comments by Reality

Reality   befriend   ignore   Wed, 12 Aug 2015, 2:26pm PDT   Share   Quote   Like   Dislike     Comment 1

Self-driving cars, just like cars, railroads, bridges and horse carriages before it, will significantly reduce the cost of transportation, and thereby increase the carry capacity of the planet by increasing trade/exchange/division-of-labor.

Total miles driven by cars will of course go up, as people will send their cars to do errands that right now would be too costly in terms of time and human labor (if dedicated driver is required). The per mile material cost itself will go down because a self driving car can quickly rack up 300,000 miles in a year like a NYC cab instead of 100k miles in 10 years.

Reality   befriend   ignore   Thu, 6 Aug 2015, 12:13pm PDT   Share   Quote   Like   Dislike     Comment 2

tatupu70 says

I not against anyone. Well, I guess I'm against people who post nonsense on pat.net.

Then you should be against yourself.

tatupu70 says

Reality says

In reality, the rich save by investing! That investment if leveraged creates multiple times the demand that the original cash amount would create!

With a good portion of their money, yes. The investment doesn't create demand. Demand exists--the investment can help entrepreneurs create products or services that meet the demand that already exists.

Do you realize that you just proved yourself to be completely ignorant of economics and never even taken Econ 101?! Investment spending of course creates Current Demand. The Output/Return (if any) in the future from current Investment doesn't appear in the Current Demand or Current Supply.

tatupu70 says

Reality says

Lack of after-tax profit opportunity. Why would anyone invest in something that would result in negative after-tax return? thanks to high taxes and cheap money keeping too many competitors in numerous industries living off low interest rate. That's why new money is being poured into SF high tech industry in hopes of a field that might yield high return.

So, let's recap. You're saying that there actually is lots of demand that isn't being met because there is no cash available to invest in capital to meet this demand.

Stop lying. I said no such thing. You are trying to put your own nonsense in my mouth. A negative after-tax return means the "Want" does not constitute Qualfied Demand (== defintion of Demand) at all. Let me give you an example: say a Marjuana grower using current technology in a particular location can generate 20% pre-tax profit after capital and labor cost, yet because the federal income tax code doesn't allow deduction of expenses for running a pot growing business and the guy is in the 25% tax bracket. That means the guy is not able to run a pot growing business regardless how much market Want for pot is out there at the current price, and regardless how much money he can borrow. The more he borrows and grows, the more he'd just lose money after tax! He can run a pot growing business and hire people only if:

1. the effective tax rate is lowered either by lowered rate or by allowing deduction of business expenses;

2. new technology making pot growing yield higher than 33% in the locality: $75k expenses would yield $100k revenue, and at 25% tax on revenue would leave $75k after-tax, his break-even point, not counting any of his own time and labor.

3. competitors go out of business and allow prices to go up so that he can generate more than 33% profit

What I asked how this is possible with interest rates at near all time lows--you respond that it's not actually lack of cash/capital--it's because entrepreneurs can't compete with the existing producers?? Huh? If the current producers are able to produce at lower cost than any new competitors, why is there unmet demand???

Tax code, regulations, sunk cost, etc. etc. See example above. Artificially low interest rate enable the Ponzi borrowers to stay in business and drag down prices.

tatupu70 says

Great non-answer. Actually I do think like a businessman and I understand that there's no reason to invest when there is no unmet demand. And when there is all kinds of excess supply. Funny, I guess supply doesn't create its own demand after all.

You obviously don't understand what Demand means in economics: Demand means Qualified Demand, which is a Want combined with the Ability to Pay at a Price level that someone can profitably Supply (Qualified Supply). Human Want is unlimited. However, resources are always limited. A factory that turns metal and leather into obsolete Lada cars that are worth less than the original metal and leather are worth does not produce Qualified Supply; however, to the idiots like you, it would be called "excess capacity" for car production.

The solution for that "excess capacity" is not printing up money to give cars away and waste more metal and leather to keep the Lada factory running, but to dismantle the obsolete factory and liberate the workers to work for more productive factories making more up to date cars.

Reality   befriend   ignore   Thu, 6 Aug 2015, 11:08am PDT   Share   Quote   Like   Dislike     Comment 3

tatupu70 says

This is completely incorrect. Basically you are saying there is no cash available for anyone to invest to "cater to current consumer demand". Interest rates are near all time lows. There is literally a sea of cash looking for anything to invest in. What the hell is stopping new entrepreneurs from forming new businesses now???

