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Author Topic: Inflation supports economic growth. Prove otherwise in this thread!  (Read 4288 times)
ronskii
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July 04, 2014, 12:54:49 AM
 #1

I have been always taught that slight inflation is good. I saw people pointing out 100 year graph of USD always having slight inflation. It makes sense, it makes a little urge for people to spend.
But I believe that also deflationary system can work. People will still buy things they need, although not as much.. Causing joblessness etc  Huh

If possible to, can you please somehow prove that deflationary financial system can be sustainable aswell?
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July 04, 2014, 01:02:34 AM
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Cash-induced inflation disrupts the production structure and redistributes wealth so that capital flows into enterprises that would otherwise be unsustainable without said inflation. When these enterprises begin to take advantage of inflation, which usually comes in the form of direct subsidies or cheap credit, they expand exponentially. They go regional, national, international, and all the while they are hiring more people. When the cheap money stops flowing, those inflation-dependent enterprises will of course collapse, and all of the people working for those enterprises will be out of a job. In addition to disrupting the production structure, inflation stimulates demand and thereby increases prices. So, when the credit-addicted businesses fail and all their employees are out of a job, demand suddenly decreases because they can't afford to buy anything. As a result, prices must drop for the remaining enterprises to stay in business.

As for deflation, it can be both good or bad. It is good when the purchasing power of money is increasing because prices are going down as a result of innovation and competition. But it is harmful when it is caused by a drop in aggregate demand-- which is generally brought about because of the unemployment caused by central banks' inflationary policies-- or when a central bank/government deliberately contracts the supply of money so that the demand for money is higher than the available stock of money.
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July 04, 2014, 01:07:34 AM
 #3

Inflation is good for borrow's since you pay the money back with dollars that are not worth as much and it hurts people with savings. Deflation is good for creditors and people with savings as their dollars are worth more tomorrow than they are worth today.

Some small inflation can be good, but when you look at how acutely the monetary base has skyrocketed, this is a problem.

http://www.geekcipher.com/technology/bitcoin-vs-us-dollar-in-retaining-value/

^^First graph on that page

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ronskii
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July 04, 2014, 01:17:08 AM
 #4

Inflation is good for borrow's since you pay the money back with dollars that are not worth as much and it hurts people with savings. Deflation is good for creditors and people with savings as their dollars are worth more tomorrow than they are worth today.

Some small inflation can be good, but when you look at how acutely the monetary base has skyrocketed, this is a problem.

http://www.geekcipher.com/technology/bitcoin-vs-us-dollar-in-retaining-value/

^^First graph on that page
http://www.slate.com/blogs/moneybox/2012/08/03/the_monetary_base_is_irrelevant.html
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July 04, 2014, 01:23:51 AM
 #5

I have been always taught that slight inflation is good. I saw people pointing out 100 year graph of USD always having slight inflation. It makes sense, it makes a little urge for people to spend.
But I believe that also deflationary system can work. People will still buy things they need, although not as much.. Causing joblessness etc  Huh

If possible to, can you please somehow prove that deflationary financial system can be sustainable aswell?

 Come on man.  We're not going to write your economics thesis for you for free...
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July 04, 2014, 01:54:46 AM
 #6

Cash-induced inflation disrupts the production structure and redistributes wealth so that capital flows into enterprises that would otherwise be unsustainable without said inflation. When these enterprises begin to take advantage of inflation, which usually comes in the form of direct subsidies or cheap credit, they expand exponentially. They go regional, national, international, and all the while they are hiring more people. When the cheap money stops flowing, those inflation-dependent enterprises will of course collapse, and all of the people working for those enterprises will be out of a job. In addition to disrupting the production structure, inflation stimulates demand and thereby increases prices. So, when the credit-addicted businesses fail and all their employees are out of a job, demand suddenly decreases because they can't afford to buy anything. As a result, prices must drop for the remaining enterprises to stay in business.

As for deflation, it can be both good or bad. It is good when the purchasing power of money is increasing because prices are going down as a result of innovation and competition. But it is harmful when it is caused by a drop in aggregate demand-- which is generally brought about because of the unemployment caused by central banks' inflationary policies-- or when a central bank/government deliberately contracts the supply of money so that the demand for money is higher than the available stock of money.

This is good. Don't get scared away by the nuts like me. Keep posting!
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July 04, 2014, 01:57:37 AM
 #7

Inflation is good for borrow's since you pay the money back with dollars that are not worth as much and it hurts people with savings. Deflation is good for creditors and people with savings as their dollars are worth more tomorrow than they are worth today.

Some small inflation can be good, but when you look at how acutely the monetary base has skyrocketed, this is a problem.

http://www.geekcipher.com/technology/bitcoin-vs-us-dollar-in-retaining-value/

^^First graph on that page
http://www.slate.com/blogs/moneybox/2012/08/03/the_monetary_base_is_irrelevant.html

The Slate article is interesting but doesn't say anything about the future. What happens when one of those giant banks that's holding all that fiat gets in trouble again and starts using it?
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July 04, 2014, 02:19:22 AM
 #8

Inflation is a necessary component of usury. If we used a deflationary system the banks as we know them could not exist.

Inflation is good for banks, deflation is good for everyone else.

Look inside yourself, and you will see that you are the bubble.
Erdogan
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July 04, 2014, 12:41:26 PM
 #9

Cash-induced inflation disrupts the production structure and redistributes wealth so that capital flows into enterprises that would otherwise be unsustainable without said inflation. When these enterprises begin to take advantage of inflation, which usually comes in the form of direct subsidies or cheap credit, they expand exponentially. They go regional, national, international, and all the while they are hiring more people. When the cheap money stops flowing, those inflation-dependent enterprises will of course collapse, and all of the people working for those enterprises will be out of a job. In addition to disrupting the production structure, inflation stimulates demand and thereby increases prices. So, when the credit-addicted businesses fail and all their employees are out of a job, demand suddenly decreases because they can't afford to buy anything. As a result, prices must drop for the remaining enterprises to stay in business.

As for deflation, it can be both good or bad. It is good when the purchasing power of money is increasing because prices are going down as a result of innovation and competition. But it is harmful when it is caused by a drop in aggregate demand-- which is generally brought about because of the unemployment caused by central banks' inflationary policies-- or when a central bank/government deliberately contracts the supply of money so that the demand for money is higher than the available stock of money.

Totally correct. Glitters.
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July 04, 2014, 01:12:00 PM
 #10

No it does not, economic growth is caused by increased production, not increased money supply

Yes you earn more money, but inflated money, so in effect you earn less, it only looks more.

It's a scam.
Harley997
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July 04, 2014, 06:16:57 PM
 #11

Inflation is a necessary component of usury. If we used a deflationary system the banks as we know them could not exist.

Inflation is good for banks, deflation is good for everyone else.
Inflation is actually good for anyone who borrows money as it is now cheaper, in terms of effort, to pay back the loan. The opposite is true for people who hold assets as their assets are now worth less. Since banks lend money inflation is actually bad for banks.

Moderate amounts of inflation provide people an incentive to not put off purchases an undue amount of time.

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July 04, 2014, 09:14:27 PM
 #12

Deflation gives incentive to save. Less loans mean less debt and less slavery. And inflation is caused by lending, the extra money from interest is where money printing comes from. It does not hurt banks at all, on the contrary, it hurts everyone who does not have the ability to print money.

Look inside yourself, and you will see that you are the bubble.
Harley997
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July 04, 2014, 10:04:53 PM
 #13

Deflation gives incentive to save. Less loans mean less debt and less slavery. And inflation is caused by lending, the extra money from interest is where money printing comes from. It does not hurt banks at all, on the contrary, it hurts everyone who does not have the ability to print money.
If inflation is higher then interest rates then lenders will end up having assets that are worth less then when the funds were lent out.

If you have an incentive to save then you have an incentive not to spend, if you do not spend money then there will be overall lower economic output

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July 04, 2014, 10:11:49 PM
 #14

Inflation is good for borrow's since you pay the money back with dollars that are not worth as much and it hurts people with savings. Deflation is good for creditors and people with savings as their dollars are worth more tomorrow than they are worth today.

Some small inflation can be good, but when you look at how acutely the monetary base has skyrocketed, this is a problem.

http://www.geekcipher.com/technology/bitcoin-vs-us-dollar-in-retaining-value/

^^First graph on that page
http://www.slate.com/blogs/moneybox/2012/08/03/the_monetary_base_is_irrelevant.html

The monetary base is still increasing at an alarming rate, whether its parked with the fed, in my savings account or stuffed in someones mattress, the fact remains the same: It's increasing rapidly.

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July 05, 2014, 02:52:37 AM
 #15

Inflation is good for borrow's since you pay the money back with dollars that are not worth as much and it hurts people with savings. Deflation is good for creditors and people with savings as their dollars are worth more tomorrow than they are worth today.

Some small inflation can be good, but when you look at how acutely the monetary base has skyrocketed, this is a problem.

http://www.geekcipher.com/technology/bitcoin-vs-us-dollar-in-retaining-value/

^^First graph on that page
http://www.slate.com/blogs/moneybox/2012/08/03/the_monetary_base_is_irrelevant.html

The monetary base is still increasing at an alarming rate, whether its parked with the fed, in my savings account or stuffed in someones mattress, the fact remains the same: It's increasing rapidly.

What you should be worried is that even w QE, demand hasn't risen and unemployment is still not dropping.

Means its not working so they gotta find a better theory or we looking at possibly a decade of recession like Japan
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July 05, 2014, 06:06:05 AM
 #16

slight inflation is good for the government/bankers who get the seniorage(benefit) of introducing the fiat

inflation is bad for the population as your savings is devalued and you might not even know it, its a hidden tax

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July 05, 2014, 09:29:50 AM
 #17

Inflation is good for borrow's since you pay the money back with dollars that are not worth as much and it hurts people with savings. Deflation is good for creditors and people with savings as their dollars are worth more tomorrow than they are worth today.

Some small inflation can be good, but when you look at how acutely the monetary base has skyrocketed, this is a problem.

http://www.geekcipher.com/technology/bitcoin-vs-us-dollar-in-retaining-value/

^^First graph on that page
http://www.slate.com/blogs/moneybox/2012/08/03/the_monetary_base_is_irrelevant.html

The monetary base is still increasing at an alarming rate, whether its parked with the fed, in my savings account or stuffed in someones mattress, the fact remains the same: It's increasing rapidly.

What you should be worried is that even w QE, demand hasn't risen and unemployment is still not dropping.

Means its not working so they gotta find a better theory or we looking at possibly a decade of recession like Japan

Yes, the economy is obviously not healthy.  If it were, all the QE the Fed has been doing should have caused massive inflation.
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July 05, 2014, 11:14:23 AM
 #18

All trades are between two entities. In an inflation scenario, you say that the loaner who buys a house, wins, because his house has a rather stable value (let's just assume that), and the loan shrinks in value. Everybody knows this.

But here is the puzzle. What about the lender? He also knows this. Why is the bank willing to lend money and get back less value later? The answer is the money supply manipulation.

The question of inflation or deflation is that it does not matter, as long as the money supply is not manipulated. Lender and loaner has the same information and the same access to money. The interest rate will float, and at times of inflation the interest rate will also rise, giving a positive real interest rate. The reason for inflation or deflation is things like inventions, change in resources, needed change in the capital structure, change in the number of people, change in the tendency to save money. The prices and interest rate will adjust continually to direct the productive capacity of the land.

The volume of money does not have to be a mathematically fixed number. In fact it can never be, because there will always be alternative money like gold, silver, types of fiat, and bubbly goods like aluminium, oil, houses that also function as a store of value sometimes. Also natural changes in the money supply. Then there is credit, that will automatically grow in times of demand for money and will work counter to deflation.

That is why we call it sound money. The supply is not fixed, but it is relatively stable and unmanipulated by governments. The point is to remove the money supply question from politics.

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July 05, 2014, 12:09:30 PM
 #19

Cash-induced inflation disrupts the production structure and redistributes wealth so that capital flows into enterprises that would otherwise be unsustainable without said inflation. When these enterprises begin to take advantage of inflation, which usually comes in the form of direct subsidies or cheap credit, they expand exponentially. They go regional, national, international, and all the while they are hiring more people. When the cheap money stops flowing, those inflation-dependent enterprises will of course collapse, and all of the people working for those enterprises will be out of a job. In addition to disrupting the production structure, inflation stimulates demand and thereby increases prices. So, when the credit-addicted businesses fail and all their employees are out of a job, demand suddenly decreases because they can't afford to buy anything. As a result, prices must drop for the remaining enterprises to stay in business.

