Teigen, Ronald L.
Some Observations on Monetarist Analysis
Cassel, Dieter and Thieme, H. Jörg
Die US-Inflationsbekämpfung 1966 bis 1970: Einige Konsequenzen für die Bundesrepublik Deutschland
Zur Habenszinsbindung in den Vereinigten Staaten
Zur Diskussion um die Olympia-Goldmünze
Páramo, J. M. G.
Soziologische und ökonomische Probleme der Klein- und Mittelbetriebe in Spanien
Portfolio-Kapitalexport und Zahlungsbilanz
(Lutz R. Raettig)
Die Sicherheit der Scheckeinlösung
Die Aufwertung der Deutschen Mark, staats- und völkerrechtliche Überlegungen zur Neufestsetzung der Währungsparität im Jahre 1969
Teigen, Ronald L.
Some Observations on Monetarist Analysis
In this paper, I have tried to sketch the main outlines of monetarist thought. It has developed that the version of Keynesianism against which the monetarists pit their model is indeed an out-of-date, inadequate, and- to use Professor Johnson's term - a "vulgar" version of current post-Keynesian thinking. When incorrect monetarists assertions about the nature of modern Keynesianism are corrected, it is seen that the two models are indeed very similar. Instead of differing in that one version (the Keynesian) employs a theoretically unsatisfactory deus ex machina assumption while the other has implicit in it a large amount of unspecified economic behaviour, it turns out that the two models differ chiefly in the realism and relevant of their assumptions, with the typical Keynesian assumption of money wage inflexibility appearing much more appropriate for short-run (i. e., stabilization policy) use, and the typical monetarist assumption of wage and price flexibility, or of the rate of interest being determined by considerations other than current aggregate demand and supply, being more useful in the analysis of secular change. It further appears that monetarist fascination with the money stock is unwarranted by monetarist logic, which seems to me to place great emphasis on portfolio disequilibrium as a potent driving force in the economy. It does not follow from this view, as a matter of logic, that observed changes in the money stock have any particular significance as a causative force. Further assumptions about elasticities, price flexibility, etc., are required to give monetary changes pride of place, as I have tried to show in this essay. On the positive side, monetarists have contributed to the development of macroeconomic thought by demonstrating that the links relied on by most Keynesians to connect the real and monetary sectors probably are not those which Keynes had in mind, and overlook completely the important substitution and wealth effects which are the concomitants of portfolio adjustment. The monetarists have also called our attention to the distinction, apparently first made by Irving Fisher many years ago, between market and real interest rates, and therefore to the potentially important role of price expectations in dynamic macroeconomics. These phenomena are extraordinarily difficult to capture in empirical models, out work is proceeding along these lines. It is to be hoped that during the next few years, they will be made standard features of Keynesian theoretical and empirical models, and that dependable evidence will be provided so that the remaining questions which divide us can be settled; mainly, whether, as Brunner phrases it, we can reject the possibility that "...detailed allocative patterns significantly influence the aggregative behaviour of the economic process..." and proceed on the basis that "... aggregative forces and allocative forces are approximately separated". This point of view, which dismisses most of the detail presently being built in to large econometric models such as the Federal Reserve Board-MIT model as being irrelevant and even misleading, appears to underlie most of the econometric work of the monetarists. It seems to the present writer to be a restatement, in general terms, of the old quantity-theory propositions that the demand-for-money function is extremely stable in the sense of having very few arguments (and, in particular, being responsive to few if any yields on other assets). lf the demand for money is determined only by income (or wealth), for instance, then, for aggregative purposes, we need not know anything about the determinants of prices (yields) and quantities demanded and supplied in various financial markets. But, as Brunner points out, this is really an empirical question, and is outside of the scope of the present essay.
Cassel, Dieter and Thieme, H. Jörg
Combatting Inflation in the USA, 1966-1970. Some Consequences for the Federal Republic of Germany
The path of the Federal Republic of Germany from the price level stability of 1967/68 to the current acceleration of inflation has some parallels with developments in the USA. In order to avoid a repetition in the Federal Republic of Germany of the US economic policy mistakes since 1965, the most important stabilization policy measures are described and their effects interpreted from the monetary standpoint. It becomes evident that not only the inflation itself causes costs to the national economy, but also the combating of inflation. The further the inflation process has progressed, the higher are those costs. At the present time, however, the theoretical groundwork is lacking for a short-term, optimal-cost and politically practicable stabilization programme. As shown by a critical examination of Friedmann's and Brunner's approaches the monetarist theories also provide no politically exploitable information as yet on the ratio in which the damping effect of monetary restrictions is broken down into price and output effects. As long as this splitting problem is unsolved, the economic costs of stabilization policy cannot be calculated. This makes them a shuttlecock for widely differing interests, whose growing influence prevent a solution of the inflation problem. For the Federal Republic of Germany, the consequences are as follows: The observed shift of responsibility for inflationary processes as a result of the ground gained by non-monetary inflation theories must unequivocally be transferred back to the Government and the Bundesbank. The latter should make the best of the already high costs of combating inflation before they become completely intolerable politically and inflation becomes a permanent phenomenon sanctioned in the interests of pressure groups. In the long run, the best strategy consists in not allowing inflationary trends even to start. To attain this goal, however, a change in economic policy conceptions would be necessary, the contours of which are outlined.