Lack of after-tax profit opportunity. Why would anyone invest in something that would result in negative after-tax return? thanks to high taxes and cheap money keeping too many competitors in numerous industries living off low interest rate. That's why new money is being poured into SF high tech industry in hopes of a field that might yield high return.

Fiat money and/or banks are not stopping this. Nor could they be.

Only because you are unable to think like a businessman.

Reality   befriend   ignore   Thu, 6 Aug 2015, 11:04am PDT   Share   Quote   Like   Dislike     Comment 4

tatupu70 says

Defer your purchasing power to someone else either consuming or making investment purchases of other goods

Typically this is called "saving" and is another option that you neglected to mention.

"saving--process of setting aside a portion of current income for future use, or the flow of resources accumulated in this way over a given period of time"

http://www.britannica.com/topic/saving

Rich save at a much, much higher rate than the poor.

The rich do not save money in their mattresses. When they bank the money, the money becomes loanable to others; in a fractional reserve system, multiple times over! So your mattress nonsense is fundamentally contrary to application to the rich. Make up your mind please, are you against the rich or against people putting much of their money in their mattresses. These two are mutually exclusive groups.

tatupu70 says

BTW, the poor put far higher percentage of their net worth in mattress than the rich do. So if you are afraid of people putting money in mattress, you should advocate taking money from the poor who put their money in mattresses to the rich who are much more thoroughly banked . . . ironically, that's precisely what the fiat money printing does: transfering wealth from the poor who keep much higher percentage of their net worth in cash (and less banked) to the rich who are more banked and leveraged!

The mattress statement was to use an extreme to prove a point. Probably lost on you, I realize, but I try. The only ironic thing is that you continue to post this nonsense.

Nope, it is not lost on me at all: I pointed out the inherent contradiction in your hypothesis. In reality, the rich save by investing! That investment if leveraged creates multiple times the demand that the original cash amount would create! That may actually be somewhat of a valid argument against government incentives for over-stimulate during booms: as leveraged investment demand by the rich may create incentives for malinvestment to meet those demands. That is actually one of the fundamental reasons why central banking creates bubbles and bust: the central banks tend to be too slow in removing their interest rate suppression effort, the result is effectively a negative tax on investment and leveraging when a boom is already underway, leading to bubble! which of course would eventually lead to bust.

Reality   befriend   ignore   Thu, 6 Aug 2015, 10:07am PDT   Share   Quote   Like (1)   Dislike     Comment 5

tatupu70 says

lol--your incorrect assumption is that wealthier people have a better track record of investments. And that poor people would do worse than them.

The correlation is not 100%, but certainly statistically significant, except for the government enforced cronies getting rich thanks to government granted privileges.

Regardless, we're in a demand driven recession. As I've said many, many times to you--we have an overabundance of cash available to invest. The reason it isn't invested is because there is no demand and we already have excess capacity for basically everything.

"Demand driven recession" is a sad joke invented by the likes of John Law and Keynes. Every recession is "demand driven recession" by their illogic, so there is no point to this label anyway even in their made-up universe. What's really happening now, as in practically every recession, is that previous speculative allocation resources (aka investment) is now revealed to not to match consumer demand. i.e. past investment is now found to be malinvestment. The solution to such a problem is forcing the write-off of old debts associated with those malinvestment, so that new entrepreneurs can emerge better catering to current consumer demand. Those new entrepreneurs can create far more additional productive and good paying jobs than the TBTF banks that the fiat money machine is trying to save.

Reality   befriend   ignore   Thu, 6 Aug 2015, 9:58am PDT   Share   Quote   Like   Dislike     Comment 6

tatupu70 says

Income can only be directed into either consumption or investment, both are forms of spending ("Demand")

What am I investing in when I put my income in my mattress?

Putting your income/money in your mattress would:
1. Defer your purchasing power to someone else either consuming or making investment purchases of other goods;
2. Increase market demand for printed cash; i.e. ink, cotton, and security
3. Increase market demand for mattress. LOL.

BTW, the poor put far higher percentage of their net worth in mattress than the rich do. So if you are afraid of people putting money in mattress, you should advocate taking money from the poor who put their money in mattresses to the rich who are much more thoroughly banked . . . ironically, that's precisely what the fiat money printing does: transfering wealth from the poor who keep much higher percentage of their net worth in cash (and less banked) to the rich who are more banked and leveraged!

