patrick.net

Dan8267 says

No, the law of economics should read as I wrote it several times: Printing money increases the prices of goods relative to what they would be had the additional money not been printed.

This happens 100% of the time.

Dan : you are right, the price of goods relative to what they would be had the additional money not been printed . but is it fair to do that ? you seem to be against unfairness ..right.
If i work for 1 year and produce 100 items and get X dollars . should it not be fair that i only get those 100 items for the same X dollars after few years down the road when i exchange them. if you don't print at all, i will be getting 200 items for my X dollars. why should it be the case ? this is called rent seeking behavior. rent seeking is exacerbated by deflation.

lets take the above example : if there are 100 items and $100 dollars in the system. now lets assume $100 is created out of thin air and somebody creates 100 items using that money ( as debt) . now we have 200 items and $200 dollars. perfectly fair to me.. if i created 100 items , i should be entitled to just 100 items.
ofcourse , this is not happening in real world ..but this should be goal --> 0% inflation. getting 0% inflation while also creating debt for invetments is a very difficult thing to do in real world hence targeting 2% inflation is reasonable .
i would take the 2% inflation rate anyday versus deflation which gives capital holders or older generation to get more than what they created by rent seeking. deflation is also hard to control once it goes out of hand. deflation economy also produces less growth than low inflation economy assuming all other circumstances are constant.

chanakya4773 says

Dan : you are right, the price of goods relative to what they would be had the additional money not been printed . but is it fair to do that ? you seem to be against unfairness ..right.

Unfortunately, we can't even have that discussion until people accept what changing the money supply is and what it does. Only when we all understand the consequences of actions can we debate whether those consequences are overall good or bad.

However, to clarify, I have never advocated long-term deflation or even net positive deflation. What I have advocated is a quick removal of the inflation that Bernanke has done over the past 7 years, particularly by removing all the money injected into too-big-to-fail banks. This would restore affordability of most goods back to 2007 levels (not that long ago) and will allow housing to reach historically normal and affordable levels while preventing tens of millions of people on fix incomes from slipping below the poverty line, not to mention the fact that wages have not reason to compensate for the decreasing purchasing power.

The "emergency liquidity injection" should not be made permanent or we'll just have the middle class getting poorer while all that new money chases fewer and fewer commodities, creating bubbles and depressions when those bubbles burst.

chanakya4773 says

i would take the 2% inflation rate anyday

In order to reach 2% inflation we need to deflate because we're well past 2% inflation.

Dan8267 says

This would restore affordability of most goods back to 2007 levels (not that long ago) and will allow housing to reach historically normal

I understand that you are frustrated by asset booms and busts which gives the opportunity for the more sophisticated to siphon off from the less sophisticated. but the problem is not due to the fed. most asset bubbles are due to bad lending standards. if fed money is loaned the right way , we will never have asset bubbles atleast due to the fed money. nobody can stop the bubbles due to private money

the current housing bubble is again the price we are still paying for the bad lending practices.ideally i would have liked to see the housing prices to go down a lot but that would have displaced too much work force from the economy and would have created imbalances.

Dan8267 says

What I have advocated is a quick removal of the inflation that Bernanke has done over the past 7 years, particularly by removing all the money injected into too-big-to-fail banks.

Thats why fed tracks inflation. it does not want to punish savers in order to create financial stability and reduce unemployment. i don't think inflation is high enough to justify keeping other people on unemployment just to give the savers small increase in buying power. you have to remember that being unemployed is not easy. you have to balance the collective good. i would rather have few people lose small purchasing power rather than have a unemployed parent not able to put food on the table for his kids.

We all should collectively see the real problem.. the real problem is and always will be the banks which gamble with our money (fractional reserve system) for the sake of fat bonuses for executives.

chanakya4773 says

Thats why fed tracks inflation. it does not want to punish savers in order to create financial stability and reduce unemployment.

