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Off Topic Politics & World Issues
141

[quote]LIFTICVSMAXIMVS wrote:
dhickey wrote:
What I have been trying to wrap my head around is what would have happened (or may still happen) if we wouldn’t have had a bailout. Would restricted credit have caused deflation?

The bailout is an attempt to fix prices higher than consumers want them to be. The collapse only happens because consumers cannot afford stuff.

Increasing the supply of money does not change that fact except for in the certain industries that will see money first. In this case it is evident the bailout is directed at bank stock prices.

Restricted credit is deflation. It is a contraction of the money supply. A decrease in money will decrease demand and prices will drop.

This is a perfectly natural occurrence in a free and unhampered market and is usually very painless because it can only be caused by hoarding – as apposed to saving and investing.

The reason why it is so disastrous in our current market is because failures are continually propped up until the consuming public loses its confidence.
[/quote]

If you have a large debt inflation = good, and deflation = bad. If there was no bailout I was ready to pay down my mortgage as I believe the credit market drying up would be deflationary.

With the bailout, I am going to keep my mortgage with the (questionable)expectation that we will see significant inflation. The gov’t has to be cognisant of this and their trillions of dollars in debt. Unless they are to pay in some other currency or their debt includes some clause or leverage for inflation or deflation.

I am actually much less convinced we will see any appreciable inflation. If the bailout money simply keeps the credit markets open and twarts the deflationary effects of credit drying up, do we really get any appreciable inflation?

I am not so sure of this with the bailout. People will continue to borrow and long as debt is cheap. The fed is likely to keep interest rates down, and buying up bad debt should loosen the credit markets.

[quote]
Really though this is a pickle for our government because they are damned if they do and damned if they don’t. Personally, I think we should just pay the piper and get it over with. Of course that depends on how much government will stand in the way with “New Deal” type policies that it can actually happen.[/quote]

If they didn’t have trillions in debt, that would be much worse in real dollars should we see deflation, we not have seen such a push for this bailout. Ok maby a bit of stretch, but this had to factor into the decision and aggressiveness.

I am stil trying to solidify this in my own mind, but maybe wallstreet wasn’t the only concern. We know mainstreet wasn’t. Maybe a bankrupt federal gov’t is the real concern. Can’t blame wall street for that.

142

[quote]dhickey wrote:
Or are we arguing that inflation is different that what most people understand it to be?[/quote]

I am arguing that inflation is not what most people understand it to be. MZM is the only real way to measure inflation.

143

[quote]LIFTICVSMAXIMVS wrote:
rainjack wrote:
LIFTICVSMAXIMVS wrote:
So then if prices rise differently does one measurement make sense? Shouldn’t every good and service have its own measure?

Every industry does have its own measure. But CPI simplifies all those measures into a single number.

I don’t think anyone is really pinning everything on the CPI. It’s not perfect, but it is about the best we have in terms of providing an estimate of the economic weather.

I am afraid the CPI and other such industry standards are merely to pull the wool over people’s eyes so that no one will know the real extent of inflation. It is a protective measure to keep the dollar stable in terms of other currencies. You can call that a conspiracy if you like.[/quote]

What a surprise, another liberal engaged in conspiracy theorism.

144

[quote]dhickey wrote:
I am not so sure of this with the bailout. People will continue to borrow and long as debt is cheap. The fed is likely to keep interest rates down, and buying up bad debt should loosen the credit markets.[/quote]

The only way to influence people’s decision to borrow is to keep the interest rate at close to 0%.

I agree. I would rather pay down debt while there is massive inflation. But inflation also means prices will be higher so that more will need to be borrowed/saved in order to stay productive. Underconsumption is not the issue we are facing. In fact, it is quite the opposite.

I will try and find a link that explains how credit affects production as I am not sure I am eloquent enough to do it justice.

145

[quote]PRCalDude wrote:
What a surprise, another liberal engaged in conspiracy theorism.
[/quote]

Conspiracies happen all the time. Political correctness is an example of one.

146

[quote]LIFTICVSMAXIMVS wrote:
dhickey wrote:
I am not entirely sure what you guys are arguing about. Inflation is cause by changes in money supply or credit. It is measured in rising prices.

Mathematically it is impossible to measure inflation in terms of prices. In order to do this one needs an separate index for every good and service. Inflation can only be measured in terms of the amount of money presently in the system (MZM).

