How to Debate Paul Krugman "Ask Questions Like a Child"


By Mish   Follow   Sat, 26 Jan 2013, 4:44pm   3,377 views   63 comments
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How to Debate Paul Krugman: "Ask Questions Like a Child"
http://globaleconomicanalysis.blogspot.com/2013/01/how-to-debate-paul-krugman-ask.html
Mish

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  1. mell


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    24   8:39pm Mon 28 Jan 2013   Share   Quote   Permalink   Like   Dislike  

    iwog says

    Yeah not so much. Explain why printing up $750 billion and sending every taxpaying American a check for $5000 would benefit the wealthy. It's people like you who are fundamentalists about the debt that prevent any useful monetary policy from taking place. Why do we have QE instead of monetization? Because the Heritage Foundation has everyone convinced that monetization will unleash a financial Godzilla that will crush us.

    I've always said that I would prefer sending every American a check instead. But your conclusion that whe have QE because of fundamentalists (which I am not) is completely ridiculous. If at all, QE is closer to monetization than to what the "fundamentalists" want. The one issue we have - and that has been discussed here multiple times as well - is that the money will likely trickle up fast, even when it is distributed amongst "ordinary" people. Still better than the bailouts and QE. Definitively inferior to a sound money policy though.

  2. boldej


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    25   8:41pm Mon 28 Jan 2013   Share   Quote   Permalink   Like   Dislike  

    mell says:

    Iwog, you should read/watch some Nassim Taleb before you go apeshit on people who don't subscribe to the BS peddled by Krugman.

    Nassim Taleb is one total idiotic jerk who got famous for just the cover title (and nothing worthwhile inside) of one factually useless book (Black Swan).

    At least two years ago he got famous (briefly) again by idiotically proclaiming that EVERYBODY should short treasuries. A trade that would have bankrupted EVERYBODY.

  3. mell


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    26   8:47pm Mon 28 Jan 2013   Share   Quote   Permalink   Like   Dislike  

    iwog says

    None of it has anything to do with the national debt.

    That's grand - maybe you should write to the gov then and tell them they can easily take on another 16 trillion because things will only get better! I mean, what are they waiting for then? We can eradicate world poverty once and for all once the secret is out. Stop international aid and just send a couple of printing presses to the 3rd world! Once they prosper they will erect big PK statues of liberty for worship and he will be promoted to King of the world!

  4. iwog


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    27   8:49pm Mon 28 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike   Protected  

    mell says

    The one issue we have - and that has been discussed here multiple times as well - is that the money will likely trickle up fast, even when it is distributed amongst "ordinary" people.

    Of course it will trickle up fast. That's how capitalism works. The nature of profit is consolidating wealth from other people into fewer and fewer hands. The ONLY FIX is a method to return wealth back down to consumers, and the ONLY way government can fix this is through tax and wage policy. Monetary policy is almost irrelevant although it can be a short term fix.

  5. iwog


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    28   8:58pm Mon 28 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike   Protected  

    mell says

    That's grand - maybe you should write to the gov then and tell them they can easily take on another 16 trillion because things will only get better! I mean, what are they waiting for then? We can eradicate world poverty once and for all once the secret is out. Stop international aid and just send a couple of printing presses to the 3rd world! Once they prosper they will erect big PK statues of liberty for worship and he will be promoted to King of the world!

    Nothing to respond to here. The United States is an economic wealth engine with an output of X. Monetary policy can influence demand which can increase X, or it can retard demand which will reduce X.

    Instead of being obsessed with debt, you should be looking at how various monetary actions affect X because ultimately it is the creation of wealth that matters. Do you really give a shit if a Big Mac costs $100 if you make $200 an hour? WHY?

    Zimbabwe's problem wasn't printing. Zimbabwe's core problem was that all the farms were stripped from white capitalists and the production of wealth crashed. Instead of buying debt dogma, start thinking in terms of an economic model.

    Example: A monopoly game has come to a standstill because one player controls most of the property and most of the cash while the remaining players have all their properties mortgaged and are broke. Is defaulting on the mortgages (turning them back over and allowing them to function again) and giving every player $1000 good or bad for the game?

