patrick.net

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.

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.

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.