As for deflation, it can be both good or bad. It is good when the purchasing power of money is increasing because prices are going down as a result of innovation and competition. But it is harmful when it is caused by a drop in aggregate demand-- which is generally brought about because of the unemployment caused by central banks' inflationary policies-- or when a central bank/government deliberately contracts the supply of money so that the demand for money is higher than the available stock of money.

Best explanation I have seen so far to date.

But here is the puzzle. What about the lender? He also knows this. Why is the bank willing to lend money and get back less value later? The answer is the money supply manipulation.

The question of inflation or deflation is that it does not matter, as long as the money supply is not manipulated. Lender and loaner has the same information and the same access to money. The interest rate will float, and at times of inflation the interest rate will also rise, giving a positive real interest rate. The reason for inflation or deflation is things like inventions, change in resources, needed change in the capital structure, change in the number of people, change in the tendency to save money. The prices and interest rate will adjust continually to direct the productive capacity of the land.

Also agree on the point here.

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July 06, 2014, 01:49:06 AM
 #20

Inflation is good for borrow's since you pay the money back with dollars that are not worth as much and it hurts people with savings. Deflation is good for creditors and people with savings as their dollars are worth more tomorrow than they are worth today.

Some small inflation can be good, but when you look at how acutely the monetary base has skyrocketed, this is a problem.

http://www.geekcipher.com/technology/bitcoin-vs-us-dollar-in-retaining-value/

^^First graph on that page
http://www.slate.com/blogs/moneybox/2012/08/03/the_monetary_base_is_irrelevant.html

The monetary base is still increasing at an alarming rate, whether its parked with the fed, in my savings account or stuffed in someones mattress, the fact remains the same: It's increasing rapidly.

What you should be worried is that even w QE, demand hasn't risen and unemployment is still not dropping.

Means its not working so they gotta find a better theory or we looking at possibly a decade of recession like Japan
The goal of QE was to get people to take more risk with their capital and to get asset prices to rise. This has happened and QE has been successful in this regard. It was hoped that the rising asset prices and people taking more risk with their capital would result in higher employment rates.

What has hampered higher employment was the amount of transfer payments and new regulations that has set back our economy. Things like unemployment insurance that lasts almost 2 years and disability insurance that lasts a lifetime give people disincentives to look for and actually work.
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July 06, 2014, 03:49:08 AM
 #21

Inflation is good for borrow's since you pay the money back with dollars that are not worth as much and it hurts people with savings. Deflation is good for creditors and people with savings as their dollars are worth more tomorrow than they are worth today.

Some small inflation can be good, but when you look at how acutely the monetary base has skyrocketed, this is a problem.

http://www.geekcipher.com/technology/bitcoin-vs-us-dollar-in-retaining-value/

^^First graph on that page
http://www.slate.com/blogs/moneybox/2012/08/03/the_monetary_base_is_irrelevant.html

The monetary base is still increasing at an alarming rate, whether its parked with the fed, in my savings account or stuffed in someones mattress, the fact remains the same: It's increasing rapidly.

What you should be worried is that even w QE, demand hasn't risen and unemployment is still not dropping.

Means its not working so they gotta find a better theory or we looking at possibly a decade of recession like Japan
The goal of QE was to get people to take more risk with their capital and to get asset prices to rise. This has happened and QE has been successful in this regard. It was hoped that the rising asset prices and people taking more risk with their capital would result in higher employment rates.

What has hampered higher employment was the amount of transfer payments and new regulations that has set back our economy. Things like unemployment insurance that lasts almost 2 years and disability insurance that lasts a lifetime give people disincentives to look for and actually work.

Actually the goal of QE was to inject liquidity into the banking system w the hope that banks would lend the money out.  But what happened instead was the banks used the money on investments so the stock markets shot up.  The reason they did this because private sector doesn't want to take on new debt because they're paying down balance sheets

I don't believe unemployment insurance de-incentivize people from looking for jobs.  Its more like the jobs aren't available.  Even though 2 years is a long time its still temporary

Its not just unemployment, the entire US economy is in a  slump by most metrics. 

Richard Koo has a good theory that explains this he calls "balance sheet recession" and another one called "QE trap"
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July 06, 2014, 07:22:24 PM
 #22

Inflation is good for borrow's since you pay the money back with dollars that are not worth as much and it hurts people with savings. Deflation is good for creditors and people with savings as their dollars are worth more tomorrow than they are worth today.

Some small inflation can be good, but when you look at how acutely the monetary base has skyrocketed, this is a problem.

http://www.geekcipher.com/technology/bitcoin-vs-us-dollar-in-retaining-value/

^^First graph on that page
http://www.slate.com/blogs/moneybox/2012/08/03/the_monetary_base_is_irrelevant.html

The monetary base is still increasing at an alarming rate, whether its parked with the fed, in my savings account or stuffed in someones mattress, the fact remains the same: It's increasing rapidly.

What you should be worried is that even w QE, demand hasn't risen and unemployment is still not dropping.

Means its not working so they gotta find a better theory or we looking at possibly a decade of recession like Japan

Yes, the economy is obviously not healthy.  If it were, all the QE the Fed has been doing should have caused massive inflation.
The amount of additional dollars that has been injected into the economy is huge. QE has made the money supply artificially higher then it otherwise would be.

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July 06, 2014, 08:22:08 PM
 #23

Inflation is good for borrow's since you pay the money back with dollars that are not worth as much and it hurts people with savings. Deflation is good for creditors and people with savings as their dollars are worth more tomorrow than they are worth today.

Some small inflation can be good, but when you look at how acutely the monetary base has skyrocketed, this is a problem.

http://www.geekcipher.com/technology/bitcoin-vs-us-dollar-in-retaining-value/

^^First graph on that page
http://www.slate.com/blogs/moneybox/2012/08/03/the_monetary_base_is_irrelevant.html

The monetary base is still increasing at an alarming rate, whether its parked with the fed, in my savings account or stuffed in someones mattress, the fact remains the same: It's increasing rapidly.
But it doesn't really matter because QE can't contribute to inflation, and it has been proved at least two times (Japan and US).
What Fed does is replacing treasury securities that banks hold with reserves. Reserves on their own can't flow into the economy, they are only used in transactions between commercial banks, Fed and the government.
The only positive thing QE might've done is unloading toxic MBS's from the banking system and thus calming the markets.
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July 07, 2014, 01:12:32 AM
 #24

That is, until they do begin to use them. The rules are constantly changing. There is a nonzero chance that the coming economic meltdown is planned. As long as it happens in a controlled way, it is possible to benefit from it.

Look inside yourself, and you will see that you are the bubble.
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July 07, 2014, 05:42:07 AM
 #25

Inflation is good for borrow's since you pay the money back with dollars that are not worth as much and it hurts people with savings. Deflation is good for creditors and people with savings as their dollars are worth more tomorrow than they are worth today.

Some small inflation can be good, but when you look at how acutely the monetary base has skyrocketed, this is a problem.

http://www.geekcipher.com/technology/bitcoin-vs-us-dollar-in-retaining-value/

^^First graph on that page
http://www.slate.com/blogs/moneybox/2012/08/03/the_monetary_base_is_irrelevant.html

The monetary base is still increasing at an alarming rate, whether its parked with the fed, in my savings account or stuffed in someones mattress, the fact remains the same: It's increasing rapidly.
But it doesn't really matter because QE can't contribute to inflation, and it has been proved at least two times (Japan and US).
What Fed does is replacing treasury securities that banks hold with reserves. Reserves on their own can't flow into the economy, they are only used in transactions between commercial banks, Fed and the government.
The only positive thing QE might've done is unloading toxic MBS's from the banking system and thus calming the markets.

How do you figure that QE doesn't contribute to inflation?  We have had inflation over the last few years, and look at how much the markets have gone up since 2009.
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July 07, 2014, 07:13:20 AM
 #26

I have been always taught that slight inflation is good. I saw people pointing out 100 year graph of USD always having slight inflation. It makes sense, it makes a little urge for people to spend.
But I believe that also deflationary system can work. People will still buy things they need, although not as much.. Causing joblessness etc  Huh

If possible to, can you please somehow prove that deflationary financial system can be sustainable aswell?

Because the monetary base of bitcoins cannot be expanded, the currency would be subject to severe deflation if it becomes widely used. Keynesian economists argue that deflation is bad for an economy because it incentivises individuals and businesses to save money rather than invest in businesses and create jobs. The Austrian school of thought counters this criticism, claiming that as deflation occurs in all stages of production, entrepreneurs who invest benefit from it. As a result, profit ratios tend to stay the same and only their magnitudes change. In other words, in a deflationary environment, goods and services decrease in price, but at the same time the cost for the production of these goods and services tend to decrease proportionally, effectively not affecting profits. Price deflation encourages an increase in hoarding — hence savings — which in turn tends to lower interest rates and increase the incentive for entrepreneurs to invest in projects of longer term.

From https://en.bitcoin.it/wiki/Controlled_supply

Simply put people invest because they expect a greater return than deflation can bring in the long term, therefore the economy is grown at a rate of development greater than the price decrease and promotes long term over short term investments on a balance sheet, second bitcoin is still inflationary this concern is not to be addressed for a few more decades.

262500    2    25.00    2014    11812500    1312500    13125000    11.11%    62.500%
315000    2    25.00    2015    13125000    1312500    14437500    10.00%    68.750%
367500    2    25.00    2016    14437500    1312500    15750000    9.09%    75.000%
420000    3    12.50    2017    15750000    656250    16406250    4.17%    78.125%
472500    3    12.50    2018    16406250    656250    17062500    4.00%    81.250%
525000    3    12.50    2019    17062500    656250    17718750    3.85%    84.375%
577500    3    12.50    2020    17718750    656250    18375000    3.70%    87.500%
630000    4    6.25    2021    18375000    328125    18703125    1.79%    89.063%
682500    4    6.25    2022    18703125    328125    19031250    1.75%    90.625%
735000    4    6.25    2023    19031250    328125    19359375    1.72%    92.188%
787500    4    6.25    2024    19359375    328125    19687500    1.69%    93.750%

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July 07, 2014, 09:36:12 AM
 #27

But I believe that also deflationary system can work. People will still buy things they need, although not as much.. Causing joblessness etc  Huh

I wouldn't mind working a little less.

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July 07, 2014, 09:37:02 AM
 #28

If possible to, can you please somehow prove that deflationary financial system can be sustainable aswell?

Hey, I have an idea: let's just try it out!

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July 07, 2014, 10:50:27 AM
 #29

But I believe that also deflationary system can work. People will still buy things they need, although not as much.. Causing joblessness etc  Huh

I wouldn't mind working a little less.

Exactly. Inflation is what keeps us in the hamster wheels, locking us into bullshit jobs. http://strikemag.org/bullshit-jobs/

Spending is not what makes an economy wealthy. The available products and technology do. We could work less without losing "income", i.e. our standard of living.

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July 07, 2014, 12:31:42 PM
 #30

I have been always taught that slight inflation is good. I saw people pointing out 100 year graph of USD always having slight inflation. It makes sense, it makes a little urge for people to spend.
What makes you think you should decide whether people spend?  Who gave you that right?  It's this kind of I-know-better-than-you-what's-good-for-you thinking that is at the root of the ills of society.

Just leave people alone to do with their assets what they will.
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July 07, 2014, 03:11:12 PM
 #31

Inflation is good for borrow's since you pay the money back with dollars that are not worth as much and it hurts people with savings. Deflation is good for creditors and people with savings as their dollars are worth more tomorrow than they are worth today.

Some small inflation can be good, but when you look at how acutely the monetary base has skyrocketed, this is a problem.

http://www.geekcipher.com/technology/bitcoin-vs-us-dollar-in-retaining-value/

^^First graph on that page
http://www.slate.com/blogs/moneybox/2012/08/03/the_monetary_base_is_irrelevant.html

The monetary base is still increasing at an alarming rate, whether its parked with the fed, in my savings account or stuffed in someones mattress, the fact remains the same: It's increasing rapidly.
But it doesn't really matter because QE can't contribute to inflation, and it has been proved at least two times (Japan and US).
What Fed does is replacing treasury securities that banks hold with reserves. Reserves on their own can't flow into the economy, they are only used in transactions between commercial banks, Fed and the government.
The only positive thing QE might've done is unloading toxic MBS's from the banking system and thus calming the markets.

How do you figure that QE doesn't contribute to inflation?  We have had inflation over the last few years, and look at how much the markets have gone up since 2009.
Because QE can't in its nature, and I explained why. Inflation is out there for sure, but it doesn't mean it's because of QE.
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July 07, 2014, 03:55:17 PM
 #32

Inflation is good for borrow's since you pay the money back with dollars that are not worth as much and it hurts people with savings. Deflation is good for creditors and people with savings as their dollars are worth more tomorrow than they are worth today.

