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#15069560
SolarCross wrote:It is "non-zero" because the Fed want a meal ticket for all their money printing, they do not do it for free. They try to keep it under some smallish number, like "2%", (does this count real asset inflation or just consumer goods?), because more will turn people into banker hanging nazis. Who even notices 2%?


I believe it's 2% inflation on consumer goods. How exactly is this a meal ticket for their money printing? I'm not understanding that statement.

I agree, that those who benefit the most from this policy of forcing inflation is the rich. Those the benefit the least, or are actually hurt by it, are the poor. Which I've stated previously, and why I agree with the OPs opening sentiments.
#15069584
late wrote:It's nonzero because it has to be.

We left gold because we had to. A growing economy with a fixed money supply means an economy that runs out of money.

Instant recession.

No, a growing economy with a stable money supply means falling prices. "We" left gold because it is not so easy to monopolise, and the reason for monopolising money is to get away with counterfeiting it.
#15069591
SolarCross wrote:
No, a growing economy with a stable money supply means falling prices. "We" left gold because it is not so easy to monopolise, and the reason for monopolising money is to get away with counterfeiting it.



In the 1800s, the economy ran out of money regularly.

One economist described it as being like a dog on a leash. About the same time the dog gets going good, slam, he's flat on his back.

There isn't enough gold. There's lots of it in the Belt, support NASA.

In the meantime, there's a reason OECD countries don't have a gold standard...

In a recent survey of economists not one supported a gold standard.
#15069598
SolarCross wrote:No, a growing economy with a stable money supply means falling prices. "We" left gold because it is not so easy to monopolise, and the reason for monopolising money is to get away with counterfeiting it.


late wrote:In the 1800s, the economy ran out of money regularly.

One economist described it as being like a dog on a leash. About the same time the dog gets going good, slam, he's flat on his back.

There isn't enough gold. There's lots of it in the Belt, support NASA.

In the meantime, there's a reason OECD countries don't have a gold standard...

In a recent survey of economists not one supported a gold standard.


You guys are both right.

Solarcross is right in that not having the gold standard, certainly makes it easier to manipulate the money supply. It places more power in the hands of the elite. However, late is also right in that without a flexible money supply, it becomes harder to grow the economy as things become less fluid/liquid. Capitalists would argue that halted economic growth due to a low money supply is an easily preventable issue when you get off something like the gold standard.

Last, being off the gold standard makes it easier for governments and banks to be irresponsible.
#15069599
late wrote:In the 1800s, the economy ran out of money regularly.

One economist described it as being like a dog on a leash. About the same time the dog gets going good, slam, he's flat on his back.

There isn't enough gold. There's lots of it in the Belt, support NASA.

In the meantime, there's a reason OECD countries don't have a gold standard...

In a recent survey of economists not one supported a gold standard.

Bankers ran out of money because they were trying to counterfeit a fixed supply of other people's gold with a limitless supply of paper bills they print up. When people turn up with paper to get their gold back, the bank got caught out for being a cheat. That is what a "bank run" is. Scammers getting caught scamming.

Getting rid of gold allows for much more room for limitless counterfeiting. The only trick is keeping people believing a little piece of paper is actually worth something.... so that is why the Gold "standard" went.

In the end though all the chickens will come home to roost and then the lamposts will sag with the weight of counterfieters.
Last edited by SolarCross on 24 Feb 2020 17:34, edited 1 time in total.
#15069601
Rancid wrote:
Solarcross is right in that not having the gold standard, certainly makes it easier to manipulate the money supply.



History tells us that in the past, governments had no trouble at all getting into financial hot water.

If someone was crazy enough to try, we would immediately plunge into a severe depression. And then we'd go off the gold standard, and spend a generation or two trying to recover part of what we'd lost.

It's economic Russian Roulette with a fully loaded revolver.
#15069602
Rancid wrote:I'm not 100% sure of this. When so many people around the globe basically depend on this scam, it's in everyone's interest to keep it going, or find a way to save it. :)

Sure, but can they succeed? Governments have been counterfeiting currency since the earliest days of civilisation. Sooner or later it gets busted up by reality. I think the question is when rather than if all the scams come undone and we have to go back to honest money (not necessarily gold, could be bitcoin or something else) once again.
#15069614
SolarCross wrote:Sure, but can they succeed?


Good question.

SolarCross wrote:I think the question is when rather than if all the scams come undone and we have to go back to honest money (not necessarily gold, could be bitcoin or something else) once again.


I agree. Something feels unsustainable about the entire financial capitalist system. It just feels like somethings gotta give at some point.

Though, I would argue, this probably would still be true even if the money supply were on something like gold.
#15069730
Rancid wrote:This statement is the same point, you just stated the converse. :) Hoarding cash means people don't invest. ;) You target a non-zero number, so that people don't hoard (i.e. they invest). :)

Also, the 2% target is largely because the fed just feels it's a good number. There's not real hard empirical data based reason for 2%. It just kind of seems to work. You right, that it's possible the optimal target should be higher than 2%, but again, it's really hard to come up with a number that can be supported with hard evidence. The target is just because it seems to work, not because we know its best.


- No. If you have, for example, a baseline inflation rate of 2% and a real interest rate of 2%, the nominal interest rate is 4%. Hence, you can lower the real interest rate to -2% by lowering the nominal interest rate to 0%. You cannot go below 0%, or at least not much, because then people would start hoarding actual PHYSICAL cash. With a baseline inflation rate of 0%, you could only lower the real interest rate to 0% before hitting the zero lower-bound. In the absence of PHYSICAL cash, central banks would have a 0% inflation target.

