patrick.net

Dan8267 says

Similarly currency debasement is an attack on the life savings of families which is why Americans save damn little. 40% of Baby Boomers have nothing saved and one in three Americans have zero retirement savings. These statistics should make you shit your pants if you truly understand it's significance.

That is scary, but you have not tied it to inflation. People save too little because they make too little and spend too much.

Dan8267 says

The best way to provide a safe store of money, as well as to satisfy the government's interest of stopping tax evasion and money laundering, is to completely automate banking. Banks' don't actually add value to the industry anymore. The mechanics of banking that have value to the consumer -- things like saving, checking, transferring funds, using electronic money -- are all done completely by software. Having a single, non-profit national bank to handle all these basic and standardized functions would be far more efficient and better for the economy as a whole. It would eliminate wasteful drags on the economy like the per transaction fees and percent transaction fees that debit cards impose. These fees have all the negative effects of sales taxes but none of the positive effects. They are a drain on the economy and reduce growth.

Banks should only be rewarded with profit for adding value. What value the banks do add today mostly involve risk taking. There is no reason...

Agreed. Any profits should go to pay down the debt.

freespeechforever says

http://www.telegraph.co.uk/business/2016/09/21/un-fears-third-leg-of-the-global-financial-crisis-with-epic-debt/

That was a good read. Thanks. Some choice sections below.

""If policymakers fail to mitigate the negative impacts of unchecked global market forces, then a turn to protectionism could trigger a vicious downward spiral for everyone," it said."

But what UNCTAD shows is that globalisation has not in fact worked for these countries, bar a few exceptions. One starts to suspect that it works for nobody except the owners of capital and their close allies.

... snip ...

"What is clear is that the world will soon need a massive and coordinated spending push by governments to create demand and bring the broken global system back into equilibrium. UNCTAD is entirely right about that."

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

My take on our choices in the US are ...

Trump = Hasten the day : protectionism, embrace the deflationary cataclysm, greatly increased odds of major world conflict
Hillary = Everything's fine! Keep on swimming, keep on swimming, la la la

... if the choice even matters much for where this coaster is headed.

#LogansSwan

Tampajoe says

History has shown that real wages perform slightly better during periods of inflation.

There is no major threat of inflation right now in the US. For over 4 years we have been dumping accelerant on the fire trying to create it. The Fed and central banks would love to have that as a worry. They don't.

I believe Dan is talking about actual uncontrolled inflation caused by an over abundance of currency, in spenders hands. Unless trickle down works, I don't think we are in danger of that.

Tampajoe says

That is scary, but you have not tied it to inflation. People save too little because they make too little and spend too much.

Dan already said that above. Much of your criticism looks like cross talk, or just being contrary. At the macro level, at-least in my read, you and Dan agree.

Rew says

At the macro level, at-least in my read, you and Dan agree.

I think we agree on most things. Just disagree on the impact of inflation and monetary policy.

If they hear you talking about a bubble, they'll raise prices even more. Stop it!

Rew, TJ, Dan -

As an attorney who advises construction/development firms AND also operates as a developer, I have a view that inflation is currently understated by the BLS, as the basket of goods methodology they use to weigh inflation, particularly given what I view as their disingenuous "hedonic adjustments," in deeply, deeply flawed.

To state it succinctly, the BLS & Fed Reserve under-state inflation as they overemphasize the prices of flexible goods, such as electronics, furniture, etc., which aren't purchased every day or even every year, and the prices on those items are either not inflationary and may even be deflationary, while the BLS & Fed underemphasize the prices of INFLEXIBLE GOODS & SERVICES such as housing/rent, medical costs, tuition, food, utilities, etc., which are purchased monthly or even daily, and are necessities (inflation via labor rates for skilled trades and professionals has also been running extremely high).

I see this is real time as prices are quoted to me in my field and as a consumer.

We are in a period of stagflation that will grow worse, IMO, in a similar rhyme with the 1978 to 1982 period.

