doobnVA
Well-Known Member
If I remember correctly (and I do), it wasn't only the dems who've been passing these spending bills so cut the stupid partisan bullshit already.
Seriously.
Inflation. Is it so bad for the AVERAGE American?
- Thread starter tnrtinr
- Start date
Seriously.
tnrtinr
Well-Known Member
I have just explained in the same post why that is not always true. They are two different concepts and an increase in money supply is NOT the same thing as INFLATION!!! .
tnrtinr
Well-Known Member
I see what you are saying.
Could an influx of cash help people pay debt if they are diligent? Even if that increase in MS only temporarily adjusts i rates down and allows them to reallocate debt. I say yes.
doobnVA
Well-Known Member
No, they are not "the same thing", but they are not completely independent of one another. Money supply has a DIRECT impact on inflation, even according to the website you're so fond of quoting from.
You're saying money supply doesn't cause inflation, and you're just plain wrong. IT absolutely does, and everyone but you seems to recognize it.
You're telling me that inflation isn't the result of increased supply of money, even though the web site you keep pasting from says it is, economists say it is, even the head of the Federal Reserve says it is. In short, everyone knows that pumping more money into the economy CAN and probably will cause some sort of inflation. Whether it's monetary inflation, or whether that monetary inflation leads to price inflation, it's inflation and it's caused by increasing the supply of money.
tnrtinr
Well-Known Member
Inflation is INDEPENDENT of changes in money supply. An increase in production costs, labor costs, raw materials, exchange rates, taxes, reduction in supply, increase in aggregate demand, all conribute to inflation and have NOTHING to do with the money supply.
You are wrong. Increasing the money supply CAN cause inflation (and most certainly will with regards to the Fed and their current policy) - HOWEVER increasing the MS does not HAVE to cause inflation.
Printing money when the demand remains unchanged or is decreasing will cause inflation ceteris paribus. Ceteris paribus - Printing money when the demand for dollars is increasing will cause the 1. value of the dollar to increase, 2. stay the same or 3. decrease depending on whether 1. not enough money is printed to satisfy demand 2. the exact amount of money is printed as is demanded 3. more money is printed then the demanded.
Check out this link, Its going to explain inflation in terms just about anyone can understand, pay particular attention to the example on the island. It explains clearly why things like production costs, labor costs, raw materials, exchange rates, taxes, reduction in supply and increase in aggregate demand DO NOT CAUSE price inflation
http://www.silverbearcafe.com/private/2.08/inflation.html
tnrtinr
Well-Known Member
I read your article. Why he chose a perishable item (fish) for money has me scratching my head. Now it is time for you to do some work.
Explain what happens when a woman washes ashore of my island and Menard and I have kids with her, and they have kids and so on. Before you know it there are 100,000 of "us" on the island (the womans family is know for multiple births).
Do they produce or do Menard and I do all of the work with our same output as we had when it was just the two of us? Do we increase the money supply (fish) as the population increases? If the money supply is expanded at the EXACT same rate as population growth is there inflation?
So he uses perishable fish, Dollars are made of paper and are perishable also.They burn easily and if left to rot outside will decompose quite readily. Precious metals are the ultimate money. Its just an example because its very easy to understand.I read your article. Why he chose a perishable item (fish) for money has me scratching my head. Now it is time for you to do some work.
Explain what happens when a woman washes ashore of my island and Menard and I have kids with her, and they have kids and so on. Before you know it there are 100,000 of "us" on the island (the womans family is know for multiple births).
Do they produce or do Menard and I do all of the work with our same output as we had when it was just the two of us? Do we increase the money supply (fish) as the population increases? If the money supply is expanded at the EXACT same rate as population growth is there inflation?
If everyone fishes, then there is MASSIVE inflation as there will be 100,000 fish for each loaf of bread. But that would not happen its not possible, markets will find equilibrium. Half will bake bread and half will fish if those are the only choices, in which case there would be no inflation. If everyone bakes bread there would be massive DEFLATION, as the Fish would become worth more and more bread. So just adding people into the mix does nothing to inflation , only creation of money can affect it.
What makes you think that adding people and at the same time adding money would not create inflation? I Don't understand your logic here, adding more people only creates more demand, which drives up prices when there is no complimentary increase in supply. But that isn't inflation either its just law of supply and demand, inflation is the process by which ALL items increase in price.
budsmoker87
New Member
idk. interest rates have remained very low for a lil while now, but we've been headed in this downward spiral for so long. I see this doing nothing but squeezing the little people in the private sector. And I agree- all these bailouts are doing, is reallocating wealth. to the government or major financial firms that are "too big to fail," <---amazing how americans buy into this concept, that a company is ever too big to fail. understand that under our financial system, this means that smaller companies are too little to save...and the money that went to the too-big-to-fails, are failing anyway.
