It's About Liberty: A Conservative Forum
Topics => Economy => Topic started by: TheGreatDebator on March 22, 2011, 04:04:29 PM
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I have seen people warning of hyperinflation. What is it? And how do we measure it?
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The classic definition is 100% price increase over 3 years. Not that the Fed or the CPI is worth a damn. (It is cooked, revised and excludes fuel and food, not that people need that to live on!) But over the course of the past year, about 16 different commodities experienced over 25% increase in just that time period. (See link below) And Qualitative Easing (QE) "printing money/monetization" can exacerbate that to where it feeds on itself and grows out of control. The Fed and Treasury are playing chicken with inflation and fiscal policy coming out of politicians isn't helping things by taking capital away just to pay interest on the debt!
http://www.finviz.com/futures_performance.ashx?v=16 (http://www.finviz.com/futures_performance.ashx?v=16)
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What is the justification for the CPI NOT including food and fuel in the inflationary calculation? It seems utterly illogical.
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The only reason I can see is them claiming food and fuel prices are too "unstable" - they go uuuup/they go dowwwwn/rinse/repeat - to get a good fix on the index. Which, to me, is all the more reason to include them, but what do I know.
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So, assuming the Fed did calculate commodity prices into the equation, what should they do? And would that change other prices?
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So, assuming the Fed did calculate commodity prices into the equation, what should they do? And would that change other prices?
No capisce "what should they do?"
Their CPI doesn't change the price of anything; it reports.
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Well, if prices really are rising, what should the Fed do?
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Well, if prices really are rising, what should the Fed do?
What do you think they should do? If they print more money then the banks will have more to lend. That could help businesses to start up.
The bank is ready to lend AT&T $20 million to buy T-Mobile. That will give T-Mobile's employee's a big raise.
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Well, if prices really are rising, what should the Fed do?
Stop printing money out of thin air would be one concrete thing the Fed could do. I am not knowledgeable enough to know what effect that would have on the economy as a whole, but I know enough to know that increasing the supply of fiat currency reduces the value of all currency in circulation. Printing money to pay the debt (quantitative easing) is undoubtedly inflationary. Doing it at the levels that Bernanke has authorized is very inflationary. It doesn't take much understanding of economics to see that other converging factors that have the potential of devaluing the dollar could compound the Fed's QE inflation to create a dollar devaluation spiral, and hyperinflation.
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Well, if prices really are rising, what should the Fed do?
Die.
Libertas can answer better than I; I have only a rudimentary knowledge of the Fed. What I do know is the Fed is not part of our government, it's a conglomerate of private bankers and it owns our money. What we use for money now is just paper based on debt; there is no solid value backing any of it. It is only one in a handful of players responsible for the fiscal mess that's been foisted on us.
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Well, if prices really are rising, what should the Fed do?
Stop printing money out of thin air would be one concrete thing the Fed could do. I am not knowledgeable enough to know what effect that would have on the economy as a whole, but I know enough to know that increasing the supply of fiat currency reduces the value of all currency in circulation. Printing money to pay the debt (quantitative easing) is undoubtedly inflationary. Doing it at the levels that Bernanke has authorized is very inflationary. It doesn't take much understanding of economics to see that other converging factors that have the potential of devaluing the dollar could compound the Fed's QE inflation to create a dollar devaluation spiral, and hyperinflation.
Well, QE (as I understand it) would only be inflationary if people spent the money that was printed. They're not doing that so far. My point is that hyperinflation doesn't seem all that likely.
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Well, if prices really are rising, what should the Fed do?
Stop printing money out of thin air would be one concrete thing the Fed could do. I am not knowledgeable enough to know what effect that would have on the economy as a whole, but I know enough to know that increasing the supply of fiat currency reduces the value of all currency in circulation. Printing money to pay the debt (quantitative easing) is undoubtedly inflationary. Doing it at the levels that Bernanke has authorized is very inflationary. It doesn't take much understanding of economics to see that other converging factors that have the potential of devaluing the dollar could compound the Fed's QE inflation to create a dollar devaluation spiral, and hyperinflation.
Well, QE (as I understand it) would only be inflationary if people spent the money that was printed. They're not doing that so far. My point is that hyperinflation doesn't seem all that likely.
I'm not even close to a financial expert, but I've heard/read some experts who say that if the dollar is dropped as the international currency standard, hyperinflation is imminent. That's just one of the other "converging factors" I mentioned above that I've heard/read folks speculate could instantly devalue the dollar and begin a devaluation spiral.
By all means, if you have some insight, please share it.
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What is the justification for the CPI NOT including food and fuel in the inflationary calculation? It seems utterly illogical.
There is none . Who said government book-keeping was logical ( or honest ) ?
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Well, if prices really are rising, what should the Fed do?
The Fed should do absolutely nothing . Congress should act to remove measures which inhibit business expansion and new business start-up .