This stagflation is now beginning to choke the economy, and serve to further crimp aggregate demand (in addition to other crimping factors such as malinvestment caused by artificially low rates and distorted yield curves).

This stagflation will serve to further reduce aggregate demand regardless as to what central banks do with monetary policy, especially now that they are all at the zero-bound already (in 2008, they had a cushion from 5.5% in the fed funds rate to cut, which they did all the way down to 0.25%; they have no such cushion now with the fed funds rate at 0.5%).

This stagflation, causing decreasing aggregate demand, will ultimately result in businesses beginning to lay off employees (labor is the highest cost portion of most businesses, and typically the 1st place they cut to deal with slowing revenue and profits and margins).

freespeechforever says

As an attorney who advises construction/development firms AND also operates as a developer, I have a view that inflation is currently understated by the BLS, as the basket of goods methodology they use to weigh inflation, particularly given what I view as their disingenuous "hedonic adjustments," in deeply, deeply flawed.

To state it succinctly, the BLS & Fed Reserve under-state inflation as they overemphasize the prices of flexible goods, such as electronics, furniture, etc., which aren't purchased every day or even every year, and the prices on those items are either not inflationary and may even be deflationary, while the BLS & Fed underemphasize the prices of INFLEXIBLE GOODS & SERVICES such as housing/rent, medical costs, tuition, food, utilities, etc., which are purchased monthly or even daily, and are necessities (inflation via labor rates for skilled trades and professionals has also been running extremely high).

I see this is real time as prices ar...

Perfectly stated. Have been pointing out stagflation as result of the Fed policies for a while. The inflation in inflexible goods is exactly it, any good that cannot easily be outsourced/globalized has been experiencing high inflation. That's why there is also the EPI as a better (not flawless but better) CPI.

Two types of inflation:
http://blog.yardeni.com/2016/09/inflation-healthy-unhealthy.html?m=1

Some observations along the lines of what freespeechforever wrote

Inflation isn't being caused by monetary supply. The inflation we see for the inflexible goods is all due to local market conditions. (Food : major disruptions in environment and growing. Also, 20% of our food is imported itself. Housing : this is a supply demand issue coupled with the low interest rate monetary stance, and all the other crazy that is our current housing market/regs.)

The monetary expansion done never reached the pockets of the consumer in a very direct or impactful way. Right now, it is safely in stocks, bonds, and banks. The dollar is extremely strong against the other currencies at the moment. It only looks to be getting stronger. This all appears deflationary not inflationary.

The only sites claiming stagflation that I see are goldbug related, zero-hedge, etc.

The fed wanted asset inflation itself, to bulge out main street's wallet. They know they have to get money in a controlled manner to people. The problem is the chosen method is slow, un-even in distribution, and just plain inefficient. If you have been lucky enough to own stocks in the past 10 years, you have felt the tingly warmth in the wallet. People not so fortunate have been waiting for stock holder average joes to cash out and spend so they get some too.

freespeechforever says

This stagflation, causing decreasing aggregate demand, will ultimately result in businesses beginning to lay off employees

Said a different way, simply people are going to become more frugal, to the point that demand will plunge, business will be affected, and more people will become frugal ... on and on ... viscous cycle. I agree with you on the stag, portion, but it's stag-deflation. Prices at the super market are up (yes 'inflation'), but it isn't because too much money is chasing lettuce and oranges. It's because there have been droughts, floods, freezes, and heat waves. It's not because people are so flush with cash that the dollar is debased.

Stag-Deflation article ...
http://seekingalpha.com/article/3958309-age-stag-deflation-part-1-understanding-times

Tampajoe says

Perhaps, but the pencil won't always be balanced on its tip.

That's my point.

Tampajoe says

I maintain that the impact is negligible.

Not in my experience. The only reason I haven't lost hundreds of thousands of dollars of purchasing powers is that I have money in stocks rather than cash savings or bonds. The real value of my stock portfolio isn't affected by currency debasement, although I get taxed more on nominal gains due to currency debasement.