That must have been sarcastic.
Makes sense at savings rates around .5 percent and inflation around 5%.

chanakya4773 says

i don't think inflation is high enough to justify keeping other people on unemployment just to give the savers small increase in buying power. you have to remember that being unemployed is not easy

Those savers save

a) for themselves so that they won't end in poverty in bad times or at old age, having a cushion for the unforseen

b) so that they don't end up costing money for future generations.

chanakya4773 says

Thats why fed tracks inflation. it does not want to punish savers in order to create financial stability and reduce unemployment.

Once we accept that there are negative consequences to inflation, we can weigh those consequences against the positives, and even more importantly, we can discuss alternative solutions that accomplish what you are trying to gain through inflation but that do not suffer from the negative consequences of inflation.

I would submit that a progressive wealth tax would accomplish everything people say are the good results of inflation without the numerous bad consequences. You can prevent wealth hording, lack of consumer spending, and unemployment while not causing the working man's wages to go down, forcing people to gamble with their savings to avoid losing them, and harming people on fix incomes and salaries, which have not kept up with inflation.

Why should the 18-year-old working two low-paying jobs to save up for a car so he can commute to a better job be penalized by inflation? Why should the parents saving a few thousand dollars a year for their children's education be punished? Why should the young couple saving up for a middle class home be robbed by inflation and forced to go into debt for that home? Why should the retired widow be forced to eat cat food because social security has not kept up with inflation? Why especially when there are an infinite number of alternatives to accomplishing whatever you want to accomplish with inflation?

Here's one alternative: a wealth tax. Tax all household wealth over $500,000 at 1% per year, over $1,000,000 at 2%, over $1,500,000 at 3%, etc. up to some maximum, say $5,000,000 at 10%. This would discourage wealth hording far more than any inflation possibly could. It is the middle class, not the wealthy, who truly bare the costs of inflation.

The wealthy can hide from inflation with gold, stocks, land, real estate, rare art, diamonds, etc. These stores of wealth are not affected by inflation and are dominate by the wealthy. The middle class family cannot save up for a major purchase like a house or college degree by buying Picassos. A wealth tax would include all these things in its calculation.

A wealth tax would accomplish everything you want to use inflation to accomplish without all the horrific effects of inflation. Why not at least consider that alternative?

Dan8267 says

Here's one alternative: a wealth tax. Tax all household wealth over $500,000 at 1% per year, over $1,000,000 at 2%, over $1,500,000 at 3%, etc. up to some maximum, say $5,000,000 at 10%. This would discourage wealth hording far more than any inflation possibly could. It is the middle class, not the wealthy, who truly bare the costs of inflation.

I have to disagree with that point. Tax should not be on income the tax should be on spending.

The unfair advantage would be gone if you did away with the FED.

And while we are at it the rules for insider trading should apply to congress and the senate. As right now it is completely legal for them to profit from illegal insider trading.

indigenous says

I have to disagree with that point. Tax should not be on income the tax should be on spending.

Just to be clear, a wealth tax is not an income tax. A wealth tax is a tax on accumulated wealth beyond a given point.

Anyway, spending or sales taxes would discourage consumption and encourage saving -- or as some like to call it, hoarding -- money. As such, a spending or sales tax would do exactly the same things that long-term deflation does.

Dan8267 says

A wealth tax would accomplish everything you want to use inflation to accomplish without all the horrific effects of inflation. Why not at least consider that alternative?

Because then the wealthy would flee to Belgium and we would miss them terribly. That and they'd take all their crap with them. Like their houses, their factories, their hotels, their...

Oh.

Dan8267 says

Anyway, spending or sales taxes would discourage consumption and encourage saving -- or as some like to call it, hoarding -- money. As such, a spending or sales tax would do exactly the same things that long-term deflation does.

But saving is a natural signal that entrepreneurs should invest as (without the FED) interest rates will lower when there are excess savings. Also as interest rates fall it is a natural signal that consumers will spend as they have no incentive to save. Which is also why the entrepreneur wants to invest.

For the most part up until 1913 we did not have a central bank. Would we have comparative advantage without the government meddling? me thinks we would as it is organic to these humans* to practice such.