Reality   befriend   ignore   Thu, 6 Aug 2015, 9:09am PDT   Share   Quote   Like   Dislike     Comment 7

tatupu70 says

In reality, an increase in minimum wage would probably lead to slightly higher prices as the extra wages translate to extra demand.

This theory might have worked in a closed economy prior to automation and high sunk capital cost. We now have a service-centric economy with companies organized around as little sunk fixed capital as possible. We now have multiple decades of evidence that raising minimum wage does not lead to aggregate wage increase: instead, entry level jobs are either out-sourced or replaced by robotics and automation. The result then is lower employment rate and lower aggregate wage than it would have been if the government had not removed the first few steps in the job ladder.

Lower income folks tend to spend a larger % of their earnings than do higher income folks so a dollar paid to low income will give more demand than a dollar paid to high income.

Income can only be directed into either consumption or investment, both are forms of spending ("Demand"). Bad investment is no different from consumption. Good investment however leads to productivity increase and higher living standard. Redistributing resources from those who have a track record of making good investments to those who either never invest or have a track record of bad investments would only lead to stagnating/declining living standards and economic/social chaos.

Reality   befriend   ignore   Wed, 5 Aug 2015, 8:34am PDT   Share   Quote   Like (1)   Dislike     Comment 8

bob2356 says

Actually the first paper money was introduced in the 7th century by the tang dynasty. Called flying cash because it could blow away. Not fiat money at all, it was more a receipt that could be redeemed. You are actually talking about the song dynasty which was the first to make extensive use of paper notes starting in 960. By the 1100's the government took over all the printing issuing the jiaozi.. Again not fiat money at all. The notes were backed. When the song dynasty fell to the mongols in 1279 the mongols printed paper notes called the chao that were not backed. That was the first fiat currency. The ming dynasty ousted the mongols in 1368 and continued to print until 1450 then stopped, silver became the money used in china until the 1800's. There were no massive bubbles and collapses during the mongol empire or the early ming empire.

The "Flying Cash" of the Tang Dynasty was more like checks and bank drafts. The early Song privately issued paper notes had to be backed or faced bank-run's when such backing was in doubt. By the 12th century (we both agree on this, your "1100's" is my "12th century"), the Song government took over all the printing and issuing of Jiaozi. We agree so far. Why did it have to be government exclusive printing and issuing? For the same reason that the Federal Reserve was founded: politicians and banksters want a central bank for fiat money creation without the risk of bank runs exposing the under-backing/over-issue fraud: by transferring such risk to the public via government issued fiat currency. It took only a few years for massive inflation to take place after Song government started the fiat currency regime. "Monetary reforms," striking off multiple zero's off the number like Zimbabwe did a few years ago and Venezuela about to do soon, were frequent in late Song Dynasty, throughout Mongol Yuan Dynasty and early Ming Dynasty, every few years to a handful of decades. Ask yourself, why did Ming Dynasty give up the printing of paper money? The silver money was not a government choice, but the people's choice starting in private practice. In fact, initially Ming Dynasty waged wars on the coast against "Japanese pirates" that were shipping silver mined in Japan to China; the "Japanese pirates" were often Chinese merchants and bootleggers involved in the shipping of a money that was more readily acceptable to the Chinese public than government issued paper money was due to the latter's constant massive inflation . . . just like the USD became de facto currency in Zimbabwe when the Zim Dollar hyperinflated. By mid-Ming Dynasty, the government gave up on the enforcement against silver money, and stopped printing of paper money as paper money became literally worthless. That also explains why the Chinese silver money during Ming and Qing dynasties were lump metal of weight, not any officially denominated coins, despite the country having known coinage and saw widespread use of coins from about 300BC to 1000AD: the fiat moneys of late Song, Mongol and early Ming had so thoroughly discredited government issued money that even the Chinese population (despite their traditional faith in centralized government) figured out that the only thing the big centralized government can do to a lump of precious metal is making it worth less in the long run by debasing content in similar coins while keeping the same image on the outside.

