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Old Oct 14th, 2012, 06:42 AM   #1
morganist
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This will be a good debate.

http://morganisteconomics.blogspot.c...inflation.html
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Old Oct 14th, 2012, 08:56 AM   #2
Scataphagos
 
 
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Seems the only inflation Bernanke considers worth of consideration is the 70's type of a "wages and prices spiral".

We're likely to NEVER have that again... low wages from 3rd world countries will always be competition going forward. However, we're likely to have many of the things we buy run rampant with inflation thanks to the money pump.

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Old Oct 14th, 2012, 01:03 PM   #3
morganist
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Quote:
Quote from Scataphagos:

Seems the only inflation Bernanke considers worth of consideration is the 70's type of a "wages and prices spiral".

We're likely to NEVER have that again... low wages from 3rd world countries will always be competition going forward. However, we're likely to have many of the things we buy run rampant with inflation thanks to the money pump.

Do you see my point though that there is more than one force that impacts inflation and that the observed relationship between inflation and interest rates has led to one way of thinking that may be false.

Also the main factor will be foreign goods and the ability to purchase them due to the impact money supply has on exchange rates?
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Old Oct 14th, 2012, 01:20 PM   #4
morganist
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Quote:
Quote from Scataphagos:

Seems the only inflation Bernanke considers worth of consideration is the 70's type of a "wages and prices spiral".

We're likely to NEVER have that again... low wages from 3rd world countries will always be competition going forward. However, we're likely to have many of the things we buy run rampant with inflation thanks to the money pump.

Exactly the assumption from the 70's was the inflation that the excess money created was as a result of too much money chasing too few goods. It could be possible to argue the increase in money could have led to a decreased currency value impacting the ability to purchase goods from abroad pushing prices up creating inflation.

Do you see why the true mechanism that created inflation could have been misinterpreted and a false assumption about money supply levels and the relationship it has was inflation was created?

Could it be argued the relationship seen with interest rates and inflation is in actual fact the relationship between money supply and exchange rates and not too much money chasing too few goods in the domestic economy. If that is the case the idea that a certain level of money supply will be able to control inflation is completely wrong.
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Old Oct 14th, 2012, 05:56 PM   #5
StarDust9182
 
 
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Quote:
Quote from morganist:

Do you see my point though that there is more than one force that impacts inflation and that the observed relationship between inflation and interest rates has led to one way of thinking that may be false.

Also the main factor will be foreign goods and the ability to purchase them due to the impact money supply has on exchange rates?
IMO, Inflation is related to the increase/decrease in money value compared to the ratio of real goods and services of the economy. Many people (including me) use terms that are not precisely defined and so understanding each other's points is more difficult. Economists encourage this confusion as they work their "magic".

The FED controls USD money supply (the base currency) but an issue is that WORLD currencies to WORLD output is now the key issue (IMO) since Aug 15, 1971.

Inflation/deflation can also be hidden in currency exchanges as well if you follow my thinking. I believe that the three main currencies ratios are controlled to attempt to set world inflation but it is not working well. Someone must lose - all politicians and countries can't win in the current scenario

You are likely aware of the Triffin Dilemma - an issue arising from all this. IMO, the FED can't be successful controlling a basket of currencies (even as a base currency) when differing political agendas affect currency inter-relationships.

The salient issue of trouble in 2008 was actually the backup of world trade when the international exchange system was close to collapse because of unknowable counterparty international payment risk. All the other factors come from this trouble in rebalancing payment for world trade IMO.
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Old Oct 14th, 2012, 06:38 PM   #6
Swan Noir
 
 
Join Date: Jun 2009
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Yes ... dead wrong and they know it. Probably fairer to say the way they report on inflation to the public is misleading because they know the reality all to well.
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