What drives inflation?

Discussion in 'Trading' started by Joe Ross, Sep 24, 2010.

  1. If there is one factor that drives the inflation-deflation cycle, it is the effect and trend of interest rates. The bond/note market is the foundation of the stock market, and makes its existence possible. Interest rates compete with all other forms of investment for capital. When rates are rising, the stock market is less attractive because government bond and note yields are guaranteed, while stock market dividends and profits are not. Falling interest rates, which may stimulate inflation, precipitated the largest stock market increase in history. Real interest rate yield equals the inflation rate subtracted from interest rate yields. A 5% bond yield and 7% inflation rate erodes the purchasing power of money annually by two times.

    Notes and bonds are not really controllable by the FED. The market pretty much decides what those will be. There is a great fallacy perpetrated by the FED which makes people think the FED controls interest rates. The truth is they don't. All the FED ever does is to react to what is happening in the market. When the yield curve gets too far out of alignment, the Fed raises or lowers interest rates.

    However, there's more. The FED does control the money supply. The FED prints money with no accountability. They create money out of thin air. With the removal of the M3 statistic, the lack of control is even more prominently displayed. The FED is almost entirely responsible for long-term inflation. If you or I were to print money with no accountability, we would be put in prison for counterfeiting. Yet the FED continues to print counterfeit money to the extent that people on fixed incomes suffer tremendously from the falling dollar.
  2. businessstaxes

    businessstaxes Guest

    prices increase from higher demand more people bidding up prices..sellers can increase price as lots of demand.

    job growth and incomes increase inflation.

    the only people who want inflation are people who have assets but with working class whose wages are same rising prices is not good.

    tell me an evidence inflation creates jobs?

    the market is up for all the wrong reasons.

  3. Oh no... Joe Ross has moved on from offering random bits of trading wisdom to commenting on inflation. The end is nigh!
  4. You got it wrong. When interest rates are rising, bond market enters a bear market, and people do not buy bonds until the rates stop rising.

    Mr. Joe Ross: is it you who wrote that worthless piece or is it ghostwriters hired somewhere in india?

    Hey readers: who do you think is right in the analysis: my post or the sentence quoted from Mr. Joe Ross?

    He made so many analysis errors that there is no point to comment.
  5. _______________________________

    <b>Our economy is slowly dying, your job, lifestyle are dominated by anxiety.</b>

    <b> The economy is kept alive artificially. </b>

    No one is proposing a solution because no one has the slightest idea of why it is happening and many have vested interest in the present system.

    <b>However an objective observation of the phenomenon can help us understand it and provide us with an innovative solution. </b>

    Of course we can't solve the problem with the tools that brought us there in the first place and we need a new ideology.


    <blockquote><i>- Do you feel that your ideology pushed you to make decisions that you wish you had not made?</i>

    <i>- Well, remember that what an ideology is, is a conceptual framework with the way people deal with reality. Everyone has one. You have to -- to exist, you need an ideology. The question is whether it is accurate or not. And what I'm saying to you is, yes, I found a flaw. I don't know how significant or permanent it is, but I've been very distressed by that fact.</i>

    <i>- You found a flaw in the reality...(!!!???)</i>

    <i>- Flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak.</i>

    <i>- In other words, you found that your view of the world, your ideology, was not right, it was not working? </i>

    <i>- That is -- precisely. No, that's precisely the reason I was shocked, because I had been going for 40 years or more with very considerable evidence that it was working exceptionally well.</i></blockquote>

    <b>In order to alleviate those economic woes wee need to create, as fast as possible, a new credit free currency that will solve the credit crunch and bring incremental jobs, consumption and investments to the present system.</b>

    <a href="http://post-crash.com/credit-free.html"><b>An Innovative Credit Free, Free Market, Post Crash Economy<br>
    A Tract on Monetary Reform</b></a>

    <b><i>It is urgent if we want to limit social, political and military chaos.</i></b>


    <blockquote><i>Is the fulfilment of these ideas a visionary hope? Have they insufficient roots in the motives which govern the evolution of political society? Are the interests which they will thwart stronger and more obvious than those which they will serve?</i>

    <i>I do not attempt an answer in this place. It would need a volume of a different character from this one to indicate even in outline the practical measures in which they might be gradually clothed. But if the ideas are correct — an hypothesis on which the author himself must necessarily base what he writes — it would be a mistake, I predict, to dispute their potency over a period of time. At the present moment people are unusually expectant of a more fundamental diagnosis; more particularly ready to receive it; eager to try it out, if it should be even plausible.</i>

    <i>But apart from this contemporary mood, the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.</i>

    <i>Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas.</i>

    <i>Not, indeed, immediately, but after a certain interval; for in the field of economic and political philosophy there are not many who are influenced by new theories after they are twenty-five or thirty years of age, so that the ideas which civil servants and politicians and even agitators apply to current events are not likely to be the newest. But, soon or late, it is ideas, not vested interests, which are dangerous for good or evil.</i></blockquote>

    <a href="http://post-crash.com"><b>Credit Free Economy</b></a>
    More Jobs, No Debt, No Fear.
    Prosperous, Fair and Stable.

  6. patoo


  7. The world wide farm belt drought of 2011 will cause a nice spike in ppi and cpi, just wait.....
  8. businessstaxes

    businessstaxes Guest

    price are flate is not deflation
    a 15% price correction is not deflation.

    higher prices results in less demand...less demand less jobs.

    i don't see any evidence of deflation other than lower wages.

  9. patoo


    1) I said "toying"
    2) Interest rates are almost the lowest they have been in Joe's and my lifetime. AND Joe and I are old geezers.
    3) Wages have not inflated in the last 10 years

    who said anything about price corrections?
  10. Monetary aggregates. Period.
    #10     Sep 27, 2010