It is possible for prices to come down with an increase of the money supply if productive means are increased in one sector and demand doesn’t follow. Home prices are one example that I can think of right now.

It makes no sense to say inflation was 10% if the price of homes goes down 25%. In essence the CPI and PPI are meaningless.[/quote]

No, in real life they make sense because you need to have some sense how inflation affects an average household.

Of course they do not really measure inflation, but for a lot of purposes that is not that relevant either, because if prises rise that are important for the average consumer that is probably even worse than inflation, at least in the short run.

Since a lot of contracts have an inflation clause you need to come up with some number to measure inflation.

147

[quote]dhickey wrote:
rainjack wrote:
dhickey wrote:

Unless there were a shortage of all goods and services? I am assuming “prices” are measured in some sort of average or aggregate. One comodity going up, ie short supply, wouldn’t cause inflation.

You only have to look as far as the sharp increase in oil prices to see the effects of one commodity on the rest of the economy.

If you own a business, you are all too aware of the effect on skyrocketing fuel cost on your bottom line.

It is much worse for farmers.

But is this inflation in the traditional sense? Is it reported as such? I am not challenging, I’m asking.

To me this is all really semantics. I read quite a bit on economics and I have never heard inflation referred to as anything but what I posted a few posts up. Are both of you refering to inflation in classical terms and what is measured and reported on? Or are we arguing that inflation is different that what most people understand it to be?[/quote]

LM has the economic textbook idea and little experience how important it is to measure “real inflation” (meaning rising prices for the average guy) and RJ does not get economics but knows that what he calls “inflation” matters even though LM claims it isn´t real.

To further muddy the waters, inflation can raise prices but does not necessarily have to and rising prices in the CPI do not necessarily mean inflation, though the CPI is used to measure the effects of inflation on an average household.

148

And, as an RJ special, looks like the tulip mania was caused by an increase in money supply:

http://www.lewrockwell.com/podcast/?p=episode&name=2008-10-06_042_tulip_mania.mp3

149

[quote]orion wrote:
And, as an RJ special, looks like the tulip mania was caused by an increase in money supply:

http://www.lewrockwell.com/podcast/?p=episode&name=2008-10-06_042_tulip_mania.mp3

[/quote]

Lew Rockwell? This is why talking with you is pointless.

But - How’s that “owning a 10 year-old Ford” dream of yours coming?

Better buy now. The Euro is on its way to the shitter.

I love how people who have nothing know so fucking much more than people who are actually out there living that which the nothings can only criticize.

Perhaps you should just stick with smoking weed. You seem to have that mastered.

150

[quote]rainjack wrote:
Lew Rockwell? This is why talking with you is pointless. [/quote]

But you have nothing to say worth noting and only know how to make an argument by criticizing the messenger. If it were Sean Hannity giving this assessment you’d be all over it.

151

[quote]LIFTICVSMAXIMVS wrote:

I am afraid the CPI and other such industry standards are merely to pull the wool over people’s eyes so that no one will know the real extent of inflation. [/quote]

And why is this necessarily a bad thing?

I mean if we really look at the Quantity Theory of Money that states that MV=PQ (the money supply times the velocity of money is equal to nominal output), there are two factors that could affect inflation, money supply and velocity of money. The CPI, regardless of its accuracy does what it is supposed to do, which is to be used as a tool to manage inflationary expectations. I don’t think that this could be understated: what really matters in controlling inflation is managing inflationary expectations.

Velocity of money in our economy has remained somewhat constant and predictable over time. However, the recent credit crunch has unleashed a snowball effect and for the first time in a very long time, we are seeing the potential effects of a deflationary change from a reduction in the velocity of money. Money supply is far easier to manipulate at a policy level than velocity of money. As a matter of fact, there are many who believe that any deepening of this recession into a depression would be caused by this decrease in velocity.

152

[quote]LIFTICVSMAXIMVS wrote:
rainjack wrote:
Lew Rockwell? This is why talking with you is pointless.

But you have nothing to say worth noting and only know how to make an argument by criticizing the messenger. If it were Sean Hannity giving this assessment you’d be all over it.
[/quote]

You have the market cornered on having nothing worth saying. You prove it almost every time you post.

153

[quote]orion wrote:
LM has the economic textbook idea and little experience how important it is to measure “real inflation” (meaning rising prices for the average guy) and RJ does not get economics but knows that what he calls “inflation” matters even though LM claims it isn´t real.
[/quote]

I see the CPI as little more than a psychological assessment tool. As a scientist I would never use it to base any predictions about what people may or may not do. It seems to me that would be the only use to have such a precise measurement.

