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I do know that I haven't gotten a raise for a couple of years and the prices at the grocery store are dramaticly higher in this time.

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good thread great info ,i'am learning

norm


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Originally Posted by siskiyous6
Every penny of the $5 Trillion "stimulus" is inflationary pressure.


Not quite.

Most of the stimulus that has been used has been thrown at the largest banks. There are tremendous deflationary pressures coming from the banks due to a large horde of MBS and derivatives of such that are worth much less than the banks book them at. The combination of tremendous stimulus (via pawning off about half of these toxic assets on the GSEs and the central bank) versus tremendous deflationary pressures (via the other half of the ilk that they still own) has been largely... nothing.

This is why there has yet to be the hyperinflation that the hardcore, and unwise, Austrian contingent predicted.

There is a large dose of inflation coming but not from this source, at least not yet. Some of this will come about and another bunch will come when foreign held dollars seep into the market. TPTB are trying for a long slow decline as opposed to the market clearing that we should have done 5 years ago.

As far as Keynes goes, don't blame him. Had we held to true Keynes principles we would have run a budget surplus when time were good not given large tax breaks into the teeth of a yawning trade deficit. MOF the trade deficit wouldn't have been allowed to occur under a Keynesian managed economy either. He correctly predicted that as economic poison that would eventually bankrupt a nation.

I take economic ideas where I find them. Almost all of them have at least a grain of wisdom in them. But for this situation I honestly believe that understanding Keynes (the real Keynes not the parody of him that is pandered by those who disagree with him) and Triffin is enough to understand what has happened and why most everyone on both sides of the aisles has been dead wrong about it for years on end.

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Originally Posted by SoTexasH
I do know that I haven't gotten a raise for a couple of years and the prices at the grocery store are dramaticly higher in this time.
So you've had a pay cut, courtesy of our friends at the Fed. Every time they increase the supply of currency, they give everybody a pay cut in order to envalue (if you will) the new money they're bringing into existence. You see, the sum total of all the money in existence possesses X value (roughly equal to the value of every good, service, and product available for purchase at any given time). Each dollar's value is X divided by the number of dollars in existence (M). When you increase the number of the units of X, you thereby decrease the value of each unit accordingly (the number of units, or dollars (M), being the denominator, and X being the numerator). That decrease in the value of each unit (dollar) is where the value now residing in the new currency came from. In other words, you can't create new value by printing new units of X (i.e., by increasing M). All you can accomplish by increasing the currency supply (M) is to redistribute the total value of X that's already in existence.

This is why a nation cannot become wealthier overall by printing more currency. That only redistributes the wealth from those who currently hold it, to those who receive the newly printed money, i.e., the banks, their partners in government, and the "too big to fails."

Expanding the currency supply ("printing") is a very sophisticated form of theft. It's why counterfeiting is a crime. It leaves the actual currency in our pockets untouched, but sucks out a portion of the value of each dollar in our pockets and places it into the newly printed currency by simple operation of mathematics (X over M). It's a zero sum game.

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Originally Posted by Penguin


This is why there has yet to be the hyperinflation that the hardcore, and unwise, Austrian contingent predicted.


Will


The only reason that it hasn't occurred is that the velocity of the currency created has been nil. Should the velocity increase, as when all holders of FRN$'s realize that the sooner that they rid themselves of a rapidly debasing currency and trade it for real goods, then you'll have your hyperinflation. It's all a matter of confidence, as most con games are.


If the American People allow private banks to control the issuance of their currency, first by inflation, then by deflation, the banks..., will deprive the People of all their Property,...Thomas Jefferson
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Originally Posted by Penguin
MOF the trade deficit wouldn't have been allowed to occur under a Keynesian managed economy either. He correctly predicted that as economic poison that would eventually bankrupt a nation.

Will


Just re-pub-low-craps serving there corporate masters for a higher stock price.


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Mike and Penguin. The Mike and the Anti-Mike. grin

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I agree but the reason the velocity has been slow is because it has been used to fill the black hole left by the housing bubble. It has in effect been extinguished.

The banks use the spread to limp toward solvency and the rest of us put up with a crappy economy while the central bank takes care of them. They have proven to be far too politically powerful to be allowed to be subject to the forces of capitalism that the rest of us face.

Eventually I believe we will have a large dose of inflation. And I agree that it will come from foreign currency being released into the market. The dollar as global currency reserve is on borrowed time. It allowed cheap energy but it also allowed the US to be stripped of its manufacturing base. The end of its regime will mean a reversing of this process but as of now there is no viable alternative. Eventually I think there will be several global currencies and the dollar will be one of them. But it is an extremely complicated process and there will be enough pain to go around and then some.

