Money Supply – Exploding Inflation

[EconProf]

[quote=Arraya]There is no inflation. Tradition measures of money supply don’t tell the whole story. Until deflation runs it’s coarse there no threat of inflation. We are few years from that. The fed wishes it could inflate and people will be begging for it[/quote]
The growth rate of the money supply used to be a good predictor of inflation. Milton Friedman championed monetarism in the sixties, seventies, and eighties and challenged the then-dominant Keynesian philosophy among economists. His theory could be summarized by the formula MV = PQ, where M = money supply, V = velocity (speed at which money changes hands), and P = price level, Q = quantity of goods and services produced. Since Q and V were largely stable, any change in M by the central bank would immediately translate into a corresponding change in Prices.
But with financial innovations, new definitions of money, and, more recently, changes in people’s willingness to hold liquidity (at .35% interest on your certificate of deposit, why bother putting your money in the bank), the M and V became less reliable.
So monetarism is dead, or at least not relevant to our current economy, and Arraya right about the current deflationary atmosphere in the face of rapidly growing money supply.

[markmax33]

[quote=pri_dk][quote=markmax33]We are set up for Japanese style stagflation […][/quote]

Huh?

[quote]The problem is that once inflation starts, every central bank in history has failed to control it. [/quote]

You mean like the 10%+ inflation in the late 1970s/early 1980s? – Whatever happened to that?

You really should quit pretending you know something about economic history. There’s a little more to it than what you’ve learned from a handful of Ron Paul videos.[/quote]

Pri – I actually predicted the housing bubble and I have an MBA thesis and graphs to prove it from 2004. I know plenty and that was WELL before I understood Austrian Economics or watched a Ron Paul video. Stop discrediting yourself. You never predicted a thing.

You bring up a good point that Paul Volker actually raised interest rates although it was unpopular in the 1980s. Since then the fed has changed the inflation measure to take out things it called “volitile”. Ironically under the old measure we are near very near 10% have been for some time. Those same warning alarms that Volker used to justify increasing the interest rates aren’t present any more.

http://www.shadowstats.com/alternate_data/inflation-charts

Additionally the fed’s charter has changed and it has shifted from controlling inflation, to controlling inflation, controlling the economy from over heating or failing. This will prevent ANY meaningful increase of interest rates because the two ideas directly conflict with each other. If you read the history of all foreign central banks they all follow the same trends. They get a small piece of power and keep gaining more and more until it fails.

Here is a graph on Japan’s stagflated housing prices over the last 30 years. We are certainly enacting the same policies they did by creating extra low interest rates, wastefuly government spending to “create jobs” and several other things.

http://www.marketoracle.co.uk/images/2008/japan-house-prices–nov08.gif

Pri – We are trying to provide meaningful information on this blog. Please provide facts and information and stop calling names.

[markmax33]

[quote=Hobie]Got me MM33. Fell for your RP trap. sheese. So much for a conversation.[/quote]

I would be for any candidate that is an Austrian economist. He’s the only one. What can you do? Keep voting for people to destroy our currency and run up massive debt and destroy the country for our children? The two parties are arguing about cutting $1T dollars out of a $50T budget. They can’t even cut 2% and most of the cuts are in years 8-10! How can you stand for this insanity?

I’d vote for Gary Johnson too. He understands why we are getting ripped off.

[sdduuuude]

The graph shows 7 years of money supply increase.
Inflation has, in that 7 years, been unremarkable.

Seems if the increase in money supply was going to cause major inflation, we would see some movement by now. Something else must be in effect.

I’m with Arraya and Econ Prof on this one.

[Anonymous]

[quote=markmax33]Pri – I actually predicted the housing bubble and I have an MBA thesis and graphs to prove it from 2004.[/quote]

Come to think of it, so did I. I drastically reduced my real estate holdings in 2004 – i.e. made my prediction with real money. (And I have the county recorder documents to prove it…)

So did a guy name Rich Toscano. Actually, so did a lot of people. You see, the “I predicted the bubble” card is old and played. Having done so hardly makes anyone an authority on all things economic.

Speaking of Rich, here’s an analysis of US vs. Japanese monetary policy that actually makes sense:

http://www.pcasd.com/us_not_going_down_japans_road

(Note that the article makes no use of the word “stagflation.”)

Next time, make the effort to click a few links on this very page you are reading.

