Inflation is a weapon of rich people to rob and exploit poor people. - Page 3 - Politics Forum.org | PoFo

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#15069910
I see people are still mixing up "gold standard" with gold. They are actually different things, the latter is gold and the former is a piece of paper that is supposedly worth a certain amount of gold but might actually not be and probably is not due to cheating.

A fool and his money are soon parted as they say (you are fool indeed if you do not know the difference between gold and a piece of paper.)
#15069954
Truth To Power wrote:
There is probably a point in talking about why you can't get there from here. It's important to understand the characteristics of the different kinds of money.



Silly Wabbit, no point...

What would make sense is talking about how to improve the situation. But those are the basics, they haven't changed in a century.

Throwing money away on pointless war is how nations have destroyed themselves for a millennia or more.

You take care of the business of the country. You make sure kids are well educated, that problems get solved, and that debt is an investment in the future...
#15069964
SolarCross wrote:I see people are still mixing up "gold standard" with gold. They are actually different things, the latter is gold and the former is a piece of paper that is supposedly worth a certain amount of gold but might actually not be and probably is not due to cheating.

A fool and his money are soon parted as they say (you are fool indeed if you do not know the difference between gold and a piece of paper.)


Can I borrow $1000?
#15070093
Rancid wrote: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.


There are certainly arguments for and against a higher target. An argument against a higher target is that inflation is generally undesirable or unpopular and comes with certain costs (though at that low level probably not quantifiable), an argument for a higher target is more effective monetary policy.

Rancid wrote: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).


A higher baseline inflation rate has per se no effect on real interest rates and investment.

Rancid wrote: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.


Physical cash is less than 10% of M3. With digital money, you can charge negative interest, that's the difference.

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.


I don't think it's a mystery. There are explanations such as the global "saving glut".
#15070100
Rugoz wrote:An argument against a higher target is that inflation is generally undesirable or unpopular and comes with certain costs (though at that low level probably not quantifiable), an argument for a higher target is more effective monetary policy.


Can you show empirical data that says 3% or higher is worse than 2%, and by what measure?

Rugoz wrote:A higher baseline inflation rate has per se no effect on real interest rates and investment.


:eh:

How does base line inflation not have an effect on real interest rates? Real interest rates are calculated using inflation rates. The same is true for real wages. It's wages after factoring in inflation.

The first sentence of the below link:

The real interest rate is the rate of interest an investor, saver or lender receives (or expects to receive) after allowing for inflation.
https://en.wikipedia.org/wiki/Real_interest_rate


Rugoz wrote:Physical cash is less than 10% of M3. With digital money, you can charge negative interest, that's the difference.


Why can't you have negative rates with physical cash?

Rugoz wrote:I don't think it's a mystery. There are explanations such as the global "saving glut".


Maybe I'm being a little bit hyperbolic here, maybe there's a cultural misunderstanding here. None the less, I stand by my description that it's a mystery (keep reading).

Yes, and that's one possible explanation out of many. Everything I've read list many possibilities, but does not definitively conclude on anything. Hence, it's still a mystery. We have ideas of what might be the cause, but we are still not 100% sure.

There are many reasons, and evidence to support all of them. It's not clear which of all the explanations is the biggest contributor, nor is it clear which of all the explanations is accurate.

So sure, it's not a total mystery, but there's still a lot of uncertainty (i.e. mystery)
Last edited by Rancid on 26 Feb 2020 14:54, edited 1 time in total.
#15070105
BicCherry wrote:Inflation is a weapon of rich people to rob and exploit poor people.

2% target inflation is generally an invention by rich people to enslave, exploit poor people.

Rich people own many properties, own shares in companies. Mostly the amount of liquid cash held by rich and poor people is about same since rich people prefer to hold little cash because they know that inflation will erode the value of cash at the rate at which they have set inflation at.

Not particularly "a weapon of rich people (etc)" then.

Inflation helps the rich to remain rich always because the poor will always have to work since their savings are eroded significantly by inflation and they have little property to dispose off to yield $$$ in old age.

Not if wages are also rising, or even leading the inflation. Then, purchasing power is redistributed to wage earners. That's why political parties representing the asset owning class are hawkish about it.

Also, debtors tend to gain from inflation because they repay creditors with a quantity of money worth less in real terms. And, almost by definition, creditors tend to be richer than debtors.

Inflation helps to scare poor people into spending $$$ made by factories whose share holders are rich people.

Rising prices scare poor people into spending? Really?

But mainly, inflation helps to keep poor people working and serving rich people because any savings of the poor are eroded by inflation and the rich remain well served both by share dividends from the companies that they own as well.as from disposing off real estate or living off rent from their real estate which they rent at inflation adjusted (increasing) rent to the poor.

Not if wages are also rising, or leading the inflation. Etc.

