Friday, October 7, 2011

Notable pundit off base

Nobody would care about the size of the monetary base except for the belief that increasing the base leads to a rise in prices. Krugman

The channel model looks at monetary base build up and say we expect larger transactions, less often. The shock has imposed order on the public pricing markets, they are less precise. Less precision is a network rank reduction, fewer bits are needed for the economy to self-describe. Inventories are a bit more conservative internal to the firm or household and external pricing a bit more volatile.  Disorder is borrowed for the firm by adding order to market transactions.

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