The Chimera of Macroeconomics

  We have the monetary inventory equation owing to William Baumol : M d = ( b ∙ T / 2 i ) 1/2 . T , for the aggregate monetary expenditures per annum , includes spending for GDP ( P ∙ Y ), intermediate goods, production factors, physical assets, human educations, financial instruments and the like.   Monetary Transmission Mechanism . The essence of fiscal policy or monetary policy is supplying “incremental money” ( Δ M ) to the private sector. On the other hand, we are very much well aware that the raison d'être of money is in spending.              As all of us try to get rid of the annoying thing, additional due to monetary policy, as soon as possible, some combination of the following will happen without fail: 1)      More products ( ΔC ) and fresh assets ( ΔI ) are created, and an increase in GDP ( ΔY ) follows. 2)      Prices of some products are raised. The...

  Imagine we get incremental money ( Δ M ) from the “ helicopter drop ,” so to speak. What would take place soonest? 1)      The Fisherian way: We spend Δ M as soon as possible because “ Money is of no use until it is spent ” (1930, p.5). A silver lining nevertheless, the increment ( Δ M ) is never excrement. 2)      The Keynesian way: Our “preference” is to hoard the additional “ liquidity ” ( Δ M ) in small rectangular solid pieces of paper or “thin-airy” demand deposits for fear of the “ liquidity trap ” (1936). 3)      The Hicksian way: The real GDP momentarily shoots up as in M= k ∙ P ∙ Y (1937) with P “sticky” and k “constant.” 4)      The Baumolite way: There will be inflation through a double channel; one the increment of Fisherian money of no use ( Δ M ) and the other the “doubling up” of the velocity of spending ( ΔV ) (1952). 5)      The Mankiw style i...