Dimensions of Economic Management

I was thinking about the following main dimensions of macroeconomic management (taken to include monetary and fiscal policy).
  1. The difference between state spending and state revenues influencing the level (debt) and rate of change (deficit or surplus) of the 'national debt'*.[*I mean by 'national debt' (quotes are intentional) both the bonds issued by the state, including any bought by the central bank, plus any reserves or banknotes directly issued by the state or central bank (i.e. people's QE)
  2. The composition of how that national debt is financed (bonds and/or reserves), and the interest rate charged on it - i.e. on bonds or reserves (positive, zero or negative)
  3. The quantity and rate of change of private credit in the economy (influenced by capital ratios and capital levels, in the past and in  China reserve ratios and reserve levels, controls on non-bank lending and credit guidance; also influenced by whether banks are permitted to issue deposits usable in the payment system)
  4. The composition of tax revenue, in particular the expected tax rate and thus the rate of return on marketable non-debt monopolistic assets (e.g. land and land value tax).
  5. The composition of state spending (including spending on 'people's QE')
  6. The composition of private credit (both deposit-creating credit, if permitted, and other credit such as bonds or P2P lending) between investment, consumption and asset purchase (influenced by financial system structures and government incentives)

Here are some possible strategies:
  • An 'increased deficit' strategy changes 1 in a stimulative direction
  • A QE strategy changes 2 in a stimulative direction
  • A 'people's QE strategy changes 1 and 2 in a stimulative direction (and also may change 5)
  • A 'financial repression' strategy ('e,g. monetisation of debt, without interest paid on reserves, mandatory reserve ratios for banks and repression of shadow and overseas banking) changes 2 in a stimulative direction (e.g. lower returns on bonds) and 3 in a depressive direction (restrictions on private credit) 
  • A bank recapitalisation strategy changes 3 in a stimulative direction (more bank capital means more lending)
  • A land value tax strategy changes 4 in a depressive direction (lower returns for monopoly assets)
  • A wealth tax strategy changes 2 in a stimulative direction (lower returns on government debt) and 4 in a depressive direction (land tax)
  • A reduced debt/GDP ratio focused strategy might combine financial repression (2 and 3) with investment focused credit (6)
Institutionally, it may or may not be useful to limit the room for manoeuvre of one or more of the state actors. But that's another story. We need to know the options before choosing institutional design.




Global Heating (continued)

The energy imbalance (see last post http://climatephilosopher.blogspot.co.uk/2015/01/happy-new-year-heres-interesting.html ) is about 0.5W/m2 on average over the last 30 years.

Here are my calculations.
Net radiative imbalance = (Energy imbalance in J/year)/(Area of Earth * Seconds per year) = 8e21 / (5e14 * 3.1e7) = 0.5W/m2

I'm not sure the exact extent to which they are comparable, but it seems lower than the estimates of radiative forcing now (2.3 +/- 1), even accounting for the fact that RF will be higher now than in the average of the 1970-now period.

So either RF and heat imbalance can't be directly compared like this, or sulphates are shielding more than we think, or the basic processes of heating aren't as bad as the IPCC say.

The exponential growth in RF factors sort of cancels out the log scale on which they have an effect.

That's not to invalidate the other points in other parts of the picture which may favour the other sides of the debate (e.g. the slow feedbacks and the systemic picture once carbon cycle and oceans are considered); but it seems that the ocean heat flow on the face of it support the contention that there is such a thing as global warming, but it's less serious (from the point of view of the basic heat imbalance) than the IPCC says it is.

Global Heating


Happy New Year!

Here's an interesting factoid: the average amount of extra energy (300ZJ/40 years ~=8ZJ) gained per year by the world due to global warming between 1970 and 2012 is similar to the total energy contained in the world's remaining oil reserves.


[1] My calculations based on diagram from David Mackay Talk http://www.inference.eng.cam.ac.uk/mackay/presentations/Simonyi2014/mgp00012.html
[2]  7.9×10^21 J estimated energy contained in the world's petroleum reserves as of 2010 (Wikipedia http://en.wikipedia.org/wiki/Orders_of_magnitude_(energy)#1021)


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