Wein aub, Sidney
A icle
Mone a ism's Muddles
K edi und Kapi al
P o ided in Coope a ion wi h:
Duncke & Humblo , Be lin
Sugges ed Ci a ion: Wein aub, Sidney (1981) : Mone a ism's Muddles, K edi und Kapi al, ISSN
0023-4591, Duncke & Humblo , Be lin, Vol. 14, Iss. 4, pp. 463-495,
h ps://doi.o g/10.3790/ccm.14.4.463
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Mone a ism's Muddles
By Sidney Wein aub, Philadelphia
The whiplash o Uni ed S a es in la ion, he s e n Fede al Rese e
policies, and he dizzy in e es a e pla eaus, mus inexo ably e ise
he p eponde an Ge man mone a is con ic ions. Financial ma ke
in e ac ions ha e s ipped away he enee ha Bonn could adop an
independen policy o se e na ional needs. Rocke ing Uni ed S a es in-
e es a es ha e been a magne o siphon unds om Ge many, com-
pelling skywa d pa e ns o in e es a es ei he in conscious de ense
o mechanical in e lock. The ic ion o sepa a e mone a y ini ia i es
has been exposed; he Bundesbank has been demo ed in his episode o
he s a us o a pe plexed ollowe a he han a bold in epid leade ,
e aining only a s aw es ige o na ional asse ion in succumbing o
a damaging in la iona y d op in he exchange a e. Ex e nal winds
ha e hus exploded he glowing mone a is ision o a ee domes ic
mone a y hand.
This is he u gen message ca ied by he 1981 hunde claps. The
ale was ne e amply o e old by mone a is s who bli hely assumed
ha each coun y could se , and hi , i s own p ecise money supply
a ge . Financial lows oday a e so massi e and elec onically ins an-
aneous, ha in e es a e dis up ions in one cen e ansmi immedia e
shocks in o he coun ies. G an ed a ai ly equal poli ical clima e, he
coun y a he op o he in e es a e heap will d ag o he s up o nea
i s own pe ch and, wi h he Fede al Rese e ecen ly a he op o i s
game, i has come o ule he oos . The impac on Ge many has hus
been high in e es a es, slow g ow h, and nagging in la ion in some
unhappy mimic y o he Uni ed S a es s ag la ion iasco.
Ge many pa ly escaped he de as a ing Uni ed S a es in la ion ha oc
o he 1970s, wi h he compa a i e sco e abou 140 o 70 pe cen . Policies
os e ed by bi e pas in la ion memo ies encou aged a huge in low
o unds o li he dolla DM a e by abou 80 pe cen . Laudable p o-
duc i i y ad ances, a es ained wage s ance by he ade unions, and
an a ailable pool o "gas a bei e s," acili a ed he supe io p ice pe -
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464 Sidney Wein aub
o mance. Ebb and low in "gas a bei e s" cushioned he unemploymen
icks exhibi ed in he Uni ed S a es. Too, in e es a e phenomena and
in la iona y expec a ions o he Uni ed S a es, c ea ed a Bundesbank
illusion ha i was la gely he undispu ed mas e in i s own house,
di ec ing i s own des iny. Suddenly, o di e se and some opposi e
easons i s sway has become dilu ed and an unadul e a ed mone a is
s ance will be e e mo e suspec as an ope a ional guide.
The doc inal loss need no be mou ned o e o s pene a ed i s
ounda ions and pe mea ed i s supe s uc u e. Las i es in economics,
howe e , a e always p ema u e o enacious pa isans li e on, unwill-
ing o concede blunde ; ye he igid in luences will decay unde an
app op ia ely e ised pe spec i e. Fa al o dominee ing mone a ism
none heless has been i s con iden a i ma ion o he co-exis ence o
selec and isola ed islands o mone a y powe despi e he ob ious in e -
na ional ansmission bel ha in okes s a k pa allels, di e ing only
he e and he e in de ails, wi h ei he he B e on Woods scheme o
in age old gold s anda d.1 Fo Ge many he implica ions a e p o ound
o a u u e conca ena ion o e en s can la e up in many ways om
a a ie y o qua e s. Ge many's supe io p ice pe o mance can e en
be impai ed, wi h modes p e ious lu ches being ans o med o size-
able lunges unless he ace s o in e dependence a e assigned g ea e
c edence han unde he dominan mone a is heology o neglec and
exchange a e abandonmen .
I. Aspec s o Mac oeconomic Policy
The b oad di ec ions o mac oeconomic (including mone a y) policy
a e ew: (1) he p ice le el, and hus in la ion; (2) op imal ou pu and
he associa ed employmen , including o Ge many he "gas a bei e "
b igade, and (3) iden i ied wi h (2) a e in e es a e pa e ns; and no
leas (4) in e na ional ami ica ions including he DM o eign exchange
alue, impo -expo magni udes, and he capi al lows gene a ed by
in e es a es ab oad, which esul om a complex o judgmen s in he
wo ld economy on expec ed in la ion and in e es a es in he espec i e
cen e s.
1 See Sidney Wein aub (o he Uni e si y o Texas, no o be con used wi h
his au ho ), "Flexible Exchange Ra es: Old Vinega In New Wine," Jou nal
o Pos Keynesian Economics (Summe 1981).
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Mone a ism's Muddles 465
None heless, he key o success on (2-3-4) and he whole in e depend-
en chain, si s i mly in he pocke o (1): cu b in la ion and economic
oubles can be a e ed and ic o ies sigh ed. Failu e on he in la ion
on opens he doo o wide chaos and a domino eac ion. In la ion
is hus he o e iding issue and gene ally co ec ly pe cei ed as such
in Ge many, as inculca ed by his o y. English wo ld economis s, in
con as , a e mo e ap o miso de hei p io i ies in a o o jobs, ou -
pu , o ene gy sel -su iciency. S op in la ion and he g and p izes in
he economic domain a e open. Acquiesce in in la ion and o midable
o e en insu moun able ba ie s obs uc e e y u n.
II. Money and Mone a ism
Money has been in he o e on o economic conjec u e since ea ly
imes despi e some e angelical e o o mone a is s o abou wo
decades o p e end hey in en ed he medium and disco e ed i s s udy.
Pa icula ly spu ious was he ea ly allega ion ha Keynes had neglec -
ed i s i al essence despi e a li e ime o de o ion o he subjec , and he
legacy o he IMF and he Wo ld Bank.2 The es y mone a is assaul
was capsuled in he en icing slogan ha "Money Ma e s", as i any-
one s eeped in economic a ai s e e doub ed i . To be su e, many o
he sel -s yled Keynesians — su ely no Keynes — had unde played
he ami ica ions o money and, o his ex en , he mone a is s es o ed
a mo e easonable balance. Too, o hei c edi hei o e s a emen
p o oked academic economis s o de o e mo e a en ion o se ious
p ac ical issues and shed he end o a cane imme sion in emp y and
p e y echniques eple e wi h ob usca o y ma hema ical symbolism.