The wealthy and their money have a way of parting without any aide. The highest turnover of any income quintile is a the top. The only way they remain blue bloods is cronyism other wise GM and the big banks would be no more.

Otherwise they would loan out there money and contribute to growth. No meddling required.

You do realize that the inequality meme is just that?

* not sure this applies to everyone on this forum?

chanakya4773 says

if fed money is loaned the right way ,

You fool, that never happens. And you know why? Its not their money to loan.
They are NOT loaning their hard earned money. They have a very little incentive check if the money is lent the right way. They are not answerable to public or even to themselves.

The same goes for the banks, which is why fractional reserve lending is fundamentally evil.

gsr says

chanakya4773 says

if fed money is loaned the right way ,

You fool, that never happens. And you know why? Its not their money to loan.
They are NOT loaning their hard earned money. They have a very little incentive check if the money is lent the right way. They are not answerable to public or even to themselves.

The same goes for the banks, which is why fractional reserve lending is fundamentally evil.

Thats why there are lending standards !
the people of US through their representatives are supposed to push for it.
When you have to put 20% down , even if the bank is willing to give you free money to invest in some junk, you won't do that because you will lose your collateral.
this is just one example, their are more ways to make sure the banks are not reckless. its not rocket science.actually banks are required to have some collateral as well.

fractional reserve lending has worked for several decades wonderfully until we removed all checks and balances.

gsr says

chanakya4773 says

if fed money is loaned the right way ,

You fool, that never happens. And you know why? Its not their money to loan.

They are NOT loaning their hard earned money. They have a very little incentive check if the money is lent the right way. They are not answerable to public or even to themselves.

The same goes for the banks, which is why fractional reserve lending is fundamentally evil.

Yep.

gsr says

They have a very little incentive check if the money is lent the right way. They
are not answerable to public or even to themselves.

Are you saying the capitalist profit motive doesn't work? Are you a communist???

Banks are answerable to their owners. In the case of the large banks, that is the public through stock ownership.

indigenous says

How much income mobility exists in America? Research consistently affirms that there is substantial upward income mobility in the United States, with the lowest income earners typically showing the strongest results.

Manyy studies in the past 5 years say the opposite.

http://www.sciencedaily.com/releases/2012/09/120905141920.htm

http://www.sciencedaily.com/releases/2012/09/120905141920.htm

http://www.npr.org/2013/03/07/173733691/social-mobility-is-the-american-dream-slipping-away

Even Jeb Bush knows...

JEB BUSH: I think going forward we have to deal with our longer structural problems. The biggest one, as far as I'm concerned, is that we're no longer socially mobile as a country. You have people that are born poor, and there's a higher and higher probability they're going to stay poor; and you have people that are born rich, and there's a greater probability they're going to stay rich.

Bernanke is certainly aware of this- I think he is just talking taper-remember he said he would taper if the economy improved as per Fed forecasts-it wont, and he'll keep up the stimulus

Some things become clearer if you look higher up the food chain. They micromanage the whole fucking world for the sole benefit of the Plutonomy (to use a Citigroup coinage)

http://www.occupy.com/article/global-power-project-part-1-exposing-transnational-capitalist-class

"With such massive wealth and power held by these institutions and "networks" of corporations, those individuals who sit on the boards, executive committees and advisory groups to the largest corporations and banks wield significant influence on their own. But their influence does not stand in isolation from other elites, nor do the institutions of banks and corporations function in isolation from other entities such as state, educational, cultural or media institutions.

Largely facilitated by the cross-membership that exists between boards of corporations, think tanks, foundations, educational institutions and advisory groups — not to mention the continual "revolving door" between the state and corporate sectors — these elites become a highly integrated, organized and evolved social group. This is as true for the formation of national elites as it is for transnational, or global, elites.

The rise of corporations and banks to a truly global scale – what is popularly referred to as the process of “globalization” – was facilitated by the growth of other transnational networks and institutions such as think tanks and foundations, which sought to facilitate these ideological and institutional structures of globalization. A wealth of research and analysis has been undertaken in academic literature over the past couple of decades to understand the development of this phenomenon, examining the emergence of what is often referred to as the "Transnational Capitalist Class" ".

