Not to steer things off topic but, this is from a book I read recently....called "Reefer Madness: Sex, Drugs, and Cheap Labor in the American Black Market" ( a longer exerpt can be found here: http://www.wnyc.org/books/15307) Author makes an interesting point below: The U.S. dollar now serves as the unofficial currency of this new global underground. During the late 1960s and early 1970s American economists began to notice that the amount of currency in circulation had grown much larger than the amount ordinary citizens were likely to use in their everyday transactions. The discovery led to the first inklings that an underground economy was emerging in the United States. While business publications heralded the advent of a cashless, credit-based economy, the use of banknotes quietly soared. The $100 bill soon became the underground favorite, not just in the United States, but overseas as well, thanks to its high face value and the relative stability of the dollar. During the late 1970s the outflow of currency from the United States averaged about $2 billion a year. By the 1990s, about $20 billion in U.S. currency was being shipped to foreign countries every year. Today approximately three-quarters of all $100 bills circulate outside the United States. The supremacy of the dollar in the global underground has proven a boon to the American economy. The outflow of U.S. currency now serves, in essence, as a gigantic interest-free loan. Every time the U.S. Treasury issues new banknotes, it purchases an equal value of interest-bearing securities. Those securities are liquidated only when the currency is taken out of circulation and put into a bank. In 2000 the U.S. Treasury earned an estimated $32.7 billion in interest from its banknotes circulating overseas. The 1996 redesign of the $100 bill was partly motivated by fears that Middle Eastern counterfeiters had created a convincingly real $100 bill, a "supernote" that might threaten the role of U.S. currency in unofficial transactions. The latest threat to the $100 bill comes not from organized crime figures, but from the central bank of the European Union. The new 500-euro note is perfect for black market activity. It has roughly five times the value of a $100 bill, allowing drug dealers and smugglers to lighten their suitcases. Portugal has banned the 500-euro note for those reasons, and its acceptance in other foreign undergrounds is not yet certain.
do you even trade or do you spend all your time trying to impress people with your brilliance? you sound like a wet behind the ears kid with a lot of book learning but no common sense.
Yeah I do trade, profitably, but at least I have education to know the difference between normal supply/demand price behavior and inflation.
This is great stuff and along the lines of what my thesis will be about. I plan to start my PHd next fall and I am interested in the movements of underground capital. I may write my dissertation about that...
so your saying that if prices rise because of demand its not inflation? then if prices fall because of a lack of demand its not deflation. what school did you get that education at?
Yeah I guess you are right. I should have read the same comic books as you so that I would have the same level of education. I guess that Ebay, Qualcomm, and every other hot stock should be counted in the CPI. Some may call that inflation but who is then wet behind the ears and in their diaper??? I know it is a complex argument for you and I am not going to explain it, but price action is different from inflation. Maybe I should explain this a different way... Inflation/Deflation is not what happens to YOU when you watch old episodes of Baywatch. http://online.sfsu.edu/~pgking/macropdfs/infl.pdf Go to this site and read this. It was the first one that popped up on my yahoo search and seems adequate. Who knows, you might learn something. BTW, don't beat yourself up, that technical institute you attended was a better alternative using a cost/benefit analysis, NOT!!!!!!!!!!!
i didn't mention financial assets. you did.i said services and commodities. maybe you should go back to where you got that education and ask that teacher if you missed something.
I think this issue gained recent media attention with the discovery of truckloads of USD in the vaults of Baghdad.
Where is inflation in the consumer sector? For one, the Govt has a huge incentive to cheat on the CPI numbers every month that gauge the "official inflation rate". When inflation is down, it looks good politically, it saves them money on Social Security CPI adjusted payment increases, etc. Inflation in many parts of the economy are up. Sometimes dramatically. Healthcare rising, what, 10-13% a year? College education, services, tickets to the movies, you name it. This is partially offset by Dell computers at $500 and DVD players under $200. But on the whole, inflation is not zero in this country. Things cost alot more in 2003 than they did 5 or 10 years ago. The real inflation is in stocks, bonds, real estate, sports franchises, virtually any asset out there. No country in history has ever inflated its currency and achieved long lasting prosperity. The music stops eventually. Greenspan should have popped the bubble back in 96/97 when it was getting started. Now he's created two more huge bubbles in real estate and consumer spending. Compare M3 to population growth? M3 has grown much much faster than the population or CPI or GDP. GDP averages what, 3% a year. 4% if we are in a roaring 90's? Greenie would faint if he could only print money at 3-4% annual increases.
Don't know if you are a fan of Jim Rogers, but I read this in his site at the beginning of this year Your views are in good company.