G an ed he signi icance o money, mone a is s can be aul ed o
hei pe cep ion o how "money ma e s." I is in hei policy p e-
sc ip ions ha we bes can ca ch he spi i o mone a ism; hey gene -
ally a ow ha mone a y policy can s and alone in achie ing economic
s abiliza ion. La gely hey de ide iscal policy and aise hackles a he
me e mu mu o Incomes Policy.
2 See my essay on "Keynes and he Mone a is s," in Keynes, Keynesians,
and Mone a is s (Uni e si y o Pennsyl ania P ess, 1978). Paul Da idson has
poin ed ou ha in p ac ically all his majo w i ings he wo d 'money' ap-
pea s in Keyne's i les. See Da idson, Money in he Real Wo ld (Macmillan,
2nd edi ion 1978).
30 K edi und Kapi al 4/1981
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466 Sidney Wein aub
1. Mone a is Wings
Two wings o mone a ism can be iden i ied: (1) o emos is he do-
minan eligion espoused by he indomi able P o esso Mil on F iedman
ha he sole p e equisi e is a s eady and unde ia ing g ow h o he
money supply pe annum. Cen al banks a e ma ked o ex inc ion,
o be supplan ed by a s a is ical cle k (o he u mos in eg i y, o be
su e) delega ed o execu e he "3 Pe cen Rule."3 Some imes his is p e-
sen ed as i 's eadiness' was he unique c i e ion bu su ely nobody has
in ima ed ha a 1,000 pe cen (o mo e) daily emission o money would
su ice. Thus i is eally a wo-pa ule, s eadiness a 2, 3, o 4 pe cen :
o con enience we use he ea e he middle ange igu e. (2) he b eak-
away inge, ha dly less adaman abou mone a y policy as he chie
ene o economic sal a ion, led by P o esso s Ka l B unne and Allan
Mel ze , bu who a e willing o coun enance some cyclical oscilla ions
om he igid Rule. Da id Laidle , o example, mos ecen ly an-
nounced some de ec ion in decla ing " ha he case o go e ning mo-
ne a y policy by ules [ a he han judgmen o disc e ion] is impossible
o sus ain."4 The la e a icle goes a owa d abandonmen o he
ideological e oci y wi h which mone a ism was ende ed, hough e-
cep i i y owa d o he policy ins umen s is s ill ma kedly hos ile e en
hough he ug is pulled ou om s ead as mone a is s ands; he
acknowledgemen o mone a is concep ual lapses e ades a concession
o analy ical o policy de ea .
2. The Mone a is Indic men
In indic ing mone a ism as a mo e chao ic, incomple e, muddled, and
less a icula e doc inal a ay han i s public hype bole has con eyed,
he ollowing bill o pa icula s will be en e ed: (1) he bewilde ing
agueness o he money concep o which he Rule is o be applied;
3 See, e.g. Mil on F iedman, "The Role o Mone a y Policy," Ame ican Eco-
nomic Re iew (Ma ch 1968), p. 16. A longe discussion appea s in Ma in
B on enb enne , "Mone a y Rules: A New Look," Jou nal o Law and Eco-
nomics (Oc obe 1965).
4 Da id Laidle , "Mone a ism: An In e p e a ion and An Assessmen ," Eco-
nomic Jou nal (Ma ch 1981), p. 25. C . he admi able a icle by James Tobin,
"The Mone a is Coun e -Re olu ion Today — An App aisal," Ibid. Also he
sho e commen s by R. C. O. Ma hews, J. E. Meade, and Tobin, in he same
issue. In he same c i ical con ex , see (Lo d) Nicholas Kaldo and James
T e i hick, "A Keynesian Pe spec i e on Money," Lloyds Bank Re iew (Jan-
ua y 1981).
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Mone a ism's Muddles 467
(2) he shallowness in he mone a is dismissal o he e a ic luc ua ions
o money eloci y; (3) he looseness o he iden i iable lag be ween
money maneu eu s and he co ec i e s abiliza ion esponse o he
economy; (4) he lack o a mone a is gene al heo y o he ela ion
be ween money and p ices; (5) a peculia opaqueness in no disce ning
he connec ion be ween money incomes and he demand o money,
wi h especial e e ence o he wage bill; (6) he mone a is espousal o
he Phillips cu e hoax in a con ingen sadis ic acquiescence o indi ec
mone a y o e kill a lic ing jobs and p oduc ion, and (7) he mone a is
de elic ion in neglec ing o ale he a ious na ional money au ho -
i ies o he ulne abili y o hei exchange a es in he sensi i e in e -
na ional ne wo k unde he pu sui o he simple-minded Rule. Today
he Fede al Rese e exe s much o i s will on o he cen e s; in he
u u e simila mischie may by pe pe a ed om o he qua e s. Las ly
o ou pu poses (8) in seeking o s abilize he eal ou pu and p ice
sec o o he economy, p ac ical mone a ism p ocu es i s ques ionable
elie by upse ing and des abilizing he inancial sec o , se ing in
mo ion a cos ly seesaw ha a ely achie es a s eady balanced no m.
This is a s ong b ie , condemna o y o mone a ism. I sus ained, i
sugges s he need o new policies in ol ing new ideas in o de o
hwa in la ion and o a e he s ag la ion o o associa ed unemploy-
men , s upendous ou pu losses, and ocke ing in e es a e phenomena
in money ma ke s gone be se k in eco ding 'usu y made legal.' The
squalid economic sequel is he bane ul p ice ha wes e n economies
a e paying o hei some imes explici and mo e o en implici addic ion
o mone a is nos ums.
Money maneu e s ha e a majo pa o play in economic s abiliza ion
policies. Bu he manne in which hey can con ibu e o mo e obus
economic pe o mance has no been disce ned by he mone a is s.