But mostly, all these bailouts do is fuck us over while reallocating wealth to the central banks/government, who aren't even afflicted by the sour economy
once again, when the money supply is increased by over 70%, ya can't help but intuitively think the dollar WILL lose value, and there's only 2 options left for the fed/treasury to prevent total collapse:
1. increase interest rates and taxes (carbon taxes!!!!), to suck the money back in so the dollar WON't collapse (placing tremendous strain on middle and lower classes)
2. drop the dollar and introduce a new world currency (which i feel the central banks DO want to secure global financial control)...I think it's simply a matter of time till our currency collapses and a new currency is introduced. this will really bridge the fascism gap full-circle, with the same central bank controlling the world financial system/politics. Get to know the obama crew- they're all members/former members of major financial firms and/or the federal reserve itself
the amount of currency vs amount of production is what really predicts amount of inflation.
hyperinflating the currency, as WE'RE doing, since we're a country of consumerism and not production (and our trade w/productive countries is falling OFF the map) is gonna decrease the value of the dollar, and it'll basically take MORE of your dollars to afford products, without an increase in wages.
there's a reason why inflation never exceeded past 15 cents since the american revolution in 1776 till 1913. now the value of the currency is all over the map, and it's because we've handed the printing powers to the federal reserve, without much oversight whatsoever.
constitutionally, CONGRESS is the ONLY entity allowed to print the currency of our nation. But what's the constitution mean anymore? Most americans are clueless
tnrtinr
Well-Known Member
Thank you for not answering my questions.
If half - 50,000 people catch 2 fish per day and 50,000 bake 2 loaves of bread per day and fish is "money" then the money supply has increased by 50,000 times from when it was just two guys!!! It went from 2 loaves per day to 100,000 loaves per day and the money supply (fish) has increased from 2 fish per day to 100,000 fish per day!!! Yet here would be ZERO inflation (WHICH IS EXACTLY WHAT I HAVE BEEN SAYING)!!! You CAN INCREASE THE MONEY SUPPLY WITHOUT CAUSING INFLATION.
Let me use some real numbers so that I can illustrate.
http://www.federalreserve.gov/releases/h6/hist/h6hist1.txt
http://en.wikipedia.org/wiki/Demographic_history_of_the_United_States
In 1960 there was give or take $140,000,000,000 in M1 and a population of 179,323,175 or $780 of M1 for every American. If the money supply were not increased from 1960 there would only be $464 for every American in 2007 and down to $244 in 2100. What do you think will happen to the price of goods and services with a FIXED monetary supply and an EXPONENTIALLY growing population / demand?
I just found it funny that he used the MOST perishable item to serve as currency. Coupled with the fact that the currency is consumed and replenished daily. Not well thought out IMO. But whatever I get what he was trying to say.
This is oversimplified because we know that there were more products than loaves and fish on the island. But assuming that the population is equally allocated across the sectors the below statement will ring true.
If half - 50,000 people catch 2 fish per day and 50,000 bake 2 loaves of bread per day and fish is "money" then the money supply has increased by 50,000 times from when it was just two guys!!! It went from 2 loaves per day to 100,000 loaves per day and the money supply (fish) has increased from 2 fish per day to 100,000 fish per day!!! Yet here would be ZERO inflation (WHICH IS EXACTLY WHAT I HAVE BEEN SAYING)!!! You CAN INCREASE THE MONEY SUPPLY WITHOUT CAUSING INFLATION.
I just outlined it above. If the money supply is increased at the exact same proportion as population growth there is ZERO INFLATION OR DEFLATION. If you do not increase the money supply with the example above you have 2 fish and 2 loaves of bread to divide over 100,000 people!!! The deflation would be so great that you would not have currency SMALL enough to conduct transactional business (which after all is the purpose of money).
Let me use some real numbers so that I can illustrate.
http://www.federalreserve.gov/releases/h6/hist/h6hist1.txt
http://en.wikipedia.org/wiki/Demographic_history_of_the_United_States
In 1960 there was give or take $140,000,000,000 in M1 and a population of 179,323,175 or $780 of M1 for every American. If the money supply were not increased from 1960 there would only be $464 for every American in 2007 and down to $244 in 2100. What do you think will happen to the price of goods and services with a FIXED monetary supply and an EXPONENTIALLY growing population / demand?
I wasn't aware you had asked me any questions.
The reason your example seems to make sense is because the whole fish/bread thing is oversimplified. In your scenario we are increasing the population instantly and at the same time we are printing an equal amount of cash to keep the ratio the same. The problem is that it takes 18-22 years for a human being to actually become a self sufficient consumer that becomes part of aggregate demand. We can print 100 trillion dollars in 1/1000th of a second. We don't actually "print" the money as it is just digital and the Fed has an infinite account from which to draw from.