The repeated massive / hyper- inflations in late Song, Mongol Yuan and early Ming dynasties of course produced economic bubbles and busts in the market place (price inflation does not hit all sectors at the same time; massive increase in money supply create bubbles in certain sectors). The Chinese court historians simply had more important things to write about, such as wars, conquests and mass slaughters (some accounts claim China lost more than half of its population during Mongol conquest and occupation, which lasted only some 80 years or so, a very short dynasty by Chinese standards). The most pernicious bubble during those 100-200 years was actually the government bubble: the fiat money essentially financed the Mongol conquest of not only most of Asia but also the Middleast and Eastern Europe, through the mobilization power of a fraudulent promise (the money/credit promise) that is more sophisticated than the 72-virgin martyrdom promise and the usual paradise/reincarnation promise. Fiat money has tremendous mobilization power during wars, able to reel in a somewhat sophisticated population not easily swayed by the 72-virgins. The Mongol use of it led to the biggest empire in term of land area, ever in human history . . . with unimaginable misery and strife for humanity. That was the most significant bubble from the Song-Mongol/Yuan-Ming fiat money episode, before the people of east asia rejected all paper money and all government minted money, embracing lump metal as money despite government violent enforcement against honest money.

bob2356 says

John Law was fraud plain and simple, not fiat currency. He issued bank notes that were supposed to be backed but weren't.

John Law was in charge of French government finances, and implementing those policies in the name of the French government. Yes, all governments are forms of fraud and con game to some degree. It is a fictiticious entity for a small group of people to defraud the gullible public.

Most of the bubbles and collapses in history happened in hard money societies, either paper money backed by hard currency or just hard currency. They were caused by credit speculation or plain old fraud, not fiat money. Tulips were speculation on futures contracts with a 2.5% down payment. South sea bubble was classic pump and dump stock fraud. the bus and panic of 1819 was also fraud since the bus never acquired the gold backing as required in their charter, etc., etc..

The bust and panic of 1819 was due to prior suspension of gold standard during the Napoleonic War. British central bank was set up to run gold standard during peace time, then suspend gold standard during major wars in order to mobilize societal resources. There had been massive monetary/credit expansion during the Napoleonic Wars. After Napoleon was captured for a second time and sent to the island of Helena in south Atlantic, the central bank had to contract money supply and return to normalcy. In the other instances, government sponsored credit speculation and fraud were/are by definition not hard money societies.

Reality   befriend   ignore   Tue, 4 Aug 2015, 5:09pm PDT   Share   Quote   Like   Dislike     Comment 9

tatupu70 says

The new money is simply the government spending in excess of tax collection, and other money borrowed into existence via the fractional reserve system. The crucial difference between government borrowing vs. private sector borrowing is that government borrowing is borrowed via identity theft: future tax payers' identities are on the hook; this also applies to borrowing by institutions that are back-stopped by the government.

Not really. The vast majority of it is simply borrowed. Not monetized. When I buy a government bond, no new money is created.

Nonsense. When the FED buys government bond, the FED creates money out of thin air and enable the government to spend the money (perhaps already spent).

And, I'm curious--what institutions are backstopped by the government right now? This agreement is in writing, right?

In writing is quite unnecessary, so long as the money can be spent without being personally held responsible for paying it back. Fanny and Freddie were bailed out to the tune of hundreds of billions if not trillions despite not having written agreement for back-stopping; in fact, the writing was explicit that they were not backed up. LOL!

tatupu70 says

The govenment bureaucrats on average making double the average private sector job receive much more money than the alleged welfare recipients. The fractional reserve banks receive interest payment on money created out of thin air. Both bid up stock prices.

But you were talking specifically about "new" money. If the only part of the budget that increased is welfare, then only welfare recipients are getting "new" money, right?

No. Without new money constantly being created to finance the government, the bureaucrats would not be able to get raises every year; heck would probably face massive lay-off's and cut-backs. Their purchasing power is very much dependent on the constantly flow of new money financing the government (i.e. resources that could have been better allocated to capital improvement higher productivity and higher living standards.) Debt that can never be paid off.

tatupu70 says

FED is the enabler of government expansion and borrowing; the government is the reason why worthless pieces of paper and ledger entries created by the FED are worth anything: fiat money power. The two are the two sides of the same coin ripping off the American people.

Actually, the US was free to borrow money before the existence of the Federal Reserve. It had a $75MM debt after the revolutionary war.

Have you not heard of the expression "not worth a Continental"? Without the central bank holding the interest rate down, the government would have to borrow at much higher interest expense.

tatupu70 says

NYC is the location of the most government back-stopped big banks. SF is the location of technology bubble, which attracts much of the new money borrowed into existence.

