patrick.net

control point says

Well, I pointed out previously that Money velocity is merely derived number = it is GDP/Money Supply.

How does that account for speculation? or that clearly the velocity of money would be much higher in NY than Jackrabbit gulch NV?

control point says

So what you are saying is that inflation is low in the face of exploding money supply because money velocity is decreasing. Hence, inflation is affected by combination of money supply AND Money Velocity, right?

No it is just money supply the velocity is irrelevant.

control point says

This is actually true. But lets use some math, shall we?

No math is required or apt

control point says

Inflation = Change in (money supply * money velocity.)

As I said before just the money supply and also as compared to the need for additional money.

control point says

So, inflation is the difference in demand this year vs. the demand last year of the same goods/services.

Inflation is driven by demand.

No it is not.

Another thing to consider is that your math is taken from the viewpoint of the aggregate rather than from the viewpoint of how the individual actually behave.

If the velocity of money being exchanged increases then the velocity of goods must also increase. Which limits the velocity of money as only so many goods can be consumed by the customer.

The prices will rise more slowly at the beginning stages of inflation and faster as the inflation continues to a point where it will rise faster than the supply of money towards the final stages of inflation. The point is that the inflation is not proportional to the volume of money. It is actually tied to the desire of the good.

indigenous says

It is actually tied to the desire of the good.

Right. Desire = Demand.

The rest of what you wrote is nonsensical. I don't know why you respond to me; you must be a masochist.

control point says

The rest of what you wrote is nonsensical. I don't know why you respond to me; you must be a masochist

And you say our fingers are up to the 2nd knuckle, yours are up to the third.

Good point about bothering to respond, it is clearly futile.

control point says

I don't enjoy arguing with morons, so last chance.

Well then I think you should stop looking in the mirror.

LOL. Good night guys.

No more high quality macroeconomic education for both of you from me, for free no less.

Let me know when you actually invest real money based on any of your beliefs - I will most likely be a willing and happy counterparty.

control point says

No more high quality macroeconomic education for both of you from me, for free no less.

I know how you feel.

You mean your high quality untested macro economics, that are more delusion than reality. And when they are tested the best you can come up with is ad hominem

control point says

oney supply grows on one graph 1959-1980, inequality falls on the other 1959-1980.

But to answer you question the fall has to do with the tax rates posed on the super wealthy with a few other things.

In 1982 the top tax rate dropped from 81%-91% from the 1940's down to 77% in the 60's and finally 50% in 1982. However, the top marginal tax rate has been at 38.5% since 1987 with some some very small fluctuation here and there except for 1988 where it was 28%. However, this is will my point in the money supply kicks in..

According to your chart the income levels rises around 1987 which is where the top tax rate was 38.5%, in 1993-2003 the top tax rate was at 39.6% yet instead of the wealth disparity staying stagnate for 10 years (like it did from 65-81) it continues to increase rapidly (due to a rapid increase of the money supply) and only drops temporarily after the dotcom bubble.

Even after the Bush tax cuts in 2003 which only reduced it by 4% the wealth disparity continues to increase much more than the rate of the tax cut and even today when Obama increased it back to 39.6% the wealth gap still increases even at a faster pace but only because the money supply is increasing at a faster rate.

Also during the 70s your chart bottoms out which should be so as the money supply increased slowly, however, inflation was high during the 70s and peaked at 81 then quickly turned around to a low by 1983 which is why you see a huge jump of income inequality after 1983. According to my chart in 1983 the money supply jumps again drastically, while taxes were at 50%. Even though taxes don't fall again until 1987 the income equality gap is still rapidly increasing along with the money supply.

My chart and your chart shares the same story. The money supply from the 60s up until the 1983 steadily increase, nothing major but a slow steady increase, however it rapidly increases in 1983, presumably to counter the recession and high unemployment levels (something the FED always does).

Again if you look at my chart with yours you see another rapid increase of the money supply between 2001-2002 from the dotcom bubble while yet inequality still runs rampant but tax on the top stayed around the mid 30% and once again you see an even bigger increase from 2008-2009 while yet again top marginal tax stayed in the mid or even high 30s but yet you still see an even a bigger rate of income inequality.

If anything your chart and my chart share the same story and proves my point.

Here is the straight dope:

http://mises.org/daily/2916

control point says

The inflection points, in the early 1930s and late 1970s, are clear. If money supply was the cause - you would think we would see a change in the money supply as well. We don't - you know and I know that money supply growth has been consistently increasing throughout.

