Happy Hours post Magna Fiasco

 

When the base is twisted, the building must be vulnerable to an outside shock. Notwithstanding, the sun will rise next morning and shine all over the ground, with or without the building. 

 

Macroeconomics Fiascos:

Resident Aliens

1.     The investors in charge of “I”

2.     The central bankers in charge of “r” and “M”

3.     Secretary of the Treasury in charge of “G” in general and “ΔG” in particular

4.     The Capitol Hill or the Parliament in charge of “T” in general and “ΔT” in particular

“Consumption”

1.     Always and everywhere for “luxuries” only; never for Investment of any sense

2.     Absolutely forbidden from multiplying

“Going Fiscal”

1.     “Consumption without production” is possible as needed, particularly in the short run. (Note: there is a “constant” added to the gross domestic expending schedule.) 

2.     “Digging a ditch for the sake of refilling” is incremental consumption. (Note: That would be called “waste of money” if not “fiscal.” A lining in the cloud: The private sector ends up with incremental money, ΔM, to spend all for consumption which is definitely to “multiply” this time.)

3.     Creating a white elephant is more “spending for the sake of spending” than investing for a better future.

4.     Marginal contribution to GDP (Y) of the USD spent or the GBP spent is usually different, “cross-sectional” the bigger vs “longitudinal” the less.

5.     Fiscal multiplier is immune from fallacy of composition. The theory of “thinking at the margin” in the market holds Heavenly true in the economy. Subject to a couple of cross-sectional gaps:

①   The marginal benefit from the individual consumable product (q) declines Earthly, while the marginal propensity to consume of the gross national products (Y) stays constant “secularly” (from Alvin Hansen and Larry Summers).

②   The market demand slopes down with no exception. The aggregate demand curve slopes up for the purpose of begetting the Keynesian Cross and down for the sake of giving birth to the AD curve of Ben Bernanke with so much fame.

6.     In the chasm between the reality of "flowing" and the imagination of "crossing," the fiscal multiplier is named in the formal manuals (FM) to be be, FM= 1/ (1- MPC).

 

Happy Hours. Shh among the rest of us, the aggregate consumption (C) and investment (I), fiscal or private, are everywhere equal in being “spending” except for in Eternity. As such, the marginal propensity to spend must in all cases be 1.00, where Y≡ C+ I. Blessed or otherwise, the consequence of “fiscal multiplication” surely is ΔG/ (1- 1.00)= ∞. In other words, ΔG= $1.00 multiplies to ΔY= $1,000,0000,000,000,000,…………….

             It’s party time! Drink, Drink, Drink!

Waking up in the Morning. “Fiscal multiplication” is more like fallacy amplification. Apparently, that’d be a hangover.

             Sir Fiscal Multiplier, PhD, FM, NoL, we wouldn’t mind at all, “If You Go Away.”


Édith Piaf - Ne me quitte pas


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