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Komrade K
Forum Full Member


Registered: 08/02/05
Posts: 927
Location: Whitstable, Kent England
 
Re:Brace for impact
Sunday, November 15 2009 @ 04:05 PM CST

Quote by: MotherofMeursault


Inflation is the expansion of the money supply. Period. It is the Federal Reserve that invents the money and injects it into the economy. The Fed is not an inflation watchdog; it IS the inflator. Each dollar it invents reduces the value of all other existing dollars, and so (after a time delay as the market realizes there are all these new dollars) prices rise to protect the value of goods.
Inflation is not rising prices; it is falling money.
Other factors (such as velocity) enhance the effects of inflation, but inflation is the culprit.


As for the rest of your comment (if I understand it correctly), deflation does not have to be an inability to spend, it can -and often is- a reluctance to spend. The Keynesian view of the economy is that it's a machine: load it up with more money, and it'll begin purring again.
But an economy is not a machine; it is an ECOLOGY. It is people with all their unpredictable and uncontrollable feelings about how things are and all the decisions that flow from those feelings. When the ecology is wounded and lies down for a while, it should be left alone to heal. The Keynesians step in with their stimulus poles and try to shock the poor beast back into action. Their repeated attempts to stimulate with rafts of money create (to further mix metaphors) a sort of fiscal fuel-air bomb of idle dollars. As Jim Sinclair is fond of pointing out, "Hyperinflation is not an economic event; it's a currency event". That is, it's an entirely avoidable event, but once set in motion impossible to stop. Sooner or later, all the bad dollars in the system are going to have to be shaken out. The more dollars the Fed pumps into the economy, the more devastating the shakeout will be.




Like the idea of the economy as an ecosystem in that it's a good analogy for a complex of multifaceted interactions which aren't fully understood. Your point about the psychology of the situation is also a good one - clearly how people feel about both their own and the wider economic situation is going to influence their propensity to spend and/or save. However saying that increased money supply causes inflation is a bit like saying umbrellas cause rain as changes to money supply are generally a symptom of inflationary and deflationary pressures.

Take for example the expansion of money supply following the credit crunch. The increase in money supply has been to ease credit flow - in other words, we're back to our old friends supply and demand. At this point in time I would agree that the debt burden taken on by the US, UK and elsewhere could potentially lead to high inflation as central banks come to refinance but what is clear right now (well over a year after the fall of Lehman) is that increased money supply has not caused high inflation - indeed the opposite has happened and central banks are worried about deflation.

In the context of the economy as ecosystem analogy the focus on currency is limiting and therefore unhelpful because it's just one of the facets of this 'ecosystem'. It's intellectually 'nice' but excludes the messy stuff that affects us day-to-day in our household budgets and workplace.

Now I understand that from your perspective you view the new healthcare proposals as likely to expand the money supply still further but it's clear from what you've said previously that a) the US healthcare system is in need of serious reform and b) there are vast cost savings to be made in this process. In other words reform could potentially have a very beneficial effect on government expenditure and reduce the net burden on the taxpayer.

KK
Feter
Forum Full Member


Registered: 07/03/06
Posts: 4462
Location: , Nowhere !
 
Re:Brace for impact
Sunday, November 15 2009 @ 04:13 PM CST

151??

«Blues is easy to play, but not to feel » (Jimi Hendrix)
MotherofMeursault
Forum Full Member


Registered: 09/28/08
Posts: 380
Location: , United States
 
Re:Brace for impact
Sunday, November 15 2009 @ 08:09 PM CST

Quote by: Komrade K


Like the idea of the economy as an ecosystem in that it's a good analogy for a complex of multifaceted interactions which aren't fully understood. Your point about the psychology of the situation is also a good one - clearly how people feel about both their own and the wider economic situation is going to influence their propensity to spend and/or save. However saying that increased money supply causes inflation is a bit like saying umbrellas cause rain as changes to money supply are generally a symptom of inflationary and deflationary pressures.

Take for example the expansion of money supply following the credit crunch. The increase in money supply has been to ease credit flow - in other words, we're back to our old friends supply and demand. At this point in time I would agree that the debt burden taken on by the US, UK and elsewhere could potentially lead to high inflation as central banks come to refinance but what is clear right now (well over a year after the fall of Lehman) is that increased money supply has not caused high inflation - indeed the opposite has happened and central banks are worried about deflation.

In the context of the economy as ecosystem analogy the focus on currency is limiting and therefore unhelpful because it's just one of the facets of this 'ecosystem'. It's intellectually 'nice' but excludes the messy stuff that affects us day-to-day in our household budgets and workplace.

Now I understand that from your perspective you view the new healthcare proposals as likely to expand the money supply still further but it's clear from what you've said previously that a) the US healthcare system is in need of serious reform and b) there are vast cost savings to be made in this process. In other words reform could potentially have a very beneficial effect on government expenditure and reduce the net burden on the taxpayer.

KK



I'm glad you like the analogy; I can't claim credit for it, though: that's an Austrian School of Economics concept. I like the Austrians very much. And you are a very gracious debater; I am looking forward to thrashing this whole thing out with you.

