Balderdash

Evidence That Big Inflation Is Coming

ever hear of stagflation?


On Jan 28 07:13 PM jrs87sch wrote:

> I think we have to have some major moves in economic growth before
> we have to worry about any significant changes in inflation.
>
> If you have an opinion, tell me about it at www.InvestorPitStop.co...

Evidence That Big Inflation Is Coming

ever hear of stagflation?


On Jan 28 07:13 PM jrs87sch wrote:

> I think we have to have some major moves in economic growth before
> we have to worry about any significant changes in inflation.
>
> If you have an opinion, tell me about it at www.InvestorPitStop.co...

Evidence That Big Inflation Is Coming

On Jan 27 01:21 AM Dirk McCoy wrote:

> First, prices wouldn't multiply by the same factor- principle on
> debt, for one example. Another would be certain currencies. Another
> would be goods with higher investment requirements, like automated
> flat panel TV factories, as opposed to those with lower investment
> requirements, like boomer middle managers.

You're right ... prices won't multiply by the same factor with an injection of money into the banking system. Rather, it will mutilate savers and reduce the value of debt. Point here is though, society can't get something for free here; you're always robbing peter to pay paul unless you manage to multiply all prices, debts, etc, by the same factor, which is not only impossible but totally pointless.

>
> Second, as people saw their asset values recover relative to debt,
> wealth effect would kick in, and spending resume. As banks had fewer
> loans defaulting, their performance would recover as well.
>

This is tantamount to kicking the can down the street. If the banks are the source of the new captial, it will originate as loans and encourage people to go deeper into debt. Until people reach their new debt ceilings, banks will get repaid, essentially through the loans they just provided. But without a parallel increase in real wealth and productivity the result will be the same and performance would deteriorate 'post-stimulus'.

> Third, increase in supply and demand lead to greater specialization
> and division of labor- this is where real productivity and improved
> living standards emerge. This only leads to collapse and liquidation
> when interventionists show up with their every 7-8 year or so Fed
> interest rate hikes to slow down an "overheating" economy and create
> another Latin/Asian/global financial crisis. If they just stop meddling,
> then instead of wholesale economic destruction, just a few less productive
> producers- usually the late entrants, not the early- will have to
> turn over management/ownership to more productive players.

Would you have us permanantely suppress interest rates? The fed does this by monetizing treasury and other debt instruments . At some point a currency crisis would ensue and not any amount of dollars would buy you a lollipop as people realized it's all a sham. What leads to higher living standards is increased production of goods, services and technology which can't possibly be properly encouraged through capital injections and attempts to prop up home prices.
>
> On Jan 26 08:57 PM Balderdash wrote:

Evidence That Big Inflation Is Coming

On Jan 27 01:21 AM Dirk McCoy wrote:

> First, prices wouldn't multiply by the same factor- principle on
> debt, for one example. Another would be certain currencies. Another
> would be goods with higher investment requirements, like automated
> flat panel TV factories, as opposed to those with lower investment
> requirements, like boomer middle managers.

You're right ... prices won't multiply by the same factor with an injection of money into the banking system. Rather, it will mutilate savers and reduce the value of debt. Point here is though, society can't get something for free here; you're always robbing peter to pay paul unless you manage to multiply all prices, debts, etc, by the same factor, which is not only impossible but totally pointless.

>
> Second, as people saw their asset values recover relative to debt,
> wealth effect would kick in, and spending resume. As banks had fewer
> loans defaulting, their performance would recover as well.
>

This is tantamount to kicking the can down the street. If the banks are the source of the new captial, it will originate as loans and encourage people to go deeper into debt. Until people reach their new debt ceilings, banks will get repaid, essentially through the loans they just provided. But without a parallel increase in real wealth and productivity the result will be the same and performance would deteriorate 'post-stimulus'.

> Third, increase in supply and demand lead to greater specialization
> and division of labor- this is where real productivity and improved
> living standards emerge. This only leads to collapse and liquidation
> when interventionists show up with their every 7-8 year or so Fed
> interest rate hikes to slow down an "overheating" economy and create
> another Latin/Asian/global financial crisis. If they just stop meddling,
> then instead of wholesale economic destruction, just a few less productive
> producers- usually the late entrants, not the early- will have to
> turn over management/ownership to more productive players.