Some small inflation can be good, but when you look at how acutely the monetary base has skyrocketed, this is a problem.

http://www.geekcipher.com/technology/bitcoin-vs-us-dollar-in-retaining-value/

^^First graph on that page
http://www.slate.com/blogs/moneybox/2012/08/03/the_monetary_base_is_irrelevant.html

The monetary base is still increasing at an alarming rate, whether its parked with the fed, in my savings account or stuffed in someones mattress, the fact remains the same: It's increasing rapidly.
But it doesn't really matter because QE can't contribute to inflation, and it has been proved at least two times (Japan and US).
What Fed does is replacing treasury securities that banks hold with reserves. Reserves on their own can't flow into the economy, they are only used in transactions between commercial banks, Fed and the government.
The only positive thing QE might've done is unloading toxic MBS's from the banking system and thus calming the markets.

How do you figure that QE doesn't contribute to inflation?  We have had inflation over the last few years, and look at how much the markets have gone up since 2009.
Because QE can't in its nature, and I explained why. Inflation is out there for sure, but it doesn't mean it's because of QE.

I did a little research, and I see what you mean about how bank reserves held at the Fed have increased by almost as much money as the QE programs have created.  I still think that QE has caused inflation, but in the sense that the deflation we experienced in 2009 probably would have continued if it weren't for QE and other actions taken by the Fed and government.

Putting my belief about inflation having negated deflation aside, I'm also not sure that QE can't contribute to inflation, especially in the future.  So far, banks have had reason to park a lot of their money at the Fed.  But depending on Fed policy, they may start to withdraw their excess reserves and lend them out.  That would cause inflation.

In any case, thanks for making light of where a lot of the QE money has gone.  That's not something I had considered.
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July 07, 2014, 04:13:09 PM
 #33

I did a little research, and I see what you mean about how bank reserves held at the Fed have increased by almost as much money as the QE programs have created.  I still think that QE has caused inflation, but in the sense that the deflation we experienced in 2009 probably would have continued if it weren't for QE and other actions taken by the Fed and government.

Putting my belief about inflation having negated deflation aside, I'm also not sure that QE can't contribute to inflation, especially in the future.  So far, banks have had reason to park a lot of their money at the Fed.  But depending on Fed policy, they may start to withdraw their excess reserves and lend them out.  That would cause inflation.

In any case, thanks for making light of where a lot of the QE money has gone.  That's not something I had considered.
Yes, deflation event was fairly short. But I'm inclined to thank the Treasury for this, not the Fed (but the Fed actions likely helped by calming the panic and giving some confidence). What is truly inflationary is budget deficit, because it adds financial assets to the private sector, which helps increase spending.

As of reserves, it's important to understand that banks can't "withdraw their reserves and lend them out". The reserve money is only used inside the Fed payment system, i.e. in transactions between banks, the Fed and the Treasury.

Reserve requirement does not actually restrain bank lending in a modern monetary environment, because new reserves can always be created by using discount window, repo operations and so on.
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July 07, 2014, 04:27:38 PM
 #34

Without QE the money would have had to come from elsewhere. As such it did cause inflation.

Look, it's simple. The money is either real, or it is not. If it is real money then it is part of the economy. If it's not real money, then it doesn't exist and doesn't count.

Look inside yourself, and you will see that you are the bubble.
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July 07, 2014, 06:19:07 PM
Last edit: July 22, 2014, 12:28:47 PM by tee-rex
 #35

I have been always taught that slight inflation is good. I saw people pointing out 100 year graph of USD always having slight inflation. It makes sense, it makes a little urge for people to spend.
But I believe that also deflationary system can work. People will still buy things they need, although not as much.. Causing joblessness etc  Huh

If possible to, can you please somehow prove that deflationary financial system can be sustainable aswell?

It can be, and actually was sustainable in the late 18th and through the 19th centuries under the gold standard. The reason for this is rather simple though. Money appreciation (that is deflation) was compensated by technological innovations and growth in productivity (remember the Industrial Revolution which happened in the period from about 1760 to 1840). The same is also possible today if, for example, they find a means to postpone the coming of old age significantly (I've heard that half of all production worldwide in the last 50 years was due to an increased human lifespan).
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July 07, 2014, 08:07:19 PM
 #36

I understand the idea that inflation encourages exchange of money for goods and investments. I wont attempt to claim this doesn't support growth. But people do not like being dictated to that having value sapped from their savings is a good thing, like they need to be whipped into splurging their money. The system supposedly works to stimulate a certain pattern of spending and growth, but it is narrow minded to assume it is the only way to do things. So - rather than 'more of the same, but mo'betta', IMO people are turning away from the system in order to do things differently.
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July 07, 2014, 08:12:08 PM
 #37

I have been always taught that slight inflation is good. I saw people pointing out 100 year graph of USD always having slight inflation. It makes sense, it makes a little urge for people to spend.
But I believe that also deflationary system can work. People will still buy things they need, although not as much.. Causing joblessness etc  Huh

If possible to, can you please somehow prove that deflationary financial system can be sustainable aswell?


As an individual when you work, get paid and put your money in the bank are you becoming wealthier or poorer? Hint: You are increasing your stockpile!

If you save your money for many years and then start spending it and depleting your stockpile, are you becoming wealthier or poorer?

Now if you had saved $100,000 during your career, retired, and lived off a fixed income from your savings, do you think rising prices would be a benefit?

In my opinion, spending just for the sake of spending is not a formula for wealth creation. Savings, investment and wise spending are what makes everyone wealthier.

Inflation is a terrible hidden tax for those on a fixed income and punishes savers. The ones who benefit are the ones who get to spend the newly created money first before the general increase in prices. So if the government prints more money and then spends it into the economy they can benefit by paying today's prices. Once that money makes it way through the economy and prices rise it hurts the average person because wages generally do not keep up with prices and savers are losing purchasing power their existing savings.

Read Murray Rothbard - What has government done to our money. Check out Mike Maloney's stuff http://www.hiddensecretsofmoney.com/
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July 08, 2014, 06:40:12 AM
 #38

I would argue there are different kinds of growth:

  • Artificial type of growth (generated by injecting newly generated money into the economy).
  • Growth financed by investment of existing money (usually savings)

On paper using an aggregate view they look the same: GDP increases. However they differ in sustainability and effect on the economy: the first one is kind-of "fake". It might not have been done without the new money being printed, so whatever was done with that money is less economically viable. At the same time it has the effect of "removing" value from projects that are economically viable (due to the reduced value of the existing money). It results in misallocation of capital that will correct at some point and in addition distorts price signals, making the economy less efficient. The second type of growth ("real growth" if you will) is more sustainable. There was a viable economic reason the investment was made (otherwise it wouldn't have been made). Of course also these businesses / innovations can fail, but they should turn out to do so at a lesser rate.

Essentially growth generated by inflation is "fake paper growth". It's like blowing air into a balloon: it get's bigger, but doesn't gain weight.

just my 2 satoshis

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July 08, 2014, 06:48:33 AM
 #39

In my opinion, spending just for the sake of spending is not a formula for wealth creation. Savings, investment and wise spending are what makes everyone wealthier.

Inflation is a terrible hidden tax for those on a fixed income and punishes savers. The ones who benefit are the ones who get to spend the newly created money first before the general increase in prices.

Well said, man.

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July 08, 2014, 07:35:57 AM
 #40

I would argue there are different kinds of growth:

  • Artificial type of growth (generated by injecting newly generated money into the economy).
  • Growth financed by investment of existing money (usually savings)

On paper using an aggregate view they look the same: GDP increases. However they differ in sustainability and effect on the economy: the first one is kind-of "fake". It might not have been done without the new money being printed, so whatever was done with that money is less economically viable. At the same time it has the effect of "removing" value from projects that are economically viable (due to the reduced value of the existing money). It results in misallocation of capital that will correct at some point and in addition distorts price signals, making the economy less efficient. The second type of growth ("real growth" if you will) is more sustainable. There was a viable economic reason the investment was made (otherwise it wouldn't have been made). Of course also these businesses / innovations can fail, but they should turn out to do so at a lesser rate.


Those are good practical points as well.


To add a bit more... many people will argue that this "fake growth" is good and it can be difficult to distinguish between the two.

To make it easier just look at the principal of it and you'll always spot a bullshit argument.

The fiat system is forced upon us through law, which means that issuing a competing currency to your nation's currency is illegal. Therefore nobody can compete with the gov./central bank. Normally everyone knows that that competition in the market is a good thing, but why is money the exception? Why can the gov. issue more currency, but if the average person does it's called counterfeiting (which of course is theft)?

What is considered immoral for us as individuals, cannot magically be morally correct for a group of individuals who call themselves the government/central bank. End of story!

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July 08, 2014, 07:48:26 AM
Last edit: July 22, 2014, 12:25:53 PM by tee-rex
 #41

The fiat system is forced upon us through law, which means that issuing a competing currency to your nation's currency is illegal. Therefore nobody can compete with the gov./central bank. Normally everyone knows that that competition in the market is a good thing, but why is money the exception? Why can the gov. issue more currency, but if the average person does it's called counterfeiting (which of course is theft)?

Actually, money is no exception. We have dollars, euros, pounds, pesos or whatever, and they are all competing with each other at an international scale (or, rather, economics are). You can hold your savings in whatever currency you see most appropriate (or profitable). Also, If I'm not mistaken, bitcoin is not considered illegal in the USA, though it is obviously not a legal tender there.
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July 08, 2014, 10:05:20 AM
 #42

It results in misallocation of capital that will correct at some point and in addition distorts price signals, making the economy less efficient.

Not "less efficient" (in fact, too much efficiency would be a problem: http://www.scribd.com/doc/26248658/Is-Our-Monetary-Structure-a-Systemic-Cause-for-Financial-Instability-Bernard-Lietaer ), but (apart from the hamster wheel bullshit jobs) we get a major collapse or a giant "economic discharge" (i.e. war) every couple of decades.

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July 08, 2014, 04:36:33 PM
 #43

The fiat system is forced upon us through law, which means that issuing a competing currency to your nation's currency is illegal. Therefore nobody can compete with the gov./central bank. Normally everyone knows that that competition in the market is a good thing, but why is money the exception? Why can the gov. issue more currency, but if the average person does it's called counterfeiting (which of course is theft)?

Actually, money is no exception. We have dollars, euros, pounds, pesos or whatever, and they are all competing with each other at an international scale (or, rather, economics are). You can hold your savings in whatever currency you see most appropriate (or profitable). Also, If I'm not mistaken, bitcoin is not considered illegal in the USA, though it is obviously not a legal tender there.


Crypto currencies are the solution to fiat! BTC was built with a limit of 21M units because Sastoshi knew the evils of inflation. The distributed nature of the system means that it essentially cannot be shutdown. Governments accepting Bitcoin is not because they wish for competition, but more because they don't have a choice. Of course most of them at this point are ignorant of the technology and will be pressured in due to demand as well.

Sorry but your argument for national currencies being an example of competition is a huge stretch. Up until recently most people in the world could not open up an account in any currency of their choosing. Nowadays it's possible, but sill extremely limited. If these currencies were truly competing then we'd all able to hold a basket of them and even be able to spend them anywhere. Argentina for example has made it illegal for their citizens to save in USD, meanwhile they are inflating the currency at 20% a year and headed for a collapse that will devastate many peoples savings. Gold has been confiscated in the past as well.
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July 08, 2014, 04:44:51 PM
 #44

In my opinion, spending just for the sake of spending is not a formula for wealth creation. Savings, investment and wise spending are what makes everyone wealthier.

Inflation is a terrible hidden tax for those on a fixed income and punishes savers. The ones who benefit are the ones who get to spend the newly created money first before the general increase in prices.

Well said, man.
If you invest well then your investments should outpace the rate of inflation, giving you a smaller gain on your investment but still a net gain, the same is generally true for interest on savings accounts and CDs as the interest paid is usually slightly obove the inflation rate, although this is not the case now.

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July 08, 2014, 05:11:58 PM
Last edit: July 22, 2014, 12:26:11 PM by tee-rex
 #45

The fiat system is forced upon us through law, which means that issuing a competing currency to your nation's currency is illegal. Therefore nobody can compete with the gov./central bank. Normally everyone knows that that competition in the market is a good thing, but why is money the exception? Why can the gov. issue more currency, but if the average person does it's called counterfeiting (which of course is theft)?