III. Mone a ism's Eg egious Hal -T u h
Mone a y policy has been beguiled by he ac u ed u h ha in-
la ion esul s om " oo much money chasing oo ew goods." This has
been he a chaic supe icial 'axiom' behind which cen al banke s ha e
aken e uge o escape esh hinking. I s con en su used mone a ism,
wi h P o esso F iedman being i s mode n p ophe . The non- e i y
e e s a leas as a back as Jean Bodin in 1576, and i was con eyed
wi h mo e acui y by Da id Hume in 1752, usually a elling unde he
30*
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468 Sidney Wein aub
name o he "Quan i y Theo y o Money" (QTM). While i has been
d essed up o look new, incisi e, and p o ound, he o iginal condi ions
ha once ga e i c edence no longe p e ail.5
How easy economic policy would be i only i we e ue! The cen al
bank would only ha e o wa e i s es aining wand and he long in la-
ion nigh ma e would be o e . The Fede al Rese e is nea ly 68 yea s
old. The Bank o England awai s i s 300 h anni e sa y. Appa en ly, o
belie e he mone a i s, hey a e oo dumb — as a e he Bundesbank
o icials — o g asp he "in ica e" mone a is sec e o he iddles o
he economic uni e se, as e ealed h ough he mone a is s, which
enjoins he cen al bank o g ab igh hold on he money supply o end
ou sea o economic oubles. Implici ly, mone a ism alleges ha in la-
ion bea s he label "Made A he Cen al Bank." I ancies ha a single
pe son, o a hand ul o pe sons h oughou he wo ld, ha e concoc ed
ou p ice ials and ha e obs uc ed he elimina ion o ou o deal.
The mone a is assessmen mus ank nea he op in he annals o
my hs, supe s i ions, and heology pon i ica ing as economic analysis.
The sophomo ic no ion has been he sopo i ic ha has o e whelmed
he p o essional a e ni y o yea s, and one o which cen al banke s
ha e assen ed in exagge a ing hei own powe s. They ha e ac ed on
he elemen al oolishness o he p oposi ion, and when hei lailing
h us s ha e allen way sho o abo ing in la ion hey ha e sc aped
in consoling hemsel es wi h he mone a is a ionaliza ion ha hey
missed ou in he hun o he elusi e ope a ing o mula. In ecen
yea s hey ha e e en bowed o he mone a is s' heological injunc ion
o igno e in e es a es, o e en o eign exchange a es, and o ac by
a hypno ic ocus on my hical mone a y "agg ega es."
I no o he auma in lic ed on ou economies we could be bemused
by he solemn shallowness o his pseudo-in ellec ual 'deep- hink.'
Despi e he high-b ow ma hema ical symbols and he scholas ic eco-
nome ics equen ly deployed o h ow dus and ja gon o bewi ch
hose unwa y o he eso e ic exe cises, he only op ions open o cen al
banks, a e all he mys icism is emo ed, emain: (1) o inc ease, (2) o
dec ease, o (3) o keep cons an , he annual low o money supplies.
The e is no mys e y abou hese al e na i es, and he cen al bank
should no o en ha e o awai he la es echnical a icle be o e deli-
5 See my Capi alism's In la ion and Unemploymen C isis: Beyond Mone-
a ism and Keynesianism (Addison-Wesley, 1978), especially pp. 82 - 83.
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Mone a ism's Muddles 469
be a ing i s money supply s a egy, despi e he di he injec ed by he
mone a is s o e such elemen a y no ions which ha e been ele a ed
o a complexi y akin o nuclea physics o gene ic esea ch. Cen al
banke s, o ou so ow, ha e aken igh a he supe icial banali ies
e en hough he mone a is 'disco e ies' a e abou as o iginal as sea
a el.
IV. The Bewilde ing A ay o Monies
Mone a is s s ess a lock on money supplies as he me hod o s a-
bilize he economy. Wha hen is "money?" He e hen a e he ini ial
pe plexi ies.
In a ully mone ized economy money would appea as sho elled ou
om one side o e e y exchange, and hus would en e in mo e ans-
ac ions han any o he i em, in ac money would be pa o all ex-
changes. On his concep ion we would ha e no di icul y in iden i ying
he money in ou espec i e economies, ecognizing i as he coin, cu -
ency, and checks ha a e used daily, despi e he linge ing emnan s
o ba e ansac ions. Be uddling o his humd um abula ion o he
money agg ega e is he ac ha in each coun y he e a e a a ie y
o sa ings accoun s, say, ha can be quickly con e ed in o cash o be
used o paymen . Go e nmen obliga ions can also be liquida ed,
along wi h sha es o s ock, holdings o o eign exchange, e c.
Unde he zeal o nume ical magni udes we ha e hus been bom-
ba ded wi h di e en agg ega es, each con aining a mo e inclusi e as-
so men o liquid asse s, such as M-l, M-2, M-3, ... M-n, in bewilde ing
p o usion, wi h each highe numbe ed "money" con aining he p e ious
ca ego ies wi h some new addi ions. Thus he M-l would con ain coins,
cu ency, and checking accoun s, a nex highe M would add in sa ings
accoun s, e c. un il T easu y bills o o he highly nego iable ins u-
men s also ind hei moneyness sanc i ied in he numbe s. P esumably
a M-°© migh con ain all saleable asse s, including exis ing ombs ones!
The numbe ing spiel can, unde Soc a ic logic, ul ima ely p o e ha
"money" is some hing in he eye o he beholde as an economic e sion
o beau y.
Mone a is s uni o mly iew his slippe y s a is ical a ay wi h he
u mos solemni y, issuing wa nings o he cen al bank o con ol he
money supply. Ye i he cen al bank ied o unde ake he mission
wi h he exac i ude demanded by some mone a is ana ics i would
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470 Sidney Wein aub
ha e o ex end i s policing a m o nea and a mone a y subs i u es,
and end up moni o ing all weal h capable o con e sion in o cash o
i s equi alen .
Unde he aegis o mone a is doc ine eng ossed in he p oli e a ion
o M-concep s, cen al banks ha e ended o calcula e mo e and mo e
o he agg ega es o p o ide busy wo k o i s s a . Wi h each in en ion
o new money subs i u es, as Eu odolla s o Ce i ica es o Deposi , as
in he Uni ed S a es as a a ional esponse o in e es a e phenomena
o as a ax shel e , he e is a new M- ail o ollow as a canine sni s
a scen . Each new se ies is p esen ed as i i we e exac , down o wo
decimal places, un il new (and always incomple e) da a compel a e-
ision. I is on such imp ecise and lexible in o ma ion masque ading as
ha d ac s ha p ecise and in lexible policy ecommenda ions a e made.
Ou side he solemn hocus pocus magic show he cen al bank can
only exe cise di ec , bu po ous and ne e wa e igh , con ol o e M-l,
he coin, cu ency, and checking accoun ca ego y. I hen becomes a
bys ande in wa ching i s maneu e s ma ginally, o may be signi i-
can ly, abo ed by spillo e s in o ou o he amo phous M-l sie e om
neighbo ing M-cons i uen s. The cen al bank is placed in he posi ion
o a swi mas e chasing a lee dog o ma ching s amina able o shi
di ec ion a will. I can each ou o en o g ab he dog which always
is adep a eluding i . The cen al bank may ge e y close on occasion
only o be us a ed when i smells success.