After reading your comments, though, I think we might be shouting at each other from opposite sides of a chasm.
To clarify my position: I do not think inflation is CAUSED by increases in the money supply; I say it IS an increase in the money supply. The inflation itself is the cause of the 'pressures'. Those factors you are talking about, such as velocity (which I mentioned in a post a page or so back), ENHANCE the effect of that currency inflation, which is what, ultimately, creates the runaway inflation so common to heavily debased currencies.

I know that we were told that the increase in the money supply was to ease credit flow; we have been told that repeatedly by the media and Mr. Bernanke. I have not seen an easing of credit flow, though: bank loans are harder to get, credit card companies are increasing the minimum monthly payments, banks are failing, unemployment is nearing 10% and CIT (a payroll lender) declared bankruptcy two weeks ago. Even die-hard Keynesian boosters would have to admit that the attempt to reinflate the credit bubble is a failure. And all the excess dollars that now exist present enough of a risk that Mr. Bernanke has taken pains to assure us he has an 'exit plan'. (It might be worth pointing out here that while he hasn't described what that plan might look like, he HAS reassured us that the spigot of low interest rates will be left open for the foreseeable future.)

And I am unconvinced that deflation is a threat to anyone. A contraction in the money supply increases the value of the money as surely as the creation of new money devalues existing currency. Even if we use the government's definition of deflation (falling prices), why is that a problem? Prices naturally fall as a result of improvements in manufacturing, efficiency, etc. Why would the government wish to protect us from the scourge of falling prices? Personally, I think it's a straw man designed to distract us from the Fed's inflation of the currency.

I also don't see much healthy supply and demand going on. High unemployment is an oversupply of workers, and no wealth creation (ie, no domestic manufacturing) means no demand for them. The dollar, too, is subject to the law of supply and demand. Since the end of July, the Dollar Index has dropped from 79.5 to 75.5 and shows no signs of stopping. Again, Bernanke's assurance that interest rates will remain low is an open invitation to short the dollar, further reducing demand for it.

Finally, what I am saying about the US healthcare system is that it needs to return to its pre-Nixonian state, when doctors were paid for services rendered and accidents/catastrophic care were the kind of rare events that one naturally insures against. To do that would entail entirely removing the government from the medical, pharmaceutical and insurance industries. That is the only way I see that cost savings will be effected.
If the government would like to turn its much celebrated power toward disentangling itself from those industries, I would happily canvas for that.

Warmly,

MoM




Dadai.2
Forum Full Member


Registered: 09/09/08
Posts: 1733
Location: Frisco, Texas 😎 USA
 
Re:Brace for impact
Sunday, November 15 2009 @ 08:28 PM CST


MoM, you are a veritable wealth of economic and monetary history and information...

thank you...

D

Take a listen >>> Texas Tango
Dadai.2
Forum Full Member


Registered: 09/09/08
Posts: 1733
Location: Frisco, Texas 😎 USA
 
Re:Brace for impact
Sunday, November 15 2009 @ 08:29 PM CST

Quote by: Feter
151??



Don't worry brother, it'll go to higher numbers.

Smile

Take a listen >>> Texas Tango
guitapick
Forum Full Member


Registered: 01/18/07
Posts: 2031
Location: New York City, USA
 
Re:Brace for impact
Sunday, November 15 2009 @ 10:47 PM CST

Quote by: MotherofMeursault

...High unemployment is an oversupply of workers...



And an undersupply of jobs...outsourced jobs...white and blue collar...the global economy has replaced our national economy...is this good?


I live between the notes

CDBaby "Above the Surface" iTunes Store

MotherofMeursault
Forum Full Member


Registered: 09/28/08
Posts: 380
Location: , United States
 
Re:Brace for impact
Monday, November 16 2009 @ 12:15 PM CST

Quote by: guitapick
Quote by: MotherofMeursault

...High unemployment is an oversupply of workers...



And an undersupply of jobs...outsourced jobs...white and blue collar...the global economy has replaced our national economy...is this good?




Doesn't sound too good to me. Especially considering that in our lifetimes the US has gone from the world's greatest creditor nation to the world's chief debtor nation into the bargain.

ronnielong
Forum Full Member


Registered: 04/18/04
Posts: 850
Location: Denver, Colorado USA
 
Re:Brace for impact
Thursday, December 03 2009 @ 03:58 PM CST

Quote by: MotherofMeursault
Quote by: ziti
MoM

cant help but notice when someone calls me "boy"...

and Ed is a good friend of mine, and I call him "dear" all the time.

Coming from you it sounds very arrogant. The point is being made about the right "talking down" to the MJ community.

Thanks Ed....I think you are right on...dearie.



Fran,

Do not take offense, please. The 'dear' business (and the 'Love, MoM' thing, too) is an essential part of my persona; it is 'schtick'.

MoM



That's funny...

I remember a certain someone giving me grief for my "schtick"...

To be fair though, your "persona" definitely emits the stink of arrogance... you can admit it... but it makes for a good "show" Wink

So... Carry on...

