patrick.net

Eerily Similar!

Similarly, the designation of the 1920s as a period of inflationary boom may trouble those who think of inflation as a rise in prices. Prices generally remained stable and even fell slightly over the period. But we must realize that two great forces were at work on prices during the 1920s—the monetary inflation which propelled prices upward and the increase in productivity which lowered costs and prices. In a purely free-market society, increasing productivity will increase the supply of goods and lower costs and prices, spreading the fruits of a higher standard of living to all consumers. But this tendency was offset by the monetary inflation which served to stabilize prices. Such stabilization was and is a goal desired by many, but it (a) prevented the fruits of a higher standard of living from being diffused as widely as it would have been in a free market; and (b) generated the boom and depression of the business cycle. For a hallmark of the inflationary boom is that prices are higher than they would have been in a free and unhampered market. Once again, statistics cannot discover the causal process at work.

Bubbabear says

t it (a) prevented the fruits of a higher standard of living from being diffused as widely as it would have been in a free market;

Wrong. That assumes inflation doesn't also inflate wages which it normally does.

The same applies to (b). the booms and busts only happened because wages happened to not be inflated, which had nothing to do with inflation itself.

You people are so focused on inflation that you fail to register the #1 lesson of economics 101: the value of the currency doesn't change markets equilibrium points. Just the 'nominal' value of these points.

Multiply the amount of currency by 2: what is changed? At equilibrium all prices and revenues are multiplied by 2, but except for that nothing has changed. The money will flow in the same ways as before, to the same places. Who cares if prices are nominally twice as much if it represents the same value and your salary is also twice as much.

The central problem we have today is that wages didn't keep up with inflation.
How is that the fault of central banks? It is not. If anything it is linked with trade.

Bubbabear says

The central problem we have today is that wages didn't keep up with inflation.

How is that the fault of central banks?

By pulling growth from the future with reckless credit bubbles, deregulation and monitery policies....

Bubbabear says

By pulling growth from the future with reckless credit bubbles, deregulation and monitery policies....

Also by the fact (one of many overlooked by clit student) is that inflation is not even.

Bubbabear says

By pulling growth from the future with reckless credit bubbles, deregulation and monitery policies....

Nope. Increasing debt pulls growth from the future. But an increase of base money is just inflation. Nothing pulled from the future.

indigenous says

Also by the fact (one of many overlooked by clit student) is that inflation is not even.

At the equilibrium, it is always even.
But of course the fed doesn't control where the money flows. These are other factors. If wages are anchored down by international competition, this has nothing to do with the fed. These wages would go down relative to other prices, regardless of whatever the fed does.

Heraclitusstudent says

Bubbabear says

By pulling growth from the future with reckless credit bubbles, deregulation and monitery policies....

Nope. Increasing debt pulls growth from the future. But an increase of base money is just inflation. Nothing pulled from the future.

No inflation yet inspite of a flood of money. Deflation remains a bigger concern.

Heraclitusstudent says

But of course the fed doesn't control where the money flows.

Sort of does through it allowing mercantilism.

But the overarching point is that inflation aides the upper quintiles and punishes the lower ones.

Strategist says

Nope. Increasing debt pulls growth from the future. But an increase of base money is just inflation. Nothing pulled from the future.

No inflation yet inspite of a flood of money. Deflation remains a bigger concern.

Yes but what the fed did is an inflation of the money supply.

indigenous says

Sort of does through it allowing mercantilism.

Do you understand that the fed is not running the trade policy?

Heraclitusstudent says

Do you understand that the fed is not running the trade policy?

Do you understand that they(not sure if this is the FED but some govt agency) do by using a floating exchange rate.

And targeting inflation at 3% based off of Milton Friedmans' policy ideas.

Heraclitusstudent says

Strategist says

Nope. Increasing debt pulls growth from the future. But an increase of base money is just inflation. Nothing pulled from the future.

No inflation yet inspite of a flood of money. Deflation remains a bigger concern.

Yes but what the fed did is an inflation of the money supply.

They increased the money supply to astonishing levels. I think the plan is to suck it back up once we are on a sustained path to economic recovery. They will be able to suck up most of it.

indigenous says

Bubbabear says

By pulling growth from the future with reckless credit bubbles, deregulation and monitery policies....

Also by the fact (one of many overlooked by clit student) is that inflation is not even.

Well from what I've been reading, the mobsters have absolutey nothing to do with this mild recession we've been experiencing by forcing us to eat our own seed corn

http://www.realforecasts.com/are-we-eating-our-seed-corn/

Strategist says

They increased the money supply to astonishing levels. I think the plan is to suck it back up once we are on a sustained path to economic recovery. They will be able to suck up most of it.