On Deposit Rate Maintenance in the United States
There have been maximum interest rates for deposits in the USA since the Thirties, but up to 1966 they affected only parts of the banking system, and only occasionally did interest on deposits rise to the maximum rates. Then, however, the scope of their applicability was extended; moreover, the maximum rates mostly no longer permitted fair market interest on deposits. Deposit rate maintenance, once introduced to protect the depositor and almost forgotten for two decades, was revived as an instrument of cyclical policy and credit control, and initially, it seemed, with some success. In order to avoid having to respond to massive withdrawals of now low-interest deposits by partial liquidation of assets, the banks sought and found ways of replacing deposits by other liabilities, if they had not already succeeded in preventing the outflow of funds by way of premiums and tie-in transactions. The supervisory authorities did not succeed in blocking at an early date all the possible courses of evasive action that were adopted in the course of time and in enabling deposit rate maintenance to take full effect, to some extent probably because they did not want to disturb the structure of the credit markets even more. Anyhow, short-term direct credits recorded record growth rates, and many former depositors blindly waived the protection that lies in the intermediation of the banks. This became very obvious after Penn Central became insolvent. Credits were misdirected, forces of production were wasted in evasive processes, and there were unfavourable distributive effects which were not balanced by any evident successes. It is therefore hardly to be expected that interest rate maintenance will again attain the importance it had in recent years. For the German observer it is interesting for two reasons: It throws light on the debate concerning decontrol of interest rates in Germany, and it brought into being and favoured new forms of banking business.
On the Debate concerning Olympic Gold Coins
President Nixon's spectacular decision to suspend gold redemption of the dollar indefinitely has brought the hitherto much too slow "demonetisations of gold", i. e. the freeing of the international monetary system from its intolerable dependence on gold speculation, a good step forward; at last we have a clear renunciation of the "gold illusion" that is still widespread even in some central bank circles and whose proponents feel justified in regarding the yellow metal as a stable alternative to all other means of payment and stores of value for international payments. The German Bundesbank had a similar opportunity a year ago when the bill was introduced concerning the minting of gold alloy Olympic coins for DM 100. Nothing could have disavowed the gold illusion more effectively than the authorization of gold alloy - in addition to the already issued silver alloy - Olympic coins, which without question would have been totally absorbed, like the former, by demand from coin collectors at home and abroad; apart from a corresponding neutralization of money, it would have made possible a painless financing of the deficit on the 1972 Olympic Games, which must now be effected all the more painfully from tax revenue. The objections of the Bundesbank to this unconventional financing of the 1972 Olympics were more of a formal and juristic nature; the central bank saw a danger to its note-issuing monopoly in the envisaged extension of state coinage prerogatives to coins "the face values of which invade the orders of magnitude reserved for notes". Objections of this and a similar nature wasted the irretrievable opportunity of delivering a further powerful blow at that international source of trouble, gold speculation, and the underlying gold illusion on the occasion of a quite unique financing task, i. e. one that recurs only once every thirty years, which could not have set any precedent for other purposes.
Páramo, J. M. G.
Sociological and Economic Problems of Small and Medium Businesses in Spain
The average size of Spanish industrial firms is fairly small, to no slight extent as a consequence of the low population density of large areas with a relatively low income level. The large number of small firms, on the other hand, results from the infrastructural conditions in rural areas, as a consequence of which there are, generally speaking, no large farms in Spain. The Spanish middleclass entrepreneur - in the industrial field, and in the fishing and agricultural sectors - is mostly inadequately trained; there is a shortage of qualified management personnel. The tax and credit system in Spain does not provide small and medium businesses the desired equality of opportunity and competition conditions. Certain types and forms of financing are still underdeveloped in Spain. It is necessary to create institutions which devote themselves to management and technological consultation (forecasts, market research, etc.). The existing, advantages which have hitherto been limited exclusively to export firms with an "exporter's card" must be extended to smaller firms. A policy is required for medium and small firms, which fosters competitive medium sized firms in the light of the European market and restricts the advance of foreign firms in Spain, above all with regard to the development demands made on the Spanish economy.