on one hand you have money supply. on the other (equally important) is products/services supply. production in asia has exploded over the last decade comparing to lets say 80s. thats why inflation is not high. in times of war however, when production is very low (aside from military production), hyperinflation happens. but all economists focus only on money supply. what a bunch of ignorant fools
Interesting thread, but I don't think that it will have such a great impact in our daily life. Take for instance those people who have bought expensive real estates, these will be the biggest winners as the inflation goes berserk. Thoughts?
very good except i would say during war time, prices rise because of scarcity of resources as the war effort sucks it all up. Of course war now days are low resource events, unmanned drones which rarely need replacing. but ya if you want a high standard of living you need production, production, production. not some effort to perfect the money supply
More of an observation than a rant. There are two form of $'s ... after tax cash 98% of typical us workers/tax payers receive via w2 + cash tied up in pensions and retirement funds / savings etc. Cash that is very traceable and visible to bankers/irs and the likes. Cash you use to buy assets that create more tax liabilities or consumables generating sales tax. Any income made overseas is required to be reported and taxed in the year received. (2nd Class Dollars / Individual $'s) Then we have pre-tax/no tax / govt secured / anything > $100K CD or any business investment funds domestic or abroad that are kept outside of M3 visibility, reporting or accountability. Electronic equivalents and exotic scrips that pass between federal and private interests to keep the cheese flowing. Any profits made overseas are required to be reported but taxed upon repatriation. (First Class Dollars / Entity $'s) First Class Dollars flow freely between these interests and they can borrow / create as much as they want @ 2%. Hell, sometimes they even pay themselves 3% to write a deal to borrow @ 2%. They park profits overseas and have 50% more capital tax deferred perpetually. These Jagaloons got greedy bet big and were 15 minutes and a bailout from being liquidated in October 2008. My primitive theory is along the lines of water will find its level... the interventions were financial dams trying to control the flow. It's been 3 years + and they've been slowly letting the water out and everyone in the 2nd class dollar pool is feeling some pain. The interventions were manufactured to protect only the first class dollars and associated power and control. Bright side is our $ remains the only game in town and our military has done a stellar job quashing anyone that wants to give it up and trade in gold.
"Bright side is our $ remains the only game in town and our military has done a stellar job quashing anyone that wants to give it up and trade in gold." can u supply proof of the above or are you ju7st another clueless american hiding his face in the sand?
A dollar is whatever a man with the working end of a govt issued M-16 pointing at you tells you it is.
I do believe there are fewer and fewer options for US citizens to move cash out of the US as a result of the over reaching laws and all of the surveillance/FINCENs operations. Even certain credit card transactions are scrutinized and limited. The world appears wide open to multinational entities. Gold Dinar -> Quashed IMFSDR Push in Feb 2011 -> Quashed WebGold and e-Currencies ->Quashed What reasonable choices does one have? EURO? AUD? GBP? INR? Barter? Reality is virtually all transactions have gone electronic via CC/Debit/ACH etc. Your money is nothing more than a journal entry in some computer system. At this moment in time it is very difficult for Americans to open foreign bank accounts. It's difficult to break a c-note outside of the US these days.
The 'dollar' is the non interest bearing demand debt of the U.S. Government, that by the operation of law is used as legal tender to settle accounts and pay taxes. Does that help you make sense of it?
yes, actually, it does, so when they print, not only does the buying power of my dollar go down, but my debt goes up (I'm patriotic, so I call the debt of my country "my debt.")
But they don't really print. They buy or sell longer term interest bearing debt (U.S. Treasuries) which has the effect of increasing or decreasing aggregate bank reserves. The actualy 'dollars' in circulation have not changed much for over a decade...printed dollars are created and destroyed according to the demand for circulation...which has been declining becuase of the expanding use of credit and debit cards. What really happens when the dollar supply changes, is that credits are added or subtracted from the aggregate bank reserves. It goes like this: the Fed decides for whatever policy reason to buy U.S. treasuries, so it either bids for them at auction or it buys them in the secondary market through its primary dealers. The Fed creates a liabilty on its books for the amount of the Treasuries purchased ('Cash' debt account is credited) and the Fed adds a corresponding asset on its books for the amount and kind of the Treasuries acquired. If the Treaury securitiy is purchased at auction from the Treasury, the 'cash' so created is added to the account of the Treasury as an asset and the Treasury lists a corresponding liability in Treasury debt. The Treasury then pays its obligations, redeems maturing securities, whatever, and the 'cash' is then credited to the aggregate private bank accounts at the Fed. If the Treasury security is purchased in the secondary market the so created 'cash' is transferred to the aggregate private banking market directly and the Treasury asset is debited from the aggregate private banking assets and credited to the Fed as an asset. In this way, assets that would otherwise be in the aggegage private banking balance sheet decline and aggregate reserves increase (unless the banks lend the money out). Income producing assets decline in the aggregate private bank balance sheet and income producing assets increase on the Fed balance sheet...remember the Fed creates non interest bearing liabilities to acquire interest bearing assets. What really happens is the private bank operating profits from investment decline and the income shifts to the Fed which they return to the Treasury. Note that all this is simply credits and correspondinig debits that all take place within the aggregate banking system. In terms of supply of money to the economy nothing really happens unless private credit epands or contracts....and the transfer of liabilities and assets within the government and private aggregate bank balance sheets does not of itself change private credit. This is why, in previous threads, I have always described money as credit and why I have indicated that the supply of currency is irrelevent and cannot of itself create a condition of inflation. This is why the Quantity Theory of Money created in the 17th century, before modern fiat currency and credit markets, no longer explains the issues of money supply that translates into price index inflation that can be measured. For inflation to manifest there has to be an expansion of aggregate private credit to the extent that excess reserves decline and aggregate private debt expands,....cash reserves are exchanged for private interest bearing assets...and bank income increases apart from the intergovernment banking ledgers. In this way you see that the dollar is only 'credit', all money is credit and is integrated with all sovereign credit of differring coupon and duration. All notions of money supply need to be adjusted to thinking about 'private credit supply and demand.' You can have M1 increase as credit contracts becuase the loans paid off return longer term assets to demand deposit assets. This is not inflationary, it is the opposite, it is deflationary.