Would you have us permanantely suppress interest rates? The fed does this by monetizing treasury and other debt instruments . At some point a currency crisis would ensue and not any amount of dollars would buy you a lollipop as people realized it's all a sham. What leads to higher living standards is increased production of goods, services and technology which can't possibly be properly encouraged through capital injections and attempts to prop up home prices.
>
> On Jan 26 08:57 PM Balderdash wrote:

Evidence That Big Inflation Is Coming

check your math


On Jan 26 05:27 PM RVN-VET wrote:

> 360 billion would give each american 1 million to be given on a ration
> card for specific items (only) and only so much a year (to meat out
> over time) to save their homes, and to buy only american products.
> This would be the only grass roots program that would insure BIG
> MONEY would not just blow more BIG MONEY...or make more big money.
> The payback here from grass roots is that all americans would be
> insured against loseing their homes.
>
> Any auto MFG should explain to BIG OIL they should take a vested
> interest in their companies because without them there would not
> be a BIG OIL. I don't know where the BIG OIL become so independant
> they think they can artifitially inflate prices by restricting output
> to insure income levels but this is totally an independant idea from
> somewhere that has too much control over OIL. So if they want to
> continue they should care about their future and INVEST.

Evidence That Big Inflation Is Coming

Don't confuse money with demand. We could multiply all prices in the world by a factor of 100, and that wouldn't spur demand; it would simply change the basis of price. If we did this, would it change the ratio of value of various goods? No! 1 chicken would still be worth 1/250 of a piano, despite the 100-fold increase in price of both.

What matters here is profit margin -- the producer will increase production to the extent that the input prices -- raw materials, labor, etc, lag the output prices. If we simply multiplied all prices by 100, there would be no harm done because all prices would rise in equal proportion.

The reason that inflation is so dastardly is that the prices don't always rise in equal proportions.. those who get the money first get to buy stuff at low prices and screw the rest of us who saved our dollars. Indeed, inflation encourages malinvesment because the producer that increases production in response to inflation due to a temporary iniquity will soon see his newfound profit margins collapse and lead to liquidation.

Hope this helps

On Jan 25 07:49 AM [e-mail] wrote:

> Your comment -- "When a central bank doubles the monetary base in
> a matter of months, a lot more money is going to be flooding into
> the real economy. It will compete for finite goods, services, and
> investments, driving up prices" -- doesn't this instance send a message
> to manufacturers and service providers to rehire and crank up production
> to satisfy demand, thereby correcting the problem?? What am I missing?

Evidence That Big Inflation Is Coming

Don't confuse money with demand. We could multiply all prices in the world by a factor of 100, and that wouldn't spur demand; it would simply change the basis of price. If we did this, would it change the ratio of value of various goods? No! 1 chicken would still be worth 1/250 of a piano, despite the 100-fold increase in price of both.

What matters here is profit margin -- the producer will increase production to the extent that the input prices -- raw materials, labor, etc, lag the output prices. If we simply multiplied all prices by 100, there would be no harm done because all prices would rise in equal proportion.

The reason that inflation is so dastardly is that the prices don't always rise in equal proportions.. those who get the money first get to buy stuff at low prices and screw the rest of us who saved our dollars. Indeed, inflation encourages malinvesment because the producer that increases production in response to inflation due to a temporary iniquity will soon see his newfound profit margins collapse and lead to liquidation.

Hope this helps

On Jan 25 07:49 AM [e-mail] wrote:

> Your comment -- "When a central bank doubles the monetary base in
> a matter of months, a lot more money is going to be flooding into
> the real economy. It will compete for finite goods, services, and
> investments, driving up prices" -- doesn't this instance send a message
> to manufacturers and service providers to rehire and crank up production
> to satisfy demand, thereby correcting the problem?? What am I missing?

Seven Reasons Inflation Won't Vanish

In response to deflationists:

Consider the following economy. Person A, Person B, and a bank.

Time 1: Bank has $0, Person A has $100 and a sandwich, Person B has $0 but a decent credit rating.

Time 2: Person A deposits $100 in Bank. Person B borrows $100 from Bank and buys sandwich from A with $100 and eats it. Now Person A has $100 plus $100 demand deposit in the bank, Person B has nothing, and the bank has a loan to B.

Time 3: Person A deposits $100 in Bank for a total of $200 deposited. Bank has $100 plus a loan to B. B has nothing. B defaults on loan because he has no job. The world is one sandwich poorer.

Time 4: Ben Bernanke gives Bank $100 for nothing so Person A gets his deposits back. Now Person A has $200, Bank $0, and Person B $0.
No sandwiches.

Net result? Twice the money and no sandwiches. Lesson? Inflation doesn't need wage growth and it isn't an equal opportunity virus. The bankers are getting free money and we're running out of sandwiches.