Actually, money is no exception. We have dollars, euros, pounds, pesos or whatever, and they are all competing with each other at an international scale (or, rather, economics are). You can hold your savings in whatever currency you see most appropriate (or profitable). Also, If I'm not mistaken, bitcoin is not considered illegal in the USA, though it is obviously not a legal tender there.

Crypto currencies are the solution to fiat! BTC was built with a limit of 21M units because Sastoshi knew the evils of inflation. The distributed nature of the system means that it essentially cannot be shutdown. Governments accepting Bitcoin is not because they wish for competition, but more because they don't have a choice. Of course most of them at this point are ignorant of the technology and will be pressured in due to demand as well.

Actually, cryptocurrencies are not very far from fiat. Both bitcoin and fiat are money since they are called so and accepted as such (no utility besides being a currency). Regarding the limit of 21M coins, it is not really an advantage since, in the first place, it won't be reached any time soon, and it can be changed afterwards if such a necessity should arise, in the second. Smiley

As to Bitcoin's generation rate, it is also a double-edged sword (there are pros and cons to this).
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July 08, 2014, 06:34:22 PM
 #46

The fiat system is forced upon us through law, which means that issuing a competing currency to your nation's currency is illegal. Therefore nobody can compete with the gov./central bank. Normally everyone knows that that competition in the market is a good thing, but why is money the exception? Why can the gov. issue more currency, but if the average person does it's called counterfeiting (which of course is theft)?

Actually, money is no exception. We have dollars, euros, pounds, pesos or whatever, and they are all competing with each other at an international scale (or, rather, economics are). You can hold your savings in whatever currency you see most appropriate (or profitable). Also, If I'm not mistaken, bitcoin is not considered illegal in the USA, though it is obviously not a legal tender there.

Crypto currencies are the solution to fiat! BTC was built with a limit of 21M units because Sastoshi knew the evils of inflation. The distributed nature of the system means that it essentially cannot be shutdown. Governments accepting Bitcoin is not because they wish for competition, but more because they don't have a choice. Of course most of them at this point are ignorant of the technology and will be pressured in due to demand as well.

Actually, cryptocurrencies are not very far from fiat. Both bitcoin and fiat are money since they are called so and accepted as such (no utility besides being a currency). Regarding the limit of 21M coins, it is not really an advantage since, in the first place, it won't be reached any time soon, and it can be changed afterwards if such a necessity should arise, in the second. Smiley

As to Bitcoin's generation rate, it is also a double-edged sword (there are pros and cons to this).



Fiat has nothing to do with its utility. Fiat literally means "by government decree". http://www.merriam-webster.com/dictionary/fiat. So by definition BTC it is a long ways from fiat!

As for the technical side, may the best crypto currency win! I don't use Bitcoin because I like the name. I use it because it is based on sound Austrian principals and at this point in time no other competitor has anything better to offer in my opinion. So far the market is favoring Bitcoin so you're arguing against a lot of people. If you want to understand where I'm coming from check out the links I provided earlier.

I think the bottom line is that whatever YOU think about inflation and technical stuff is fine. There is or will be a currency tailored to your exact desires and you'll be free to use it.

If you think it's use should be mandatory and made law (aka forced upon everyone else!), then I highly disagree because that would be fiat again.










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July 08, 2014, 07:11:19 PM
Last edit: July 22, 2014, 12:26:32 PM by tee-rex
 #47

The fiat system is forced upon us through law, which means that issuing a competing currency to your nation's currency is illegal. Therefore nobody can compete with the gov./central bank. Normally everyone knows that that competition in the market is a good thing, but why is money the exception? Why can the gov. issue more currency, but if the average person does it's called counterfeiting (which of course is theft)?

Actually, money is no exception. We have dollars, euros, pounds, pesos or whatever, and they are all competing with each other at an international scale (or, rather, economics are). You can hold your savings in whatever currency you see most appropriate (or profitable). Also, If I'm not mistaken, bitcoin is not considered illegal in the USA, though it is obviously not a legal tender there.

Crypto currencies are the solution to fiat! BTC was built with a limit of 21M units because Sastoshi knew the evils of inflation. The distributed nature of the system means that it essentially cannot be shutdown. Governments accepting Bitcoin is not because they wish for competition, but more because they don't have a choice. Of course most of them at this point are ignorant of the technology and will be pressured in due to demand as well.

Actually, cryptocurrencies are not very far from fiat. Both bitcoin and fiat are money since they are called so and accepted as such (no utility besides being a currency). Regarding the limit of 21M coins, it is not really an advantage since, in the first place, it won't be reached any time soon, and it can be changed afterwards if such a necessity should arise, in the second. Smiley

As to Bitcoin's generation rate, it is also a double-edged sword (there are pros and cons to this).

Fiat has nothing to do with its utility. Fiat literally means "by government decree". http://www.merriam-webster.com/dictionary/fiat. So by definition BTC it is a long ways from fiat!

I'm talking about the essence of bitcoin, not about formal definitions (sorry if it wasn't evident from the start). To keep things simple, think that Satoshi Nakamoto issued an edict that made bitcoin into a money. Smiley

And I didn't understand what you meant by "fiat has nothing to do with its utility".
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July 08, 2014, 07:37:03 PM
 #48

The fiat system is forced upon us through law, which means that issuing a competing currency to your nation's currency is illegal. Therefore nobody can compete with the gov./central bank. Normally everyone knows that that competition in the market is a good thing, but why is money the exception? Why can the gov. issue more currency, but if the average person does it's called counterfeiting (which of course is theft)?

Actually, money is no exception. We have dollars, euros, pounds, pesos or whatever, and they are all competing with each other at an international scale (or, rather, economics are). You can hold your savings in whatever currency you see most appropriate (or profitable). Also, If I'm not mistaken, bitcoin is not considered illegal in the USA, though it is obviously not a legal tender there.

Crypto currencies are the solution to fiat! BTC was built with a limit of 21M units because Sastoshi knew the evils of inflation. The distributed nature of the system means that it essentially cannot be shutdown. Governments accepting Bitcoin is not because they wish for competition, but more because they don't have a choice. Of course most of them at this point are ignorant of the technology and will be pressured in due to demand as well.

Actually, cryptocurrencies are not very far from fiat. Both bitcoin and fiat are money since they are called so and accepted as such (no utility besides being a currency). Regarding the limit of 21M coins, it is not really an advantage since, in the first place, it won't be reached any time soon, and it can be changed afterwards if such a necessity should arise, in the second. Smiley

As to Bitcoin's generation rate, it is also a double-edged sword (there are pros and cons to this).

Fiat has nothing to do with its utility. Fiat literally means "by government decree". http://www.merriam-webster.com/dictionary/fiat. So by definition BTC it is a long ways from fiat!

I'm talking about the essence of bitcoin, not about formal definitions (sorry if it wasn't evident from the start). To make things simple, think that Satoshi Nakamoto issued an official decree that made bitcoin into a money. Smiley

And I didn't understand what you meant by "fiat has nothing to do with its utility".


You said, "Actually, cryptocurrencies are not very far from fiat. Both bitcoin and fiat are money since they are called so and accepted as such (no utility besides being a currency)." So all I meant was that their utility aside from being a currency is irrelevant because that has nothing do with what is defined as fiat.

Ok, so if Satoshi declares it to be a currency that's fine. Do you think Satoshi can legally compel you to use and accept it like the state can?
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July 08, 2014, 08:56:37 PM
 #49

Inflation drives debt, and create long term bubbles. Deflation drives savings, and investment.

http://mises.org/daily/3229
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July 08, 2014, 09:05:45 PM
 #50

Inflation drives debt, and create long term bubbles. Deflation drives savings, and investment.

You got it backwards.  Inflation & deflation don't drive anything they are symptoms of the economy.  Booms & busts happen as business cycles.

The question is how do you deal w inflation & deflation?
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July 08, 2014, 09:21:44 PM
 #51

Inflation drives debt, and create long term bubbles. Deflation drives savings, and investment.

You got it backwards.  Inflation & deflation don't drive anything they are symptoms of the economy.  Booms & busts happen as business cycles.

The question is how do you deal w inflation & deflation?

With sound money the value of the money, which is the inverse of the prices of other goods, and the interest rate, signals to the actors what is the correct level of saving in money, the correct level of consumption and the correct level of investments.

With unsound money the signals are distorted and there is no guidance. Calculation is impossible and investments become random, the search for value is done in stead via asslicking the rulers.
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July 08, 2014, 09:28:19 PM
 #52

Inflation drives debt, and create long term bubbles. Deflation drives savings, and investment.

You got it backwards.  Inflation & deflation don't drive anything they are symptoms of the economy.  Booms & busts happen as business cycles.

The question is how do you deal w inflation & deflation?

... you're playing at semantics. You reiterated what I said. One "deals with" inflation by going in to debt. You "deal with" deflation by saving. When any entity holds the keys to the printing press of a fiat currency, inflation is the cause. Inflation is the increase in the monetary base. Devaluation of the unit of currency is the symptom.

http://mises.org/daily/3229
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July 09, 2014, 02:27:49 AM
 #53

Inflation drives debt, and create long term bubbles. Deflation drives savings, and investment.

You got it backwards.  Inflation & deflation don't drive anything they are symptoms of the economy.  Booms & busts happen as business cycles.

The question is how do you deal w inflation & deflation?

... you're playing at semantics. You reiterated what I said. One "deals with" inflation by going in to debt. You "deal with" deflation by saving. When any entity holds the keys to the printing press of a fiat currency, inflation is the cause. Inflation is the increase in the monetary base. Devaluation of the unit of currency is the symptom.

Its not semantics.   Market forces are very difficult to manipulate.   Inflation/ deflation are measurements.   They are symptoms not causes.

Saving or spending can be reactive.  But how do you mandate that?   Can't force people to save or spend if they don't want to.   The only thing the Fed can do is raise/lower interest rates.  Govt can save or spend if Congress approves budget
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July 09, 2014, 05:45:34 AM
 #54

It results in misallocation of capital that will correct at some point and in addition distorts price signals, making the economy less efficient.

Not "less efficient" (in fact, too much efficiency would be a problem: http://www.scribd.com/doc/26248658/Is-Our-Monetary-Structure-a-Systemic-Cause-for-Financial-Instability-Bernard-Lietaer ), but (apart from the hamster wheel bullshit jobs) we get a major collapse or a giant "economic discharge" (i.e. war) every couple of decades.

If you view the purpose of an economy as producing prosperity and well-being for the people by using resources (natural ones, energy and labour), I wouldn't call what we currently have "efficient": many people are forced to work in slave-like conditions, we're using up natural resources at an increasing pace, polluting the life on this planet and the lives of many cannot be called prosperous or even good.

I argue that this inefficiency and other negative implications of the way our economy currently functions are largely a result of the type of money we use and propose the use of Bitcoin as a solution. I believe widespread use of cryptocurrency as a store of wealth and for payments can have very positive effects for our well-being, both for the people individually and as a whole, including non-human life. Might be a naive dream, but I'm willing to try it out.

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July 09, 2014, 10:13:58 AM
 #55

i didn't say we have too much efficiency today  Smiley

i believe it's not even possible to have 100% efficiency (we require failure to learn), but what we do today is try to strive for it anyway (by force, hierarchy and authority), and we're wasting resources and (literally) our time (see again, bullshit jobs) in doing so.

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July 09, 2014, 10:46:33 AM
Last edit: July 22, 2014, 12:26:50 PM by tee-rex
 #56

The fiat system is forced upon us through law, which means that issuing a competing currency to your nation's currency is illegal. Therefore nobody can compete with the gov./central bank. Normally everyone knows that that competition in the market is a good thing, but why is money the exception? Why can the gov. issue more currency, but if the average person does it's called counterfeiting (which of course is theft)?

Actually, money is no exception. We have dollars, euros, pounds, pesos or whatever, and they are all competing with each other at an international scale (or, rather, economics are). You can hold your savings in whatever currency you see most appropriate (or profitable). Also, If I'm not mistaken, bitcoin is not considered illegal in the USA, though it is obviously not a legal tender there.

Crypto currencies are the solution to fiat! BTC was built with a limit of 21M units because Sastoshi knew the evils of inflation. The distributed nature of the system means that it essentially cannot be shutdown. Governments accepting Bitcoin is not because they wish for competition, but more because they don't have a choice. Of course most of them at this point are ignorant of the technology and will be pressured in due to demand as well.

Actually, cryptocurrencies are not very far from fiat. Both bitcoin and fiat are money since they are called so and accepted as such (no utility besides being a currency). Regarding the limit of 21M coins, it is not really an advantage since, in the first place, it won't be reached any time soon, and it can be changed afterwards if such a necessity should arise, in the second. Smiley

As to Bitcoin's generation rate, it is also a double-edged sword (there are pros and cons to this).

