From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Thu Nov 18 2004 - 02:05:56 EST
At 11:23 PM -0500 11/17/04, Allin Cottrell wrote: >In response to my comment, > >>>That is the context of "special indexes" of the sort you have >>>mentioned. Some would claim that sensitive commodity prices serve >>>as a leading indicator for the CPI (with a lot of error and noise, >>>of course) -- and to that extent they can serve as a guideline for a >>monetary policy that aims to maintain CPI inflation within a target band. > >Rakesh wrote: > >>The CPI is a joke, politically manipulable and meaningless in its >>aggregate nature. > >I wouldn't say it's a joke. It is manipulable to some degree, but >meaningful in its aggregate nature. For example for workers and >capitalists negotiating wages the CPI, however imperfect, is much >more relevant than the prices of just a few selected commodities -- >particularly those that enter nobody's consumption. I think Reuven Brenner makes a good argument that Greenspan does not (as you did suggest) inflation target (nor of course does he follow wacky Friedman's wacky money creation rule). CPI is meaningless as far as Greenspan is concerned. Of course part of my point is that to the extent that money has only been and can only be partially decommodified in a capitalist society money creation cannot and has not been put at the service of full employment and other social goals. Having once expressed extreme antipathy to the Keynesian welfare state in the name of the gold standard, Greenspan is the perfect man to control the money supply, to sacrifice the global working class at the altar of gold or more precisely Baker's commodity index. The question of who is James A Baker III is very interesting. > >>Greenspan is using a basket of commodities in which gold features >>prominently as an end in itself. He is trying to ensure that the >>dollar depreciates vis a vis that basket in a very gradual and >>controlled way. > >As a thought experiment, consider what would happen if a serious gap >opened between the time path of the CPI and that of the gold-basket, >that is, if stabilizing the price of the gold-basket meant >destabilizing the CPI. Do you think Greenspan would go for that? I >very much doubt it. Again I think this is why other price sensitive commodities (perhaps oil and grain) are in the basket--to prevent such a stark divergence between the index and the general price level. The gold standard is impractical; it's a reactionary utopia (Krugman once wrote a popular column mocking the gold bugs). Baker's commodity index is a modification (perhaps imposed on the US by foreign central banks in possession of US govt paper), but perhaps this modification has led to a dialectical change in the nature of money (Brenner thinks that Greenspan abused the discretion it gave him, and he is being forced to act more strictly in accordance with it). You may well in fact be right that the Baker commodity index should not be understood in any way as commodity money. I would not go that far. But again I have been attempting to give what I consider to be the only plausible affirmative answer to the question of whether there is any way in which commodity money exists today. Rakesh > >Allin.
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