  6. mell


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    29   9:37pm Mon 28 Jan 2013   Share   Quote   Permalink   Like   Dislike  

    I think you are overestimating the "wealth engine" US. You surely have to tie the debt somehow to the GDP and set upper limits - depending on how you calculate we already around 75%-100%.

  7. mell


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    30   9:58pm Mon 28 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike  

    boldej says

    mell says:

    Iwog, you should read/watch some Nassim Taleb before you go apeshit on people who don't subscribe to the BS peddled by Krugman.

    Nassim Taleb is one total idiotic jerk who got famous for just the cover title (and nothing worthwhile inside) of one factually useless book (Black Swan).

    At least two years ago he got famous (briefly) again by idiotically proclaiming that EVERYBODY should short treasuries. A trade that would have bankrupted EVERYBODY.

    It's funny how you guys attack people like Taleb or Schiff who made their money actually working in the real world of finance and - despite the fact that nobody is always right - are still in business and have made money with their trades. On the other hand you have people who get paid money for writing bullshit theories that can be disproved by 5 year olds common sense and who don't work in the real world but somehow the "Professor" gives you a fuzzy and warm feeling. You can't be serious, really. Science should be left to chemistry, biology, physics, pure math and whatnot, voodoo zombie economics have nothing to do with it ;)

  8. Peter P


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    31   10:02pm Mon 28 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike   Protected  

    Yep. Do not listen to any "economist" who cannot even make money off the market.

    Good traders make good trades. Great traders recover from bad ones.

  9. Peter P


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    32   10:07pm Mon 28 Jan 2013   Share   Quote   Permalink   Like (2)   Dislike   Protected  

    Black Swan is a great book.

    Great money managers make predictions just for fun. And they are very often wrong.

    “I changed my mind, and made an absolute fortune.”
    -- George Soros

    Taleb and Soros are two of the most important thinkers in the past 50 years.

  10. Peter P


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    33   10:10pm Mon 28 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike   Protected  

    boldej says

    At least two years ago he got famous (briefly) again by idiotically proclaiming that EVERYBODY should short treasuries. A trade that would have bankrupted EVERYBODY.

    You need a better understanding of epistemology.

    Also, the meaning of terms like "should" and "would have."

  11. david1


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    34   5:53am Tue 29 Jan 2013   Share   Quote   Permalink   Like   Dislike  

    mell says

    It's funny how you guys attack people like Taleb or Schiff who made their money
    actually working in the real world of finance

    It's funny because these people are not great traders - they are salesmen. Just like the mortgage guys and the bloke at the used car lot - they make money convincing others to spend or give them money.

    Anyone can constantly predict doom. Every once in a while they will be right - And there are plenty of like minded people with some money who will throw some their way. Regardless of the year, there are plenty of people out there with money who think we are headed for doom and gloom. If these guys were are good at predicting the markets as you think they would be 1000 wealthier.

    And you wouldn't hear from them. As soon as someone figures out the market - then either opens their mouth (writes a book) about it or becomes large enough that the market notices - the market figures them out and takes their advantage away.

    It's why you'll see a top money manager make outsized returns in the past when they were managing less than a billion. As soon as they get a couple billion - no more outsized returns.

    Hedge funds are closing left and right for this very reason - they do not in general return more than the market - and that isn't going to justify the fees in the long term.

    Even Soros cried wolf three times before he was right. He remained wealthy because as he was a doom/gloomer, he had his money invested in the opposite way 99% of the time. You don't hear Buffet on TV talking about the coming crash.

  12. iwog


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    35   6:49am Tue 29 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike   Protected  

    mell says

    I think you are overestimating the "wealth engine" US. You surely have to tie the debt somehow to the GDP and set upper limits - depending on how you calculate we already around 75%-100%.

    I don't care about the GDP. We have more food than we could ever possibly need. Anyone who wants a car can have one. Homes are plentiful. Lightly used clothing is practically free. Technology is everywhere as is media. We are awash in productivity and wealth.