Fiat has nothing to do with its utility. Fiat literally means "by government decree". http://www.merriam-webster.com/dictionary/fiat. So by definition BTC it is a long ways from fiat!

I'm talking about the essence of bitcoin, not about formal definitions (sorry if it wasn't evident from the start). To make things simple, think that Satoshi Nakamoto issued an official decree that made bitcoin into a money. Smiley

And I didn't understand what you meant by "fiat has nothing to do with its utility".


You said, "Actually, cryptocurrencies are not very far from fiat. Both bitcoin and fiat are money since they are called so and accepted as such (no utility besides being a currency)." So all I meant was that their utility aside from being a currency is irrelevant because that has nothing do with what is defined as fiat.

I still don't understand why you said that, since you just repeated in other words what I had said ("no utility" vs "irrelevant utility"). Actually, there is no utility besides that of being a money for both bitcoin and fiat (in its digital form indeed). But never mind! Wink
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July 09, 2014, 10:54:18 AM
Last edit: July 22, 2014, 12:27:02 PM by tee-rex
 #57

Ok, so if Satoshi declares it to be a currency that's fine. Do you think Satoshi can legally compel you to use and accept it like the state can?

You are not the first here who tries to explain to me what "fiat" really means, but you don't know that in case of the dollar, the U.S. can't legally compel you to use and accept it (the same is true in many other jurisdictions). In fact, it is the U.S. that takes onto itself an obligation to accept the U.S. dollar as a means of payment for all debts, public charges, taxes and dues. Smiley
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July 09, 2014, 04:03:26 PM
 #58

Inflation drives debt, and create long term bubbles. Deflation drives savings, and investment.

You got it backwards.  Inflation & deflation don't drive anything they are symptoms of the economy.  Booms & busts happen as business cycles.

The question is how do you deal w inflation & deflation?

... you're playing at semantics. You reiterated what I said. One "deals with" inflation by going in to debt. You "deal with" deflation by saving. When any entity holds the keys to the printing press of a fiat currency, inflation is the cause. Inflation is the increase in the monetary base. Devaluation of the unit of currency is the symptom.

Its not semantics.   Market forces are very difficult to manipulate.   Inflation/ deflation are measurements.   They are symptoms not causes.

Saving or spending can be reactive.  But how do you mandate that?   Can't force people to save or spend if they don't want to.   The only thing the Fed can do is raise/lower interest rates.  Govt can save or spend if Congress approves budget

Look up "semantics".

I didn't say anything about forcing behavior. I said individuals deal with inflation by taking on debt. Look how many people take out long term debt in bitcoin? No one that expects to pay it back!

The Fed does more than just manipulate interest rates. They buy debt that no one would, for prices that no one would pay. That's equivalent to printing money and distributing it to banks. That is direct inflation of the monetary base. The devaluation of currency is the symptom. The inflation is the cause. The last audit also showed huge loans to many well connected banks without repayment. More direct inflation. Even if there ever is a repayment, any loan the Fed creates is inflation. The deflation comes when it's repaid.

http://mises.org/daily/3229
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July 09, 2014, 05:40:25 PM
 #59

Inflation drives debt, and create long term bubbles. Deflation drives savings, and investment.

You got it backwards.  Inflation & deflation don't drive anything they are symptoms of the economy.  Booms & busts happen as business cycles.

The question is how do you deal w inflation & deflation?

... you're playing at semantics. You reiterated what I said. One "deals with" inflation by going in to debt. You "deal with" deflation by saving. When any entity holds the keys to the printing press of a fiat currency, inflation is the cause. Inflation is the increase in the monetary base. Devaluation of the unit of currency is the symptom.

Its not semantics.   Market forces are very difficult to manipulate.   Inflation/ deflation are measurements.   They are symptoms not causes.

Saving or spending can be reactive.  But how do you mandate that?   Can't force people to save or spend if they don't want to.   The only thing the Fed can do is raise/lower interest rates.  Govt can save or spend if Congress approves budget

Look up "semantics".

I didn't say anything about forcing behavior. I said individuals deal with inflation by taking on debt. Look how many people take out long term debt in bitcoin? No one that expects to pay it back!

The Fed does more than just manipulate interest rates. They buy debt that no one would, for prices that no one would pay. That's equivalent to printing money and distributing it to banks. That is direct inflation of the monetary base. The devaluation of currency is the symptom. The inflation is the cause. The last audit also showed huge loans to many well connected banks without repayment. More direct inflation. Even if there ever is a repayment, any loan the Fed creates is inflation. The deflation comes when it's repaid.

Buying bitcoin =/= taking out long term debt.  Taking on debt means borrowing

The Fed has been doing QE for a while.  Last time I check no inflation.  They want inflation but its just not happening

You have so little understanding of economics.  Your theoretical basis is wrong and you ignore what is actually happening in reality.  They can print as money as they want but if the money is stuck in the financial sector and never reaches the real economy then no inflation is going to happen.



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July 09, 2014, 05:42:58 PM
 #60

Inflation drives debt, and create long term bubbles. Deflation drives savings, and investment.

You got it backwards.  Inflation & deflation don't drive anything they are symptoms of the economy.  Booms & busts happen as business cycles.

The question is how do you deal w inflation & deflation?

... you're playing at semantics. You reiterated what I said. One "deals with" inflation by going in to debt. You "deal with" deflation by saving. When any entity holds the keys to the printing press of a fiat currency, inflation is the cause. Inflation is the increase in the monetary base. Devaluation of the unit of currency is the symptom.

Its not semantics.   Market forces are very difficult to manipulate.   Inflation/ deflation are measurements.   They are symptoms not causes.

Saving or spending can be reactive.  But how do you mandate that?   Can't force people to save or spend if they don't want to.   The only thing the Fed can do is raise/lower interest rates.  Govt can save or spend if Congress approves budget

Look up "semantics".

I didn't say anything about forcing behavior. I said individuals deal with inflation by taking on debt. Look how many people take out long term debt in bitcoin? No one that expects to pay it back!

The Fed does more than just manipulate interest rates. They buy debt that no one would, for prices that no one would pay. That's equivalent to printing money and distributing it to banks. That is direct inflation of the monetary base. The devaluation of currency is the symptom. The inflation is the cause. The last audit also showed huge loans to many well connected banks without repayment. More direct inflation. Even if there ever is a repayment, any loan the Fed creates is inflation. The deflation comes when it's repaid.

Buying bitcoin =/= taking out long term debt.  Taking on debt means borrowing

The Fed has been doing QE for a while.  Last time I check no inflation.  They want inflation but its just not happening

You have so little understanding of economics.  Your theoretical basis is wrong and you ignore what is actually happening in reality.  They can print as money as they want but if the money is stuck in the financial sector and never reaches the real economy then no inflation is going to happen.


Inflation is not stucked in the financial sector. It is exported out to export counties where food and housing price has gone off the roof in the last 2-3 years.

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July 09, 2014, 05:46:14 PM
Last edit: July 22, 2014, 12:27:28 PM by tee-rex
 #61

Buying bitcoin =/= taking out long term debt.  Taking on debt means borrowing

The Fed has been doing QE for a while.  Last time I check no inflation.  They want inflation but its just not happening

You have so little understanding of economics.  Your theoretical basis is wrong and you ignore what is actually happening in reality.  They can print as money as they want but if the money is stuck in the financial sector and never reaches the real economy then no inflation is going to happen.

Welcome liquidity trap! Cheesy
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July 09, 2014, 07:02:57 PM
 #62

Inflation drives debt, and create long term bubbles. Deflation drives savings, and investment.

You got it backwards.  Inflation & deflation don't drive anything they are symptoms of the economy.  Booms & busts happen as business cycles.

The question is how do you deal w inflation & deflation?

... you're playing at semantics. You reiterated what I said. One "deals with" inflation by going in to debt. You "deal with" deflation by saving. When any entity holds the keys to the printing press of a fiat currency, inflation is the cause. Inflation is the increase in the monetary base. Devaluation of the unit of currency is the symptom.

Its not semantics.   Market forces are very difficult to manipulate.   Inflation/ deflation are measurements.   They are symptoms not causes.

Saving or spending can be reactive.  But how do you mandate that?   Can't force people to save or spend if they don't want to.   The only thing the Fed can do is raise/lower interest rates.  Govt can save or spend if Congress approves budget

Look up "semantics".

I didn't say anything about forcing behavior. I said individuals deal with inflation by taking on debt. Look how many people take out long term debt in bitcoin? No one that expects to pay it back!

The Fed does more than just manipulate interest rates. They buy debt that no one would, for prices that no one would pay. That's equivalent to printing money and distributing it to banks. That is direct inflation of the monetary base. The devaluation of currency is the symptom. The inflation is the cause. The last audit also showed huge loans to many well connected banks without repayment. More direct inflation. Even if there ever is a repayment, any loan the Fed creates is inflation. The deflation comes when it's repaid.

Buying bitcoin =/= taking out long term debt.  Taking on debt means borrowing

The Fed has been doing QE for a while.  Last time I check no inflation.  They want inflation but its just not happening

You have so little understanding of economics.  Your theoretical basis is wrong and you ignore what is actually happening in reality.  They can print as money as they want but if the money is stuck in the financial sector and never reaches the real economy then no inflation is going to happen.

You drank the koolaid.

You need to read my post before replying. I said no one is taking out BTC debt because it's deflationary. No shit borrowing = taking on debt. Try to follow along.

I never thought I'd actually come across someone who believed the government's inflation figures... and purported to know anything about money. Inflation is around 6% currently, when should be experiencing deflation currently.

http://mises.org/daily/3229
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July 09, 2014, 08:10:03 PM
 #63

Koolaid huh?  Yeah thats cute.  Inflation is currently 2.1%.  Did you pull 6% from your butt or is it based on data?

And why you keep talking about bitcoin when im talking about economics?  You think you buying bitcoin will cause deflation?  Or people actually prefer deflation? LOL.  Theres koolaid here but im not the one drinking it

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July 09, 2014, 09:21:53 PM
 #64

Koolaid huh?  Yeah thats cute.  Inflation is currently 2.1%.  Did you pull 6% from your butt or is it based on data?

And why you keep talking about bitcoin when im talking about economics?  You think you buying bitcoin will cause deflation?  Or people actually prefer deflation? LOL.  Theres koolaid here but im not the one drinking it

Your reading comprehension is atrocious. Go back, read over all of our ex

Inflation, if measured in the historical manner rather than however the government decides is necessary to hide the true state of the economy, is around 6%. http://www.shadowstats.com/alternate_data/inflation-charts

http://mises.org/daily/3229
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July 09, 2014, 11:37:15 PM
 #65

Koolaid huh?  Yeah thats cute.  Inflation is currently 2.1%.  Did you pull 6% from your butt or is it based on data?

And why you keep talking about bitcoin when im talking about economics?  You think you buying bitcoin will cause deflation?  Or people actually prefer deflation? LOL.  Theres koolaid here but im not the one drinking it

Your reading comprehension is atrocious. Go back, read over all of our ex

Inflation, if measured in the historical manner rather than however the government decides is necessary to hide the true state of the economy, is around 6%. http://www.shadowstats.com/alternate_data/inflation-charts

Really shadowstats?   Thats where you got your numbers from?  Oh lord  Roll Eyes
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July 10, 2014, 06:37:16 PM
 #66

Can we limit the logical fallacies? Or are you simply interested in rhetoric?

http://mises.org/daily/3229
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July 10, 2014, 06:40:21 PM
 #67


Really shadowstats?   Thats where you got your numbers from?  Oh lord  Roll Eyes


You forgot to insert an argument.
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July 10, 2014, 06:46:20 PM
 #68


Really shadowstats?   Thats where you got your numbers from?  Oh lord  Roll Eyes


You forgot to insert an argument.


He doesn't have one. He seems to regurgitate talking points from MSNBC, and has little understanding.

http://mises.org/daily/3229
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July 10, 2014, 08:22:43 PM
 #69


Really shadowstats?   Thats where you got your numbers from?  Oh lord  Roll Eyes


You forgot to insert an argument.


He doesn't have one. He seems to regurgitate talking points from MSNBC, and has little understanding.

Ha ha wrong.  I don't follow mainstream economics.  I follow heterodox economics & MMT.   No need for me to argue shadowstats.  Just google "shadowsats debunked" and you will find many examples of why its shit
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July 10, 2014, 09:20:32 PM
 #70

It just occurred to me that something very important is missing from this thread.

