In Kerala, it's getting increasingly difficult to hire labour to pluck coconuts. The main reason is that it is very risky. I read somewhere that falls from coconut trees are the single biggest cause of spinal injuries in Kerala.

For some time now government agencies have been trying to develop a machine to make coconut plucking easier and safer, with varying degrees of success.

The photograph below shows a new machine for the purpose. Strictly speaking it's not a machine but an attachment. Using it the coconut plucker can climb a tree as easily as if he were walking on a road, except that in this case the road is vertical.

The cost of the device is Rs 2,500.

The link below lists coconut climbers in Trivandrum using the new device along with their telephone numbers. The person in the photograph is R. Sreejith.

Coconut climbers using new device in Trivandrum

South Korean: Mere paas Samsung hai, LG hai, Kia hai. Tere paas kya hai?

North Korean: Mere paas Dear Leader hai.

(Deewaar, otherwise known as the 38th Parallel)

This blog has been silent for three months. I was waiting for the first estimate of third quarter GDP in order to calculate the income velocity of money, which as we have shown earlier, is a vital parameter in judging the health of the economy.

The graph of corrected money supply (we have considered sweeps too in our calculations) continued to rise until the end of September 2011 as seen in the graph below.

The income velocity of money is as seen in the graph below.

As can be seen, at the end of September 2011 we were exactly in the situation we were in at the beginning of 2006. This, if readers recall, was when housing starts began to fall, though the equity markets did not reflect the fall in money supply until more than a year later.

Someone (I think it was Popper) observed that interesting theories should make predictions that are easily falsified. Saying that it will rain in 2012 is too easy; a really interesting theory would predict that it will rain on 12 August 2012 but not on 1 September 2012.

I shall therefore go out on a limb and predict that in December 2012 the S&P 500 will touch 800.

Those to whom Corrected Money Supply and Income Velocity of Money (as we calculate it) seem like Greek may find it useful to read The Riddle of Money, Finally Solved.

It is interesting to read Krugman's remedy for Japan's recession, advanced in 1997. The Fed has followed it to the hilt so far in the US and has nothing to show for its pains.

"The simple fact is that there is no limit on how much a central bank can increase the supply of money. [sic] Could the Bank of Japan, for example, double the amount of monetary base - that is, bank reserves plus cash in circulation - over the next year? Sure: just buy that amount of Japanese government debt. True, even such a large increase in the money supply might not drive down interest rates very much, since they are already so low. But an increase in Japan's money supply could ease the economic problem in ways other than lower interest rates. It is possible that putting more cash in circulation will stimulate spending directly -- that the extra money will simply "burn holes in peoples' pockets". Or banks, awash in reserves, might become more willing to lend; or individuals, with all that cash on hand, will bypass the banks and find other ways of investing. And even if none of these things happens, when the Bank of Japan increases the monetary base it does so by buying off government debt -- and therefore makes room for spending increases or tax cuts.

"So never mind those long lists of reasons for Japan's slump. The answer to the country's immediate problems is simple: PRINT LOTS OF MONEY. But won't that be inflationary? Well, remember that the Bank of Japan is supposed to be impotent: if it prints more money, people will simply hoard it rather than save it. But printing money is only inflationary if people spend it, and if that spending exceeds the economy's capacity to produce. You cannot first argue that monetary policy is ineffective as a way to increase demand, then reject a proposal to print more money on the grounds that it will cause inflation."

The full article can be seen at What is wrong with Japan?.

Readers might wonder why a Keynesian was advocating such notably monetarist remedies instead of recommending public spending. The reason was that the Japanese government had tried it and failed.

The graph of Corrected Money Supply below shows a massive increase upto June 2011.

It has gone way above its previous peak at the end of 2005. But the situation is still (I am speaking of June, remember) a little less dangerous than it was then, as the graph of Velocity of Money below shows. Since then, of course, it has probably got a lot worse.

I wonder whether the real crash is going to occur in the treasuries market. Perhaps all those who bought treasuries at rock bottom yields are going to get a rude shock if interest rates go up. Buyers of short-term treasuries can of course hold them to maturity but those with longer-term treasuries may suffer a sharp erosion in capital.

If you haven't been keeping up with this blog you might want to read The riddle of money, finally solved which explains Corrected Money Supply.