    We have a distribution problem, not a wealth production problem. The reason people can't buy homes right now, just like in a Monopoly game, is that people who don't need them are hoarding them for profit. On a larger scale, corporations do this with our natural resources and factories. Printing up trillions of dollars to level the playing field will not cause people to stop going to work. It will not stop GM from producing cars or contractors to stop remodeling homes. On the contrary, X will increase and therefore our collective standard of living.

  13. CBOEtrader


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    36   6:57am Tue 29 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike  

    iwog says

    Krugman understands that wealth distribution is almost entirely a game played with paper markers, and that manipulating those paper markers can result in a more equitable distribution of productivity.

    Ok, how does increasing paper markers help to distribute wealth?

  14. marcus


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    37   7:09am Tue 29 Jan 2013   Share   Quote   Permalink   Like   Dislike  

    iwog says

    It will not stop GM from producing cars or contractors to stop remodeling homes. On the contrary, X will increase and therefore our collective standard of living.

    I agree that inflation would get things going and it would improve people's balance sheets, because their debt gets paid back with dollars that are worth less.

    But I'm not convinced that the standard of living improves for most of those without a lot of debt.

    Those with a lot of debt, including the government, and real estate investors like yourself, as well as all the corporations that have issued a lot of long term debt (at super low rates) get a lot equity out of nowhere. And that sir, is a sweet deal.

    I would be surprised if wages would keep up.

    I say that substantial inflation if and when it comes will ultimately be a step towards our standard of living getting notched another peg lower.

    One question might be, how much inflation occurs before we reach full employment?

    How will increases in productivity due to robotics and other technology "trickle down."

    People on here talk about the 20 hour work week. How does such a thing come about? I understand why it might be good for everyone, just like more progressive taxes would be good for everyone. But how do those in power ever see this, when all they can see is the very short term impact on their bottom line?

  15. iwog


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    38   7:22am Tue 29 Jan 2013   Share   Quote   Permalink   Like   Dislike   Protected  

    marcus says

    People on here talk about the 20 hour work week. How does such a thing come about?

    Legislation. The same way European nations legislate 4 paid weeks of vacation for every worker along with 10 paid holidays. Corporations might grumble about it, but it results in a level playing field.

    Productivity is approaching $140,000 per worker. There's no reason why workers can't take half of that and donate the other half to making capitalists rich. Forcing wages higher might drive a few marginal businesses out of the market, but think about all that increased demand if the average wage was $70,000 a year? Think of how big an advantage independent contractors and small businesses with few employees would have over the monster mega-caps?

  16. CBOEtrader


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    39   7:39am Tue 29 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike  

    iwog says

    WHY NOT monetize some of the debt?

    Because this is a direct transfer of wealth from the working class to the investor class. Pure theft.

  17. iwog


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    40   7:52am Tue 29 Jan 2013   Share   Quote   Permalink   Like   Dislike   Protected  

    CBOEtrader says

    Because this is a direct transfer of wealth from the working class to the investor class. Pure theft.

    This is a cliche, not an explanation. Where the wealth goes depends entirely on where the printed money goes.

    I'm getting a little annoyed at those of you who think printing up money and handing it to poor people just makes the rich richer. What if I printed up a billion dollars and gave it to a homeless person? Would he still be homeless and would the rich still get richer?

  18. CBOEtrader


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    41   7:54am Tue 29 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike  

    iwog says

    Printing up trillions of dollars to level the playing field will not cause people to stop going to work.

    How? We've been printing money like crazy, and it has ended up in the hands of the rich.

    Perhaps more important than the transfer of wealth is the transfer of power. The other side of money printing, government spending is the method by which the tiny power elite transfer power from the masses to themselves.

    It seems that printing money and increased government spending are the root problem that makes the playing field unequal.

  19. CBOEtrader


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    42   7:57am Tue 29 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike  

    iwog says

    I'm getting a little annoyed at those of you who think printing up money and handing it to poor people just makes the rich richer.