However, if I kept my savings in cash in the bank for a year or several, I would have lost enough wealth to buy a house. That's not negligible.

So the only reason I'm not losing purchasing power to currency debasement is because I'm assuming risk in the form of stock ownership and sacrificing liquidity. Again, that's not a negligible cost.

Tampajoe says

History has shown that real wages perform slightly better during periods of inflation.

In contrast to what? Periods of deflation? In any case, that does not imply that currency debasement or CPI increases -- which are not the same thing -- causes real wages to rise. In fact, such a conclusion defies logic.

Tampajoe says

which "kind" of inflation

I don't use the word inflation anymore. It's pointless since the word has been poisoned with deliberately misleading and inconsistent usage.

I use the term cost of living increases when talking about the nominal rise in living expenses. I use the term CPI increases when talking about increases in the Consumer Price Index. I use the term currency debasement when talking about increases in the money supply and the resulting decreasing purchasing power of a currency because of printing money. All three of these things are completely different phenomenon. It is bad to confuse them.

Tampajoe says

If real wages are going up, who cares if something costs $5 or $50?

Someone who has significant savings. Let's say Bob saves for 30 years to buy his dream house. Currency debasement reduces the values of his savings by 50%. It does not help Bob if his nominal wages are increased such that his real wages have neither gained nor loss value. That prevents Bob from losing income. It does not prevent Bob from losing his savings and not being able to buy his dream house.

Savings matters. Savers should not be punished. If savers are punished, people will choose to be debtors and to depend entirely on Social Security for their retirement.

Tampajoe says

Dan8267 says

The typical worker, by mathematical necessity, will have lower real wages as the result of currency debasement even if asset deflation -- which quite frankly affects different assets at vastly different rates -- raises the real wages of workers

False. I hope I've explained that already.

It does not matter if you explain something if your explanation is contradicted by mathematics. No theory inconsistent with mathematics is valid, no matter how appealing.

Tampajoe says

Dan8267 says

In the case of real estate, a lot of responsible savers would have been able to purchase houses and live in them had it not been for quantitative easing.

Also false, as I explained to Mell earlier.

I did not purchase a house because of the quantitative easing of 2007-2015. I would have bought a house in cash, no mortgage, had massive currency debasement not happened. In order for the above statement to be false, I would have to not exist. That puts a bit of a hole in your theory. I'm pretty damn sure I exist.

Of course I can't be sure that you exist because the only evidence I have of your existence is my sensory input which is just data and that can be faked. Hmmm, let there be light.

www.youtube.com/embed/S-xUjmJkO8g

Tampajoe says

The housing bubble was caused by the abandonment of underwriting standards.

You forgot cheap money created by currency debasement. Writing standards could have been completely abandoned and the house bubble would have never happened if interest rates were at 12%.

Tampajoe says

Actually, sans intervention, there would be more renters paying high rents to investment companies

The total number of people living in houses, renters plus "owners", is a zero-sum game. During the housing bubble there were entire neighborhoods and entire condo buildings with only one or two people in them. The housing bubble was not caused by a shortage of inventory. In fact as the bubble inflated, housing inventory skyrocketed.

Tampajoe says

The dynamic between owner and worker exists with or without inflation.

Yes, but that does not imply the dynamic is not affected by currency debasement.

Tampajoe says

Workers want as much as the can get and owners want to pay as little as possible. It's independent of inflation.

Having said that, empirically it can be seen that workers tend to have more power to force higher raises during periods of moderate to high inflation.

First off, what you are trying to imply in your last statement directly contradicts you explicitly say in the previous sentence. If currency debasement or cost of living increases or CPI increases (whichever you mean by inflation) causes worker's real wages to rise, then by definition, worker's real wages are NOT independent of inflation (again, whatever you mean by inflation).

Of course, it does not logically follow that because employers always try to squeeze their employees that currency debasement is irrelevant to how much employers can exploit.

