Thread Rating:
  • 0 Vote(s) - 0 Average
  • 1
  • 2
  • 3
  • 4
  • 5
The Great Inflation
#61
The Economist often uses the Big Mac as a way of gaging the value of a currency, since it is nearly ubiquitous.

Prices are obviously also affected by the emotions of various investors. If gold, (or $ or Cu or wheat e.g.) is popular or folks fear inflation or shortages, its price is high. Or, speculators may expect demand/popularity to pick up or decline (greed). The volatility of certain markets illustrates this.

I think a crucial point in determining inflation is what percentage of the average person's income is tied up in buying necessities. With no discretionary money, there follows hard times.




Jefferson: I place economy among the first and important virtues, and public debt as the greatest of dangers. To preserve our independence, we must not let our rulers load us with perpetual debt. We must make our choice between economy and liberty, or profusion and servitude. If we can prevent the government from wasting the labors of the people under the pretense of caring for them, they will be happy.
Reply
#62
(05-22-2011, 05:30 PM)jt Wrote: I think a crucial point in determining inflation is what percentage of the average person's income is tied up in buying necessities. With no discretionary money, there follows hard times.

Sorry, I'm having trouble following your logic. Can you explain this more? The point about hard times is obvious enough, but why specifically inflation?
Reply
#63
If the average person must spend nearly all their income on necessities (food, lodging, clothes, and the like), then they have virtually no money to spend on pleasure, toys, their wants and non essentials (discretionary money). Most of the economy of advanced countries is tied up in cars, ipods, cosmetics, fancy clothes, eating out, music, TV, more furniture and house than is needed, etc., etc. This is, I think, where the high profit margins are by and large. And these non essential expenditures are, in my opinion, what drives a huge part of the economy of advanced countries either directly or indirectly.

For example, China is trying to advance consumerism in its country to lessen its dependence on exports.

For example, when the housing market tanks people stop buying houses and they also stop buying furniture, appliances, etc. and many segments of the economy suffer.

When people stop spending, other people stop making money and the government therefore does not get the lost income and sales taxes.

I gather that you are an econ major b5d. I think my supposition would make an interesting study for an economist.





Jefferson: I place economy among the first and important virtues, and public debt as the greatest of dangers. To preserve our independence, we must not let our rulers load us with perpetual debt. We must make our choice between economy and liberty, or profusion and servitude. If we can prevent the government from wasting the labors of the people under the pretense of caring for them, they will be happy.
Reply
#64
(05-24-2011, 05:27 PM)jt Wrote: I gather that you are an econ major b5d. I think my supposition would make an interesting study for an economist.
Yep. Well, partially at least.

The logic is good, except the economic hardship should result in deflation. As people buy less stuff, companies must cut prices to compete. Then, they must lay people off, so demand goes down even further... It's always possible the central bank will overreact, or the government will default and they'll have to print money, but deflation is the main effect.

One of Krugman's big skticks is that people are biased towards being inflation hawks over deflation hawks. It seems to me personally like an oddly technical point for people to get so passionate about - probably has something to do with the fact that I didn't live through the '80s. But, I have to say he seems to have called it.
Reply
#65
Another thing is to think of natural cycles. The Foreclosure crisis resulted in many homes changing hands. People who couldn't afford homes at $200,000 or $500,000 can now purchase that home for half that. Besides starter homes, established homeowners can reinvest in bigger, nicer homes for the same cost of their old home.

That is the start of a cycle. As new homes start, as you say, other purchases are put off to afford the big purchase - but only for awhile. A new home or a resold home will need new furniture, new appliances, and new grounds-keeping, and those purchases will be greater than normal if the homes had never changed hands.

Inflation or deflation is one thing, but the basic marketplace is another. As goods are increasingly bought and sold, most things improve.
Reply
#66
b5d said:
"One of Krugman's big skticks is that people are biased towards being inflation hawks over deflation hawks."

This sounds a bit strange to me, since all we heard about for years (even with Greenspan) is the danger of deflation. The fed has been pumping money into the system madly recently and Greenspan had a very loose money policy for a while. The fed has also been hinting to us that "a little inflation" would be good. These observations certainly don't support your statement. Rather, people (in charge) seem to be biased towards being deflation hawks.
Jefferson: I place economy among the first and important virtues, and public debt as the greatest of dangers. To preserve our independence, we must not let our rulers load us with perpetual debt. We must make our choice between economy and liberty, or profusion and servitude. If we can prevent the government from wasting the labors of the people under the pretense of caring for them, they will be happy.
Reply
#67
Deflation hawk = preventing deflation at all costs.
Reply
#68
Sorry never mind.
Reply
#69
(06-01-2011, 02:10 AM)b5d Wrote: Deflation hawk = preventing deflation at all costs.

What is interesting is that only the Keynesians worry about all this. And that leads me to think that there is more here than just fear. Perhaps the issue of 'fear' is just a perception. Keynesians love to borrow and spend. And Collectivists love to borrow and spend other people's money. Together they form a wonderful team, where they can play with everyone else's money.

Perhaps Keynesians really aren't all that worried about the evil Deflation Monster? After all, this is a great excuse to create more liquidity for more fun and games in the "Borrow, Tax, and spend", economic world.








Here's another thought: I wonder if the State has given researches any grant monies for the sole purpose of studying the social habits of the Collectivist, and Keynesian? After all, they are more than willing to throw hundreds of millions of dollars at 'so called' scientists claiming to study the effects of Global Warming.