Define economic growth.

Look inside yourself, and you will see that you are the bubble.
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July 10, 2014, 10:08:46 PM
 #71

Evenly-Distributed inflation has no effect on the economy whatsoever aside from potentially tricking people into thinking they are wealthier than they are because they are falsely comparing their wealth today, to their wealth yesterday, using different units (i.e, currency today vs. currency yesterday). Evenly-Distributed inflation is just an accounting trick and nothing more, affects nothing in real terms.

Evenly-Distributed inflation is where a certain portion of the interest rate is effectively new money being created.

What DOES have an effect on the economy is non-evenly-distributed inflation (where some people have disproportionate access to the new money creation) and manipulated interest rates,  both of which are negative for fairly obvious reasons.

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July 10, 2014, 10:15:19 PM
 #72

Inflation drives debt, and create long term bubbles. Deflation drives savings, and investment.

You got it backwards.  Inflation & deflation don't drive anything they are symptoms of the economy.  Booms & busts happen as business cycles.

The question is how do you deal w inflation & deflation?

... you're playing at semantics. You reiterated what I said. One "deals with" inflation by going in to debt. You "deal with" deflation by saving. When any entity holds the keys to the printing press of a fiat currency, inflation is the cause. Inflation is the increase in the monetary base. Devaluation of the unit of currency is the symptom.

Its not semantics.   Market forces are very difficult to manipulate.   Inflation/ deflation are measurements.   They are symptoms not causes.

Saving or spending can be reactive.  But how do you mandate that?   Can't force people to save or spend if they don't want to.   The only thing the Fed can do is raise/lower interest rates.  Govt can save or spend if Congress approves budget

Look up "semantics".

I didn't say anything about forcing behavior. I said individuals deal with inflation by taking on debt. Look how many people take out long term debt in bitcoin? No one that expects to pay it back!

The Fed does more than just manipulate interest rates. They buy debt that no one would, for prices that no one would pay. That's equivalent to printing money and distributing it to banks. That is direct inflation of the monetary base. The devaluation of currency is the symptom. The inflation is the cause. The last audit also showed huge loans to many well connected banks without repayment. More direct inflation. Even if there ever is a repayment, any loan the Fed creates is inflation. The deflation comes when it's repaid.

Buying bitcoin =/= taking out long term debt.  Taking on debt means borrowing

The Fed has been doing QE for a while.  Last time I check no inflation.  They want inflation but its just not happening

You have so little understanding of economics.  Your theoretical basis is wrong and you ignore what is actually happening in reality.  They can print as money as they want but if the money is stuck in the financial sector and never reaches the real economy then no inflation is going to happen.

There has been little/no inflation throughout QE because the economy was so bad that without QE there would likely have been deflation (negative inflation), so QE did in effect did raise the inflation rate.

This spot for rent.
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July 10, 2014, 11:29:44 PM
 #73


Really shadowstats?   Thats where you got your numbers from?  Oh lord  Roll Eyes


You forgot to insert an argument.


He doesn't have one. He seems to regurgitate talking points from MSNBC, and has little understanding.

Ha ha wrong.  I don't follow mainstream economics.  I follow heterodox economics & MMT.   No need for me to argue shadowstats.  Just google "shadowsats debunked" and you will find many examples of why its shit

MMT modern money theory. Fuck someone, I had to unnecessarily look that up. It seems to be a variant of socialism; central planning with government intervention in the free market.
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July 11, 2014, 01:04:51 AM
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Really shadowstats?   Thats where you got your numbers from?  Oh lord  Roll Eyes


You forgot to insert an argument.


He doesn't have one. He seems to regurgitate talking points from MSNBC, and has little understanding.

Ha ha wrong.  I don't follow mainstream economics.  I follow heterodox economics & MMT.   No need for me to argue shadowstats.  Just google "shadowsats debunked" and you will find many examples of why its shit

MMT modern money theory. Fuck someone, I had to unnecessarily look that up. It seems to be a variant of socialism; central planning with government intervention in the free market.


Let me guess.. You are an Anarcho-Capitalist who reads Rothbard or learned economics from Stefan Molyneux.  Roll Eyes

Central planning is everywhere and not distinct feature of Socialism.   MMT looks at the operational aspects of banking.  It has nothing to do w Socialism vs Capitalism or whatever b&w scenario you imagine

You won't get heterodox economics or MMT because theres no politics in it.   Theres no villain for you to get pissed  at.   Its just about studying the boring world of banking and trying to model the system to find weaknesses.  
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July 11, 2014, 01:26:58 AM
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Really shadowstats?   Thats where you got your numbers from?  Oh lord  Roll Eyes


You forgot to insert an argument.


He doesn't have one. He seems to regurgitate talking points from MSNBC, and has little understanding.

Ha ha wrong.  I don't follow mainstream economics.  I follow heterodox economics & MMT.   No need for me to argue shadowstats.  Just google "shadowsats debunked" and you will find many examples of why its shit

MMT modern money theory. Fuck someone, I had to unnecessarily look that up. It seems to be a variant of socialism; central planning with government intervention in the free market.


Let me guess.. You are an Anarcho-Capitalist who reads Rothbard or learned economics from Stefan Molyneux.  Roll Eyes

Central planning is everywhere and not distinct feature of Socialism.   MMT looks at the operational aspects of banking.  It has nothing to do w Socialism vs Capitalism or whatever b&w scenario you imagine

You won't get heterodox economics or MMT because theres no politics in it.   Theres no villain for you to get pissed  at.   Its just about studying the boring world of banking and trying to model the system to find weaknesses.  
Looks like you are the one peddling politics. Molyneux is about statistics, hard numbers and cause and effect. And he deals in far more than just economics, that's just a symptom of greater underlying problems.

The fundamental symptom that drives most of the current problems, including the economic ones, is the fact that the western fertility rate is too low. More people are dying than are being born, and this has been the case for about 30 years now. At the same time the baby boomers are reaching retirement age in these years. With the economic model we use (taking from those who work and giving to those who do not work) this means taxes keep going up while the benefits from those taxes become less for all of us. That's why the economy is tanking, it is mathematically unsustainable with these demographic problems.

It will take at least 50 years to reverse this trend, and it will get worse before it gets better. And that's just symptoms. The underlying causes are too complex and too longwinded to get into here. But the solution is not. The welfare system has to end. It's the only way, and it will happen against our will if we do not make the choice.

None of this is politics or personal opinion. It's just math and cause and effect.

Look inside yourself, and you will see that you are the bubble.
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July 11, 2014, 01:38:45 AM
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Err no.   I'm not peddling any politics.   I'm peddling academics over armchair economics.

Molyneux uses data that supports his soapboxing.   Its not "math".  If you want learn economics from sources like that go ahead.   I don't care.   Just everyone will think you're a dumbass

I dont get the connection you make between birth rate and current recession.   Everyone knows its from deleveraging MBS's after the housing bubble burst
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July 11, 2014, 01:45:45 AM
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Inflation drives debt, and create long term bubbles. Deflation drives savings, and investment.

You got it backwards.  Inflation & deflation don't drive anything they are symptoms of the economy.  Booms & busts happen as business cycles.

The question is how do you deal w inflation & deflation?

... you're playing at semantics. You reiterated what I said. One "deals with" inflation by going in to debt. You "deal with" deflation by saving. When any entity holds the keys to the printing press of a fiat currency, inflation is the cause. Inflation is the increase in the monetary base. Devaluation of the unit of currency is the symptom.

Its not semantics.   Market forces are very difficult to manipulate.   Inflation/ deflation are measurements.   They are symptoms not causes.

Saving or spending can be reactive.  But how do you mandate that?   Can't force people to save or spend if they don't want to.   The only thing the Fed can do is raise/lower interest rates.  Govt can save or spend if Congress approves budget

Look up "semantics".

I didn't say anything about forcing behavior. I said individuals deal with inflation by taking on debt. Look how many people take out long term debt in bitcoin? No one that expects to pay it back!

The Fed does more than just manipulate interest rates. They buy debt that no one would, for prices that no one would pay. That's equivalent to printing money and distributing it to banks. That is direct inflation of the monetary base. The devaluation of currency is the symptom. The inflation is the cause. The last audit also showed huge loans to many well connected banks without repayment. More direct inflation. Even if there ever is a repayment, any loan the Fed creates is inflation. The deflation comes when it's repaid.

Buying bitcoin =/= taking out long term debt.  Taking on debt means borrowing

The Fed has been doing QE for a while.  Last time I check no inflation.  They want inflation but its just not happening

You have so little understanding of economics.  Your theoretical basis is wrong and you ignore what is actually happening in reality.  They can print as money as they want but if the money is stuck in the financial sector and never reaches the real economy then no inflation is going to happen.

There has been little/no inflation throughout QE because the economy was so bad that without QE there would likely have been deflation (negative inflation), so QE did in effect did raise the inflation rate.

Incorrect. There has been little or no inflation throughout QE because QE has made interest rates so low that lending doesn't make sense for financial institutions. You'll notice that in supposedly riskless environments such as the treasury market or excess reserves at the fed, there has been significant "loan growth" (if you can call it that) and inflation.

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July 11, 2014, 02:03:20 AM
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twiifm: Ok not socialism, let's call it statism. The principle that some has the power to govern over others by force in violation of human rights.
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July 11, 2014, 02:17:36 AM
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"Let me guess.. You are an Anarcho-Capitalist who reads Rothbard or learned economics from Stefan Molyneux.  Roll Eyes"

I prefer that to be a mystery. The dicussion should be over my arguments (and yours).
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July 11, 2014, 02:24:32 AM
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Inflation drives debt, and create long term bubbles. Deflation drives savings, and investment.

You got it backwards.  Inflation & deflation don't drive anything they are symptoms of the economy.  Booms & busts happen as business cycles.

The question is how do you deal w inflation & deflation?

... you're playing at semantics. You reiterated what I said. One "deals with" inflation by going in to debt. You "deal with" deflation by saving. When any entity holds the keys to the printing press of a fiat currency, inflation is the cause. Inflation is the increase in the monetary base. Devaluation of the unit of currency is the symptom.

Its not semantics.   Market forces are very difficult to manipulate.   Inflation/ deflation are measurements.   They are symptoms not causes.

Saving or spending can be reactive.  But how do you mandate that?   Can't force people to save or spend if they don't want to.   The only thing the Fed can do is raise/lower interest rates.  Govt can save or spend if Congress approves budget

Look up "semantics".

I didn't say anything about forcing behavior. I said individuals deal with inflation by taking on debt. Look how many people take out long term debt in bitcoin? No one that expects to pay it back!

The Fed does more than just manipulate interest rates. They buy debt that no one would, for prices that no one would pay. That's equivalent to printing money and distributing it to banks. That is direct inflation of the monetary base. The devaluation of currency is the symptom. The inflation is the cause. The last audit also showed huge loans to many well connected banks without repayment. More direct inflation. Even if there ever is a repayment, any loan the Fed creates is inflation. The deflation comes when it's repaid.

Buying bitcoin =/= taking out long term debt.  Taking on debt means borrowing

The Fed has been doing QE for a while.  Last time I check no inflation.  They want inflation but its just not happening

You have so little understanding of economics.  Your theoretical basis is wrong and you ignore what is actually happening in reality.  They can print as money as they want but if the money is stuck in the financial sector and never reaches the real economy then no inflation is going to happen.

There has been little/no inflation throughout QE because the economy was so bad that without QE there would likely have been deflation (negative inflation), so QE did in effect did raise the inflation rate.

Incorrect. There has been little or no inflation throughout QE because QE has made interest rates so low that lending doesn't make sense for financial institutions. You'll notice that in supposedly riskless environments such as the treasury market or excess reserves at the fed, there has been significant "loan growth" (if you can call it that) and inflation.

I agree and I will add to this,  that there are a lack of borrowers.   After bubble burst,  the private sector face uncertainty so that last thing they want to do is borrow.   They're too concerned about paying down balance sheet

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July 11, 2014, 02:40:28 AM
 #81

Inflation drives debt, and create long term bubbles. Deflation drives savings, and investment.

You got it backwards.  Inflation & deflation don't drive anything they are symptoms of the economy.  Booms & busts happen as business cycles.

The question is how do you deal w inflation & deflation?

... you're playing at semantics. You reiterated what I said. One "deals with" inflation by going in to debt. You "deal with" deflation by saving. When any entity holds the keys to the printing press of a fiat currency, inflation is the cause. Inflation is the increase in the monetary base. Devaluation of the unit of currency is the symptom.