Excellent--can you show me the exact backstop agreement? When does the US government step in? Is it loans or equity?

They are called Systemically Important Financial Institutions. It is an official list at the Treasury Department.

Regardless, private banks aren't getting government paychecks so that theory is nonsense.

Of course they are: the "systematically important financial institution" is able to borrow at the FED window at near-zero percent, then turn around and lend to the US government at around 2-3%. The institution is taking zero risk and has no capital tied up, yetfor every $100 Billion lent to the government, it is rippping $2-3Billion from taxpayers every year!

And neither are technology companies in SF so that is nonsense as well. Like most of your postings.

Technology companies in SF are where the gamblers are chasing higher returns with their low cost money. You are just too dumb to look beyond the silly propagandas; or perhaps you are paid to be a propagandist.

Reality   befriend   ignore   Tue, 4 Aug 2015, 4:53pm PDT   Share   Quote   Like   Dislike     Comment 10

iwog says

I just found it funny that instead of coming up with a list of famous historical bubbles and busts on your own, you had to cut and paste JPEG image from god-knows-where.

You found it funny because every time a historian disagrees with your cartoon version of history, you just pretend history doesn't exist.

Stop projecting your personal experience with historians to me. I have never had a historian disagree with me on historical facts, and I count two bona fide historians among my relatives: one a college history professor and the other a high school history teacher of 40+ years before his retirement. I sometimes express an interpretation of historical events that they were not used to; neither of them ever disagreed with my recollection of facts; both were quite intrigued by the new interpretation I offered.

iwog says

Feel free to dig into the details in those bubble-and-bust episodes in that JPEG. Most of them were caused by government fiat money attempts and central banking attempts that led to brief periods of too easy money then followed by bust when the con was inevitably exposed.

Nope, not necessary at all because I proved you were wrong. Remember?

Nobody remembers your fantasy. You cited a list of bubbles and busts, most of which were caused by government fiat money attempts and central banking attempts, essentially proving my point, as usual :-) You are out of your mind if you think the famous historical bubble the French Mississippi Bubble took place under gold standard. It was the first attempt at fiat money and central banking in the post-Dark Age Europe, thanks to John Law, who wrote a book remarkably similar to Keynes' General Theory. LOL.

iwog says

Almost all financial bubbles took place under a loose money regime, where money and credits were rapidly created to excess.

So I link LOTS of financial bubbles that took place under a fixed money regime.

What fixed money regime are you talking about? The list you provided was replete with fiat money attempts and central banking attempts. For example, the biggest bubble among them, John Law's experiment in France (and French colony in North America), involved issuing paper monetizing French government debt.

MORE than the 20th-21st century in fact. It doesn't MATTER that you used the little baby technique of blaming government when you don't know why something happened because you're WRONG! Almost all financial bubbles DID NOT TAKE PLACE under a loose money regime, in fact bubbles and crashes occur MORE OFTEN in a hard money regime prior to the creation of the fed.

LOL! The FED is the third central bank in the US alone! Prior to that, there were the First Bank of the United States, and Second Bank of the United States. There were numerous central banking and fiat money attempts worldwide before the FED; many of them led to the bubbles and busts that you cited in your list.

IN fact it would be accurate to say that prior to the fed and fiat currency AND government involvement, bank failures were a plague. They were a plague for HUNDREDS OF FUCKING YEARS and they ruined people over and over and over and over again. THIS is your superior system?

Are you really that ignorant? Fiat paper money was first introduced in the far east around the 12th century! John Law tried to copy that in France some 600+ years later. Both led to massive bubbles and collapses, with numerous bubbles and collapses due to the fiat money plague ever since. If we do not limit the scope of fiat money to paper money, the Romans had "silver coins" that had less than 0.1% silver content after a couple centuries of debasement from 90+% silver content. The base metal coin with tiny silver content was essentially fiat money, except it was done in base metal instead of paper (because durable paper was not invented yet). The result was once again massive transfer of wealth from the commoners to the Roman power elite, leading to the breakdown of trade and division of labor in the Roman world. That was about 1500 years ago! The FED is little more than another short-lived attempt at repeating the same mistake in those 1500 years since then.