I'd say they haven't,...................yet? And when they do, let's start with that little Ferret Faced guy, who writes for the NYTimes, and passes himself off as a college professor in economics. He's already admitted to being a confirmed socialist,........and a Keynesian to boot. Surprise, Surprise, Surprise!!S18

___________________________________________________________________________________________________
"Falsehood flies, and truth comes limping after it" - Jonathan Swift, 1710
Reply
#70
(05-27-2011, 09:16 PM)jt Wrote: b5d said:
"One of Krugman's big skticks is that people are biased towards being inflation hawks over deflation hawks."

This sounds a bit strange to me, since all we heard about for years (even with Greenspan) is the danger of deflation. The fed has been pumping money into the system madly recently and Greenspan had a very loose money policy for a while. The fed has also been hinting to us that "a little inflation" would be good. These observations certainly don't support your statement. Rather, people (in charge) seem to be biased towards being deflation hawks.

Jt, here is something else to add to the "Deflation" debate, and continue with David's, post, and mine, above.

You mentioned Greenspan's loose money policy. However, if you go back a decade, or so, you can find evidence of him reside over a deflationary period. Uncle Jude(an in "U-De") sounded the horn for several years, and he was so vocal about deflation that Greenspan finally refused to accept e-mails from him. See The Deflation Monster.

One other thing to note here: The deflationary period existed during divided government, where Bubba resided in the WH, and the GOP ruled both houses of congress. What was unique was the fact that the constant conflict between both ends of Pennsylvania Avenue created surpluses, and economic expansion. And it was the expansion that really necessitated expansion of the money supply, in order to keep up with this growth. And that is where Greenspan fell down on the job. As a result, he overcompensated during Junior's tenure of the WH.

Unfortunately, we now have just the opposite situation, and Deflation is NOT part of the problem. We are foolishly squandering our heritage, in a fiscal sense. Obama, and Junior before, have spent us into a corner. There never was a problem with deflation once the Dumbasses controlled both ends of Penn. Ave. They simply did what Big Government addicts do best: SPEND MONEY like there is no tomorrow.

So now, we are stuck with Monetary INFLATION, and there is no end in sight, as the Collectivists do what they do best: Spend more than they have, and inflate the currency in order to "Do Unto Others As You Would NOT Have Them Do Unto You, Except Do It First".

And the rest of the story,................is history. Don't you just love how easy it is to Fuck Up The Works? S14 *





* Pardon my profanity, but it is definitely called for here. S11

___________________________________________________________________________________________________
"Falsehood flies, and truth comes limping after it" - Jonathan Swift, 1710
Reply
#71
Deflationary periods are not all bad. For example when technology or manufacturing can produce more goods cheaper, then prices fall naturally to everyone's benefit.

Unfortunately, various elites remember Japan's collapse and the pullback of the depression, and publicly quiver and rant at the possibility that prices might fall. They live in their own ivory tower, I wot. I have watched their excursions into paranoia about this for years, and nothing happened, except that the groundwork for a new boom and bust cycle was laid.

As I understand economics, a new equilibrium cannot be reached until the market clears its imbalances freely. Efforts to prevent this only result in prolonged pain.
Jefferson: I place economy among the first and important virtues, and public debt as the greatest of dangers. To preserve our independence, we must not let our rulers load us with perpetual debt. We must make our choice between economy and liberty, or profusion and servitude. If we can prevent the government from wasting the labors of the people under the pretense of caring for them, they will be happy.
Reply
#72
Here is the latest "Given" of the week:Lack of buyers may force Treasury to boost interest rates. The big question will most likely be,......how high the interest rate will have to go in order to attract investors. Investors, other than themselves of course.

My guess is that the Fed, in all their Keynesian Glory, will not start getting the message, unless the only buyer winds up being themselves. This is going to be well worth watching. Beer and popcorn recommended.
___________________________________________________________________________________________________
"Falsehood flies, and truth comes limping after it" - Jonathan Swift, 1710
Reply
#73
There must be a shortage of 2x4's with which to whack Jackasses over their head.
Jefferson: I place economy among the first and important virtues, and public debt as the greatest of dangers. To preserve our independence, we must not let our rulers load us with perpetual debt. We must make our choice between economy and liberty, or profusion and servitude. If we can prevent the government from wasting the labors of the people under the pretense of caring for them, they will be happy.
Reply
#74
(06-12-2011, 05:02 PM)jt Wrote: There must be a shortage of 2x4's with which to whack Jackasses over their head.

Let's hope not. [Image: jackass-painted-into-corner.jpg]

___________________________________________________________________________________________________
"Falsehood flies, and truth comes limping after it" - Jonathan Swift, 1710
Reply
#75
As if propping up Greece, and making guarantees to the World Bank/IMF, now the Boy Wonder is helping to buoy Egyptian debt too.

There is no doubt that Obama deserves the title "Cowboy" for playing fast and loose. Didn't he accuse Junior of this very same thing?
___________________________________________________________________________________________________
"Falsehood flies, and truth comes limping after it" - Jonathan Swift, 1710
Reply
#76
Yes, but BHO is a cowboy of the intellect, wherein a drawl is replaced by the frequent use of "uh, ... uh ... "
Jefferson: I place economy among the first and important virtues, and public debt as the greatest of dangers. To preserve our independence, we must not let our rulers load us with perpetual debt. We must make our choice between economy and liberty, or profusion and servitude. If we can prevent the government from wasting the labors of the people under the pretense of caring for them, they will be happy.
Reply


Forum Jump:


Users browsing this thread: 1 Guest(s)