Its not semantics.   Market forces are very difficult to manipulate.   Inflation/ deflation are measurements.   They are symptoms not causes.

Saving or spending can be reactive.  But how do you mandate that?   Can't force people to save or spend if they don't want to.   The only thing the Fed can do is raise/lower interest rates.  Govt can save or spend if Congress approves budget

Look up "semantics".

I didn't say anything about forcing behavior. I said individuals deal with inflation by taking on debt. Look how many people take out long term debt in bitcoin? No one that expects to pay it back!

The Fed does more than just manipulate interest rates. They buy debt that no one would, for prices that no one would pay. That's equivalent to printing money and distributing it to banks. That is direct inflation of the monetary base. The devaluation of currency is the symptom. The inflation is the cause. The last audit also showed huge loans to many well connected banks without repayment. More direct inflation. Even if there ever is a repayment, any loan the Fed creates is inflation. The deflation comes when it's repaid.

Buying bitcoin =/= taking out long term debt.  Taking on debt means borrowing

The Fed has been doing QE for a while.  Last time I check no inflation.  They want inflation but its just not happening

You have so little understanding of economics.  Your theoretical basis is wrong and you ignore what is actually happening in reality.  They can print as money as they want but if the money is stuck in the financial sector and never reaches the real economy then no inflation is going to happen.

There has been little/no inflation throughout QE because the economy was so bad that without QE there would likely have been deflation (negative inflation), so QE did in effect did raise the inflation rate.

Incorrect. There has been little or no inflation throughout QE because QE has made interest rates so low that lending doesn't make sense for financial institutions. You'll notice that in supposedly riskless environments such as the treasury market or excess reserves at the fed, there has been significant "loan growth" (if you can call it that) and inflation.

I agree and I will add to this,  that there are a lack of borrowers.   After bubble burst,  the private sector face uncertainty so that last thing they want to do is borrow.   They're too concerned about paying down balance sheet



This is also true, but the primary problem is that there are a lack of lenders, as shown by the fact that there's a huge shortage banks willing to offer mortgages to the average american. Businesses don't want to borrow, but consumers do and can't get it. Maybe if the consumers could get it, and the threat of a rate spike wasn't always on the horizon, businesses would be more encouraged to borrow?

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July 11, 2014, 02:43:05 AM
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"Let me guess.. You are an Anarcho-Capitalist who reads Rothbard or learned economics from Stefan Molyneux.  Roll Eyes"

I prefer that to be a mystery. The dicussion should be over my arguments (and yours).


Ok its hard not to make that assumption because every you post sounds like it comes straight from some AnCap handbook.

Back to the argument of "if inflation can be measured using indexes like CPI or GDP".  I say yes.  But the models do get revised.  The most accepted model comes from Bureau of Labor & Statistics

You think if the stats come from World Bank or BLS then its bunk because you don't "trust" these organizations due to personal politics.  My argument is that they're data is academic and even though BLS is a govt agency.  Doesn't imply that they do these studies w bias.  They are professional economists & statisticians so their interest would be academic not partisan.  Heres a paper where they explain how CPI is calculated if you care to read

http://www.bls.gov/opub/mlr/2008/08/art1full.pdf

Furthermore, World Bank is not a political organization so why would they publish false data?  What is the motive?  Because they are "banksters" out to get the little guy?

Shadowstats has been debunked by a lot of economist bloggers so I dont need to argue why its bunk.  It would take a tl;dr post.  You can google it and decide yourself.  But nobody in the economics profession quote shadowstats data.

So I ask you what is more likely?  Using Occums Razor..  Is shadowstats correct or the rest of the world correct?  
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July 11, 2014, 02:53:32 AM
 #83

Inflation drives debt, and create long term bubbles. Deflation drives savings, and investment.

You got it backwards.  Inflation & deflation don't drive anything they are symptoms of the economy.  Booms & busts happen as business cycles.

The question is how do you deal w inflation & deflation?

... you're playing at semantics. You reiterated what I said. One "deals with" inflation by going in to debt. You "deal with" deflation by saving. When any entity holds the keys to the printing press of a fiat currency, inflation is the cause. Inflation is the increase in the monetary base. Devaluation of the unit of currency is the symptom.

Its not semantics.   Market forces are very difficult to manipulate.   Inflation/ deflation are measurements.   They are symptoms not causes.

Saving or spending can be reactive.  But how do you mandate that?   Can't force people to save or spend if they don't want to.   The only thing the Fed can do is raise/lower interest rates.  Govt can save or spend if Congress approves budget

Look up "semantics".

I didn't say anything about forcing behavior. I said individuals deal with inflation by taking on debt. Look how many people take out long term debt in bitcoin? No one that expects to pay it back!

The Fed does more than just manipulate interest rates. They buy debt that no one would, for prices that no one would pay. That's equivalent to printing money and distributing it to banks. That is direct inflation of the monetary base. The devaluation of currency is the symptom. The inflation is the cause. The last audit also showed huge loans to many well connected banks without repayment. More direct inflation. Even if there ever is a repayment, any loan the Fed creates is inflation. The deflation comes when it's repaid.

Buying bitcoin =/= taking out long term debt.  Taking on debt means borrowing

The Fed has been doing QE for a while.  Last time I check no inflation.  They want inflation but its just not happening

You have so little understanding of economics.  Your theoretical basis is wrong and you ignore what is actually happening in reality.  They can print as money as they want but if the money is stuck in the financial sector and never reaches the real economy then no inflation is going to happen.

There has been little/no inflation throughout QE because the economy was so bad that without QE there would likely have been deflation (negative inflation), so QE did in effect did raise the inflation rate.

Incorrect. There has been little or no inflation throughout QE because QE has made interest rates so low that lending doesn't make sense for financial institutions. You'll notice that in supposedly riskless environments such as the treasury market or excess reserves at the fed, there has been significant "loan growth" (if you can call it that) and inflation.

I agree and I will add to this,  that there are a lack of borrowers.   After bubble burst,  the private sector face uncertainty so that last thing they want to do is borrow.   They're too concerned about paying down balance sheet



This is also true, but the primary problem is that there are a lack of lenders, as shown by the fact that there's a huge shortage banks willing to offer mortgages to the average american. Businesses don't want to borrow, but consumers do and can't get it. Maybe if the consumers could get it, and the threat of a rate spike wasn't always on the horizon, businesses would be more encouraged to borrow?

Mortgages are harder to get now than pre bubble.  Pre bubble there was deregulation that led to sub-prime lending.  Banks got burned by that so they're cutting back on mortgages.  I had problems proving my income (self employed) when I wanted to refinance my mortgage.  But bank extended my business credit no problem. 

Also, because of financialization of economy, a lot of finance is in the shadow bank industry.  So for example swaps on bitfinex is shadow banking.  So even when QE gets injected into the banking system the money gets routed to speculative activity and not routed to the "real economy".  Lending does occur but not for startup or job creation.  This is one reason why stock market has had bull run
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July 11, 2014, 03:04:20 AM
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Mortgages are harder to get now than pre bubble.  Pre bubble there was deregulation that led to sub-prime lending.  Banks got burned by that so they're cutting back on mortgages.  I had problems proving my income (self employed) when I wanted to refinance my mortgage.  But bank extended my business credit no problem. 

Also, because of financialization of economy, a lot of finance is in the shadow bank industry.  So for example swaps on bitfinex is shadow banking.  So even when QE gets injected into the banking system the money gets routed to speculative activity and not routed to the "real economy".  Lending does occur but not for startup or job creation.  This is one reason why stock market has had bull run

Printed money usually end up in financial asset than productive usage.
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July 11, 2014, 03:13:19 AM
 #85

"Let me guess.. You are an Anarcho-Capitalist who reads Rothbard or learned economics from Stefan Molyneux.  Roll Eyes"

I prefer that to be a mystery. The dicussion should be over my arguments (and yours).


Ok its hard not to make that assumption because every you post sounds like it comes straight from some AnCap handbook.

Back to the argument of "if inflation can be measured using indexes like CPI or GDP".  I say yes.  But the models do get revised.  The most accepted model comes from Bureau of Labor & Statistics

You think if the stats come from World Bank or BLS then its bunk because you don't "trust" these organizations due to personal politics.  My argument is that they're data is academic and even though BLS is a govt agency.  Doesn't imply that they do these studies w bias.  They are professional economists & statisticians so their interest would be academic not partisan.  Heres a paper where they explain how CPI is calculated if you care to read

http://www.bls.gov/opub/mlr/2008/08/art1full.pdf

Furthermore, World Bank is not a political organization so why would they publish false data?  What is the motive?  Because they are "banksters" out to get the little guy?

Shadowstats has been debunked by a lot of economist bloggers so I dont need to argue why its bunk.  It would take a tl;dr post.  You can google it and decide yourself.  But nobody in the economics profession quote shadowstats data.

So I ask you what is more likely?  Using Occums Razor..  Is shadowstats correct or the rest of the world correct?  

I would say shadowstats is not correct in estimating inflation (in general price level), because changes in measurement (for instance changing the content in the shoppers basket) is necessary over time. You can not take a basket from forty years ago and apply it now, the product sortiment is not according to the preferences of todays consumers.

On the other hand, removing articles on the grounds that they show price volatility, is also incorrect and in fact absurd. If you want to measure the variation of price level, you can not take out the components that change.

The current consumer price index preferred by the Fed as the most relevant, is wrong, because it excludes products essential to consumers and is a large part of the total consumption. Food and energy - that must be close to half of the consumption for many consumers.

Then there is the fact that the composition of the reference never fits all consumers. The composition is different for each consumer, and varies greatly.

Then again there is some indexes (chained) that continually adjusts the basket based on the prices. It gives a lower number-

Then in some countries, price level abroad is included, the idea is that the consumer is on vacation abroad sometimes.

Adding this confusion together, and knowing that the resulting index number has profound consequences for the liabilities of the government, the suspicion is that a low number is preferred.

A fundamental question in relation to the value of money, is that you have to include more than the most common consumer goods, you need to take price of capital goods into account also.

The measurements of gross domestic product and money velocity have exactly the same fundamental problems.

That is a bouquet of reasons to say that fundamentally, it is not computable. It is possibe to measure and compute numbers, but standard economics of today is poisoned by numbers. And look at the research reports of today - differential equations and third root and whatever - when you start out with badly defined and fundamentally unmeasurable parameters, that is just hogwash.

Austrian economy does not try to compute these things, but rather start out from some axioms relation to individual's actions of choice, and builds upon that with logic. That is why I like it.

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July 11, 2014, 03:30:06 AM
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Also, because of financialization of economy, a lot of finance is in the shadow bank industry.  So for example swaps on bitfinex is shadow banking.  So even when QE gets injected into the banking system the money gets routed to speculative activity and not routed to the "real economy".  Lending does occur but not for startup or job creation.  This is one reason why stock market has had bull run
This type of activity is the result of people moving down both the risk curve and the time to maturity curve. In other words people are taking more risks with their capital, which leads to higher asset prices, which leads to people feeling like they have more money, which hopefully leads to people spending more money, thus stimulating the economy.

I would certainly agree that people are taking on more risk as a result of QE, and asset prices certainly have gone up significantly, but it does not appear that people are spending more money as a result of this newly created wealth.

This spot for rent.
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July 11, 2014, 04:09:25 AM
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The current consumer price index preferred by the Fed as the most relevant, is wrong, because it excludes products essential to consumers and is a large part of the total consumption. Food and energy - that must be close to half of the consumption for many consumers.


Say what?  Did you even read that article I posted?

http://www.bls.gov/opub/mlr/2008/08/art1full.pdf

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July 11, 2014, 04:22:26 AM
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This type of activity is the result of people moving down both the risk curve and the time to maturity curve. In other words people are taking more risks with their capital, which leads to higher asset prices, which leads to people feeling like they have more money, which hopefully leads to people spending more money, thus stimulating the economy.


The issue w this logic is that investors are a small % of the population and they can't consume for everyone.  This is why we need more jobs.  We need more middle class consumers then the top 1% buying fancy toys (although they contribute by buying expensive things)

Even if top 1% owns 50% of wealth they cannot possibly consume 50% of the goods
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July 11, 2014, 05:33:19 AM
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It just occurred to me that something very important is missing from this thread.

Define economic growth.

Excellent point.

Also: define inflation (there's monetary inflation and price inflation)

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July 11, 2014, 12:13:31 PM
 #90

It just occurred to me that something very important is missing from this thread.

Define economic growth.

Excellent point.

Also: define inflation (there's monetary inflation and price inflation)

Growth is usually measured by GDP

And inflation measured by CPI and PPI
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July 11, 2014, 12:49:04 PM
 #91

It just occurred to me that something very important is missing from this thread.

