And what do we mean by "GDP" when so much of our stuff is produced overseas?
So the Mn doesn't correlate nicely. In other words, the Quantity Theory of Money is inadequate on its own. Yeah, and?
But the point is that the availability of money does change. The world of the credit card and home loans approved over the phone and asset-backed securities is a different world from the world of bank notes and specie that Marx talked about.
> > B) That we're discussing it is largely due to Friedman.
>
> Another strike against him!
Oh, come on! You've talked about money supply plenty.
> > But Friedman looked at the Great Depression and he saw something that
> > had to be explained - idle workers, idle factories, homeless people,
> > empty homes. He came to the conclusion that what was keeping those
> > people from doing jobs that needed doing and paying rents and
> > mortgages for those homes was a lack of money. And I think that's
> > obviously true.
>
> Marx sneered at people who thought the problems with capitalism were
> the result of a shortage of the circulating medium.
Hang on! "The problems of capitalism" is pretty broad. At some level the Marxian crisis IS a shortage of the circulating medium - too much "medium" in the hands of people who horde it and too little "medium" in the hands of people who produce things and need to buy them. What would the Marxian crisis of capitalism look like to a modern economist? What would we see in the various measures and aggregates?
Friedman's
> monetary theory of the depression ignores all the real sector
> problems - e.g., the rapid growth in productivity vs. incomes in the
> 1920s. Friedman wants to exempt capitalism from any systemic
> responsibility for the depression and blame the state, in the person
> of the central bank, instead. The Fed probably fucked up in the late
> 1920s, but fuckups don't explain mega-disasters like the 1930s.
Of course Friedman wants to get capitalism off the hook! He was an apologist for capitalism! Nevertheless, when you have idle workers, idle factories, empty houses and homeless people it is clearly a lack of money separating them. *I* am not saying that government is to blame. TO the contrary I (and Friedman, way back in his Keynesian days when he was being honest) am sure wealthy people and capitalism were to blame. But the crisis expressed itself in a lack of money. The workers were there. The factories were there. The houses were there. The people who needed homes were there. What was keeping them all apart? Rich people refused to pay workers and rich people refused to accept rents and mortgage payments that workers could afford. Rich people kept money from flowing through the system.
The central bank exacerbates the problem by not realizing that it has to compensate for the misbehavior of these rich people. Then the government - borrower of last resort - comes in and gets the money flowing again.
Hyper-inflation? Isn't that rich people extending too much money to too many other rich people on terms that are too easy given the likelihood of those rich people to pay them back?
Paul Volcker steps in and forces the rich people to start charging each other more appropriate interest rates and they stop inflating the money supply.
Of course the Friedmanite idea that the money supply would be perfect BUT FOR the government is idiotic. There are people who control the money supply and they are the people who have the money - rich people. The government has a lot of money, but not so much as rich people have. But to say that because Milton Friedman came to the wrong conclusions we shouldn' t look at the supply of money in the economy seems just crazy.