The rate of the increase in 60s-70s was slow, not rapid. I stated this multiple times.

control point says

You have identified it as taxes - and I agree with you. Taxes and regulations - ie restrictions on free market capitalism - were increased starting under the Second New Deal and remained that way

Negative, I identified it as taxes and slow steady of the money supply. Once the money kicked into overdrive it didn't matter what the tax rate was, the wealth gap kicked into overdrive as well.

control point says

Just wanted to point this out - it is a contradiction if you still subscribed to the "money supply = inflation" theory. If inflation was high, then money supply growth must also be high if they are equal.

Incorrect, money doesn't get taken out of the economy over night. You can have money supply increasing slow or fast but with the money supply constantly growing for decades it takes time for all that money to exit the economy even when inflation is high.

Sadly, you didn't learn anything. I am quite disappointed.

You just ignored that once again no matter the tax rate, when the money supply kicks into overdrive so does the wealth disparity.

What will it take for you to learn something? I think i am done giving you free lessons.

spydah_hh says

You just ignored that once again no matter the tax rate, when the money
supply kicks into overdrive so does the wealth disparity.

The data just doesn't show that. Here's how I would look at it:

The tax rates, regulation situation, labor power (leverage) set the stage for whether disparity will grow or fall. Growing money supply simply amplifies the effect.

That's overly simple, obviously...

spydah_hh says

The rate of the increase in 60s-70s was slow, not rapid. I stated this multiple
times.

Are you ready for this? Other than the spike at the peak of the dot com bubble (which, by the way aligns with falling income inequality) - year over year money suply growth ramped up in the 1960s and largely remained rangebound from around 1970 through 2007.

That is, the data once again shows your assertion that "money supply growth in the 1960s and 1970s was slow" at least when compared to the 1980s,1990s, and most of the 200s, is false. If money supply growth in the 1960s and 1970s was slow, it was slow in the 1980s and 1990s as well.

http://research.stlouisfed.org/fred2/graph/?g=sNN

spydah_hh says

What will it take for you to learn something? I think i am done giving you
free lessons.

FFS even your verbal abuse isn't original.

Son, there isn't a single thing you could show me that I didn't already see when poking around mises.org from 2006-2008.

tatupu70 says

The tax rates, regulation situation, labor power (leverage) set the stage for whether disparity will grow or fall. Growing money supply simply amplifies the effect.

So you agree then?

Like I told you you're going to get wealth disparity not matter what. A doctor is going to make more than a taxi driver, a business man is going to make more than his workers, that's just the natural order of economics or economic LAW. However, like you said the growing money supply simply amplifies the effect.

Glad you finally agree.

Now just need to get you to agree on the SS ponzi scheme.

control point says

That is, the data once again shows your assertion that "money supply growth in the 1960s and 1970s was slow" at least when compared to the 1980s,1990s, and most of the 200s, is false. If money supply growth in the 1960s and 1970s was slow, it was slow in the 1980s and 1990s as well.

Now now, lets be consistent you already used my money supply chart and wanted me to explain why the incomes from the 59 though 80s was declining and I already explain why.

Actually no, the money supply drastically increased in 1983 and has so ever since. In fact the drastic increases occurred in 1983, 2001, and 2008. There was more increases to the money supply from 2001 then 1983 but more increases from the money supply in 2008 than 2001. Even today the money supply is still being ramped up more than it was in 2008. What do all those years have in common? Hint starts with an R.

In fact every time we get a recession more money is needed to stimulate the economy and it worked for quite some time. Now though after the 2008 recession the tactic is no longer working and really is just making matters worst as the dollar falls and prices rise, while yet we're still receiving bad economic data. In order words, after decades of being suppressed by the phony economy, the real economy is starting to show its ugly head and it's not pretty. Soon the money supply will increase even more due to more bad economic data but it still won't turn things around, and the bad economics is due to a multitude of reasons. But unlike in 1983 and 2001 we were able to create booms (which are bubbles) to dig us out of the previous recession. However, we exhausted our monetary strategies in creating 2008 bubble, which is why things are still bad and not improving. In fact economic data have gotten much worst since the reduction of QE, it leads me to believe that the FED will increase their QE at some point.

spydah_hh says

Like I told you you're going to get wealth disparity not matter what. A
doctor is going to make more than a taxi driver, a business man is going to make
more than his workers, that's just the natural order of economics or economic
LAW. However, like you said the growing money supply simply amplifies the
effect.

I don't think so. You said inflation/the Fed cause disparity. I say they are not the cause. Unless you now agree that taxes, regulation, labor power/leverage are the true causes. If so, then we agree.

Certainly you will always have disparity--the point is that you want to limit it to a reasonable level. Because the economy simply doesn't function well when disparity gets to current levels. That's why we see all the QE nonsense, bubbles and busts, etc.

spydah_hh says

Now just need to get you to agree on the SS ponzi scheme.