A e he ea ly li a ion wi h he M-l concep in he Uni ed S a es,
mone a is s ha e ended o op o an M-3 concep which includes
sa ings banks deposi s al hough his opens up a enues o magni udes
only enuously ela ed o he Fede al Rese e ope a ing ins umen s.
Copious s udies abound o demons a e he be e co ela ion o his
'money' magni ude wi h na ional income. So he cen al bank is com-
manded o seize on he money magni ude which, based no on he
s a is ics o omo ow bu on yes e yea s da a, allows he highes pas
co ela ion. The cen al bank is o be made a sla e chained o he co -
ela ion which mone a is 's, in ac ious concla e, app o e.
Mone a is pu e y blows on a g and scale. Money exe s when i as
money se es. The cen al bank can exe a powe ul le e a ec ing
he paymen s low. Bu i canno con ol i , excep wi hin some imes
wide bounds. I can be o de ed o ly o he moon bu i will no ge
he e wi hou a spaceship. The poin becomes e en mo e decisi e as
we u n now o he eloci y concep .
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Mone a ism's Muddles 477
(la) EOE: MV = PQ, whe e M = money supplies V = money eloci y
P = p ice le el Q = eal ou pu
o domes ic GNP
Ob iously his is a uism ha asse s ha sales eceip s om ou pu
mus equal money ou lays on ha ou pu . Pu e QTM'e s would dis-
ega d any lex in V o Q and ow a di ec chain be ween M and P,
wi h M being he causal a iable. Mo e mode a e exposi o s allow o
V and Q a ia ions. S ill, majo s ess on M o con ol o e P discloses
a QTM disposi ion.
In pe cen age e ms (neglec ing [AMAV and APAQ]), om (la):
(lb) (AM/M) + (AV/V) = (AP/P) + (AQlQ) o m(AM/M) = (AP/P) +
(AQ/Q)
Aus e e QTM disciples iew AV = 0 = AQ, and m = 1, so ha hese
e ms anish. S iden mone a is s, unde F iedman's es ima es, see ( o
he Uni ed S a es), (AV/V) = 0.8 and m = 1.8, o nea ly 2 o simplici y.
In e p e ing m = 2 signi ies ha a 1 pe cen inc ease in money leads o
a 2 pe cen gain spli in some way be ween he P's and Q's.
Ea lie ema ks we e highly skep ical abou m-cons ancy. Mone a y
policy, when m is a iable, mus es on su mises o u u e m (o AV/V)
and no on AM a ia ions alone. The paymen s low o expendi u e
s eam is an amalgam o MV, as much con ingen on V swings as on
M emissions by he cen al bank. Oscilla ions in V a e no unde he
cen al bank humb. Judgmen on wa es in m a e c i ical in making
decisions on AM emissions. Pe plexi y is compounded, howe e , in o e-
cas ing m- alues in an e a o peak in e es a es and he concomi an
concoc ion o money subs i u es.
2. The "New" Quan i y Theo y
Wi h much an a e P o esso F iedman p omulga ed he "new"
QTM as:
(2) MV = Y o m(AM/M) = (AY/Y), whe e Y = na ional income
Clea ly, his connec s money supplies and money income and i is
mo e au ological and less in o ma i e han he EOE. In a biza e
chap e in economics, a e op ing o (2) o nea ly 15 yea s, and plung-
ing in hea ed deba es o e in la ion, F iedman inally disco e ed ha
his e sion o mone a ism lacked a p ice le el ancho ! The heo e ical
ounda ion inhe en in (2), so a as he p ice le el was conce ned, was
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478 Sidney Wein aub
suspended in hin ai . Hence he e has been a e e sion o (1). We shall
no e a wo se muddle sho ly. As doc inai e ideologis s mone a is s
ne e a e de e ed by hei mis akes, howe e eg egious.
The "new" QTM ha dly dese es no ice in he in la ion con ex
beyond e idencing equen mone a is con usion. One poin is wo h
ex ac ing, howe e , inasmuch as mone a is s allege causa ion om le
o igh , wi h mo e money p o oking p ice li s. The money olley is
p esumed o icoche and s ike p ices, au oma ically.
O dina ily, howe e , pu chases a e made, p ices ag eed upon, deli -
e ies execu ed, and hen, he ea e , paymen s o he ansac ions
a e consumma ed. In any empo al o de ing o he sequence i is buy
now and pay la e . Fac ually, he mone a is s see he chain backwa ds.
Money lows, om a ealis ic pe cep ion, would usually ollow p ice
ascen s, a he han he o he way. Indi iduals and i ms acqui e goods
on empo a y open c edi and hen make paymen , gene ally ou o
income, o sales p oceeds, o by sale o o he asse s, o c edi ca ds,
o o he modes o inancing. Un a elling ypical ma ke sequences
would gene a e deepe skep icism o he mone a is hesis. Fo b e i y
we o ego his explo a ion a his ime.
IX. The Wage Cos Ma kup Theo y
Many Pos Keynesian c i ics o mone a ism ha e o ganized hei
a ack on mone a ism a ound an al e na i e o mula o ca ch he p ice
le el dynamics, namely, he Wage Cos Ma kup (WCM) equa ion. Thus:
(3a) WCM: P = kw/A, whe e w = a e age money wage (and sala y)
A = a e age p oduc o labo
k = a e age ma kup o p ices o e uni
labo cos s (= w/A), o he ecip ocal
o he wage sha e
As he WCM is less amilia han he EOE, an illus a ion ough o
help. I he a e age wage (and sala y) w = 25,000 DM, and he a e age
p oduc i i y o labo is equal o 2,500 uni s, whe he ons o s eel,
bushels o g ain, ins o canned goods (o he like) hen uni labo cos s
a e (25,000 DM/2,500) o 10 DM. I business ma kups a e age ou o 2,
hen he a e age p ice o p ice le el will be 20 DM. I he a e age wage
le el zooms up o 50,000 DM, wi h A and k unchanged, he p ice le el
will double. Conside ing he es ained luc ua ions in k and A a ocke -
ing p ice le el will e lec mainly he o bi ing in w.
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Mone a ism's Muddles 479
In pe cen age e ms applicable o e ime, i ollows:
(3b) (A PIP) = (Ak/ c) + (Aw/iu) — (A AIA)
In he Uni ed S a es he k- e m is ema kably cons an , pe haps he
mos nea ly s able a io in all o economics.12 I so, o i i s luc ua ions
a e small, hen we can dis ega d i and equa ion (3b) simpli ies o:
Con on ing (3c), p ice le el pe u ba ions o uphea als come om
a ug-o -wa con lic be ween he a e age pace o pay gains and he
cus oma y imp o emen s in labo p oduc i i y.