And yeah the Fed dutifully plays their designated role in this despoiling of the commons.

Income disparity, consolidation of wealth?
(perpetual armed conflict, exponential debt growth)
Well that is the whole point, my dears.
And they certainly don't care what you do with your little "vote"

The quoted article is actually pretty good. But nowhere does it mention the Federal Reserve. You might as well follow by saying:

"And the New York Yankees dutifully play their designated role in this despoiling of the commons"

tatupu70 says

But nowhere does it mention the Federal Reserve

Yeah, I guess I was just looking for a larger context for all the "the Fed this, the Fed that".

tatupu70 says

"And the New York Yankees dutifully play their designated role in this despoiling of the commons"

OK, I think that's fair to say as well.

Robert Sproul says

Yeah, I guess I was just looking for a larger context for all the "the Fed
this, the Fed that".

That's the problem. Everyone blames the Federal Reserve, but nobody can really pinpoint how exactly the Fed is causing all these bad things to happen.

tatupu70 says

Robert Sproul says

Yeah, I guess I was just looking for a larger context for all the "the Fed

this, the Fed that".

That's the problem. Everyone blames the Federal Reserve, but nobody can really pinpoint how exactly the Fed is causing all these bad things to happen.

That's not true it has been pinpointed ad nauseam. Fed prints money for the first receivers which take their cut and as it trickles down profit and risk has to be substantially higher to make any gains. It's a ponzi scheme and the people who don't profit from it pay dearly due to inflation. Come back and make such claims when the Fed prints money and distributes the exact amount to every citizen (which would be essentially zero-sum because prices would rise but at least there are no first receivers in the crony capitalist/lobbyist VIP line). It's really just simple math.

tatupu70 says

Are you saying the capitalist profit motive doesn't work? Are you a communist???

Yeah, keep peddling the bogeyman. Do you even know the meaning of the term communism, or capitalism for that matter? Here is a small 101.

Capitalism provides a balance of risk and reward based on free market, where failure plays a big part. When profits are all privatized, and all losses are socialized, it is not capitalism by definition. It is corporate fascism, which is somewhat close to communism but not exactly same.

In short, you have full access of OPM (other people's money), and you can gamble all you want, and get bailed out if anything happens, it definitely skews the profit motive.

tatupu70 says

Banks are answerable to their owners. In the case of the large banks, that is the public through stock ownership.

No, see above one more time. Since banks are not allowed to fail, they are essentially a pseudo-private entity (i.e., fascist) under government payroll. They get free money *lent* from the Fed to gamble.

And it is not just banks. The Fed give loans to powerful "rich" people too.
Here is 201 on the FED.

"Loans were made to companies owned by wealthy Americans, including Michael Dell, founder of Dell Inc.; John Paulson, hedge fund manager; and Christy Mack, wife of Morgan Stanley CEO John Mack.
"
source: http://articles.sun-sentinel.com/2011-05-12/business/fl-federal-loan-huizenga-20110512_1_loan-program-business-loans-troubled-asset-relief-program

gsr says

Yeah, keep peddling the bogeyman. Do you even know the meaning of the term
communism, or capitalism for that matter? Here is a small 101.

It was a joke--it's called irony. You are clearly not a communist so using your misstatement about the banks not having anyone to answer to imply that you are, is funny.

gsr says

No, see above one more time. Since banks are not allowed to fail, they are
essentially a pseudo-private entity (i.e., fascist) under government payroll.

Really.. Please tell that to the 465 banks that have failed since 2008. I'm sure they'd love to have that information.

http://en.wikipedia.org/wiki/2008%E2%80%932010_bank_failures_in_the_United_States

mell says

Fed prints money for the first receivers which take their cut and as it trickles
down profit and risk has to be substantially higher to make any gains. It's a
ponzi scheme and the people who don't profit from it pay dearly due to
inflation.