[quote]You bring up a good point that Paul Volker actually raised interest rates […][/quote]

I did more than that. I provided a clear and simple example that shows your “verity” about inflation and central banks is nonsense:

The problem is that once inflation starts, every central bank in history has failed to control it.

Every central bank in history? Dude, you didn’t even bother to go back 30 years.

[quote=markmax33]The two parties are arguing about cutting $1T dollars out of a $50T budget. [/quote]

I hope you didn’t use that $50T figure in your MBA thesis…

Anyway, predictions are fun. Here’s my latest:

I predict that you will keep spamming this forum with Ron Paul fanboy propaganda and made-up economic “facts.”

Prove me wrong.

[sdduuuude]

[quote=pri_dk]I predict that you will keep spamming this forum with Ron Paul fanboy propaganda and made-up economic “facts.”[/quote]

Snicker.

[Coronita]

[quote=pri_dk]
You really should quit pretending you know something about economic history. There’s a little more to it than what you’ve learned from a handful of Ron Paul videos.[/quote]

You know, normally I would disagree with you, but I can’t find a reason not to this time…

Markmax33, please just stop… You’re totally embarrassing Ron here, and as much as admire him as a candidate and wish you continue contributing to his campaign (knowing very well he doesn’t stand a chance, so that eventuallly I’ll need to vote for for noObama anyway), please…You’re totally turning me off… 🙁

I do enjoy his newsletters though….So why not just post one of his newsletters and be done with it, okay? Here, I’ll attach the one from May.

Now please, quit acting like a nutjob…

Dear Liberty Activist,

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According to that poll, I am running a strong second in New Hampshire and am tied for third nation-wide.

But even more important, I am the most likely Republican to beat Obama in 2012.

And today’s money bomb has been a huge success.

As I write this we have raised over $950,000 in this effort.

With less than one hour to go in the day (on the East Coast), we are very close to $1 million!

Let’s post a number that will pop their eyes out of their sockets and show them the liberty movement is a force to be reckoned with.

So please, chip in to help make the Debate Day Money Bomb a huge success.

Some people are giving as much as $2,500 (the maximum allowed), and others have already pledged to give $1,000, $500, or $250.

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For Liberty,

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Paid for by Ron Paul 2012 Presidential Exploratory Committee

http://www.ronpaul2012.com

[markmax33]

[quote=pri_dk][quote=markmax33]Pri – I actually predicted the housing bubble and I have an MBA thesis and graphs to prove it from 2004.[/quote]

Come to think of it, so did I. I drastically reduced my real estate holdings in 2004 – i.e. made my prediction with real money. (And I have the county recorder documents to prove it…)

So did a guy name Rich Toscano. Actually, so did a lot of people. You see, the “I predicted the bubble” card is old and played. Having done so hardly makes anyone an authority on all things economic.

Speaking of Rich, here’s an analysis of US vs. Japanese monetary policy that actually makes sense:

http://www.pcasd.com/us_not_going_down_japans_road

(Note that the article makes no use of the word “stagflation.”)

Next time, make the effort to click a few links on this very page you are reading.

[quote]You bring up a good point that Paul Volker actually raised interest rates […][/quote]

I did more than that. I provided a clear and simple example that shows your “verity” about inflation and central banks is nonsense.

The problem is that once inflation starts, every central bank in history has failed to control it.

Every central bank in history? Dude, you didn’t even bother to go back 30 years.

But predictions are fun. Here’s my latest:

I predict that you will keep spamming this forum with Ron Paul fanboy propaganda and made-up economic “facts.”

Prove me wrong.[/quote]

That is a good article but it doesn’t prove your point. I was predicting housing prices not the overall economy. Are you arguing the basic fact that I presented that the fed is trying to inflate the currency to match the housing prices so the banks won’t take a major hit?

The GOV policies/banks balance sheets are creating a very stagnant situation by not allowing the market to fail while printing Trillions of dollars. I make my points very clear and Rich didn’t touch on that in the article. I agree with Rich 100% and maybe I shouldn’t have used to Japan has the example because they had different overall financial policies in the economy but the overall outcome of housing prices will be the same. My thesis holds true, any manipulation by the central bank is going to draw out the issue and not allow things to correct as quickly as they should have given normal market forces.