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The BLS compiles the CPI data, the Fed chooses to exclude food & fuel in order to get at the trend without swings. There may be some downstream impacts into the other categories, but that is what they do, then they can look at food & fuel as separate items and make determinations as to what is driving them now and what is likely to drive them in the short, intermediate or long term horizon. Since the numbers get messaged, if their assumptions are off, they will either undershoot (contract) or overshoot (overexpand) their growth target. The biggest problem I have with the Fed, and the Federal government at large is they are still tragically locked into Keynesian bullsh*t! They forget that real inflation is composed to two items - price changes and the FALLING VALUE OF MONEY! What Debator is referring to in his post about QE is not entirely correct, he is referencing the velocity of money. If money provided by QE was churned more, inflation could increase due to the velocity of the turnover and lead to hyperinflation. It's like a pump pumping more air into a tire, you don't want to over-inflate the tire lest it explode. Problem is, these Keynesian fools threw out caring about velocity back around the late 80's early 90's. Hell, does anybody remember M1, M2 etc? Hell no. So would these jackasses see hyperinflation on the horizon they way they look at things now? Probably not, it would be too late for them to act once it started showing up. And the even bigger, ugly damn gorilla in the room is the value of money. I'd like to hear anybody try to explain how QE is not helping to debase our currency. I'd like to see somebody argue how intervention into currency markets no matter the reason is not debasing our currency. And I damn well know there isn't anybody out there who can articulate how the grotesque spending binge the Proglodytes and Ruling Class have been on and the resulting massive debt load and required interest payments are not eroding the hell out of our currency!
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Well, if prices really are rising, what should the Fed do?
The Fed should do absolutely nothing . Congress should act to remove measures which inhibit business expansion and new business start-up .
The Fed should stop this QE BS. But I agree if a pro-growth agenda (lower spending, lower taxes, lower regulation) was enacted and the deficits eliminated and serious debt retirement occurred, that would be the best all-around solution!
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Well, if I told you that there was a room full of cash, but you didn't spend it, what impact would it have on the economy? Nothing. Just because there is more of something doesn't mean it is worth less. It has to be put to use in the economy.
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Well, if I told you that there was a room full of cash, but you didn't spend it, what impact would it have on the economy? Nothing. Just because there is more of something doesn't mean it is worth less. It has to be put to use in the economy.
Right now the new QE currency is being "printed" to service the debt. What happens if/when foreign creditors begin refusing the dollar as repayment for our debt, insisting that its value has fallen too far and is too inconsistent, and instead begin requiring us to trade for a new international currency at a bad exchange rate from our point of view?
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IDP's point is pretty spot on. Also, this is no different than what rulers did in olden days. In the old days it was called debasing. Kings collected all gold and silver in their land in return for promises to return thier coinage to them under the auspices of minting new coins. The king would melt it all down, skim some pure metal off, add in base metals, mint the coins and return them to the people. As far as the people are concerned, if they gave up 10 coins and got 10 coins, they think they have full value for what the surrendered, but they just got swindled. Other nobles knew this game and would want to be cut in for a share or the king would risk open warfare with his fellow nobles. The sheep go merrily on none the wiser. Does that make the king's actions OK? Did the people not get screwed? Same applies for currency. Supply on hand but not yet put into circulation still has a debasing effect, you just might know about it until it begins to have an effect. This effect can best be measured by currency markets. The dollar, for a long time, as been getting the living crap beat out of it. To say QE does not contribute to that erosion is folly. Does the Fed announce when or how much it releases into circulation? Do people know this? Throw in IDP's point about getting called is valid, if they demand another form of repayment, now your basically locking in the devaluation. Do we want government getting into currency speculation to hedge their bets? They would dominate the market, we call it manipulation, and it is something the Left demonizes the private sector for doing.
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Also, when the stack of reserve currency is released into circulation, that is going to affect the velocity factor.
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Well, if I told you that there was a room full of cash, but you didn't spend it, what impact would it have on the economy? Nothing. Just because there is more of something doesn't mean it is worth less. It has to be put to use in the economy.
What if I told you your painting by Rembrandt now has multiplied by 1500, all painted exactly the same by the Master.
Would your Rembrandt not be worth less?
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Well, if I told you that there was a room full of cash, but you didn't spend it, what impact would it have on the economy? Nothing. Just because there is more of something doesn't mean it is worth less. It has to be put to use in the economy.
What if I told you your painting by Rembrandt now has multiplied by 1500, all painted exactly the same by the Master.
Would your Rembrandt not be worth less?
As murmurs of the duplicates made their way around the art-buying community, the value of the original would erode somewhat. Once the existence of duplicates was confirmed and widely known, the value of the original would begin to steadily decline. Once those duplicates were released into the market, the original would instantly devalue to a fraction of its original worth, and the price for all 1500 pieces would settle on an actual market value relevant to each other, rendering the previous value of the original irrelevant to its current value.
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Well, if I told you that there was a room full of cash, but you didn't spend it, what impact would it have on the economy? Nothing. Just because there is more of something doesn't mean it is worth less. It has to be put to use in the economy.