I don't think they will remove much of it. They will just use rates to control how much flows into the economy. In a sense this is a normalization, with a lower currency value.

indigenous says

Do you understand that they(not sure if this is the FED but some govt agency) do by using a floating exchange rate.

I say: "low wages caused by trade with countries with slave labor".

You say: "fed is allowing mercantilism sort of causing that"

I say "fed is not responsible for trade."

You say "the fed control the currency level with other countries"

How does that relate with my what we are discussing? If anything a lower currency helps the American workers. The fed doesn't cause the effects on the Americans wages. These are caused by the decision to do free trade with these countries.

It's impossible to have any kind of rational conversation with you.

Heraclitusstudent says

The fed doesn't cause the effects on the Americans wages. These are caused by the decision to do free trade with these countries.

You need to learn about mercantilism

Bubbabear says

Well from what I've been reading, the mobsters have absolutey nothing to do with this mild recession we've been experiencing by forcing us to eat our own seed corn

http://www.realforecasts.com/are-we-eating-our-seed-corn/

Good read, thanks Bubba

The FED has encouraged us to consume with money we should be saving for future consumption/investing. Since there are no real savings the signal to producers have been crossed as to encourage them to malinvest.

That graph showing the real GDP is very enlightening as to what the fuck is wrong. Which correlates to the unemployment graph.

In a nutshell the economy is overvalued so we are eating our seed corn.

No getting around Says law.

The Keynesians would/could not understand this under any circumstances. They think the opposite is true.

You know what's more interesting than listening to self-proclaimed experts argue on the internet over what caused the great depression?

ANYTHING.

Homeboy says

You know what's more interesting than listening to self-proclaimed experts argue on the internet over what caused the great depression?

ANYTHING.

Back at ya and the rest of the self proclaimed experts on the left.

Bubbabear says

Well from what I've been reading, the mobsters have absolutey nothing to do with this mild recession we've been experiencing by forcing us to eat our own seed corn

Here is another article that supports that point of view, He is saying that the only thing that has supported the graphs on GDP is inflation caused by ZIRP. And that the BLS is cooking the books big time

http://davidstockmanscontracorner.com/part-1-the-zirp-economy-unmasked-zero-growth-in-private-labor-hours-since-1998/?utm_source=wysija&utm_medium=email&utm_campaign=Mailing+List+AM+Wednesday

Yes, my links get deleted by Torahvich, but get ready, this is like a socialist in training move.

If we as a country keep going this way we will be devolving back to a worse than Napoleonic state.

Heraclitusstudent says

At the equilibrium, it is always even

If you continue to print money, it never reaches equilibrium. In addition, it always benefits those who has the first access to the newly minted money. They can buy assets with cheaper prices.

corntrollio says

Any time someone's trying to base something on poorly written and poorly argued op-eds instead of thinking for yourself, you know it's going to suck. A lot of commenters here aren't really capable of doing more than parroting talking points and can't think critically. I dispatched one the other day.

You are flattering yourself, megalomania I believe they call it.

gsr says

Heraclitusstudent says

At the equilibrium, it is always even

If you continue to print money, it never reaches equilibrium. In addition, it always benefits those who has the first access to the newly minted money.

You are exactly right.
The fed creates a permanent disequilibrium and the rich benefit disproportionally. You can see the fed actions as aimed to create ever increasing leverage, or to constantly give more money to the rich. And as such they totally don't make sense.

To bad indigenous is not smart enough to make such pointed remarks.

However it still doesn't mean that all money printing is bad, contrary to the starting point of this thread.

I have argued many times that the fed could simply send a check - for the same value - to every taxpayer every month to maintain stable prices. This way they could let banks fail and housing collapse, with no resulting deflation, and without picking winners or losers.
And they would likely have had to print a lot less that way.

The truth is there are too many interests involved in the printing of money and too many smart ways to give money indirectly to people. Everything you read in a newspaper is rarely the result of idealistic decisions, and almost always the result of conflicts between players in positions of power.

Heraclitusstudent says

To bad indigenous is not smart enough to make such pointed remarks.

I have made that point many time for a long time dumb ass.

Your Keynesian ideology keeps you blind.

indigenous says

Your Keynesian ideology keeps you blind.

/?p=1237900

Heraclitusstudent says

However it still doesn't mean that all money printing is bad, contrary to the starting point of this thread.

I disagree. The central planning of printing and distribution of money is neither efficient nor moral. It always helps well connected ones, or the ones whose votes matter. In fact, it rewards bad behavior, and hence results in further malinvestments.

gsr says

The central planning of printing and distribution of money is neither efficient nor moral.

A collapse of the money supply would be extremely inefficient and also immoral, since it forces people to repay debts with money worth more than it was.

