ZERO EQUILIBRIUM

By Chinedu Okoye  Money as a Price Index: In typical Austrian fashion, Mises argues that Money isn't a measure of price or value because the valuation is subjective and so cannot be measured. So objective exchange-value is impossible. However, objective value is indeed measurable as prices is a function of costs and mark-ups on the part of the seller or producer and a function of income, and preference scaling on the part of the consumer. When both meet they bargain based on their respective subjective valuations and meet at a price, but there is a level below which the producer wouldn't go. The base price (agreed price) sets a precedence and highlights what other consumers might be willing to pay and overtime the various series of bargaining based on subjective valuations sets a price level. And because this price is quoted in terms of money, money becomes a measure of price and value, derived from bargaining at indirect exchanges. To say that prices are dependent...

The Workings of Tight Money: Here Minsky discusses how tight money can work to restrain demand. Tight Money here is defined as "rising nominal interest rates associated with stricter other terms of contracts." This he says may work to restrain demand in two ways; - The Conventional View; here "tight money operates through rationing demand by means of rising interest rates." - The Alternative View; this flows from the argument in the last section/thread on uncertainty, and "envisage tight money as inducing expectations, in the perceived uncertainty". This can be due to an episode of financial crisis or a period of financial stringency. The way in which tight money operates will depend on the state of the economy. In a non-euphoric economy, where liability structures are somewhat satisfactory a monetary restraint would manifest itself by way of rationing. In a Euphoric economic state, tight money will affect the economy only if it brings the fina...