Think about the psychology of real human beings. If currency debasement is 3.5% per year, then every worker must convince his manager, and typically that manager must convince others, to give that worker a 3.5% raise, and this must happen every single year without fail. Wages are negotiated and it's a hell of a lot easier to negotiate keeping your existing salary than getting a larger one even if it's only larger in nominal terms. The fact is that currency debasement allows companies to lower wages simply by doing nothing, which is politically a hell of a lot easier than announcing across the board wage cuts. Employees tend to strike when that happens, but they don't strike when they simply don't get a raise even though with currency debasement it's the exact same thing.

Human psychology causes lots of irrational and sub-optimal behavior especially in groups.
Tampajoe says

That is scary, but you have not tied it to inflation. People save too little because they make too little and spend too much.

It's strongly affected by currency debasement. Again, I don't know what you mean by inflation because you haven't stated that and the term is used highly inconsistently.

People are stupid, but they aren't so stupid they can't survive. Evolution guarantees a certain minimum intelligence level in any species that survives.

People know that they get screwed by savings and that currency debasement helps debtors, particularly those who get in when the rates are low (i.e. when debasement is high). Currency debasement both directly discourages savings by punishing it and indirectly discourages it by lowering real wages and thus what money people have to save and to invest. Currency debasement ultimately transfers wealth from savers to bankers. It's a hidden tax.

Wealth can only be created through productivity. Zero-sum games like currency debasement are, by definition, non-productive. The only way banks can get richer in lending debased currency is by extracting the wealth they gain from others. Printing money does not increase wealth. It can only transfer it, and it does transfer it in socially unjust and unwise ways.

Rew says

I believe Dan is talking about actual uncontrolled inflation caused by an over abundance of currency, in spenders hands.

My point is that currency debasement is unjust and bad regardless of cost of living increases or CPI increases.

Rew says

At the macro level, at-least in my read, you and Dan agree.

I think that is true, also, but I'm not sure because of the vagaries of the word inflation. However, I do think that he and I are in disagreement over the impact of printing money on the middle class. He seems to follow the false religion of Keynesianism which believes that aggregate demand is the only thing that really matters in an economy. This is a testable theory, but testing it would be extremely costly.

According to the theory, if our government spent as much money in real terms as it did during WWII on something completely frivolous like fighting a fictitious alien invasion, then our economy would be better off. After all, spending money on a completely non-productive venture, war, worked in the 1940s.

Or did it?

It's always foolish to generalize from one example. You miss lurking variables.

Sure, WWII increased employment, and that had an impact, but was it really the cure-all Keynesian believe it was? After WWII all the factories in Europe were destroyed. America had no competition. It's easy to be economically successful when you have a world monopoly on production.

But that environment does not hold true today. According to Keynesian theory, if the U.S. government spent as much money in real terms that it did during WWII, about four times what we wasted in the Middle East wars, fighting fictional aliens then our economy would boom like the 1940s and 1950s. We'd enter a new era of prosperity.

I say bupkis. All those wasted resources would have a devastating effect on our economy regardless of how many times a dollar exchanges hands. There is no real productivity and it's real productivity and wealth, not paper wealth, that matters. Aggregated demand is not the most important thing in an economy by far. The two most important things in any economy is per capita productivity and how the wealth generated by the productivity is distributed.

If we wasted all those resources and spent all that money fighting a fictional alien invasion, then our economy would still suck because we wouldn't have a monopoly on production like we did after WWII because everything would still be made in China for cheap. No amount of money spent on non-productive activities like digging and filling up holes or, even worse, counter-productive activities like war and destroying infrastructure is going to increase our real wealth or our real GDP.

And yes, Keynesians actually believe that spending money on fighting a fictional alien invasion would be an economic boom. Even really smart Keynesians like Paul Krugman believe this.

www.youtube.com/embed/jaED2ErdIv8

Please realize that it's not the alien invasion part that's silly. If Keynesian theory was accurate, Krugman would be right. The silly part is thinking that spending limited resources in a completely wasteful manner is the path to prosperity.