Mos no ewo hy is ha all o he equa ions (3) e eal ha he p ice
le el and in la ion emana e en i ely di o ced om he machina ions o
he cen al bank and money supplies. Unless he money maneu e s
ope a e in some way o s aunch he e up ion in money wages and
sala ies hey will lack any impac on he p ice le el. Implici , oo, is
he p oposi ion ha unless we a e able o es ablish some easonable
alignmen o money wages and a e age p oduc i i y we canno s em he
p ice le el ma ch.
The e is no wa an , howe e , o concluding ha mone a y policy
is impo en o wi hou inciden . Money impac s jobs and p oduc ion,
di ec ly. Indi ec ly, by c ea ing unemploymen and slow g ow h o
ecession, he cen al bank can he e o e e a d he su ge in money
wages by he sadis ic unemploymen oundabou . Acco ding o (3) i
can he ea e a ec he p ice le el.
The dismaying ac is ha we ha e no di ec means in ou s abiliza-
ion a senal o gea ing mo emen s in w and A. Ye he alignmen is
indispensable i we a e e e o succeed in s opping in la ion om
unning io wi hou paying he awesome p ice in los ou pu and
was e ul unemploymen . Wes e n economies ha e been going on in
some madness, assaul ing he laws o a i hme ic e ealed in equa-
ions (3), g an ing wage hikes o 10 o 15, o 25 pe cen in he Uni ed
S a es and he Uni ed Kingdom, and hen exp essing cons e na ion a
(3c)
(APIP)
~ (Awlw) — (AAIA)
1. P ice Le el Rega dless o Money Sleigh o Hand
12 See my Capi alism's C isis, pp. 46 - 48.
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480 Sidney Wein aub
equi alen ou b eaks in he p ice le el unde minuscule p oduc i i y
c eeps. Ge many, no leas because o he pool o "gas a bei e s," and
a mo e a ional labo mo emen , has been spa ed he wo s o he
in la ion ex a agances.
2. E e yone a Billionai e?
I incomes can go up wi hou ushe ing in he in la ion pligh hen
we can all be billionai es, his a e noon. Why no ? Raise e e yone's
pay a billion imes and le he cen al bank s op in la ion, as i p e ends
i can unde mone a is u ging. This is he absu d logic which unde -
lays hei un enable sophis ies.
Once we concede ha he e is an op imal o p ope pace o income
ad ances we shall be on he pa h o s opping in la ion. Mone a ism
canno accomplish mi acles agains in la ion in he ace o un uly pay
escala ion. England, he Uni ed S a es, Canada, o he coun ies includ-
ing Ge many, and su ely Is ael, es i y o his, as a ce i ude. Mone -
a ism has simply los sigh o income eali ies.
X. Mone a y Policy in a Con inuing Economy
F om he abo e o mulas i ollows:
(4a) Y = MV = PQ = kwN, whe e N = employmen
This me ely epea s ha money incomes (Y) equal money ou lays
(MV) equals he alue o ou pu (PQ) equals k imes he wage bill (wN).
I is om PQ = kwN ha he WCM is deduced, o A = Q/N. Equa-
ion (4a) also enables us o isola e he ollowing i al ela ions:
(4b) MV = kwN
(4c) m(AM/M) = (AJc/Jc) + { w!w) +
(AN/N)
~
(Aw/w)
+
(ANlN)
Equa ions (4b-c) a e he i al ones in a con inuing economy ushing
ou in o ime o (4c) discloses ha i money wages a e boos ed ino -
dina ely, and he money supply slacks in pace, hen employmen (N)
mus al e : cen al bank dalliance a e a big money wage e up ion
will unde mine jobs and h ough Q = Q(N), ou pu will ecede. To
illus a e, i m = 2 and he money wage climbs by 10 pe cen , unless
he money supply is augmen ed by 5 pe cen hen jobs will be washed
away.
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Mone a ism's Muddles 481
Equa ion (4c) is basic in he con inuing economy o ep oduc ion,
whe e goods a e p oduced oday o his week, consumed, and ep o-
duced, as he b ead, milk, newspape s, shoes, ui s, e c. Unless money
supplies a e ample o sus ain he highe wage bill emana ing om he
ba gaining p ocess hen jobs, and ou pu , will wi he away as he p o-
duc ion acco dion con ac s o he slowe inancing music.
I is in myopia o equa ion (4c) ha he mone a is s commi hei
mos g ie ous blunde . They innocen ly p e end, as in equa ion (1),
ha Q is a ixed mass o goods, al eady a hand and e ec i ely in a i-
able o all ime. Changes in he money supply hus descend upon he
goods olume, like a guillo ine, and yield he p ice le el cha ge.
Un o una ely o he mone a is concep ion, ou s is a p oduc ion-
low economy whe e labo inpu s a e con inuously hi ed o unde w i e
p oduc ion lows. In he ep oduc ion image, disce ned by Ma x and
he classical economis s, ou pu s a e he consequence o labo inpu s,
and moneys and he banking sys em exis o acili a e he labo inpu
p ocess, and on a size o ca y he immanen wage bill. When pay
scales moun , moneys mus ollow sui o jobs and p oduc ion will be
in jeopa dy. Uni labo cos s (w/A) decide he p ice le el, wi h p o isos
o k unde monopoly o compe i i e ma ke s. Moneys, howe e , a e
emo ed om he di ec p ice le el scene bu come on cue o jobs
and p oduc ion.
To shi he image y, he mone a is s' QTM ision conjec u es he
economy o be a huge a m whe e ou pu s a e p oduced "na u ally"
wi h ha dly any decisions on labo hi e. Subjec only o s ochas ic and
negligible aga ies in he wea he , he Q-magni ude is a he la om
yea o yea . Money descends om ou e space, as in he helicop e
illus a ion o Mil on F iedman o in he anecdo al magic o Da id
Hume whe e Englishmen awake o ind £ 5 no es s u ed in hei pocke s
o e nigh . In ei he case, mo e money hi s he unchanging olume o
goods and he p ice le el bounds up. While Q-cons ancy and M-inc eases
om ou e space may ha e been ue in Hume's ime o an ag icul u al
economy, whe e money was augmen ed by ships laden wi h gold and
sil e e u ning om o he sho es, he ision is indecen ly mis aken
as a model o he mode n economy whe e money wages ad ance
s ongly, and discon inuously, and whe e cen al banks p oli e a e, and
p oduc ion is subjec o echnological ad ance. Quan i y heo ies may
ha e i ed he bygone e a. They a e a as i ele ance o he mode n
scene.
