Is america bankrupt as a country?

Discussion in 'Economics' started by brokenmarkets, Dec 3, 2010.

  1. I doubt Ben will announce more and higher amounts of QE. QE2 was about half of the first??

    They definitely don´t want the market to start pricing in that it will be necessary with more and more QE to pay of debt. Then we have runaway inflation not far away.
     
    #41     Dec 5, 2010
  2. I'm pretty sure the US would rather go to war than denominate its debt in metals or any other currency.
     
    #42     Dec 5, 2010
  3. Larson

    Larson Guest


    Interesting point.
     
    #43     Dec 5, 2010
  4. Spending was far more "out of control" during the Civil War and during WWII. The current round may (emphasis on may; I haven't done the work to know for sure) only be as bad as what happened under Reagan during another severe recession.
    Regardless, there is precisely zero evidence of such spending leading to any sort of hyperinflation in the US.
    You, I'm sure, didn't check on what happened to the velocity and supply of money during the recently demised crisis. Velocity fell sharply even as the supply rose rapidly. The result was no inflationary impulse was felt.
    To repeat: there is no statistically significant relationship between the overall supply of money (M3) and inflation. That's why the Fed stopped tracking it, and they were right as far as that went. I'd still like them to track it just because it's a nice to know sort of thing, but it's useless as far as monetary policy goes.
    Weimar Germany is a different case altogether, as someone else already pointed out.
     
    #44     Dec 5, 2010
  5. People always need food so even when prices are going down for mobiles, tv´s etc if can spiral out of control for food. Like in China today.
     
    #45     Dec 5, 2010
  6. By the way (since I know none of you will bother) here's the real reason the deficit went up:

    Tax bills in 2009 at lowest level since 1950

    Like I said, the only thing it has to do with is the current recession/stagnation.
     
    #46     Dec 5, 2010
  7. zdreg

    zdreg

    when the velocity of the money goes up all that underlying increase in the money will cause hyperinflation. it is complete nonsense to say there is no connection between money supply and inflation. it is a simple equation that change in money supply supply x velocity = price change.
     
    #47     Dec 5, 2010
  8. cannot be bankrupt if you can print your own money and other people want to use your money.
     
    #48     Dec 5, 2010
  9. Velocity is a function of how much the money out there is really needed. That's a function of economic activity.
    Economic activity does not depend on money supply; it depends solely on confidence.
    Precisely no one is thinking about money supply, either in good or bad times. If people want money badly enough (they're confident), and banks think they're solvent enough (this varies: in good times, solvency is a fig leaf; in bad times, you practically need to have an underground vault of gold before you can get your hands on any additional money. In other words, the banks need to have confidence as well) banks will create money for them, regardless of what the Fed does. In bad times, banks will sit on their hands no matter what the Fed does.
    Human beings and how they feel drive this: if confidence is in the toilet, velocity will be low, and money supply will have only a very limited effect.
    Like I said: money supply shot up during the crisis. All that did was cover for all the deleveraging. Do you see any hyperinflation from all that money creation? If you're honest, you know what the answer is.
     
    #49     Dec 5, 2010
  10. No, but that's because velocity is low, because banks don't trust anybody. They just sit on their money, regardless of how much the FED feeds them (which is Bernanke's big mistake in judgement of course). If trust is restored and all the money comes into circulation, THEN you'll get your inflation.

    On another note: I personally think goldprice by itself is a much better indication of inflation than the CPI.
     
    #50     Dec 5, 2010