When you figure out the requirements of a Ponzi scheme, then we'll agree.

tatupu70 says

When you figure out the requirements of a Ponzi scheme, then we'll agree.

Funny your definition and my definition were the same. I don't think it's me who needs to figure out what a ponzi scheme is. I think it's you who needs to figure out how social security works.

Perhaps you should explain that to me, how does SS work in your mind?

tatupu70 says

I don't think so. You said inflation/the Fed cause disparity. I say they are not the cause. Unless you now agree that taxes, regulation, labor power/leverage are the true causes. If so, then we agree.

Inflation/the Fed is the cause for the wealth disparity we see.

tatupu70 says

Certainly you will always have disparity--the point is that you want to limit it to a reasonable level. Because the economy simply doesn't function well when disparity gets to current levels. That's why we see all the QE nonsense, bubbles and busts, etc.

This is not true. During the glided age we had the highest economic growth ever known and the standard of living for Americans we much higher than the rest of the world, even higher than Great Britain who was the world's super power at the time.

Even when Rockefeller/Vanderbuilt/Charles Scwab made their millions, Americans then were still better off than the rest of the world because those people made increased everyone's standard of living. Contrary to what was taught to you in school sadly.

spydah_hh says

Perhaps you should explain that to me, how does SS work in your mind?

Sure--it's called pay as you go. The current workers support the retired workers. Assuming you set up the system to bring in enough revenue to cover the expenses, this system can work forever with a stable population. No growth in payers is necessary.

spydah_hh says

Inflation/the Fed is the cause for the wealth disparity we see.

That's unfortunate. You appeared to be learning for a second there. So, you've completely forgotten everything you wrote about the effect of taxes on disparity?

tatupu70 says

That's unfortunate. You appeared to be learning for a second there. So,
you've completely forgotten everything you wrote about the effect of taxes on
disparity?

I'm moving on. Good luck, stay sane.

tatupu70 says

spydah_hh says

Inflation/the Fed is the cause for the wealth disparity we see.

That's unfortunate. You appeared to be learning for a second there. So, you've completely forgotten everything you wrote about the effect of taxes on disparity?

What I said was that when the money supply went into overdrive it didn't matter what the tax rates were the wealth disparity increased as well.

tatupu70 says

Sure--it's called pay as you go. The current workers support the retired workers. Assuming you set up the system to bring in enough revenue to cover the expenses, this system can work forever with a stable population. No growth in payers is necessary.

How can you know the system can work forever? For example, so what happens if the working class falls compared to those who are retired and collecting SS?

spydah_hh says

What I said was that when the money supply went into overdrive it didn't
matter what the tax rates were the wealth disparity increased as well.

Was there a time when tax rates were high, money supply was high, and disparity increased?

If not, what makes you think this?

spydah_hh says

How can you know the system can work forever? For example, so what happens if
the working class falls compared to those who are retired and collecting SS?

Then you have a problem. But that's the point. If the population is stable, like I said, then SS works fine forever.

A ponzi scheme will not continue unless there are ever increasing investors.

That's (one of) the difference(s).

tatupu70 says

Then you have a problem. But that's the point. If the population is stable, like I said, then SS works fine forever.

The population to workers to retirement on SS has been declining. When SS was first introduced the workers to SS ratio was 41 to 4 or 10 to 1 now it's down to about 3 to 1. The worker to retirement on SS population is declining and will probably decline more since the economy isn't getting any better.

tatupu70 says

A ponzi scheme will not continue unless there are ever increasing investors.

First off, those who pay into SS are investing their money into it, technically they're forced to put their money into it so you can call it a tax. But either way our money is invested into SS but by force. At least with a normal ponzi scheme excluded by the government you have an option not to put your money into it if you think something is fishy.

Nonetheless, it is still a ponzi scheme and still works like a ponzi scheme because it requires more people to place their money into the system in order to pay off those who previously paid into the system and are now collecting money from it.

Just terming the word investment does not change the definition of a ponzi scheme. A ponzi is scheme define as a process, not defined by a term.

tatupu70 says

Was there a time when tax rates were high, money supply was high, and disparity increased?

If not, what makes you think this?

Yes, I stated that in my post. Back in 1983-1987 the tax rate was 50%, however, the money supply rapidly increased in 1983 and disparity rapidly increased along with it. For 4 years the tax rate stayed at 50%, therefore even though the money supply increased rapidly the wealth gap should had remain steady for four years, however, it didn't it increased along with the rapid money supply increase.