Side note... The only productive aspect of war -- and I hate even saying that -- is the advancement of technology. However, technology can be advanced far more efficiently and cheaply without war. War only provides a political will to spend the resources on advancing technology. There are better ways to get his political will.

Rew - I disagree entirely.

Fed & other central bank monetary policy has broker the relationship between supply & demand, and poisoned investment & consumption actions and decisions, damaging the very nature/foundation of the fundamental economy to a severe degree.

Deflation in prices will come, and the assets deflating the most will be the ones that Fed Reserve and other central bank monetary policy re-flated the most during the last 6 years (look for equities and bonds - again strange historical paradox that both reflated in lockstep, as they usually have diverse moves in ordinary, less manipulated times - , commercial and residential - especially rental - real estate, less liquid assets such as art, etc. to deflate).

There has been a malinvestment splurge for 7 years now due principally to ZIRP/NIRP.

Look to see many foreclosures and bad loan write-offs on structures and developments undertaken during the last 4 years, especially, as these were speculative, yield chasing projects, not undermined by real, fundamental demand.

As it stands 80%+ of residential mortgages to purchase homes are being backed by the taxpayer via FHA/ Fannie & Freddie, and those GSEs have essentially allowed BlackRock and others like it to unload their MBSs at extraordinarily high profits and shifted risk of loss to taxpayers.

Also, on a less macro important note, there are bumper crops of food stuffs now and have been for years. Prices on food have skyrocketed due to what I referenced above, to wit the GLBA, as anything that becomes traded on commodity markets becomes manipulated greatly, and its price detached significantly from true underlying supply/demand forces.

z

One final thought. If Keynesian economics was right, the solution to every depression would always be the same thing: smash everyone's car and burn down everyone's house. The resulting demand for automobiles and construction would immediately end the depression and bring prosperity to everyone.

And the ridiculousness of this idea just never seems to be grasped by economists.

Dan, true Keynesians would shriek in horror at what neo-Keynesians such as "Space Man" Krugman have done to their name.

I'm no Kenynesian (I don't label myself or constrict myself, because economics is a dismal science and humans are fundamentally irrational, but I do ebb closer, though not even that closely, towards the Austrian school), but will testify that Krugman is full-tilt batshit crazy, and we're witnessing Abenomics (as advised by Krugman's batshit-crazy radical recklessness) literally destroy Japan in real time.

Dan8267 says

And the ridiculousness of this idea just never seems to be grasped by economists.

We could always build a big beautiful wall, and invest in things that go "boom". That will fix us too, right? I mean ... "jobs" ... and stuff.

;)

Dan8267 says

In any case, that does not imply that currency debasement or CPI increases -- which are not the same thing -- causes real wages to rise. In fact, such a conclusion defies logic.

Not really. If, and this won't always be the case, increasing money supply increases demand then it will create more jobs and more demand for labor. More demand for labor = higher real wages.

Dan8267 says

Someone who has significant savings

Rates earned on savings also increase with inflation. Unless you put it under your mattress, it doesn't matter. The delta between savings rate and inflation is pretty constant.

Dan8267 says

I did not purchase a house because of the quantitative easing of 2007-2015. I would have bought a house in cash, no mortgage, had massive currency debasement not happened. In order for the above statement to be false, I would have to not exist. That puts a bit of a hole in your theory. I'm pretty damn sure I exist.

Incorrect. You believe that prices would have fallen further absent the easing. Which is false. Your existence is true.

Dan8267 says

First off, what you are trying to imply in your last statement directly contradicts you explicitly say in the previous sentence. If currency debasement or cost of living increases or CPI increases (whichever you mean by inflation) causes worker's real wages to rise, then by definition, worker's real wages are NOT independent of inflation (again, whatever you mean by inflation).

Not at all. The dynamic is independent of inflation. But, the power of workers tends to be stronger during inflationary times whereas the power of owners tends to be stronger during deflationary times. In the most generic terms.