31 K edi und Kapi al 4/1981
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482 Sidney Wein aub
XI. Consume P ice Le els and he Open Economy
A en ion has so a been i e ed on he gene al p ice le el o all
ou pu , and in a closed economy. A aluable sho dig ession can de-
lec he ocus o he consume p ice le el and he open economy,
equi ing only modes adap a ions in he poin o iew.
1. The Consume P ice Le el
Fo he consume p ice le el, w i ing C = consume expendi u es, we
can w i e:13
(5a) C =
PCQC
= awN, whe e he subsc ip s deno e he C-sec o .
Also, a = some mul iple o he wage bill
(5b) Pc = a(w/Ac)(N!Nc)
Equa ion (5b) is in iguing o i di ulges ha , s a ing wholly om
demand conside a ions, uni labo cos s s ill occupy cen e s age o
p ices in he C-sec o . Rela i e sec o size, con eyed in he labo hi e
a io (N/Nc), also en e s. Likewise, a which in he Uni ed S a es in
ecen yea s has been abou 1.04. Palpably he a e age money wage is
capable o pe o ming s onge leaps han he combined o he e ms
whose mo emen s a e bounded while o w he sky is he only limi .
2. The Open Economy
Fo an open economy such as Ge many he wage-p oduc i i y nexus
as he p ice le el gene a o mus be modi ied only in de ails, in encum-
be ing he WCM wi h e ms o e lec he ex e nal wo ld o ces. Thus:14
(6) Pd+ = k(w/nA) (Qd/Qd+ ), whe e d = domes ic and = o eign o
impo ed. E ec i ely, in (6), he p ice le el is w i en o include
domes ically p oduced and impo ed wa es inasmuch as o eign con en
en e s in o he p ice o e e y pound o co ee, o ciga e es, o sui o
clo hes, o au omobile, e c. The e m n = he domes ic alue con en o
each i em o inal ou pu , wi h n = 0.9 in he Uni ed S a es so ha 90
cen s o e e y $ 1 o i ems sold consis s o domes ic inpu s, and anging
13 On he signi icance o a, see my "Gene alizing Kalecki and Simpli ying
Mac oeconomics," Jou nal o Pos Keynesian Economics (Sp ing 1979).
14 Fo a ulle exposi ion, see my Capi alism's C isis, Chap e 3, and he
elabo a ion in my "P ice Le el In The Open Economy," Kyklos (1977).
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Mone a ism's Muddles 483
om 0.8 o 0.85 in Ge many whe e oughly 80 o 85 p ennigs o each
1 DM o sales con ains domes ic inpu s.
The Q- e ms deno e he ela i e physical olume o domes ic o
domes ic and o eign con en . Examining he equa ion he n- e m will
end o cancel all o much o he Q- a io. I hese e ms mo e wi hin a
small ange, as hey o en do, he "impo ed in la ion" cha ge could
be comple ely laid o es .
Thus any d ama ic p ice le el explosion mus o igina e in he
domes ic economy. Wo ld p ice phenomena usually injec mainly a
pin-p ick complica ion in Ge many whe e, o he hings unchanged, a
100 pe cen e up ion in impo p ices migh li he home p ice le el
by oughly 15 pe cen . Blaming impo p ices o in la ion is disclosed
as ei he jou nalis ic hys e ia, poli ical apologe ics, o public con usion
in seeking and accep ing scapecoa s. The Ge man p ice le el is no made
ab oad o in ou e space; ins ead i bea s he label o being "made a
home." When p ices ab oad a e beha ing well he domes ic money
wage and sala y igilance can be somewha elaxed. Unde global in-
la ion a coun y mus ake a oughe s ance o nip in la ion. All majo
coun ies, and su ely he Uni ed S a es and Ge many, can ashion
hei own P-des inies, admi ing only some p ice w iggles.
XII. The Ul ima e Mone a is Muddle
P e ious passages de eloped he necessa y heo e ical base o sub-
s an ia e ou ul ima e denuncia ion ha , a bo om, he mone a is
pe cep ions o in la ion a e my hical o hey dissol e in o echnical
inde e mina eness. Tha is, he p esumed explana ions a e de ec i e in
ha hey lack a heo y o mo emen s in he p ice le el in any signi i-
can ime dimension. This is he analy ical 'black hole' in mone a ism
despi e he agg essi e and asse i e s a emen o posi ion o p e end
ha he mone a y o igins o in la ion a e axioma ic and abo e
challenge o ep oach.16
We li e in an economy mo ing ou in ime. I is no gi en o us o
s a he wo ld anew so ha he bes we can do is o induce changes
in he e olu iona y economic p ocesses in mo ion in he sys em abou
us. On his p emise, o deal wi h he e ec o changes in he pace o
money augmen a ion we again in oke equa ion (lb).
15 C . my Capi alism's C isis, Chap e 4.
31*
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484 Sidney Wein aub
(lb) m(AM/M) = (AP/P) + (A Q/Q)
Suppose m = 2, and abou 'cons an ' as F iedman a e s. Suppose he
cen al bank also ollows his injunc ion o inc ease he money supply
by 3 pe cen , in eal y o his Rule. By a i hme ical necessi y hen, he
e ms on he igh mus inc ease by 6 pe cen .
1. Mone a is F us a ion
The nub o mone a is us a ion lies in he ac ha on hei con-
cep ions hey a e unable o a hom, in condi ions o a g owing labo
o ce, he p esence o abundan unemploymen , and ci cums ances o
ad ancing p oduc i i y — all o which a e he ealis ic cases — whe he
he 6 pe cen swing in MV will ca y wi h i a
(APIP)
jump o 12 pe -
cen and a (AQ/Q) ou pu decline o 6 pe cen , o ice e sa, o any
combina ion o a ia ions o alling 6 pe cen . Thei p e ision is simply
blank on how he money supply emission will be spli be ween sup-
po ing p oduc ion o unde w i ing in la ion. On he mos elemen al
and sup eme ques ion mone a ism is exposed as pleading igno ance!
Fo he cen al bank i makes all he di e ence in he wo ld whe he
i s delibe a ions lub ica e a salub ious p oduc ion and job ou come o
w eak p ice ha oc.
The WCM heo y can un a el F iedman*s ba ling puzzle which has
con ounded mone a is hinking and which is o such immense p ac ical
impo ance.16 Recall, oo, ha mone a ism's s ipula ion o m-'cons ancy'
has al eady been denied. On he i al money li e signs on which cen al
banke s beg illumina ion mone a ism hus comes up emp y and ba en,
wi h hei doc ines gene a ing mainly u ious in ellec ual hea a he
han a glowing su e ligh . Thei policy ad ice has o be aken wi h a
ba el o sal a he han he p o e bial dosage.