    Now who's using cliche's? As much as liberals try to imply otherwise, the government is not a charity. A simple glance at the federal budget proves most printed money goes to crony capitalism, rather than to any poor person.

  20. CBOEtrader


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    43   8:01am Tue 29 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike  

    iwog says

    Would he still be homeless and would the rich still get richer?

    Yes and yes. Printing money devalues future strings of cashflow. An employment contract is a future string of cashflow. The employee loses. The power elite wins. He gets to use cheap money for sweetheart crony capital deals, while buying off votes by throwing the despondent a few extra trinkets.

  21. errc


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    44   8:01am Tue 29 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike  

    Productivity is approaching $140,000 per worker. There's no reason why workers can't take of that and donate the other half to making capitalists rich. Forcing wages higher might driv few marginal businesses out of the market, but think about all that increased demand if th average wage was $70,000 a year? Think of how big an advantage independent contractors small businesses with few employees would have over the monster mega-caps?

    ------------------

    If the average wage were 70k, all that money would be devoured by the rentiers. Landlords would jack up rents untill they couldn't jack um up no more, and housing dufuses would bid housing up against one another until they were all broke again.

    Id much rather keep the same stagnant ass wages we've suffered thru over the past thirty years, and regain some purchasing power of my dollars. Give me 1999 prices of everything I buy and nobody would need a raise.

    It would be nice to imagine a world where workers hared half their wage with "capitalsits", but it seems once the taxman takes his 40%, the rentiers get what's left, and the few capitalists left standing peck over the carcass for the remaining scraps

    People often conflate terms. All dollars are not created equally

  22. david1


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    45   8:07am Tue 29 Jan 2013   Share   Quote   Permalink   Like   Dislike  

    CBOEtrader says

    Because this is a direct transfer of wealth from the working class to the
    investor class. Pure theft.

    I think quite the opposite. The investor class holds the debt - much of it at fixed rates. Inflation at rates above the fixed rate of return on the debt deflates the value of the debt itself.

    Inflation will not happen until we have increased demand. Printing, as we have experienced, does not equal inflation.

    Printing in the form of a $1,000 check for everyone in the labor force (Cost: $155 Billion, paid for by eliminating the lower rate on capital gains, carried interest, and dividends for incomes over 200k, revenue = $158 billion) will increase demand (and inflation).

  23. iwog


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    46   8:07am Tue 29 Jan 2013   Share   Quote   Permalink   Like   Dislike   Protected  

    errc says

    If the average wage were 70k, all that money would be devoured by the rentiers. Landlords would jack up rents untill they couldn't jack um up no more, and housing dufuses would bid housing up against one another until they were all broke again.

    You're wrong. Putting money into the hands of consumers would allow them to acquire hard assets like real estate and fire the rentiers. Assuming they saved, they could eventually buy capital assets and start businesses that would compete with megacorps. All we need is intelligent tax policy.

    Next door to one of my rentals is a Mexican woman who paid cash for her $150,000 home. She then paid cash for $100,000 worth of remodeling.

    How did she do it? She and her husband saved money for 20 years.

    Watch "It's a Wonderful Life" and get back to me. The problem is ALWAYS how much wealth gets put into the hands of the consumer class and right now it's not enough. The fact that some of it goes right back up the ladder doesn't change this.

  24. david1


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    47   8:23am Tue 29 Jan 2013   Share   Quote   Permalink   Like (2)   Dislike  

    CBOEtrader says

    Printing money devalues future strings of cashflow.

    The dollar is a medium of exchange, not a store of value.

    We have printed money for 5 years at unprecedented rates without inflation. The greatest periods of inflation we have had in modern times, '73-'75 and '77-'82 have little to no correlation with money supply increases. Yes, m2 did increase '75-'76, but generally fell '73-'75 and '76-'82.

    This factual inaccuracy is rivaled only by the myth of lower tax rates leading to economic growth.

    To put it simply, an increase in the supply of something lowers the price (value) ONLY if the demand for it does not increase in a proportional manner. The proportionality depends on elasticity of course.