Dan8267 says

He seems to follow the false religion of Keynesianism which believes that aggregate demand is the only thing that really matters in an economy. This is a testable theory, but testing it would be extremely costly.

It's not polite to post what others think. Better just to post what you think. Keynes is so often misunderstood that it's almost comical to discuss his theories anymore. He has been so distorted by the right wing propaganda machine that his very name is used to scare children. I won't go through and debunk your later writings on WWII other than to say that there are many papers that show that US exports were not significantly higher than usual for more than 2-3 years. The US economy was actually recovering quite well even before WWII.

But you're right about the importance of productivity. The key point to remember was that in 1929, inequality was at all time highs (like now). What Keynesian policies did was redistribute wealth, which increased demand and productivity. An economy with 30% unemployment is not productive. Reducing inequality increases demand which decreases unemployment. Which increases productivity.

Dan8267 says

And yes, Keynesians actually believe that spending money on fighting a fictional alien invasion would be an economic boom. Even really smart Keynesians like Paul Krugman believe this.

True Keynesians believe that the correct solution depends on the situation. Keynesians believe we should be saving money during good times. And if there is high unemployment and high inequality--taking money from the 1% and giving it to the poor absolutely will improve the productivity of the economy.

Dan8267 says

One final thought. If Keynesian economics was right, the solution to every depression would always be the same thing: smash everyone's car and burn down everyone's house. The resulting demand for automobiles and construction would immediately end the depression and bring prosperity to everyone.

And the ridiculousness of this idea just never seems to be grasped by economists.

I think you need to read up a bit more on Keynes.

freespeechforever says

There has been a malinvestment splurge for 7 years now due principally to ZIRP/NIRP.

There has been recapitalization of banks and FIRE action only ...

freespeechforever says

has broken the relationship between supply & demand, and poisoned investment & consumption actions and decisions, damaging the very nature/foundation of the fundamental economy to a severe degree

... because, again, actual 'common people' don't have money. The fight is against deflation, in which the battle itself feels inflationary to us on the street, but that's not the underpinning power. There is a massive effort to get inflation and weaken currency. There is no price/wage spiral here and I don't see one coming.

Try as we might, the mighty dollar will rise, and freeze us in world trade exports increasing our trade deficit. It's death by ice and economic inactivity, not death by fire.

freespeechforever says

Also, on a less macro important note, there are bumper crops of food stuffs now and have been for years.

http://www.ers.usda.gov/data-products/food-price-outlook/summary-findings.aspx

"In 2016, ERS now predicts food-at-home (supermarket) prices to change between -0.5 and 0.5 percent—a rate of inflation (or possibly deflation) that would again fall below the 20-year historical average of 2.5 percent. The forecast has been lowered due to recent declines in prices for beef and veal, poultry, and eggs. Lower transportation costs due to deflated oil prices as well as the strength of the U.S. dollar have placed additional downward pressure on food prices in the first half of 2016.

The drought in California has raised concerns about rising produce prices at supermarkets or grocery stores. Farm-level fruit prices decreased 0.1 percent in August but are 8.2 percent higher than in August 2015. Farm-level vegetable prices decreased, falling 11.5 percent, and prices are 7.6 percent lower than at this time last year. ERS predicts farm-level fruit prices to increase between 4.5 and 5.5 percent in 2016 but to decrease 6.0 to 5.0 percent in 2017. Vegetable prices are also expected to increase in 2016—between 2.0 and 3.0—but to decrease 7.0 to 6.0 percent in 2017. "

Oil falling in price, dollar gaining strength ... no inflation in sight. Read any of the rest of the report and the findings are very supply demand with forecasts of cheaper prices.

All food CPI: http://www.ers.usda.gov/data-products/food-price-outlook.aspx

2014 = 2.4%
2015 = 1.9%
2016 = forecast -0.5% to 0.5% (from the current report in previous post ... ie updated number)
2017 = forecast 1.5% to 2.5%

With a 20 year historical average of 2.5%. That doesn't seem to indicate rampant inflationary trend in food. If anything, that looks like declining inflation to me.