But even when the tax rates dropped down in the 30% and even today 39% the wealth gap went up more much than the decreases or increases of top tax rate, and that's because the money supply increased more and more.

spydah_hh says

For 4 years the tax rate stayed at 50%, therefore even though the money supply
increased rapidly the wealth gap should had remain steady for four years,
however, it didn't it increased along with the rapid money supply increase.

I think there's a flaw in your thinking. It's not the change in tax rates that causes disparity. If tax rates are too low and they remain at the same level, disparity will increase regardless of what the money supply does.

A few other comments--it's not only income tax rates but also capital gains rates, and very important is the power of labor vs. ownership. This can be quantified by looking at corporate profits.

spydah_hh says

The population to workers to retirement on SS has been declining. When SS was
first introduced the workers to SS ratio was 41 to 4 or 10 to 1 now it's down to
about 3 to 1. The worker to retirement on SS population is declining and will
probably decline more since the economy isn't getting any better.

Yes--that's partly demogrpahics at work, partily increasing life spans, as well as a poor economy as you state. But that is not relevent as to whether SS is a Ponzi scheme.

spydah_hh says

Nonetheless, it is still a ponzi scheme and still works like a ponzi scheme
because it requires more people to place their money into the system in order to
pay off those who previously paid into the system and are now collecting money
from it.

Just terming the word investment does not change the definition of a ponzi
scheme. A ponzi is scheme define as a process, not defined by a term.

It doesn't require more people. You're wrong.

tatupu70 says

This can be quantified by looking at corporate profits.

http://research.stlouisfed.org/fred2/series/CP/

spydah_hh says

The worker to retirement on SS population is declining and will probably decline more since the economy isn't getting any better.

http://research.stlouisfed.org/fred2/series/GINIALLRH

^ that's why, but Austrian economics celebrates that trend.

tatupu70 says

Certainly you will always have disparity--the point is that you want to limit it to a reasonable level.

http://www.huffingtonpost.com/2012/05/30/us-child-poverty-report-unicef_n_1555533.html

sbh says

control point says

But lets use some math, shall we?

Noooooooooooooooo make it stop, make it stop

The math like the graphs are not a metric for what they are purported to measure. The math is specious.

indigenous says

The math like the graphs are not a metric for what they are purported to
measure. The math is specious.

Does the whole world seem specious to you?

tatupu70 says

Does the whole world seem specious to you?

Much of it, certainly your ilk

sbh says

tatupu70 says

indigenous says

The math like the graphs are not a metric for what they are purported to

measure. The math is specious.

Does the whole world seem specious to you?

Only the parts that refute his scripture. Corrupt archaeologists always find the missing link, no matter if it's a fossil or an old golf ball. Don't insult Indigence with number. Austrians never apply number. Stop it, you're being rude.

I know. I obviously haven't learned my praxeology lesson very well.

indigenous says

Here is the straight dope:

http://mises.org/daily/2916

You do realize that Hazlitt here essentially uses the same math I showed you - and he is making the same argument?

He basically says demand for goods * prices for goods = money*velocity. This is exactly what I said.

Money is only a medium of exchange - the prices of goods are affected by the demand for the goods. He is focued on the velocity (and how it is a dependent variable) but the same can be said for the supply of money - it is the other part of the same equation. We choose to increase money supply in lock step with economic growth to avoid deflation and hoarding of money.

He is describing a liquidity trap which is a Keynesian theory.

indigenous says

And when they are tested the best you can come up with is ad hominem

You suck at identifying fallacies.

"You're retarded" is not an ad hominem fallacy, it is verbal abuse.

"That argument is specious because it is from your ilk (Keynesian)" is an ad hominem.

Moron.

control point says

He basically says demand for goods * prices for goods = money*velocity.

I don't see it that way. Velocity is not part of the equation as he indicates. Goods and Money are linked but the velocity is not.

control point says

Money is only a medium of exchange - the prices of goods are affected by the demand for the goods. He is focued on the velocity (and how it is a dependent variable)

Velocity is not dependent as he indicates in the case of NY vs a smaller city. Or as we see right now as the banks are holding onto money and it is not stimulating the economy.

control point says

but the same can be said for the supply of money - it is the other part of the same equation.

Hazlett also indicates this can vary at the start middle and end of an inflationary period. There is no such thing as hording e.g. the banks currently choose to increase their reserves partly because the FED is paying them interest on those funds partly because the can play arbitrage. But is not hoarding they choose to invest that way.

I'm not familiar with the liquidity trap.

It is hard for you to understand but velocity is not tied to money supply. Right now the FED has printed 6 trillion but the velocity is not connected as it is very low. Other times it can be high in deflationary time.