttps://www.blogger.com/profile/09521604894748538215noreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-32179093402835843402016-05-27T04:44:41.208-04:002016-05-27T04:44:41.208-04:00You are confident that depreciation is responsible...You are confident that depreciation is responsible for 450% inflation? Here in Ghana and other parts of sub-Saharan Africa we've experienced record currency depreciation and attendant high inflation, nothing close to triple-digit. The ridiculous amount of inflation in Venezuela has nothing to do with the plane loads of money flown in to compensate for the drop in incomes?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8595404115121834255.post-456781846743890132016-05-26T21:02:29.006-04:002016-05-26T21:02:29.006-04:00It's important to note that the 1989 Caracazo ...It's important to note that the 1989 Caracazo meant the collapse of the two parties that monopolized political power in Venezuela since 1958 (Acción Democrática and Copei). The image that comes to mind is Greece, where PASOK and New Democracy all but vanished.<br /><br />If an anti-Maduro movement managed to gain power, chances are they will find themselves with a very volatile political basis. For a while the largely non-white lower income population may cut them some slack; but the honeymoon may prove extremely short-lived.<br /><br />And they cannot rule with the consent of the white disgruntled middle-class/oligarchy only.<br /><br />I wouldn't be surprised times of political violence were ahead.Magpiehttps://www.blogger.com/profile/07528637318288802178noreply@blogger.com