There are hundreds of failed fiat currencies. You are not doing your homework if you don’t go back and look how the rest have failed and you merely look at the last 30 years of one currency. There are hundreds of other examples in the past. I wish you realize that. I’m not saying that central banks haven’t had good policies to prolong the destruction of the currency in the past or even during our fiat currency. I’m saying the overall end point is the same and you need to look at history to realize that. The fed’s dual role of controlling interest rates and controlling economic growth mean that it has lost the ability to control interest rates.

[markmax33]

[quote=sdduuuude]The graph shows 7 years of money supply increase.
Inflation has, in that 7 years, been unremarkable.

Seems if the increase in money supply was going to cause major inflation, we would see some movement by now. Something else must be in effect.

I’m with Arraya and Econ Prof on this one.[/quote]

If you read about inflation throughout history it happens very rapidly and generally it happens after the money supply has initially expanded. I can’t force you to read history but I can give you a million examples and have listed them in the blog before. Inflation always TRAILS money printing. It takes a while for it to saturate the system and get to the bottom of the food chain. When inflation hits it hits hard and fast. A loaf of bread in Russia was $2 on Monday and $10 on Friday in the 1990s. I’m not sure how that’s Alarmist, that’s a fact.

[sdrealtor]

For what its worth, I emailed Ron Paul about his home he has advertised for sale by owner on the Internet. Its been a couple weeks and no response. Should I follow up? snicker snicker

[The-Shoveler]

Behold !! the All powerful Federal reserve bank !!! (well at least in terms of the U.S. Dollar and U.S . Federal Debt).
Able to buy unlimited U.S. treasuries and pay all interest back to the U.S treasury !!
Able to pay all the funds it receives from the maturing Treasury’s back to the U.S. Treasury !!
Please tell me you won’t accept my dollars anymore then I can fix my deflation issues and create Job’s here !!!
And I won’t have to send you any financial aid or food , Please Tell me !!!

Just joking but some mild form of the above will happen,

[Anonymous]

[quote=markmax33]There are hundreds of failed fiat currencies. You are not doing your homework […][/quote]

I’m too lazy to do my homework, but clearly you have done yours.

As an aside:

I have an uncle that collects coins (and a few paper bills as well.) When I visit family for the holidays and such, he usually shows me his latest purchases as he drops hints about how much his collection is worth. (I politely feign interest and try to sound impressed when he boasts…)

Next time I see him, I was thinking it would be cool to give him a list of all the failed currencies in history, and challenge him to collect a specimen from all of them. Maybe he could start a special “failed currency” collection?

I suppose it wouldn’t be too expensive to collect these coins and bills – since they are fiat currencies and would not be made of gold or silver – although some of them might be rare. I’m not sure.

So, could you provide me a list with all of the failed fiat currencies? If you don’t have them all, at least the first hundred? (that should keep him busy for a while…)

It would be a long list, of course. A list with hundreds of names – are they mostly from Europe? Now I’m kinda curious myself. Perhaps there is a link to the list on a Ron Paul site?

Thanks. After I give the list to my uncle I’ll update the Piggs with the progress he makes on his collection and perhaps even post a few pictures of what the bills looked like.

[markmax33]

Here is a list of 775 currencies:

http://dollardaze.org/blog/?page_id=00017

Here is a study of 775 currencies you can read:

http://dollardaze.org/blog/?post_id=00405

Here is a list of 9 with a good explanation of each:

http://www.mint.com/blog/trends/hyperinflation-the-story-of-9-failed-currencies/

Another article with pictures for you to show your friend:

http://georgewashington2.blogspot.com/2011/08/average-life-expectancy-for-fiat.html

The US currency has failed a few times already, leaving everyone broke, thus the saying,”not worth a continental” in reference to the continental dollar that was around during the civil war.

[The-Shoveler]

Guys I am sorry, I just can’t take this “our currency is going to fail” seriously,
Will we have some serious inflation ? (most likely)
My guess about 7-8% inflation a year for 5 or so years
(that will be bad no doubt about it) but it is also the only way we will ever get out of this mess as well.
Will your un-invested cash in the bank or under your mattress be worth about 50% less than it is now,
(yes most likely).
Are there outrageous Deals on homes in places other than coastal SD right now ?
(YES I at least think so).
If you must live in Coastal SD , sorry I can’t help you and I wish you luck.

[paramount]

[quote=Hobie]

My contention is that if we have a change of Administration next November the county will become more productive thus strengthening our dollar.[/quote]

I don’t think any administration change will have that much effect.

[Author]

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