Poor people on fixed incomes, e.g. retirees, might be hurt by inflation. But they might equally have benefitted from it like the boomers whose mortgages were effectively shrunk and their asset inflated.
#15070106
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.


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?


And in fact there's no evidence that it ever worked - at least not in the way assumed by monetary policy.

‘All the empirical evidence we have is that interest rates within the range of variation we see do not affect investment. Investment is driven by perceptions of risk and accelerators in demand that drive the demand for investment.

‘So it’s not a surprise that the zero interest rates have not stimulated investment. Because nobody has ever been able to find a significant interest rate effect on investment.’
- Bruce Greenwald.

.
#15070124
Truth To Power wrote:
How can you do that if you don't first understand what is wrong, and why some of the superficially plausible options, like using gold as money, won't work?



I use one of the best economists in the world.

https://www.amazon.com/Price-Inequality-Divided-Society-Endangers/dp/0393345068/ref=sr_1_1?crid=2GT2AZ1GYXU89&keywords=price+of+inequality&qid=1582734004&sprefix=price+of+in%2Caps%2C183&sr=8-1
#15070171
late wrote:I use one of the best economists in the world.

https://www.amazon.com/Price-Inequality-Divided-Society-Endangers/dp/0393345068/ref=sr_1_1?crid=2GT2AZ1GYXU89&keywords=price+of+inequality&qid=1582734004&sprefix=price+of+in%2Caps%2C183&sr=8-1

Stiglitz is better than the usual run of liars for hire, but I don't think he has a particularly good handle on monetary economics.
#15070595
Rancid wrote:Can you show empirical data that says 3% or higher is worse than 2%, and by what measure?


Well, I already said it's probably not quantifiable. The arguments against a 3% target are more political.

Rancid wrote:How does base line inflation not have an effect on real interest rates? Real interest rates are calculated using inflation rates. The same is true for real wages. It's wages after factoring in inflation.


An economy with a (mid to long term) inflation target of 4% instead of 2% and well-anchored inflation expectations is going to have a nominal interest rate that is 2% higher, but the same real interest rate, ceteris paribus.

Rancid wrote:Why can't you have negative rates with physical cash?


Because nobody can charge you for holding cash. Nobody even knows you have it.

Rancid wrote:There are many reasons, and evidence to support all of them. It's not clear which of all the explanations is the biggest contributor, nor is it clear which of all the explanations is accurate.


And those are?
#15070598
Rugoz wrote:And those are?


I've mention a few previously. One of which is technological innovation keeping the cost of goods down. That is , the walmarts and amazons of the world, are just so good at what they do, they are able to keep inflation at bay because their technological advances allow them to keep prices low. This keeps the consumer price index low, which is how we measure inflation.

Rugoz wrote:Well, I already said it's probably not quantifiable. The arguments against a 3% target are more political.


That's my point, so we do not disagree.

Rugoz wrote:An economy with a (mid to long term) inflation target of 4% instead of 2% and well-anchored inflation expectations is going to have a nominal interest rate that is 2% higher, but the same real interest rate, ceteris paribus.


I don't understand this. You will need to expand on this.

That said, inflation is not solely dictated by your target inflation rate or the interests that debt instruments yield.

Rugoz wrote:Because nobody can charge you for holding cash. Nobody even knows you have it.


Ah ok, when you say physical cash, you mean NOT depositing physical cash and just keeping it in your house. Got it.

I'm not sure what this thread of discussion was about.
#15071068
Rancid wrote:I've mention a few previously. One of which is technological innovation keeping the cost of goods down. That is , the walmarts and amazons of the world, are just so good at what they do, they are able to keep inflation at bay because their technological advances allow them to keep prices low. This keeps the consumer price index low, which is how we measure inflation.


Does that make prices less reactive to shortages on the labor market for example?

Rancid wrote:I don't understand this. You will need to expand on this.


Simple, the real return is what matters. Economic activity determines the real interest rate, the nominal is just expected inflation on top of that.

Rancid wrote:That said, inflation is not solely dictated by your target inflation rate or the interests that debt instruments yield.


Definitely not in the short term, in the mid- to long term however expectations and target should be in line.

Rancid wrote:Ah ok, when you say physical cash, you mean NOT depositing physical cash and just keeping it in your house. Got it.


Well, more likely in a vault than at home. Point is, physical cash pays no interest, positive or negative. It could be abolished or tracked or whatever, but politically that is currently not feasible.
#15071093
Puffer Fish wrote:
I highly question your logic.

Wouldn't the price of gold just go up in proportion? I don't see how that would create any problem.



It's fact, not deduction.

That happened repeatedly in the 1800s. I would guess that this would push the value of gold up, but prob a lot slower than needed. And if you made a way for gold to fluctuate quickly, I would also guess that would create other problems.

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