tag:blogger.com,1999:blog-4900303239154048192.post4417180706579165266..comments2024-03-06T06:34:42.881-05:00Comments on EconoSpeak: ≡Unknownnoreply@blogger.comBlogger3125tag:blogger.com,1999:blog-4900303239154048192.post-77689713561192073632012-02-10T21:33:28.235-05:002012-02-10T21:33:28.235-05:00Hello.This post was really motivating, particularl...<b>Hello.This post was really motivating, particularly because I was browsing for thoughts on this topic last Tuesday.</b><br><a href="https://sites.google.com/a/compare.buysalelow.objs.biz/best-buy-multiroom-digital-music-systems-home-audio-electronics-for-sale/buy-western-digital-wd-tv-live-hub-1-tb-media-center" rel="nofollow">Western Digital WD TV Live Hub 1 TB Media Center</a>Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-53009417745916043022012-02-01T12:11:50.617-05:002012-02-01T12:11:50.617-05:00In a blog post titled "Understanding sectoral...In a blog post titled "Understanding sectoral balances for the UK," Martin Wolf seemed to agree with Peter on this one:<br /><br />"[S]ome people note that the sectoral balances are identities: they must add up to zero. This is correct. But there are many different ways they can add, both in terms of the relative sizes of the surpluses and deficits and levels of economic activity. This sectoral way of thinking can be easily converted into standard macroeconomic models, in which interest rates and income jointly determine the equilibrium outcome. The important contribution of this way of thinking is that it forces one to ask how one expects the economy to add up."Shane Taylorhttps://www.blogger.com/profile/15107193862410947119noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-90069178914290320872012-02-01T11:50:23.097-05:002012-02-01T11:50:23.097-05:00The problem, as it were, with an identity is that ...The problem, as it were, with an identity is that it reduces the number of equations required to see the true relationship.<br /><br />Especially in the case of S=I, it's fairly clear that the identity is dependent on savings being available for use. (If I put $100 in my mattress, S!=I.) So if I say, Y=C+I+G+NX and use the "identity" to claim Y=C+S+G+NX => S=Y-C-G-NX, I am not so much discussing savings as I am <em>savings being put to use</em>—that is, investments. And my "identity" ceases to mean what I claimed it did.<br /><br />Simple question: the Fed is currently paying interest on Excess Reserves. Excess reserves are the banks's equivalent of "stuffing the mattress," but they produce a real cost to G (interest paid).<br /><br />Are excess reserves an investment? By the equations above, I would argue no (the increase in Y is negated by the increase in G; no value created). But are they savings? The people who deposited them in the bank certainly assume they are. So does Savings equal Investment in a time of Excess Excess Reserves?<br /><br />Identities make economists lazy. For that alone, one should be very careful about using them.Ken Houghtonhttps://www.blogger.com/profile/01440837287933536370noreply@blogger.com