2. The WCM Analysis o he P ice-P oduc ion Spli
In hei candid momen s, ese ed o occasional con essionals in p o-
essional jou nals, mone a is s ha e conceded ha hei heo y is
inde e mina e, ide s e ile. Ye he eno mi y o hei muddle has
18 On se e al occasions F iedman has admi ed ha " he gene al subjec o
he di ision o changes in money income be ween p ices and quan i ies badly
needs in es iga ion." See his "A Theo e ical F amewo k o Mone a y Ana-
lysis," Jou nal o Poli ical Economy (Ma ch-Ap il 1970), pp. 222 - 223, 234.
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Mone a ism's Muddles 485
ha dly pene a ed o icial ci cles, o il e ed down o jou nalis s, o
pe cola ed h ough public opinion which mone a is s ha e cap i a ed
o an ino dina e and undese ed deg ee. The lag in comp ehension is
dis essing in obs uc ing he de elopmen o a a ional economic policy.
The WCM heo y sol es he F iedman puzzle which has de ied he
mone a is p obe, and does so wi h passing ease. The WCM a gumen
main ains ha money supplies ha e li e ally no hing o do wi h he
p ice le el so ha (AP/P) is un ouched, and a some emo e om he
cen al bank's lailing ges u es. Money, o be su e, packs a po en
wallop bu wi h he de e minan s o P w apped in kw/A, hen he
money clou is ese ed o jobs and p oduc ion. This p oposi ion is
cen al o WCM heo y. Mone a y swipes hi a eal phenomena, a jobs
and p oduc ion and no a p ices, con a y o he mone a is hesis
which, in unb idled asse ions, igno e he ba ling "puzzle."
On his ounda ion mone a y policy can be desc ibed as es ained,
neu al, o elaxed and s imula ing depending on whe he :
(7) m
(A M/M)
g
(A
P/P)
3. The Mone a is Dubious Rule
The mone a is us a ing ne ousness in con on ing equa ion (lb)
also h ows in o dis epu e hei espousal o hei s ead as money
supply ule o economic s abiliza ion. Fo example, i annual money
supply inc emen s a e eined, say o 2 pe cen , and i m = 2, he mone-
a is s p esume ( om hei cha - eading as ology) ha (AQ/Q) " no -
mally" sp ou s ahead by 4 pe cen . Thus he 2 pe cen money augmen-
a ion, hey hink, will ba ely ole a e he p oduc ion c eep and i will
o eclose any spillo e o gene a e in la ion.
He ein he mone a is posi ion displays wo heological ene s o es
he analy ical ai h: (1) he ac ual non-axiom o m = 2, and (2) ha
he p ice le el is decided by money emissions, a he han he money
wage and p oduc i i y nexus.
On m 'cons ancy/ wi h he c ea ion o money subs i u es he ju y
e dic is in, ha ing dismissed he mone a is s' claim. On (2) i is in-
he en ly acuous o allege ha unions, o wage ea ne s gene ally, will
beha e in p ope con o mi y. I money wages moun , say, by 10 pe cen
while he cen al bank adhe es o he 2 pe cen ule hen s ag la ion
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486 Sidney Wein aub
will be ou lo , wi h p ices jumping by 8 pe cen and p oduc ion alling
by 4 pe cen (i m = 2 and A = 2, wi h k cons an ).
Essen ially his has been he so did ale o he 1970s in heeding he
mone a is p esc ip ion (imp ecisely and wi h de ia ions, o be su e).
On he o he hand, i we did ha e a easible mechanism o gua an ee
ha he (w/A) a io would hold s eady, so ha (AP/P) would be p ac-
ically ozen nea ze o o impa a la p ice end, hen he cen al
bank migh eadily be able o subsc ibe o he mone a is dic um, wi h
occasional abe a ions depending on liquidi y conside a ions.
Mone a is s ha e hus omi ed he ca dinal i s s ep in p omulga -
ing hei message p oclaiming he mone a y Rule, namely, a call o
he alignmen o money wage (and sala ies) on a e age o p oduc i i y
gains. Wi hou he money income gea ing he implemen a ion o hei
Rule is a ecipe o sel -in lic ed wounds and imbibing he bi e s ag-
la ion b ew. Money wage discipline is he inescapable impe a i e o
eeing he economy om he in la ion e e .
Mone a is s a e guil y o myopia in a sel -in lic ed blindness in
e using e en o en e ain any se ious discussion o wage policy, o
Incomes Policy gene ally.
4. The P-Q Ma ix o Economic Possibili ies
The possible combina ion o P and Q ou come a e a mo e nume -
ous and complex han mone a is supe iciali ies ha e p e ended. In
con as o he mone a is s umbling o e he inde e mina e puzzle he
WCM heo y can expose he inhe en causes o he 9 al e na i e
conca ena ions o P and Q ela ions disclosed in Table l.17
Thus wi h he P-mo emen g ounded in uni labo cos s (w/A) i
ollows ha (i m beha es) he cen al bank can exe ei he benign
o bane ul impac s on p oduc ion. Acco ding o he able he ow we
land in depends on he (w/A) pe o mance: ideally we would like o be
si ua ed in he middle ow. The column we en e is amenable o cen al
bank policy. Mone a y au ho i ies hus ca y he awesome espon-
sibili y o in luencing ou pu . Bu hey misconcei e hei mission, sho
o ull employmen ci cums ances, in hinking ha hey can sub-
juga e he p ice le el; hey ha e ailed abysmally in his objec i e —
and ine i ably acco ding o WCM easoning.
17 C . my Capi alism's C isis, p. 76.
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Mone a ism's Muddles 493
plica ion o iscal policy ei he by way o ax cu s o expendi u e in-
c eases could amelio a e he si ua ion, wi h he o eign exchange alue
o he DM la gely una ec ed. Oppo uni ies o a ional conduc , o
a e a ecession disas e , would open up once he p ice le el was e-
mo ed as a es ain hampe ing cen al bank and iscal policy ini ia i es.
In con as , mone a ism eschews adap a ion o he si ua ion con on -
ing he au ho i ies. Unde an in e es a e escala ion i counsels he same
policy as unde an in e es a e descen . When que ied abou capi al
ou lows i p esc ibes he ingenuous medicine o s oicism, o doing
no hing, howe e ill he pa ien and howe e much he w i hes, and
despi e he a ailabili y o a cu e. The mone a is s ecommend abandon-
men o he exchange a e, o le i loa , e en o descend p ecipi ously
o calami ous and in la iona y egions. Abou unemploymen , i coun-
sels likewise a do-no hing a i ude, ega dless o he su e ing and
known es o a i es. Myopically, i holds one end in sigh , namely, o
main ain he pace o money augmen a ion ega dless o he economic
shocks.