Hell it is happening around us as we speak and 90% of Americans still don't see it. A good many think reducing regulations or doing away with government unions will make us globally competitive, lol. This thing is so big that trimming around the edges won't even touch it. This is a total shakeup of the status quo. It has been going on for decades and isn't halfway done yet, not even close.

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Originally Posted by Penguin
Originally Posted by siskiyous6
Every penny of the $5 Trillion "stimulus" is inflationary pressure.


Not quite.

Most of the stimulus that has been used has been thrown at the largest banks. There are tremendous deflationary pressures coming from the banks due to a large horde of MBS and derivatives of such that are worth much less than the banks book them at. The combination of tremendous stimulus (via pawning off about half of these toxic assets on the GSEs and the central bank) versus tremendous deflationary pressures (via the other half of the ilk that they still own) has been largely... nothing.

This is why there has yet to be the hyperinflation that the hardcore, and unwise, Austrian contingent predicted.

There is a large dose of inflation coming but not from this source, at least not yet. Some of this will come about and another bunch will come when foreign held dollars seep into the market. TPTB are trying for a long slow decline as opposed to the market clearing that we should have done 5 years ago.

As far as Keynes goes, don't blame him. Had we held to true Keynes principles we would have run a budget surplus when time were good not given large tax breaks into the teeth of a yawning trade deficit. MOF the trade deficit wouldn't have been allowed to occur under a Keynesian managed economy either. He correctly predicted that as economic poison that would eventually bankrupt a nation.

I take economic ideas where I find them. Almost all of them have at least a grain of wisdom in them. But for this situation I honestly believe that understanding Keynes (the real Keynes not the parody of him that is pandered by those who disagree with him) and Triffin is enough to understand what has happened and why most everyone on both sides of the aisles has been dead wrong about it for years on end.

Will
If QE didn't amount, by simple mathematical operation, to price inflation, then the newly created currency cannot have value. Since it does have value (otherwise they wouldn't bring it into existence), then, for a certainty, each unit of money in existence has accordingly suffered a loss in value. Were it otherwise, it would be possible to increase total wealth (X) by merely increasing the money supply, which is magical thinking pure and simple.

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Originally Posted by The_Real_Hawkeye
Mike and Penguin. The Mike and the Anti-Mike. grin


Naw, me and Mike agree far more than otherwise. We just disagree on specifics at times and overarching themes once in a while. That's a healthy way to be. I learn a lot from arguing with informed folks that disagree with me. Part of the learning process.

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Originally Posted by Penguin
Originally Posted by The_Real_Hawkeye
Mike and Penguin. The Mike and the Anti-Mike. grin


Naw, me and Mike agree far more than otherwise. We just disagree on specifics at times and overarching themes once in a while. That's a healthy way to be. I learn a lot from arguing with informed folks that disagree with me. Part of the learning process.

Will
Just kidding. wink

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I disagree.

Money used to fill a black hole no longer exists. Some of it, to be sure, DOES still exist. And it can and probably will eventually find its way into the useful money pool and will cause inflation. But a lot of it won't.

It is very similar to the hyooge foreign currency reserves that people are now starting to talk about. It has tremendous inflation potential but as it is tucked away (after its use to devalue foreign currencies) the jolt has yet to occur.

This is where the dam is vulnerable. When other countries decide that devaluing to run a trade surplus is no longer the goal they start to exit. This has started but may take decades to come to fruition... or it may take a year.

Almost impossible to predict. At least I think it is but I ain't the last word or even close to it on this issue.

Will


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Originally Posted by Penguin
I disagree.

Money used to fill a black hole no longer exists.
This simply defies logic. If the new currency has no value, it wouldn't be created, since it would then serve no valuable purpose. If it has value, then that value didn't appear out of the blue (otherwise a nation could increase its total prosperity by merely increasing its currency supply). The value in the newly created currency was stolen from the value of preexisting currency units. Had it not been created, what would have been sucked into the black holes you describe? Preexisting currency is the answer. Zero sum game.

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Originally Posted by The_Real_Hawkeye
This simply defies logic. If the new currency has no value, it wouldn't be created, since it would then serve no valuable purpose. If it has value, then that value didn't appear out of the blue. It was stolen from the value of preexisting currency units. Had it not been created, what would have been sucked into the black holes you describe? Pre-existing money is the answer.


I never said it never had any value I said that it no longer exists.

It was used to cancel out an existing negative on the balance sheets of the major banks and those holding overpriced securities manufactured in the housing bubble. It was used to PREVENT a rise in currency values as deflation would have dictated.