Smile

NEW ALBUM!! CLICK HERE!
ronnielong
Forum Full Member


Registered: 04/18/04
Posts: 850
Location: Denver, Colorado USA
 
Re:Brace for impact
Thursday, December 03 2009 @ 04:59 PM CST

Quote by: MotherofMeursault
Quote by: guitapick
Quote by: MotherofMeursault

...High unemployment is an oversupply of workers...



And an undersupply of jobs...outsourced jobs...white and blue collar...the global economy has replaced our national economy...is this good?




Doesn't sound too good to me. Especially considering that in our lifetimes the US has gone from the world's greatest creditor nation to the world's chief debtor nation into the bargain.




You said you were a Constitutionalist, right MoM? Me too... and sadly we have indeed gone from 1st to last...

What say you to revolution V2.0?

Due to the fact that our Government has been fucking us for the last, say, 100 years (even longer if you're black.. or a woman...)

Don't even get me started on the Federal Reserve and the fact that they create money out of thin air... might as well put some of that Monopoly money into circulation...

But alas... revolution V2.0 will never take off... why you ask?

To be blunt: The problem is this country (at least the vast majority) seems to be full of uneducated, overweight, lazy ass pussies... glued to the TV (usually FOX news) whilst stuffing their fat faces with some kind of drive thru "food" substance... obsessed over celebrity and blind to any other option outside a two party system.

Sure, there is SOME "hope" out there... the few that believe in limited government, those that would abolish the federal reserve, that would have never gone into Iraq/Iran/Korea/Vietnam and on and on, the few that don't believe in "nation building", and some that still actually believe in the separation of church and state

Tis a shame these few aren't of many.

It is quite entertaining however, watching the two sides (reps/dems) overreact to each step the other side makes... we are a nation led by god damn adult infants... sitting in their own shit... passing the burden on to us.

I would like to say though, as an independent constitutionalist, I am ok with Obama. So far I'm not on board with the HC reform, but I guess I have to study it more (not like we have a vote anyways right??) ... but I like him waaaaayyyy more than 'W'... that guy was a fucktard.

Its just funny watching republicans FREAK for a change... wait, maybe that was the "change" big O was talkin' bout... hahaha

"Oh no! Obama is a socialist and he's gunna take away our guns and my bible and stuff!! He's one of them muslims ya know..."

You know what I mean? Reps didn't say shit when Bushy took us into an unprovoked-UNCONSTITUTIONAL-INVASION of Iraq- and the Dems just sat around like a bunch a pole smokers...

How much is that war costing us again?? In $$$$$$$ and in American lives? And who is going to pay for that (ongoing) war?

But when the scary black guy wants to do something about health care... BAM! Them Reps are all over it...

Here's a little cost comparison for ya though:
8 years of war= 938 BILLION-over 4,000 Americans Killed-over 30,000 wounded
New HC 10 year plan= 900 BILLION Dollars

I mean, is it really so scary people? I forget- if someone breaks into your house- or you get in a car crash, they send the Police and the Fire Department... right? How are they funded again?

Regardless, looks like we're the ones who gotta pay for it all...

So...

I say fuck it! Obama should just push this HC reform thru just like Bushy pushed the invasion of Iraq. Then you'll really see people shit their britches!

Hahahahahahaha....


Rant end.

Wink




NEW ALBUM!! CLICK HERE!
 
MotherofMeursault
Forum Full Member


Registered: 09/28/08
Posts: 380
Location: , United States
 
Re:Brace for impact
Thursday, December 03 2009 @ 08:14 PM CST



Oh, Ronnie, how lovely to see you again!

Yes, I agree with most of what you say (and if you scanned this thread you already know my thoughts about the Fed: the sooner it is abolished, the better). Your diagnosis of the average Amerikaner is positively Zappa-esque, and "food substance" made me laugh out loud! But I'd love to be able to convince you to rethink your HC/ Iraqistan position:

I think if I were to meet Mr. Obama, I would like him immensely. He is measured, articulate, intelligent etc. He projects (important word alert) the personification of the American upper-middle class, a group I hold in high regard (new divisive thread alert). To his credit, and I'm afraid, his enduring difficulty, he confessed early on that he was weak on the subject of economics. He has since convened not one, but two, separate bodies of 'economic advisors' to help him through the rough spots. A scan of the best and brightest he has chosen for the two groups reveals that all (with the possible exception of Paul Volcker) are Keynesians. This bodes ill.
I am sure you would agree that while it is morally satisfying to propose outspending the war in the pursuit of healthcare, it is a fools game: all the money is invented and the more that is invented, the worse the ultimate outcome will be.

Revolution 2.0 piques my interest, but the particular problem of the excess monetary inflation PLUS no household savings PLUS overwhelming foreign debt sets the stage for an inflationary depression (quite a different animal from the Great Depression). The social forces that that sets in motion could very easily produce a revolution more 'French' than 'American'. Capisce?
So, my position is: NO universal insurance, NO Middle East war, NO more support of foreign dictators, NO more counterfeit currency, NO MORE meddling of any kind...............







And, yes, I remember with great fondness my attack on your persona Big Grin

But this 'stink of arrogance' is mystifying...... I've always thought of it as 'the rare perfume of self-esteem'.

[insert winky emoticon here]


MoM