![]() ![]() As a result, the representation of the relationship between the prices of goods and services and the volume of money is provided in the Real Money Theory (RMT) identity as follows: The missing factors include land, buildings, precious metals, commodity positions, rare objects and art, shares, financial instruments, cryptocurrencies, savings and overseas flows. Indeed, the QTM lacks some 10 fundamental factors (variables) that act as money sinks. This is because the QTM does not account for the many “money sinks” that in addition to goods and services, absorb money in circulation. This identity is in reality misleading as to the causes of inflation resulting in erroneous policy decisions. Our research has found that this identity does not adequately account for the relationship between money volumes and the prices of goods and services. ![]() Where the product of Money volume (M) and the velocity of circulation (V) is equal to the product of average prices of goods and services (P) and quantities purchased (Y). The Irving Fisher version of the QTM is as follows: However, this identity is flawed and this explains why the economy has shifted into irrational territory. In reality, they all accept the logic of the so-called Quantity Theory of Money (QTM).įor almost 50 years the macroeconomic decisions in this country have been dominated by monetarism which bases the logic of monetary policy decisions on the Quantity Theory of Money (QTM) identity especially in relation to inflation. While purporting to represent distinct approaches, Keynesianism, monetarism, supply side economics, modern monetary theory and fiscal decisions all consider money volume to be a decisive factor in determining demand, prices and economic growth. In this Part 2, I explain how the erroneous assumptions of monetary theory ended up in exacerbating the state of affairs to accelerate the decline in the economy. His main reasoning related to the fact that a loss of industry and manufacturing would result in a loss of indigenous innovation putting British production behind the international competition so as to result in loss of higher paying jobs and the ability of British industry to sustain the supply of higher productivity products for the other sectors in the economy. These circumstances were predicted by Nicholas Kaldor in 1975. or a 100% rise or doubling of this percentage. The balance of payment in goods, currently a deficit of around £220 billion, is the second most negative in the world.īritain’s percentage of the working population in industry and manufacturing dropped from around 53% to 17%, a decline of almost 70% and the services sector employment has risen from 39% to 80%. Growth rates declined, higher paid skilled jobs in industry and manufacturing have been lost, real incomes for the majority have declined, income disparity has risen with poverty. Whether he agreed or disagreed with them, he said he would challenge people politely and try to understand and ask questions - not to have a debate.ĭavis' story is also the subject of a new documentary called "Accidental Courtesy" that was released a few weeks ago.Post Title: WHEN ECONOMICS MADE SENSE Part 2Ĭoinciding with the introduction of monetarism as the main component of macroeconomic management, the period 1975 through 2023 saw a breakdown in the relationships that prevailed during 1945-1965. He was able to become friends with many former Klansmen because he was willing to sit down and listen to them. Now that taboo has been forced to be lifted."ĭavis said dozens of Klan members left the group after he met and talked with them over the years. Because talking about race in this country for a long time has been a taboo. We have to address it and people are beginning to have those conversations, come together, talk about it, and that is what we need. Now we can no longer turn a blind eye to it. "Our current political climate is bringing all these things out. ![]() "This is the best thing that has happened to this country because we have been so much in denial of racism in this country, xenophobia and all these kinds of things," Davis said. Regarding the current political climate where racial tensions are flaring, Davis said he sees this as a valuable opportunity in the country right now. Davis detailed his story about how he became friends with Roger Kelly, the head of the KKK in Maryland years ago. ![]()
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