In i s ascina ion wi h money agg ega es mone a ism has o go en, o
neglec ed, he pu pose o money supplies, namely, o acili a e a s able
p ice le el, ull employmen , and in e es a es and o eign exchange
a es conduci e o hese ends. The supply o he money medium has, o
mone a is s become an end in i sel , a he han concei ed as a means
o achie ing he impo an objec i es.
The con usion has become embedded in cen al bank policy, no
en i ely o be su e; he depa u es om s ic mone a ism ha e been
ou sa ing g ace. Bu as he ideas ha e seized cen al bank psychology,
all o he wes e n economies ha e paid a se e e p ice o he wei d
mone a is oodooism posing as e i ies o be iola ed a ou pe il. In-
deed, i is because mone a ism is pa ly hono ed in he b each ha
ou economies ha e no been h own in o g ea e chaos. Time is o e -
due o cu loose om he mone a is shackles and o mo e ou o
Incomes Policy o p ice le el s abili y, and he eupon o elease
mone a y policy disc e ion, and he i ues o iscal policy, o con i-
bu e o human economic bene i .
Mone a ism has imp isoned us by p eying on ou ea s. The ac s
a e g im. The oppo uni ies ha awai us can be g asped by ac ing on
he WCM pe cep ion o he p ice le el in he economy o p oducibles.
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494 Sidney Wein aub
Zusammen assung
Mone a is ische Wi nisse
Diese Bei ag behandel die mone a is ische Theo ie sowohl in ih en heo-
e ischen wie auch in ih en angewand en Aspek en. Eingegangen wi d dabei
au ih nebelha es Konzep on de Geldmenge, ih e schwachen Behaup-
ungen übe die Umlau geschwindigkei des Geldes, ih en alschen Zusam-
menhang zwischen Geld- und P eisni eau, ih e Ve nachlässigung des Zu-
sammenhangs zwischen Lohne höhungen und P eiss eige ungen und ih e
To hei , wenn sie sich ü s ik e Geldmengenpoli ik einse z und die No -
wendigkei eine disk e ionä en No enbankpoli ik e nein ; und all dies in
eine in e dependen en Wel wi scha , in de die aben eue liche Geld- und
Zinspoli ik eines so g oßen Landes wie das de USA so o au ande e Wi -
scha en wie die Bundes epublik Deu schland, übe agen wi d.
Wes liche Volkswi scha en leiden un e dem d ei achen Desas e : P eis-
explosion, übe mäßige A bei slosigkei und übe höh en Zinssä zen au g und
de gegenwä igen Geldpoli ik. S ag la ion und Slump la ion sind öllig
neue und ungewöhnliche E ah ungen, he o ge u en du ch den dok inä en
Mone a ismus, de die Implika ionen de pe manen en Einkommenseskala-
ion igno ie (in Deu schland alle dings wegen de Anwesenhei de Gas -
a bei e und de koope a i en Eins ellung de Gewe kscha en e was besse
bewäl ig als ande swo). Abe bei diesen Zusammenhängen muß auch die
Einkommenspoli ik be ücksich ig we den, so daß die No enbanken ih e ganze
Ene gie und ih e beach lichen geldpoli ischen Ins umen e au das P oduk-
ionsni eau, die Zinssä ze und die Wechselku se konzen ie en können, ohne
in la ionä e Impulse be ü ch en zu müssen.
Summa y
Mone a ism's Muddles
This pape ea s he heo y o mone a ism in bo h i s heo e ical and
applied aspec s, including i s nebulous concep o he money s ock, i s un-
co obo a ed assump ions o money eloci y, i s e oneous causal ain o
money and he p ice le el, i s neglec o he ic be ween pay hikes and
he p ice ma ch, and i s ollies in ad oca ing igid money supply policies,
and denying he need o cen al bank mone a y disc e ion, in an in e -
dependen wo ld economy whe e ad en i ious money and in e es a e
policies in one big coun y, such as he Uni ed S a es, a e a he ins an ly
ansmi ed o a ec o he economies, such as Ge many.
Wes e n economies ha e been eeling unde he iple dis ase o zooming
p ices, excessi e unemploymen , and ex a agan in e es a es by i ue o
he mone a is policies o ou imes. S ag la ion and slump la ion a e li e ally
new and s ange expe iences engende ed by doc inai e mone a ism which
has been impe ious o he implica ions o he pe sis en pay escala ion,
managed a bi be e in Ge many han elsewhe e because o he p esence o
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Mone a ism's Muddles 495
"gas a bei e s" and a mo e coope a i e a i ude o ade unions. Bu he
ela ions will ha e o be o malized h ough Incomes Policies so ha cen al
banks can de o e hei ull ene gies and o midable mone a y ins umen s
o cope wi h ou pu le els, in e es a es, and o eign exchange a es, wi hou
ea and epida ion o in la iona y impulses.
Résumé
Chaos moné a is e
Ce e con ibu ion ai e de la héo ie moné a is e, an sous son aspec
héo ique que dans ses applica ions. On examine à ce e occasion sa concep-
ion ague de la masse moné ai e, ses a i ma ions aibles su la i esse de
ci cula ion moné ai e, sa ausse ela ion en e ni eau moné ai e e ni eau
des p ix, sa négligence du appo en e augmen a ion des salai es e augmen-
a ion des p ix e son é oi esse d'esp i , lo squ'elle se ai l'a oca d'une po-
li ique de la masse moné ai e s ic e e nie la nécessi é d'une poli ique disc é-
ionnai e de la banque cen ale; e ou cela dans une économie mondiale
in e dépendan e dans laquelle la poli ique moné ai e e des aux d'in é ê
insensée d'un pays aussi impo an que les E a s-Unis se épe cu e immé-
dia emen su d'au es économies comme la République Fédé ale.
Les économies occiden ales sou en d'un iple désas e : explosion des
p ix, chômage excessi e aux d'in é ê excessi s basés su la poli ique moné-
ai e ac uelle. La s ag la ion e la slump la ion cons i uen des expé iences
nou elles e inhabi uelles, engend ées pa le moné a isme doc inai e, qui
igno e les implica ions de l'escalade pe manen e des e enus ( ou e ois un
peu mieux maî isée en Allemagne qu'ailleu s u la p ésence de a ailleu s
é ange s e la disposi ion à coopé e des syndica s). Mais dans ces ela ions
il au aussi eni comp e de la poli ique des e enus, de so e que les banques
cen ales puissen concen e ou es leu s éne gies e leu s ins umen s con-
sidé ables de poli ique moné ai e su le ni eau de la p oduc ion, les aux
d'in é ê e les aux de change, sans a oi à c aind e d'impulsions in la ion-
nis es.
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