That's a nice narrative except that it is complete BS. Please detail how the first receivers get their money. Show me the "simple math" as you call it.

tatupu70 says

mell says

Fed prints money for the first receivers which take their cut and as it trickles

down profit and risk has to be substantially higher to make any gains. It's a

ponzi scheme and the people who don't profit from it pay dearly due to

inflation.

That's a nice narrative except that it is complete BS. Please detail how the first receivers get their money. Show me the "simple math" as you call it.

There is nothing to detail, it's in front of you. The receivers of the bailout money, the Fed purchasing MBS every month, FNM, FRE, FHA, government guaranteed loans, that's all taxpayer funded crony capitalism. There is also a recent inflation graph on this thread, easy to read.

mell says

The receivers of the bailout money, the Fed purchasing MBS every month, FNM,
FRE, FHA, government guaranteed loans, that's all taxpayer funded crony
capitalism. There is also a recent inflation graph on this thread, easy tor
read.

Again--you've detailed nothing. The bailout has nothing to do with money printing. Banks and some other entities were given LOANS that they have since paid back (for the most part).

FNM, FRE, FHA--those are acronyms. What does it have to do with money printing?

Government guaranteed loans have been around forever. There is no money printing associated with them.

I know crony capitalism is the new pet term for the right, but is it too much to ask how exactly money printing goes to the "first receivers" that are the supposed crony capitalists?

marcus says

Manyy studies in the past 5 years say the opposite.

The trouble with "studies" on this subject is that government agencies don't categorize statistics to real people they organize them to categories. So getting real data requires going beyond the obvious.

One hint though is that if it is on NPR it is painfully biased. I know this is hard for you to see but it is not hard to see for the rest of us.

I will say that IMO as the incessant march of government overreach continues the economy is burdened with resources being taken by force from the free market. Again this requires myopic free vision which renders you oblivious to it's insidious effects.

indigenous says

One hint though is that if it is on NPR it is painfully biased. I know this
is hard for you to see but it is not hard to see for the rest of us.

Let me rephrase that--

If the conclusion varies from Indigenous's preprogrammed viewpoint, then it is painfully biased"

tatupu70 says

I know crony capitalism is the new pet term for the right, but is it too much to ask how exactly money printing goes to the "first receivers" that are the supposed crony capitalists?

Gees this has been answered ad nauseam, earth to tatupu70

That's not inflation. That's the effect of increased border security.

MsBennet says

From what I can see inflation is definitely happening. I see it in groceries and supplies that I routinely buy...not to mention that $20.00 (base price) car wash the other day.

tatupu70 says

If the conclusion varies from Indigenous's preprogrammed viewpoint, then it is painfully biased"

Oh yes the pot calling the kettle black.

indigenous says

Gees this has been answered ad nauseam, earth to tatupu70

OK--then it should be no problem for you to summarize it for me.

tatupu70 says

OK--then it should be no problem for you to summarize it for me.

Not that you will listen this time either:

Inflation is not even. The cronys, TBTF big banks, get their money through uncle Ben.

This allows them to invest the money ahead of inflation. As more money is invested, mostly in RE or Equities, the price rises giving their investment a rise in value.

indigenous says

Inflation is not even. The cronys, TBTF big banks, get their money through
uncle Ben.

I understand that is what you and others claim is happening. My question is how? Please explain how the money is created and given to the "cronies"

tatupu70 says

I understand that is what you and others claim is happening. My question is how? Please explain how the money is created and given to the "cronies"

The money is printed out of thin air, it is then used to purchase bad mortgages through Freddy and Fanny, at the then value of the RE, from the banks.

tatupu70 says

I understand that is what you and others claim is happening. My question is how? Please explain how the money is created and given to the "cronies"

This taps into that topic a bit. It's called "Money as Debt." Here's the link:

http://www.youtube.com/embed/jqvKjsIxT_8

Here's another, more in depth documentary:

http://www.youtube.com/embed/iDtBSiI13fE

This guy gets a little Oliver Stone (at points) for my tastes, but there's still a lot of interesting information in it.

turtledove says

This taps into that topic a bit. It's called "Money as Debt." Here's the link:

TL;TR

How about the nutshell version?