Tampajoe says

Dan8267 says

Had housing prices been allowed to fail instead of debasing our currency, there would be more home owners today, and when I say home owners, I mean people owning equity in their houses rather than simply counting mortgage debt.

Actually, sans intervention, there would be more renters paying high rents to investment companies. More people would have been foreclosed and more houses would be owned by private equity companies that were snatching up foreclosures wherever they could.

So true. Anyone worried about inequality and the onrush of feudalism should recall non-intervention would have predicated the greatest transfer of wealth any of us have witnessed in our lifetimes. Why it is that the typical GOP elitist was so enraged?: the buying opportunity that zero-sum vultures dream of was diverted. Instead, those with some cash, some credit and some nerve were able to make good stakes a couple of years after the crash. What the Aristocracy really wanted did not transpire. We would have had a much differently structured recovery, if, in fact, we had survived it.

Rew says

"What is clear is that the world will soon need a massive and coordinated spending push by governments to create demand and bring the broken global system back into equilibrium.

There are not enough intelligent Republicans in our country to accept this. In this deflationary condition they will advocate austerity.

Rew says

Trump = Hasten the day : protectionism, embrace the deflationary cataclysm,

He'll give the elites a second bite at the "blood in the streets" apple. If that moron is elected I'm going to increase my cash/liquidity to 75% and wait for it.

Tampajoe says

increasing money supply increases demand

No it doesn't. Increasing the purchasing power of people's money increased demand. Increasing the money supply simply shifts the purchasing power and thus the demand from one set of people to another. There is no net gain. If Joe has more money due to the printing of money, then Bob effectively has less. Joe can buy more only to the amount that Bob can buy less. It's called a zero-sum game for a reason.

Tampajoe says

Rates earned on savings also increase with inflation. Unless you put it under your mattress, it doesn't matter. The delta between savings rate and inflation is pretty constant.

Not true at all. People had lots of money in money market accounts back in the 1990s because interest rates were well above inflation. Today they don't because interest rates are less than inflation.

Your statement is empirically false.

Tampajoe says

Incorrect. You believe that prices would have fallen further absent the easing. Which is false.

Now you are just contradicting with offering no justification.

The bottom line is that absent extreme measures, all markets revert to the mean. This is a universal law. Read Common Sense on Mutual Funds, one of the best books on investing ever written. The author, John Bogle, the founder of Vanguard, is very insightful.

Tampajoe says

Not at all.

More unjustified contradiction.

Tampajoe says

It's not polite to post what others think. Better just to post what you think.

That's exactly what I did. I posted what I thought the points you were trying to make, and I phrased it thusly. Understanding and confirming whether or not you understand the opposing point of view is an important part of a discussion.

Tampajoe says

True Keynesians believe that the correct solution depends on the situation.

A No True Keynesian Argument. That's sort of original.

Tampajoe says

inequality was at all time highs (like now).

Currency debasement increases inequality by transferring wealth from the middle class to banks and financial firms, neither of which produce any wealth.

Tampajoe says

Dan8267 says

One final thought. If Keynesian economics was right, the solution to every depression would always be the same thing: smash everyone's car and burn down everyone's house. The resulting demand for automobiles and construction would immediately end the depression and bring prosperity to everyone.

And the ridiculousness of this idea just never seems to be grasped by economists.

I think you need to read up a bit more on Keynes.

freespeechforever says

Dan, true Keynesians would shriek in horror at what neo-Keynesians such as "Space Man" Krugman have done to their name.

Economic Essays: John Maynard Keynes

Keynes was a great publicist for his theories. He would say things like:

"The government should pay people to dig holes in the ground and then fill them up."
People would reply. "that's stupid, why not pay people to build roads and schools"
Keynes would respond saying "Fine, pay them to build schools. The point is it doesn't matter what they do as long as the government is creating jobs".