Reality   befriend   ignore   Tue, 4 Aug 2015, 3:04pm PDT   Share   Quote   Like   Dislike     Comment 11

iwog says

That expression was quoted from Tutu. Take it up with him.

No, YOU claimed the economy can barely function based on some fantasy about the fed. I want to hear YOUR explanation of why you don't actually inhabit reality.

I'm pretty sure Tatu was saying it doesn't function when it comes to raising the standard of living for everyone.

Read the post that I was replying to. The expression was from Tutu.

Reality   befriend   ignore   Tue, 4 Aug 2015, 3:03pm PDT   Share   Quote   Like   Dislike     Comment 12

iwog says

LOL, so the duck has to cut paste a Jpeg image in order to come up with a list of historical bubbles and crashes

Uhhh because they aren't really true? Because you think my source has any bearing whatsoever on the argument? Because you're just too bloody stupid to know any better?

I just found it funny that instead of coming up with a list of famous historical bubbles and busts on your own, you had to cut and paste JPEG image from god-knows-where. Clear evidence of your lack of historical knowledge. You obviously thought the world was always on gold standard before 1933, so went looking for bubbles and crashes before 1933. In reality, gold standard was only world-wide (outside India and China, just to name a couple major economies not on gold standard even then) for a short period of time in the 2nd half of 19th century. It also happened to be the period when humanity experienced the fastest economic growth. Before then, most countries went on and off various monetary standards, more or less depending what the rulers could get away with. So it was quite pointless for you to dig up that list, except to prove my point that government money machinations led to bubbles and busts.

iwog says

In any case, thanks for providing a list of historical bubbles of crashes caused by government monetary machinations. Yes, governments have a long history of money machinations. Most of those bubbles and busts were related to war-time monetary expansion (suspension of gold standards if there had been one) and subsequent contractions, central bank attempts and failures. John Law's massive fiat money bubble in France was especially notorious.

Translation: When your stupid Austrian horseshit gets called on, just invoke the "Government DIDDA BAAAAAD THING!!!" mantra to explain away all the examples that prove you're a moron.

Feel free to dig into the details in those bubble-and-bust episodes in that JPEG. Most of them were caused by government fiat money attempts and central banking attempts that led to brief periods of too easy money then followed by bust when the con was inevitably exposed.

Not sure why you think coercion is not bad.

BTW you didn't comment on bank failures. Why do you think a free market, hard money economy has like 10 times the number of per capita bank failures? Do you think that it might be because having a gold-based currency is stupid and only stupid people support it? Just asking.

Not sure where you pulled out that statistic. I suppose the central bank of Soviet Union never failed until the Soviet Union collapsed. LOL. Bank failure is simply a reflection of its customers deciding to do business with a different bank. The sooner troubles at a bank is discovered and the bank is shunned, the better it is for the rest of the economy, instead of massive con growing into a bubble.

Reality   befriend   ignore   Tue, 4 Aug 2015, 2:52pm PDT   Share   Quote   Like   Dislike     Comment 13

iwog says

The economy can barely function

Excuse me?? The economy can barely function? What planet do you inhabit again?

The economy is functioning far more efficiently now than every before by all measures. The problem isn't productivity, the problem is with such a vast and efficient economy, all but the richest people in the world seem to be getting poorer. At the very minimum in the United States and other 1st world nations.

That expression was quoted from Tutu. Take it up with him.

Reality   befriend   ignore   Tue, 4 Aug 2015, 2:51pm PDT   Share   Quote   Like   Dislike (1)     Comment 14

tatupu70 says

No, the epithet was well placed. And the post had the content needed to show your errors. The government spends X. How do you determine which of that X is the "new" money.

The epithet was a good description of your own content. The new money is simply the government spending in excess of tax collection, and other money borrowed into existence via the fractional reserve system. The crucial difference between government borrowing vs. private sector borrowing is that government borrowing is borrowed via identity theft: future tax payers' identities are on the hook; this also applies to borrowing by institutions that are back-stopped by the government.

Welfare spending went up--so the welfare recipients are getting the "new" money? They're bidding up the stock prices?

The govenment bureaucrats on average making double the average private sector job receive much more money than the alleged welfare recipients. The fractional reserve banks receive interest payment on money created out of thin air. Both bid up stock prices.

This whole theory of yours is ridiculous anyway because you're talking about fiscal spending which the Federal Reserve has ZERO control over. Are you now saying it isn't the Fed causing the inflation?