Define economic growth.

Excellent point.

Also: define inflation (there's monetary inflation and price inflation)

Growth is usually measured by GDP

And inflation measured by CPI and PPI
Correct GDP for inflation. What do the last hundred years look like? Also compare purchasing power of the average household, also corrected for inflation.

Look inside yourself, and you will see that you are the bubble.
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July 11, 2014, 02:34:22 PM
 #92

It just occurred to me that something very important is missing from this thread.

Define economic growth.

Excellent point.

Also: define inflation (there's monetary inflation and price inflation)

Growth is usually measured by GDP

And inflation measured by CPI and PPI

How reliable do people here think those numbers are? The ones used by academic economists.
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July 11, 2014, 02:36:03 PM
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Really shadowstats?   Thats where you got your numbers from?  Oh lord  Roll Eyes


You forgot to insert an argument.


He doesn't have one. He seems to regurgitate talking points from MSNBC, and has little understanding.

Ha ha wrong.  I don't follow mainstream economics.  I follow heterodox economics & MMT.   No need for me to argue shadowstats.  Just google "shadowsats debunked" and you will find many examples of why its shit

I googled "heterodox economics debunked"... that what you said right? Came up with "a heterodox economist nowadays could be defined as ‘somebody who aims for cheap applause from economically illiterate Guardian readers’"

What should we google next? "Gravity debunked", "round earth debunked"?

Occam's razor says the central bank has both the incentive and the power to skew inflation figures.

http://mises.org/daily/3229
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July 11, 2014, 04:37:56 PM
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Really shadowstats?   Thats where you got your numbers from?  Oh lord  Roll Eyes


You forgot to insert an argument.


He doesn't have one. He seems to regurgitate talking points from MSNBC, and has little understanding.

Ha ha wrong.  I don't follow mainstream economics.  I follow heterodox economics & MMT.   No need for me to argue shadowstats.  Just google "shadowsats debunked" and you will find many examples of why its shit

I googled "heterodox economics debunked"... that what you said right? Came up with "a heterodox economist nowadays could be defined as ‘somebody who aims for cheap applause from economically illiterate Guardian readers’"

What should we google next? "Gravity debunked", "round earth debunked"?

Occam's razor says the central bank has both the incentive and the power to skew inflation figures.

yeah right I googled that and I found no such thing except one smarmy article that doesn't debunk anything.  Its just an ad hominem article.  Different schools of economics debate each other all the time but post-Keynsian are still from academia and someone like Minksy is getting very influential now that his work theorize why crisis occurs. 

Gravity & round earth are also accepted by academia.  You know whats NOT?  shadowstats & Stefan Molyneux & Rothbard.  They're considered fringe (as in lunatic)

I guess you don't understand Occum's Razor either. 
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July 11, 2014, 04:48:39 PM
 #95


The current consumer price index preferred by the Fed as the most relevant, is wrong, because it excludes products essential to consumers and is a large part of the total consumption. Food and energy - that must be close to half of the consumption for many consumers.


Say what?  Did you even read that article I posted?

http://www.bls.gov/opub/mlr/2008/08/art1full.pdf



Does it matter. Well here is a proof: The government supplies several different indexes for consumer prices. At best, only one can describe the general consumer price level. Plus, the indexes are tuned, so at one time is defined in one way, another time it is defined another way. So there can be no accurate index.

What there can be, is a number called CPI, measured at one of the specified methods. That number can be interesting to look at, that is why they make it.

Still, the general price level for consumer prices can fundamentally not be measured. I do not think the Serious Economist disagrees on this, it is more a consideration of how important it is.

Anyway, how do they ask to find the component parameters? Do they ask someone in the rockies what he sold his horse to his neighbour for? Why not? Why would anyone care, are horses in the CPI?

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July 11, 2014, 06:26:23 PM
Last edit: July 12, 2014, 07:08:11 AM by twiifm
 #96


The current consumer price index preferred by the Fed as the most relevant, is wrong, because it excludes products essential to consumers and is a large part of the total consumption. Food and energy - that must be close to half of the consumption for many consumers.


Say what?  Did you even read that article I posted?

http://www.bls.gov/opub/mlr/2008/08/art1full.pdf



Does it matter. Well here is a proof: The government supplies several different indexes for consumer prices. At best, only one can describe the general consumer price level. Plus, the indexes are tuned, so at one time is defined in one way, another time it is defined another way. So there can be no accurate index.

What there can be, is a number called CPI, measured at one of the specified methods. That number can be interesting to look at, that is why they make it.

Still, the general price level for consumer prices can fundamentally not be measured. I do not think the Serious Economist disagrees on this, it is more a consideration of how important it is.

Anyway, how do they ask to find the component parameters? Do they ask someone in the rockies what he sold his horse to his neighbour for? Why not? Why would anyone care, are horses in the CPI?



According to that article they poll a basket of goods.  And log the statistics based on that polling.  The basket of goods is chosen to represent a cross section of consumer goods from different regions .  There is a CPI-U and CPI-W to reflect the different lifestyles of urban vs non-urban dwellers.  Its similar to how the Census Bureau poll data

Just read the article.  Its pretty interesting
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July 12, 2014, 12:12:32 AM
 #97

It just occurred to me that something very important is missing from this thread.

Define economic growth.

Excellent point.

Also: define inflation (there's monetary inflation and price inflation)

Growth is usually measured by GDP

And inflation measured by CPI and PPI
Correct GDP for inflation. What do the last hundred years look like? Also compare purchasing power of the average household, also corrected for inflation.
The GDP numbers would show slower growth, but it would still show growth. Purchasing power has also increased, although the amount of the increase would be underreported as our standard of living has increased a lot.

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July 12, 2014, 08:08:02 AM
 #98

It just occurred to me that something very important is missing from this thread.

Define economic growth.

Excellent point.

Also: define inflation (there's monetary inflation and price inflation)

Growth is usually measured by GDP

And inflation measured by CPI and PPI

How reliable do people here think those numbers are? The ones used by academic economists.

Measuring anything isn't really that simple. On top of it, government official has the tendency to make themselves look good by publishing good number.
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July 12, 2014, 08:42:45 AM
 #99

It just occurred to me that something very important is missing from this thread.

Define economic growth.

Excellent point.

Also: define inflation (there's monetary inflation and price inflation)

Growth is usually measured by GDP

And inflation measured by CPI and PPI
Correct GDP for inflation. What do the last hundred years look like? Also compare purchasing power of the average household, also corrected for inflation.
The GDP numbers would show slower growth, but it would still show growth. Purchasing power has also increased, although the amount of the increase would be underreported as our standard of living has increased a lot.
The average house used to cost two yearly salaries. This is no longer the case. Same for most other stuff.

As for re: academics: nobody who care about their personal financial future takes them seriously. Look at what is, not what you are told there is.

Look inside yourself, and you will see that you are the bubble.
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July 12, 2014, 01:16:49 PM
 #100

Inflation supports debt growth, which gives the illusion of economic growth but in reality it sucks the wealth out of the poor and middle class and gives it to the rich who put their wealth in assets and loans to the poor who pay them interest. It's a vicious cycle, but it goes so slowly that not many people actually notice what's going on until it's too late. Like a frog sitting in water that slowly heats up and starts to boil.

Inflation and deflation, if happening naturally, would just be an equilibrium finder for the market. It should not be an instrument or requirement for economic growth.

Bitcoin = Gold on steroids
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July 12, 2014, 01:58:25 PM
 #101

There is a man behind the curtain.
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July 12, 2014, 02:04:43 PM
 #102

There is a man behind the curtain.


And the man realize he is slowly losing control of everything he hold dear.
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July 13, 2014, 06:05:20 AM
 #103

It just occurred to me that something very important is missing from this thread.

Define economic growth.

Excellent point.

Also: define inflation (there's monetary inflation and price inflation)

Growth is usually measured by GDP

And inflation measured by CPI and PPI
Correct GDP for inflation. What do the last hundred years look like? Also compare purchasing power of the average household, also corrected for inflation.
The GDP numbers would show slower growth, but it would still show growth. Purchasing power has also increased, although the amount of the increase would be underreported as our standard of living has increased a lot.
The average house used to cost two yearly salaries. This is no longer the case. Same for most other stuff.

As for re: academics: nobody who care about their personal financial future takes them seriously. Look at what is, not what you are told there is.
The prices of houses have increased in terms of annual salary, however interest rates have decreased dramatically so total housing costs have decreased, plus houses tend to be bigger today then they were in the past so you have a lower housing cost for a bigger house.

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July 13, 2014, 09:38:07 PM
 #104

yeah right I googled that and I found no such thing except one smarmy article that doesn't debunk anything.  Its just an ad hominem article.  Different schools of economics debate each other all the time but post-Keynsian are still from academia and someone like Minksy is getting very influential now that his work theorize why crisis occurs. 

Gravity & round earth are also accepted by academia.  You know whats NOT?  shadowstats & Stefan Molyneux & Rothbard.  They're considered fringe (as in lunatic)

I guess you don't understand Occum's Razor either. 

My general theory in life is don't trust those who benefit more from lying than being honest. You assume the fed can be trusted. You assume if it's mainstream it must be correct, and if it's fringe it must be wrong. The theory that the FED is operating for their own good does not make those ludicrous assumptions. It is only based on the assumption that a man tries to survive as best as possible. Please review Occam's Razor (and spell it right).

http://mises.org/daily/3229
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July 14, 2014, 11:36:46 PM
 #105

It just occurred to me that something very important is missing from this thread.

Define economic growth.

Excellent point.

Also: define inflation (there's monetary inflation and price inflation)

Growth is usually measured by GDP

And inflation measured by CPI and PPI
Correct GDP for inflation. What do the last hundred years look like? Also compare purchasing power of the average household, also corrected for inflation.
The GDP numbers would show slower growth, but it would still show growth. Purchasing power has also increased, although the amount of the increase would be underreported as our standard of living has increased a lot.
The average house used to cost two yearly salaries. This is no longer the case. Same for most other stuff.

As for re: academics: nobody who care about their personal financial future takes them seriously. Look at what is, not what you are told there is.
This brings up another point: yearly salaries.  Things have changed a lot with a lot of households moving from having a single earner to two.  Not only do houses often cost more than 2 yearly salaries, they often cost more than 4 yearly person-salaries.
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July 15, 2014, 10:59:25 PM
 #106

It just occurred to me that something very important is missing from this thread.

Define economic growth.

Excellent point.

Also: define inflation (there's monetary inflation and price inflation)

Growth is usually measured by GDP

And inflation measured by CPI and PPI
Correct GDP for inflation. What do the last hundred years look like? Also compare purchasing power of the average household, also corrected for inflation.
The GDP numbers would show slower growth, but it would still show growth. Purchasing power has also increased, although the amount of the increase would be underreported as our standard of living has increased a lot.
The average house used to cost two yearly salaries. This is no longer the case. Same for most other stuff.

As for re: academics: nobody who care about their personal financial future takes them seriously. Look at what is, not what you are told there is.
This brings up another point: yearly salaries.  Things have changed a lot with a lot of households moving from having a single earner to two.  Not only do houses often cost more than 2 yearly salaries, they often cost more than 4 yearly person-salaries.
I think houses have also gotten bigger in the process.

Who would have thought that if the average house was bigger that the average house would be more expensive?
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July 17, 2014, 06:03:56 PM
 #107

yeah right I googled that and I found no such thing except one smarmy article that doesn't debunk anything.  Its just an ad hominem article.  Different schools of economics debate each other all the time but post-Keynsian are still from academia and someone like Minksy is getting very influential now that his work theorize why crisis occurs. 

Gravity & round earth are also accepted by academia.  You know whats NOT?  shadowstats & Stefan Molyneux & Rothbard.  They're considered fringe (as in lunatic)

I guess you don't understand Occum's Razor either. 

My general theory in life is don't trust those who benefit more from lying than being honest. You assume the fed can be trusted. You assume if it's mainstream it must be correct, and if it's fringe it must be wrong. The theory that the FED is operating for their own good does not make those ludicrous assumptions. It is only based on the assumption that a man tries to survive as best as possible. Please review Occam's Razor (and spell it right).

This is good, but I want to point out as a precondition (I suppose you know this) you have to think that the USG is some persons, different from you. You are not USA. The vast military is not yours, it is theirs. It is not you who control the currency, it is they. It is not you who govern the country through the servants you voted in. It is they who govern you. You do not pay taxes to yourself, you pay it to them. Nothing can be learned about the currency, the debt, the interest rate, the inflation, the bank system and so on, unless this is known.
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