    Elasticity is the important key here - as we have attempted to lower the price of money at the same time the perception was it was becoming scarce - leading people to scramble to acquire and hold it.

    As we have seen since 2008, as the quantity of dollars has increased the price (value) of those dollars have actually increased as well. This fact is contraindicative of your premise.

  25. mell


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    48   8:30am Tue 29 Jan 2013   Share   Quote   Permalink   Like   Dislike  

    iwog says

    You're wrong.

    No he's right. Deflation and higher interest rates - set by the market not by the fed - is what is needed to level the playing field. It would have never come that far in terms of asset distribution to the wealthiest if we would not have embarked on this idiotic path. Fuck, everybody and their grandma is a riverboat gambler now because they can't save and watch their money evaporate. Grandma is long real estate and AAPL - fuck yeah!

  26. david1


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    49   8:39am Tue 29 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike  

    mell says

    Deflation and higher interest rates - set by the market not by the fed - is what
    is needed to level the playing field.

    Causing deflation will NOT lead to higher interest rates in the market. Show one example of the ever happening. Show any way it could be possible. Only with market manipulation.

    If the market was manipulated to cause it, who would borrow? Borrowing when the amount of your debt (in real terms) is increasing AND the interest is high? Who would do it?

    Sure there would be plenty of willing lenders in those terms...in a free market competing for the dwindling number of willing borrowers. What happens when a large number lenders compete for a small number of borrowers?

    I know you understand this. How can a market set rates high in times of deflation?

  27. errc


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    50   8:43am Tue 29 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike  

    You're wrong. Putting money into the hands of consumers would allow them to acquire hard assets like real estate and fire the rentiers. Assuming they saved, they could eventually buy capital assets and start businesses that would compete with megacorps. All we need is intelligent tax policy.

    ------------

    Iwog, I always appreciate the conversation, so excuse me for sounding terse, but that sounds like a teenage girl at a beauty pageant pining for world peace, except sillier.

    When in history have americans fired the rentiers?
    When have americans saved?
    When have we had intelligent tax policy?

    Inflation only benefits the working class when it comes in the form of wage inflation, and only in so far that the rentiers don't front run them by squeezing wage gains via rising rents

  28. mell


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    51   8:44am Tue 29 Jan 2013   Share   Quote   Permalink   Like   Dislike  

    david1 says

    Causing deflation will NOT lead to higher interest rates in the market. Show one example of the ever happening. Show any way it could be possible. Only with market manipulation.

    I wasn't connecting those two, but both would have happened independently (not necessarily at the exact same time) if we hadn't constantly intervened. The truth is nobody can exactly say when rates set by the market are going to rise or fall as it is constant balancing, and that is good that way. I am not advocating to manipulate the market, quite the opposite. But we would have had higher rates without QE and Zirp and that would have helped and encouraged savers who now have no other option but to gamble like it's 1999 again.

  29. errc


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    52   8:52am Tue 29 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike  

    My entire lifespan has seen a one way trend in interest rates. They've onlly always gone lower for thirty years. What event, and why, would have caused a reversal in this trend?

  30. david1


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    53   8:52am Tue 29 Jan 2013   Share   Quote   Permalink   Like   Dislike  

    mell says

    But we would have had higher rates without QE and Zirp and that would have
    helped and encouraged savers who now have no other option but to gamble like
    it's 1999 again.

    I disagree completely. Without QE and ZIRP the values of other asset classes would have fallen even more than they did. This would have lead to a flight to cash even more than we have experienced. Economic activity would have cratered even more than it did and there would have been literally NO ONE willing to borrow. The market would force rates negative for a safe investment with so few borrowers.

    The short, the opportunity cost for holding cash would have been zero.

  31. mell


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    54   8:57am Tue 29 Jan 2013   Share   Quote   Permalink   Like   Dislike  

    david1 says

    Without QE and ZIRP the values of other asset classes would have fallen even more than they did. This would have lead to a flight to cash even more than we have experienced.