154

[quote]LIFTICVSMAXIMVS wrote:

As a scientist I would never use it to base any predictions about what people may or may not do. It seems to me that would be the only use to have such a precise measurement.[/quote]

But this is exactly what it is used for. By businesses and investors the world over.

155

[quote]ajcook99 wrote:
And why is this necessarily a bad thing?
[/quote]
I never claimed that it was bad. I think it is important to understand the limitations certain “facts”.

I don’t think it is possible to measure money velocity either. This is just a positivistic generalization about the behavior of individual humans.

156

[quote]dhickey wrote:
LIFTICVSMAXIMVS wrote:

As a scientist I would never use it to base any predictions about what people may or may not do. It seems to me that would be the only use to have such a precise measurement.

But this is exactly what it is used for. By businesses and investors the world over.[/quote]

And they are either wrong or right so there is no real way to test its usefulness.

157

[quote]rainjack wrote:
orion wrote:
And, as an RJ special, looks like the tulip mania was caused by an increase in money supply:

http://www.lewrockwell.com/podcast/?p=episode&name=2008-10-06_042_tulip_mania.mp3

Lew Rockwell? This is why talking with you is pointless.

But - How’s that “owning a 10 year-old Ford” dream of yours coming?

Better buy now. The Euro is on its way to the shitter.

I love how people who have nothing know so fucking much more than people who are actually out there living that which the nothings can only criticize.

Perhaps you should just stick with smoking weed. You seem to have that mastered.

[/quote]

That is true.

Think about why you work hard while I smoke weed.

It is because ideas matter.

Sooo much more than hard work.

158

[quote]LIFTICVSMAXIMVS wrote:
orion wrote:
LM has the economic textbook idea and little experience how important it is to measure “real inflation” (meaning rising prices for the average guy) and RJ does not get economics but knows that what he calls “inflation” matters even though LM claims it isn´t real.

I see the CPI as little more than a psychological assessment tool. As a scientist I would never use it to base any predictions about what people may or may not do. It seems to me that would be the only use to have such a precise measurement.[/quote]

Hey, prices rise, for real people.

That is very, very real.

In the long run that is of course caused by the inflation of the money supply, but in the short run that could be caused by some prises that are particularly important to the average household, like food or energy.

When should contracts be re-evaluated if not when it affects the average consumer?

The CPI represents when inflation affects real people, most of the time.

IT has its merits and it is used by the private market for good reasons.

I am aware of the manipulations, but I am even more aware of the need for an unbiased source for inflation data.

159

[quote]orion wrote:
I am aware of the manipulations, but I am even more aware of the need for an unbiased source for inflation data.
[/quote]

Would you say, in the entrepreneurial sense, such inflation data influences you?

I am trying to wrap my mind around the notion that I could predict any thing useful with such a measurement – other than a certain class of prices have risen and certain class of people will be affected by it. How one chooses to act and how those actions will play out is still ultimately left to the actions of individuals.

It seems to me that the fundamental flaw in being influenced by such data is that everyone would ultimately attempt to predict the future based on the same data; the entrepreneur attempts to guess not only what the general consumer might do but also what other competing entrepreneurs might do in order to soften his exposure to a loss or increase his profits. Does not the correctness of the entrepreneurs’ actions still ultimately rely on individual free will when all is said and done? For example, Billy-Bob doesn’t care a wit about the CPI, when he wants a new pop-up trailer he’ll go buy it or maybe instead he goes on holiday with his family to Hawaii – whether he has the cash or not.

160

[quote]orion wrote:
rainjack wrote:
orion wrote:
And, as an RJ special, looks like the tulip mania was caused by an increase in money supply:

http://www.lewrockwell.com/podcast/?p=episode&name=2008-10-06_042_tulip_mania.mp3

Lew Rockwell? This is why talking with you is pointless.

But - How’s that “owning a 10 year-old Ford” dream of yours coming?

Better buy now. The Euro is on its way to the shitter.

I love how people who have nothing know so fucking much more than people who are actually out there living that which the nothings can only criticize.

Perhaps you should just stick with smoking weed. You seem to have that mastered.

That is true.

Think about why you work hard while I smoke weed.

It is because ideas matter.

Sooo much more than hard work.

[/quote]

Somehow I doubt your ideas are worth a ditch digger’s wages.

But I could be wrong.