What if I told you your painting by Rembrandt now has multiplied by 1500, all painted exactly the same by the Master.
Would your Rembrandt not be worth less?
As murmurs of the duplicates made their way around the art-buying community, the value of the original would erode somewhat. Once the existence of duplicates was confirmed and widely known, the value of the original would begin to steadily decline. Once those duplicates were released into the market, the original would instantly devalue to a fraction of its original worth, and the price for all 1500 pieces would settle on an actual market value relevant to each other, rendering the previous value of the original irrelevant to its current value.
Yes.
From your response, I can't tell ::thinking:: whether you see the currency inflation as analogous or not.
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Well, if I told you that there was a room full of cash, but you didn't spend it, what impact would it have on the economy? Nothing. Just because there is more of something doesn't mean it is worth less. It has to be put to use in the economy.
What if I told you your painting by Rembrandt now has multiplied by 1500, all painted exactly the same by the Master.
Would your Rembrandt not be worth less?
As murmurs of the duplicates made their way around the art-buying community, the value of the original would erode somewhat. Once the existence of duplicates was confirmed and widely known, the value of the original would begin to steadily decline. Once those duplicates were released into the market, the original would instantly devalue to a fraction of its original worth, and the price for all 1500 pieces would settle on an actual market value relevant to each other, rendering the previous value of the original irrelevant to its current value.
Yes.
From your response, I can't tell ::thinking:: whether you see the currency inflation as analogous or not.
I do. I think an economist might tell us we're oversimplifying but are in the right sphere of thinking. There are certain economic principles that are self-evident, and devaluing currency by arbitrarily increasing the supply is one I've heard explained often enough to have had it sink in. Currency on a world market has a value just like anything else. Unless someone can explain to me why flooding the market with fiat currency thus increasing the available money supply does not devalue the worth of each dollar, I think the analogy stands - at least as an illustration of the point, if not in the details of the economic mechanics.
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Well I am no financial guru by a long shot, but I see a problem with printing money even if it's not theoretically spent. Just the mere fact of its existence promotes lax fiscal discipline if there's always the understanding that it's sitting there as a "backup".
Isn't this sort of how Social Security ended up? To borrow the analogy, SS was supposed to be that cash in a room. But statist politicians can't keep their hands off of something like that. They started off saying "well, we'll just borrow some money out of the SS reserve and then when tax revenues come in later this year we'll put it back". Of course, they soon started "borrowing" more from SS than they were replacing with current revenues.
Libertas can speak far more authoritatively on monetary theory and how the laws of supply and demand work with respect to currencies; my main point is that if money is there government will spend it.
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I'll give you a dollar each, for every Rembrandt in the frame.
No frame no deal.
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Yes, G, printing currency and locking it in a room forever is just not going to happen, not at the levels we are talking about. Perhaps there is confusion over reserves Fed banks have and feed through armoured cars to the banks in their region so that they have adequate cash reserves...but we are not going be print billions and billions in currency, lock it away, and keep accumulating. It will be put out into circulation one way or another. Many big brokerage houses peddling government paper may have clients who will have proceeds wired and then the client will want to pull it out if his institution in cash, that currency demand has to be fullfilled somehow, so even in the normal course of business there will always be demands for physical currency. When or how much of that gets put back into circulation...there's a test for ya. I argue the reason the Fed gave up on tracking money supply is because how can someone in today's world track a freshly printed note from inception to final destination?
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If you have a golden pie worth a million dollars,
and you cut the pie into four slices, then,
each slice would be equal (==) to a quarter million dollars.
IOW, the value of a 'slice' would be $250k.
Now, the population can not own a 'slice', but can only purchase a certificate for a 'slice' to use for exchanging. It would cost them $250k for each certificate of a 'slice'.
Now, obama comes along, or his fed, or whatever, the head bottle washer and pie cook, decides to cut the pie into 10 'slices'. Now, the exchange rate for a certificate (pie) is $10k.
I'm sitting down here in Texas, fat, dumb, and stupid, minding my own business, and I read in the paper where the exchange rate for my pie certificate is now only worth $10k as opposed to the $250k that I spent on my pie certificate.
Now, I'm fat, dumb, stupid, and a whole more 'broker'. :(
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Just happened by this today. Very interesting to see below some of the history of the Federal Reserve.
http://www.wtv-zone.com/Mary/BIGGESTSCAMINHISTORY.HTML (http://www.wtv-zone.com/Mary/BIGGESTSCAMINHISTORY.HTML)
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Henry Ford once said " It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning ".
Bless him, he fought the Fed & Unions all his life.
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Just happened by this today. Very interesting to see below some of the history of the Federal Reserve.
http://www.wtv-zone.com/Mary/BIGGESTSCAMINHISTORY.HTML (http://www.wtv-zone.com/Mary/BIGGESTSCAMINHISTORY.HTML)
That is some interesting information. I'm not sure about all the conclusions drawn, but the facts stand on their own as interesting and certainly supportive of the conclusions in a speculative way, if not entirely indicative of them.