Keynes would agree completely with Krugman about fighting fictional aliens to stimulate the economy. I guess John Maynard Keynes is also "no true Keynesian".

I firmly do not believe we have crashed at all, as yet. I think the tech, financial, and housing burps over the past 15 years were only portents of a much, much greater failure yet to come. When it comes to equities and real estate prices, I would look back to 1994 for a landing zone.

The huge inflation the Austrian Economists expected is right in plain sight - in the inflation of assets rather than CPI variables.

For 22 years, if an asset class important enough to wealthy gamblers was threatened, the Fed/Treasury/Central Banks Cartel stepped up and covered the worst bets to keep the casino open.

I don't believe we will see THIS tower pancake down to a nice tidy pile of rubble, however. The collapsing structure will likely be accompanied by wars on many fronts. The actual possession of commodities rather than the paper varieties of them will matter entirely. Complex battles will be fought over those in physical possession of them, over the physical lanes of commerce by which those commodities can flow, and over the private organizations which have meaningful leverage.

Here is essentially what I believe to be true about the post-recession ('08) by central banks, and how they screwed the fundamental, foundation of the economy up, by using radical zero-bound monetary policy to reflate financial asset prices, massively distort natural rate of interest and break the yield curve, etc:

"The PPT and/or Fed Head 'put' have probably burned more investors than any other concept in the history of the markets.

I'm not saying that the radically activist central bankers and the pseudo/quasi-governmental technocratic group known as the working group on financial markets don't try and prevent market meltdowns.

I'm saying that the best they can accomplish is to delay the meltdowns, and that ironically, they make the inevitable meltdowns worse than they would have been if the forest fires weren't suppressed (allowing the brush and scrub to accumulate in prolific fashion).

In another irony, it's many of their very actions and radical interventionist policies that ratchet up the risk present in markets, which always and forever will unwind in a disorderly and messy fashion.

I remember the Greenspan 'put' being talked about frequently and openly in '99, just when people were starting to get worried because of the insanity of the dot.com malinvestment, and the same thing happening regarding talk of the Bernanke 'put' back in 2007, but in reference to hopium that The Bernank would save a much wider/broader swath of assets from tanking.

Well, guess what? Neither 'put' did jack shit. They merely served the purpose of allowing insiders time to unload their basket of over-inflated assets on dumb money speculators."

The Fed reserve and other central banks (BOJ, ECB, BOE, PBOC) are serial bubble-blowers, folks. They've exacerbated financial and economic crises, extending their duration and increasing their severity.

Here is essentially what I believe to be true about the post-recession ('08) by central banks, and how they screwed the fundamental, foundation of the economy up, by using radical zero-bound monetary policy to reflate financial asset prices, massively distort natural rate of interest and break the yield curve, etc:

"The PPT and/or Fed Head 'put' have probably burned more investors than any other concept in the history of the markets.

I'm not saying that the radically activist central bankers and the pseudo/quasi-governmental technocratic group known as the working group on financial markets don't try and prevent market meltdowns.

I'm saying that the best they can accomplish is to delay the meltdowns, and that ironically, they make the inevitable meltdowns worse than they would have been if the forest fires weren't suppressed (allowing the brush and scrub to accumulate in prolific fashion).

In another irony, it's many of their very actions and radical interventionist policies that ratchet up the risk present in markets, which always and forever will unwind in a disorderly and messy fashion.

I remember the Greenspan 'put' being talked about frequently and openly in '99, just when people were starting to get worried because of the insanity of the dot.com malinvestment, and the same thing happening regarding talk of the Bernanke 'put' back in 2007, but in reference to hopium that The Bernank would save a much wider/broader swath of assets from tanking.

Well, guess what? Neither 'put' did jack shit. They merely served the purpose of allowing insiders time to unload their basket of over-inflated assets on dumb money speculators."

The Fed reserve and other central banks (BOJ, ECB, BOE, PBOC) are serial bubble-blowers, folks. They've exacerbated financial and economic crises, extending their duration and increasing their severity.