FED is the enabler of government expansion and borrowing; the government is the reason why worthless pieces of paper and ledger entries created by the FED are worth anything: fiat money power. The two are the two sides of the same coin ripping off the American people.

Government contractors are in NYC and SF? Really? Please tell me more.

NYC is the location of the most government back-stopped big banks. SF is the location of technology bubble, which attracts much of the new money borrowed into existence.

Reality   befriend   ignore   Tue, 4 Aug 2015, 2:41pm PDT   Share   Quote   Like   Dislike     Comment 15

iwog says


Almost all financial bubbles took place under a loose money regime, where money and credits were rapidly created to excess.

LOL, so the duck has to cut paste a Jpeg image in order to come up with a list of historical bubbles and crashes; obviously he has no clue about those bubbles and crashes.

In any case, thanks for providing a list of historical bubbles of crashes caused by government monetary machinations. Yes, governments have a long history of money machinations. Most of those bubbles and busts were related to war-time monetary expansion (suspension of gold standards if there had been one) and subsequent contractions, central bank attempts and failures. John Law's massive fiat money bubble in France was especially notorious.

Reality   befriend   ignore   Tue, 4 Aug 2015, 2:28pm PDT   Share   Quote   Like   Dislike     Comment 16

tatupu70 says

Nope--the main cause is wealth disparity. Rich save a much higher percentage of their marginal increase than do the poor. So, as wealth disparity increases, assets get bid up as money goes from the poor and middle class (who would spend it) to the 1% (who invest it). You're right that low rates will naturally cause the present value of any future stream of cash to increase, but it's a small effect compared to the effect of increasing wealth disparity. Further, the low rates are also caused by inequality-so it's the root cause in both cases.

You have the cause and effect entirely backwards. Assets get bid up because of new money creation. Without new money creation, even the rich would have to sell a different asset in order to buy an asset. Because, obviously, even you realize the rich do not get rich by letting existing money sit idle collecting next to no interest. Leverage and new money creation are what bid up asset prices in general. Low rates obviously facillitate leverage and new money creation: to the benefit of the have's.

Reality   befriend   ignore   Tue, 4 Aug 2015, 2:22pm PDT   Share   Quote   Like   Dislike     Comment 17

tatupu70 says

Inflation is a process whereby those who get the new money first reap the benefit of spending new money against old prices, at the expense of those who get the money later who have to spend against new higher prices before the new money arrives in their hands. It's a flow scam benefiting the cronies at the expense of the rest of the society.

Bullshit. Please explain to me how anyone "gets the new money first" How does that process work? Is there a line at the Federal Reserve where I can go to get the new money? Or do you have to work at Goldman Sachs to get in that line?

Instead of throwing around content-free epithets, you should really learn how inflation works in the real economy: inflation does not hit all prices at all locations at the same time. When the government borrows a new $1T into existence, it spends the money on government contractors and government employees first. Those first recipients of new money get to spend the new money against old lower prices before prices are bid up. The new money gets into other people's hands after bidding up prices. Those who get the money later would see the prices rise first before the new money arrives in their pockets. That's why prices are so much higher in DC, NYC and SF (all places where newly created money arrive first) than the fly-over country.

Reality   befriend   ignore   Tue, 4 Aug 2015, 2:17pm PDT   Share   Quote   Like   Dislike     Comment 18

tatupu70 says

The Federal Reserve is in the process of monitoring money supply to create conditions of full employment and low inflation. It only appears that they want low rates now because of the wealth inequality. The economy can hardly function so all they can do to keep it out of recession/depression is to keep a loose monetary policy. The rest of your post is nonsense. Low rates allow everyone to "gamble" at market rates. Bailouts are irrelevant and have nothing to do with the discussion at hand.

The economy can barely function precisely because the FED price-control on money. If the government tries to price-control on bread, flour and other food, the result would be shortage of food and mass starvation, just like happened in numerous countries throughout history.

Why are they trying to price-control money? Because the government itself severely in debt, and because the big banks are heavily in debt. The extremely low short-term interest rate enabled the big insider banks to borrow at next to nothing to service existing debts.

That price-control on money is precisely why we have repeated misallocation of capital in recent decades. Low rates do not allow everyone to gamble at market rates: you try borrowing at 0.25%! In a free market place, there would be very little reason why a bank with massive bad debts should have been able to borrow at rates much lower than what you or I can borrow with our pristine credit. Yet, those functionally bankrupt banks being able to borrow at extremely favorable rates was precisely what happened.