- The FED doesn't officially have a target, but in any case, 2% was enough for a long time, because there was enough room to adjust to real interest rate downwards. Now there isn't, but central banks have found other ways to stimulate, namely through long-term interest rates with QE. In that sense the target lost its relevance to a degree.
#15069769
Rugoz wrote:- No. If you have, for example, a baseline inflation rate of 2% and a real interest rate of 2%, the nominal interest rate is 4%. Hence, you can lower the real interest rate to -2% by lowering the nominal interest rate to 0%. You cannot go below 0%, or at least not much, because then people would start hoarding actual PHYSICAL cash. With a baseline inflation rate of 0%, you could only lower the real interest rate to 0% before hitting the zero lower-bound. In the absence of PHYSICAL cash, central banks would have a 0% inflation target.


I don't see what you are disagreeing with here. I agree with what you are saying, but that doesn't change the fact that 2% inflation is a magic number. NO one in the fed can answer why it's 2% with empirical evidence, They cannot explain why 2% might be better than a say a 3%, or a 4%, or a 5% target.

Rugoz wrote:- The FED doesn't officially have a target, but in any case, 2% was enough for a long time, because there was enough room to adjust to real interest rate downwards. Now there isn't, but central banks have found other ways to stimulate, namely through long-term interest rates with QE. In that sense the target lost its relevance to a degree.



Sure, but it's taken as the de facto target. Again, pointing to the fact that 2% is basically a magic number that seems to work.


Again, the point of having some inflation is so that people don't sit on their money and either spend it or invest it (i.e. not hoard it). This statement does not contradict anything you've said (which I agree with your statements).

This would apply to both physical and digital cash. 50% of money is digital these days. That's maybe hte one area I disagree with your statement. This isn't just about physical cash. It's about all cash, and you can have inflation with digital money.
#15069772
Another economic mystery is that historically when you drop interest rates, inflation goes up, but that hasn't held true over the last 10-15 years. We are historical lows in terms of interest rates, and yet we still do not see inflation getting much above 2%. This is a mystery economists cannot explain.

This adds weight to @SolarCross's position that basically, the entire economy is kind of voodoo/scam that our leaders and economic exports don't entirely understand..... no one really understands it all. :eek: That's where my feelings of unease comes from.
#15069775
Rancid wrote:
Another economic mystery is that historically when you drop interest rates, inflation goes up, but that hasn't held true over the last 10-15 years. We are historical lows in terms of interest rates, and yet we still do not see inflation getting much above 2%. This is a mystery economists cannot explain.

This adds weight to @SolarCross's position that basically, the entire economy is kind of voodoo/scam that our leaders and economic exports don't entirely understand..... no one really understands it all. :eek: That's where my feelings of unease comes from.



I think I know why. Making money cheaper used to increase investment in the real economy (production, R&D). People would buy more.

What we have now is what I call a paper economy. Money doesn't go to the actual economy, it goes to the financial sector. And stays there.

People are close to maxxed out on debt, so where is economic growth going to happen?
#15069776
late wrote:I think I know why. Making money cheaper used to increase investment in the real economy (production, R&D). People would buy more.

What we have now is what I call a paper economy. Money doesn't go to the actual economy, it goes to the financial sector. And stays there.

People are close to maxxed out on debt, so where is economic growth going to happen?


Yea, that can be part of it. Another hypothesis I've heard is that companies like Walmart/Amazon/etc. and the tech industry have become so good at getting more and more efficient that they have basically prevented inflation via innovation.

I'd imagine the complete answer is multi-factored; As are most complicated things in life.
#15069802
late wrote:What we have now is what I call a paper economy. Money doesn't go to the actual economy, it goes to the financial sector. And stays there.

Right. The inflation is all in the rich's asset values. None of the newly issued money goes to consumers, so consumer prices are unaffected.
People are close to maxxed out on debt, so where is economic growth going to happen?

Growth of production is not the goal. Growth of privilege and parasitism is.
#15069888
Rancid wrote:Can you expand on this?

The money is almost all being created as bank loans to buy assets (mortgages for real estate and corporate loans to buy shares), so it goes to the owners of those assets, which are mostly owned by the rich. The rich then take the proceeds from the sale of their assets and use them to bid up the price of other rich people's assets. Since the rich don't want to consume much more than they already do, the additional money does not increase demand for consumer goods; so consumer prices, which are used to calculate inflation, are not increasing.
#15069890
Rancid wrote:Something feels unsustainable about the entire financial capitalist system. It just feels like somethings gotta give at some point.

Yes, the debt money system of finance capitalism is unsustainable, and will crash periodically because of its inherent positive feedback characteristic.
Though, I would argue, this probably would still be true even if the money supply were on something like gold.

Debt money causes the boom-bust cycle through positive feedback. Commodity money like gold has negative feedback. I'm not advocating a return to a gold standard because it has other problems: for one, while it would be stable once implemented, you can't get there from here.
#15069894
Truth To Power wrote:
Debt money causes the boom-bust cycle through positive feedback. Commodity money like gold has negative feedback. I'm not advocating a return to a gold standard because it has other problems: for one, while it would be stable once implemented, you can't get there from here.



IOW, there's no point in talking about it.
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