    Yes, in the short term that would have happened, no doubt. And the effect will be more and more amplified the more you stay on this path of QE and Zirp, it's similar to drug addiction. However in the mid-to-long term we would have recovered much faster and economic activity would have picked up again in conjunction with sound money and less risk. Nobody said it as going to be a cakewalk. There is no magic wand.

  32. CBOEtrader


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    55   8:57am Tue 29 Jan 2013   Share   Quote   Permalink   Like   Dislike  

    david1 says

    We have printed money for 5 years at unprecedented rates without inflation. The greatest periods of inflation we have had in modern times, '73-'75 and '77-'82 have little to no correlation with money supply increases. Yes, m2 did increase '75-'76, but generally fell '73-'75 and '76-'82.

    You are mixing up price increases with inflation. Price increases are a measurable symptom of inflation, whereas inflation is an increase in the money supply. The symptoms (price increases) lag the disease (inflation) often by many years.

  33. david1


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    56   8:58am Tue 29 Jan 2013   Share   Quote   Permalink   Like   Dislike  

    errc says

    My entire lifespan has seen a one way trend in interest rates. They've onlly always gone lower for thirty years. What event, and why, would have caused a reversal in this trend?

    There is a reason for this. Your entire lifespan has seen a greater concentration of wealth in fewer hands. Therefore, more idle capital. The capital has to go somewhere. It first goes to investing in debt instruments. This forces interest rates lower. (supply of debt increasing more than demand for it)

    Then it goes to capital investments. Stocks and real estate, causing asset price inflation in both areas.

    Finally, now we see commodity inflation. This is again caused by capital seeking return by speculating in these markets.

  34. david1


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    57   9:00am Tue 29 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike  

    CBOEtrader says

    You are mixing up price increases with inflation. Price increases are a
    measurable symptom of inflation, whereas inflation is an increase in the money
    supply. The symptoms (price increases) lag the disease (inflation) often by many
    years.

    Sorry sir, you have this backwards.

    Inflation is by definition a general level of increase in the price of goods.

  35. finehoe


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    58   9:35am Tue 29 Jan 2013   Share   Quote   Permalink   Like   Dislike  

    errc says

    My entire lifespan has seen a one way trend in interest rates. They've onlly always gone lower for thirty years. What event, and why, would have caused a reversal in this trend?

    Perhaps something along these lines: http://en.wikipedia.org/wiki/1973_oil_crisis

  36. tatupu70


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    59   10:23am Tue 29 Jan 2013   Share   Quote   Permalink   Like (1)   Dislike  

    errc says

    My entire lifespan has seen a one way trend in interest rates. They've onlly
    always gone lower for thirty years. What event, and why, would have caused a
    reversal in this trend?

    A reversal in wealth disparity. One reason interest rates are so low is because there is so much idle wealth looking for somewhere to go.

  37. iwog


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    errc says

    When in history have americans fired the rentiers?

    During Democrat administrations. Unfortunately every time a Republican government gains control, they destroy tax policy and make it very profitable to hoard all the capital assets.

  38. iwog


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    tatupu70 says

    A reversal in wealth disparity. One reason interest rates are so low is because there is so much idle wealth looking for somewhere to go.

    This is the real driver behind interest rates, not the fed and certainly not the government.

  39. CBOEtrader


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    david1 says

    CBOEtrader says

    You are mixing up price increases with inflation. Price increases are a

    measurable symptom of inflation, whereas inflation is an increase in the money

    supply. The symptoms (price increases) lag the disease (inflation) often by many

    years.

    Sorry sir, you have this backwards.

    Inflation is by definition a general level of increase in the price of goods.

    Yes inflation is an ambiguous term, as are most political terms. The powers that be literally changed the definition of inflation in 2003 http://online.wsj.com/article/SB10001424052748703730804576319173360183278.html

  40. iwog


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    CBOEtrader says

    Yes inflation is an ambiguous term, as are most political terms. The powers that be literally changed the definition of inflation in 2003

    It only becomes an ambiguous term of you buy into the bullshit. Considering how corrupt the Newscorp infected WSJ has become, I would reject anything they said about the definition.

    Inflation is a very clearly defined economic term which has no alternate meanings.

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