What would have been sucked into the black hole in it's place? Every major bank and MBSs securities holder in America. One hell of a lot of personal balance sheets as housing prices taken off life support would have crashed and taken their owners into this hole.

Make no mistake there was a decision to be made. Someone had to be thrown under the bus. When Paulson walked into congress with the demands from the large banks the die was cast. Those of us not saved by the central bank and GSE housing price/MBS bailout were the ones thrown under the bus.

Will


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i agree with aspects of "the black hole" that has helped to damp down inflation. that is debt disappears off the books during bankruptcies, and there's been quite a few of those.

when houseng and other real values decline, that's a form of deflation, or could be. when grocery prices rise, it could be bacause of increased demand, and the creation of markets for farmers by increasing the issuance of foodstamps to the poor and/or unemployed.

the flow of money, or it's velocity through the system is always important. if money doesn't flow, then those at the far edges of the economy go without.

more to be said is that the current low interest rates makes me recall relative deflation, and not relative inflation. one effect would be the cost of holding precious metals is reduced. when the i rate rises, the cost of holding assets increases.

in the uncharted waters of the post-modern era, the game appears to be on.


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Originally Posted by Penguin

I never said it never had any value I said that it no longer exists.
If it was used for a valuable purpose, that value was permanently extracted from preexisting currency. You say, to fill a vacuum, but that vacuum didn't come into existence from outside the system within which we're operating, i.e., it would otherwise have been filled by preexisting currency, which would have operated against price inflation. So the value of the new currency was in its capacity to nullify an operation against price inflation. Zero sum game.

There's no cheating in math, and monetary economics, once you cut through all the BS, is essentially just math. All that smoke and mirrors accomplishes is to manipulate the results in terms of who gets screwed by bad policies, i.e., it can alter who gets left holding the bag, which usually works out to you and me, leaving the banks and the "too big to fails" in the clear.

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Yeah but the result of it is totally different. You speak as though all of the money created has the potential to create massive inflation at any moment. Fact is that a lot of it no longer has that ability as its potential has already been spent to prevent a deflationary event. Some of it can still cause inflation but a whole lot can't.

There is a whole other set of currency that is stowed away by those who hold treasuries. That inflation potential is real and still exists. But that is a different story.

It is kind of funny to me that everyone slept right through the biggest inflation event of my lifetime, the housing bubble. Rent replacement in lieu of housing prices lulled away the devastating effects of asset price inflation while ignorant know it all pundits and political hacks spoke of the great moderation and the Bush Miracle. Bwahahaha! :p

It is all part of the mutated economy. Getting this beast healthy and on its feet is going to be quite the shock to the system. It is too bad we can't make a list of all those coin operated economists and pundits who have been wrong almost all the way along the line and pass a law that they be silenced on matter economics. It would be nice to have some responsibility brought into that profession... and silence a lot of the self serving foolishness that hinders truth finding.

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Originally Posted by Gus
i agree with aspects of "the black hole" that has helped to damp down inflation. that is debt disappears off the books during bankruptcies, and there's been quite a few of those.

when houseng and other real values decline, that's a form of deflation, or could be. when grocery prices rise, it could be bacause of increased demand, and the creation of markets for farmers by increasing the issuance of foodstamps to the poor and/or unemployed.

the flow of money, or it's velocity through the system is always important. if money doesn't flow, then those at the far edges of the economy go without.

more to be said is that the current low interest rates makes me recall relative deflation, and not relative inflation. one effect would be the cost of holding precious metals is reduced. when the i rate rises, the cost of holding assets increases.

in the uncharted waters of the post-modern era, the game appears to be on.


Good grief Gus you can type something that we can all understand! : grin:


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Originally Posted by Penguin
Yeah but the result of it is totally different. You speak as though all of the money created has the potential to create massive inflation at any moment.
There's always a lag time, but whenever the currency supply is increased, there's no getting around the fact that it decreases the value of each unit of currency by simple operation of math. It doesn't matter if it was printed and then not placed into circulation. It was placed somewhere where it filled a hole that would have otherwise been filled by preexisting currency. Thus it had an inflationary effect perfectly in mathematical accord with the extent to which it increased the currency supply.

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Maybe, but if you sit around waiting for the inflationary impact of a lot of that 'stimulus' you'll never see it. It has already had its impact... Preserving a previous inflationary event, the overpricing of housing.

A hell of a lot of money was used for this purpose, to prevent price discovery in housing. It was extinguished in cancelling deflation. It may still no be enough, we may still see downward pricing in housing if the central bank or the GSEs pull their support for the MBS market.

Will


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