Reality   befriend   ignore   Tue, 4 Aug 2015, 2:10pm PDT   Share   Quote   Like   Dislike     Comment 19

tatupu70 says

You are only proving the fallacy in your school of economics in defining inflation as survey price of a bureaucratically chosen sampling of consumer goods.

Nope--the purpose of CPI and other inflation definitions is to gauge the impact of rising prices. If my Van Gogh painting goes up in value by $10K, it has zero impact on my weekly expenses. Same with my stock portfolio. Even if the price of the Van Gogh is going up due to money supply, restricting money isn't the answer. Redistributing wealth is.

Utter nonsense. You are repeating the exact same mistake that the FED made in the 1920's, and again in the 1990's: the FED focused on consumer price inflation and allegedly not seeing any, therefore allowed for all sorts of stimulative monetary policies despite obvious rising asset prices, eventually leading to massive bubble and crash!

The purpose of measuring inflation is to estimate money supply conditions in the economy, because money supply is what the central bankers have influence/control over. The idea that CPI is the full picture for inflation has repeatedly proven to be wrong, repeatedly leading to disasterous monetary policies, that massively enrich the wealth and then plunge the whole economy into depression to be paid for by the rest of the society. Perhaps, that is precisely the purpose of wannabe central planners using CPI as stand-in for real inflation!

Reality   befriend   ignore   Tue, 4 Aug 2015, 2:04pm PDT   Share   Quote   Like   Dislike     Comment 20

tatupu70 says

Inequality is fundamentally a natural human condition: human beings would never have evolved if our female ancestors were non-discriminating and faced men that were all exact equals. However, inflation managed by government officials exacerbates inequality and renders economic advantage to degenerate political cronies.

Thanks for the history lesson. Nobody is arguing for complete equality. The second sentence is more of your usual BS. Inflation is a distraction.

Inflation is a process whereby those who get the new money first reap the benefit of spending new money against old prices, at the expense of those who get the money later who have to spend against new higher prices before the new money arrives in their hands. It's a flow scam benefiting the cronies at the expense of the rest of the society.

tatupu70 says

The real inflation rate, when taken into account asset inflation, has not been "very low." The asset inflation caused by the artificially low interest rate imposed by the FED is exacerbating the inequality.

There is no "real" inflation rate that includes assets. Assets have been rising because of high wealth disparity--it's not the cause.

Your definition of "inflation" by focusing on consumer price alone has led to wrong monetary policies numerous times, because consumer price inflation is not the complete picture on inflation. People can put new money towards anything they want. In order to see the whole picture, you have to count asset price inflation along with consumer price inflation and producer price inflation (for intermediate goods).

Asset rising is not caused by wealth disparity but caused by decreasing interest rate: lower interest rate makes the present value of a future cash stream higher. It's just like a 10year coupon bond would be worth more at present if interest rate is higher; the coupon bond still pays out the exact same amount of coupon at each period, there is no increase or change in future wealth created. However, when the interest rate is lower, the present cash value is higher. Fairly simple math and accounting, none of which you seem to understand.

tatupu70 says

Are you trying to copy Milton Friedman? He advocated abolishing humans from running the central bank, and let computers keep money supply growth rate at 2% constantly. That has not been the world that we live in. The FED officials have been causing fluctuating inflation rate, not a constant 2%.

Huh? Just asking the "inflation is bad" crowd why low to moderate inflation is bad.

"Low to moderate inflation" is subjective. Government officials managing and creating inflation is what makes inflation bad: because government officials are human beings too, and they have friends and families who can benefit from the new money at the expense of the rest of the society who receive the new money later. Inflation created by government is not exactly carried out by burying random jars of cash to be discovered, like John Maynard Keynes suggested. In fact, mineral gold under gold standard is actually somewhat like the randomly buried jars of cash recommended by Keynes. LOL!

tatupu70 says

A fiat currency is not a naturally occurring phenomenon. Exchange rates and interest rates are determined/influenced by how much the central banks are printing the particular fiat currency.

No kidding. Your buddy indigenous claimed that the central banks sets the exchange rate. Which is obviously incorrect.

Many (most) central banks have "target rates" for both exchange rates and interest rates: they approximate/achieve those targets by pulling on the levers of money creation.

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