I just described how the fed could send a check of the same value to every taxpayer.
Assuming this is used to maintain the supply of money constant, explain how this would be "inefficient" or not "moral".

Heraclitusstudent says

I just described how the fed could send a check of the same value to every taxpayer.

Assuming this is used to maintain the supply of money constant, explain how this would be "inefficient" or not "moral".

Bad idea, your premise is that you can fix meddling with more meddling.You are not that smart and neither is ben or janet.

It would not work because finding the market price is not a top down activity. It requires billions of decisions at the consumer level.

Read the link by Bubbabear it explains how putting more money into the system encourages people to spend and not save. This has been going on since the late 70's. For production to occur you must have investment from savings. This is defined as deferred consumption. This indicates when a business should invest as an excess of savings creates a lower interest rate in the market place. This does not occur when the FED controls the interest rates.

As the article indicates everyone trades real goods for real goods and use money as a way of making the exchange. E.G. if I am selling machinery and you are selling manure I would assign a value to the machinery based off of market demand and you the same. We would then use money for the trade.

But the process gets skewed with excess money gets pushed into the system, not just by inflation. But also by skewing the purchase preferences and by skewing when the consumer wants the product. In short we are eating our seed corn by not saving.

Good article that I'm sure you will not read:

http://www.realforecasts.com/are-we-eating-our-seed-corn/

indigenous says

It would not work because finding the market price is not a top down activity. It requires billions of decisions at the consumer level.

Your premise is that a currency is part of a market. It is not. Transactions can be cleared in any currency, and that shows the currency is an external factor. If the currency used fluctuates wildly, this is not part of the market, it is an exogenous disruption of the market.

You think everything is meddling. The fractional banking system is unstable by nature and this has nothing to do with gov intervention. And in a large crisis, it can cause large fluctuation of a currency value thereby disrupting markets.

indigenous says

Read the link by Bubbabear it explains how putting more money into the system encourages people to spend and not save.

That's not what I'm talking about. If you print money only to prevent deflation, you don't encourage people to spend. You just prevent them from gaining undue benefits from storing cash in a mattress.

Heraclitusstudent says

If you print money only to prevent deflation

That implies that there would be job losses if money was not printed. Where's the evidence that this would happen? It seems to me to be like scare tactics with red scare back in 1950s and terrorists using dirty bombs in early 2000s. All hype, no substance.

dublin hillz says

That implies that there would be job losses if money was not printed. Where's the evidence that this would happen? It seems to me to be like scare tactics with red scare back in 1950s and terrorists using dirty bombs in early 2000s. All hype, no substance.

There was NO inflation previous to the FED in 1913. You could bury a dollar in 1776, and dig it up in 1912 and it would still buy a dollar's worth of stuff. Inflation is manipulation by the FED.

You INFER that there would be job losses, but that is just your ignorance. Inflation is not necessary to the economy at all.

dublin hillz says

That implies that there would be job losses if money was not printed. Where's the evidence that this would happen?

In an economy like the US today, with the stock of debt that exists, deflation would cause a death spiral leading to the collapse of the financial system worldwide. This would not be a market clearing event, it would be a total destruction event.

If you think this can happen without unemployment, you're a dreamer.

Heraclitusstudent says

In an economy like the US today, with the stock of debt that exists, deflation would cause a death spiral leading to the collapse of the financial system worldwide. This would not be a market clearing event, it would be a total destruction event.

Why is that?

indigenous says

There is nothing wrong with deflation in fact quite the opposite.

If you mean in the US like it was before the fed, there is still something clearly wrong with deflation.

With a fixed money supply, in a society where productivity is increasing, and the population is growing, one could benefit from just storing money. Not investing it. Not taking risks. Not working. Just storing money.

Clearly this is immoral and a very bad incentive to have in a market based society.

indigenous says

Why is that?

Fractional reserve banking.

Heraclitusstudent says

If you mean in the US like it was before the fed, there is still something clearly wrong with deflation.

What?

Heraclitusstudent says

With a fixed money supply, in a society where productivity is increasing, and the population is growing, one could benefit from just storing money.

By definition investment is deferred consumption. So what. The fact is that deflation occurred in 2010 or so because of a shrinking credit market.

Why couldn't money just become more valuable?

indigenous says

By definition investment is deferred consumption. So what.

Storing money is not investment.

There was no deflation in 2008-2010. Just a slowdown of money growth. And we saw the results.
http://research.stlouisfed.org/fred2/series/WM2NS

Heraclitusstudent says

Storing money is not investment.

Why not?

Heraclitusstudent says

There was no deflation in 2008-2010.

Then explain my graph?

Heraclitusstudent says

deflation would cause a death spiral leading to the collapse of the financial
system worldwide

The solution to that would be implementing significant punishments on the so called strategic defaulters.