The bubble came because the Fed reserve screwed with the interest rates so much that it became stupid to save money, it was way more sensible to rack up the credit by purchasing an asset (home) and then watch as it appreciated. The Fed can set an interest rate however they want, but they cannot make it too low for too long before the bond market drives those interest rates back up. The rates as of now are being driven up by lack of demand for poor performing T-Bonds. Thats why you never saw the Bernanke 3.9% Mortgages he promised would happen.
jeff f
New Member
tnt, inflation is the fastest way to kill anything good in an economy. these arent new concepts and there are plenty of examples in recent history to understand what happens. argentina in the early 80's comes to mind and most recently a country in africa (rowanda?) suffered hyper inflation. people were literally using wheelbarrows to carry cash to buy basic groceries.
think about it like this, if i gave everyone a million dollars and you wanted to sell something normally valued at 10 bucks, you would ask more because you know people have a million dollars now. you did nothing to increase the value of your product, hence its inflated and the value of money is deflated. the whole balance is now distorted. a very very very dangerous situation.
now apply that to a global economy, your money is worth nothing and another country not suffering inflation can buy your stuff for little money. history on the subject is well written. inflation = people suffering terribly
think about it like this, if i gave everyone a million dollars and you wanted to sell something normally valued at 10 bucks, you would ask more because you know people have a million dollars now. you did nothing to increase the value of your product, hence its inflated and the value of money is deflated. the whole balance is now distorted. a very very very dangerous situation.
now apply that to a global economy, your money is worth nothing and another country not suffering inflation can buy your stuff for little money. history on the subject is well written. inflation = people suffering terribly
slipperyP
Well-Known Member
You hear the stories of cars costing $1000 to $3000 and a pack of gum costing 5 cents. New cars are 16 to 100 thousand dollars and a pack of gum is a dollar. Its not that the gum is worth a dollar now...the money is only worth 5 cents.
Inflation and deflation are as connected as my dick and balls.
Ron Paul says it very well....
http://www.youtube.com/watch?v=JAzagrai-0M
Inflation and deflation are as connected as my dick and balls.
Ron Paul says it very well....
http://www.youtube.com/watch?v=JAzagrai-0M
Thebiglungblowski
Well-Known Member
this is a video each and everyone of you need to see.. and once you finish seeing it you need to tell each and every American that you truly love and care for. and MAKE sure they see this too.. spread the knowledge..
http://www.youtube.com/watch?v=1gKX9TWRyfs
http://www.youtube.com/watch?v=1gKX9TWRyfs
tnrtinr
Well-Known Member
When a sentence that is directed at you ends in a "?" that means that it is a question. It is customary to supply an answer for each question that you know or think to be true.
It is impossible to continue to reply to you when I do so in a straightforward manner which I answer all of your questions and respond to all of your suppositions and you respond with new topics.
Hey, it is your model. I have added 1 (one) variable to your model and you have not answered a single question yet. It makes sense because it makes sense - if there are 2 products or 1 billion products you cannot keep the MS fixed forever for fear of inflation. In fact it becomes more obvious as you add products and services that eventually you will need to increase the money supply to meet the demands of the exponentially growing population with increasing demands.
Again, we were not talking about this - you brought your fictional story to me and I went with it. Please TRY to stay on topic.
tnrtinr
Well-Known Member
I believe you are talking about Zimbabwe. This is exactly what I am saying. If you are paying for bread with a $100 million, that 5 thousand dollar debt that you have is a drop in the bucket (since your debt is not adjusted upwards when inflation is added to the economy). You could pay off all debt EASILY.
The price specie flow explains what happens next.
doobnVA
Well-Known Member
That's assuming that inflation would cause wages to increase at the same rate that the dollar value drops, which wouldn't likely happen.
Just because things cost more, doesn't mean that people are going to earn more. Besides that, the fact that everything cost so much would mean people would likely have very little in terms of "extra income" to use paying off debt.
It's a great theory, but it isn't what would happen at all.
Remember the great depression?
Yeah, that's more along the lines of what it would be like. People earning very little money and having to spend it all just to feed their families (and still going hungry).
Sure, $5000 dollars isn't much if you're earning millions... but what if your expenses and earnings are equal? By your logic, I should be able to pay my credit cards off because the payment is only $500 and our family earns somewhere near $40k per year. BUT, after I pay all the other bills, buy groceries and take care of household expenses, etc there just isn't enough left.
You may want to reread your and my posts again and really see if I didn't answer them, because I DID. If you don't understand inflation after it was taught to you like you were a 5 year old you never will.
Its not my Model, Maybe you were unaware that the authors name is right after the title after the "By" word.
In Zimbabwe they don't accept cash for items, they only accept gold/silver for the majority of your day to day must have items like food. Even if you had 1 trillion dollars, the inflation is so bad that in 8 hours the price of things will double so no one will take the cash, it has NO VALUE because they printed too much of it, not because of the population.
There is no need to attack me, your understanding of inflation is totally whack, your WRONG WRONG WRONG, get over trying to win your argument. God damned people and their precious fucking ego's.
TheBrutalTruth
Well-Known Member
You are saying that those that have saved, been frugal, and have been diligent in their saving should be punished while those that have bee stupid, slothful, and careless should be rewarded.
And then you fail to address the fact that inflation causes prices to increase and thus everyone will ultimately get hurt, just those that have saved and invested will get hurt more, because they will be stolen from (their savings will be devalued) so that those that are in debt will see their loans amortize themselves.
Of course, you failed to address that for the average American the majority of their debt is their home, which really makes a lot of sense when you consider how much a home costs, even after the bubble burst.
Other than that nice post, I mean, at least you seem to be able to think for yourself, and that is something that is truly rare.