[Rich Toscano]

[quote=pencilneck]Doug Noland’s latest puts a good perspective on this inflation/deflation discussion:

“And I find myself increasingly frustrated by the ongoing “inflation vs. deflation debate.” With today’s low level of consumer price inflation, those arguing that deflationary forces are the paramount systemic risk now dominate policy dialogue. Most tend to be inflationists. Most argue for additional stimulus and see little risk in such activist policymaking.

I see risks altogether differently. We are in the late-phase of a multi-decade historic Credit Bubble. The greatest risk at this point is that massive issuance of non-productive governmental debt foments a crisis of confidence at the very heart of our monetary system. The top priority must be to ensure that such a devastating outcome is avoided – and at significant unavoidable cost. It is imperative that we as a nation come to the recognition that real financial and economic pain must be endured to protect the long-term viability of our monetary system. The inflation rate is not the key issue. And efforts to try to inflate our way out of structural debt problems are a lost cause. We must instead move forcefully to rein in our deficits and avoid further debt monetization in order to protect the soundness of our money and Credit – or else risk a financial crash.”

http://www.safehaven.com/article/17675/quantitative-easing-two%5B/quote%5D

Yes, Noland is fantastic imho. Though in this case I think he is more describing the fight between the Krugman types and the austerity types, basically saying that they are arguing over the wrong thing (ie which of their plans will help economic growth better, when in fact the actual topic should be, how do we prevent a crisis in our currency and debt?)

That said, the inflation vs deflation debate is for the most part a waste of time because the participants are usually using a different vocabulary from one another and it’s all cross-talk.

[Rich Toscano]

[quote=pencilneck]Doug Noland’s latest puts a good perspective on this inflation/deflation discussion:

“And I find myself increasingly frustrated by the ongoing “inflation vs. deflation debate.” With today’s low level of consumer price inflation, those arguing that deflationary forces are the paramount systemic risk now dominate policy dialogue. Most tend to be inflationists. Most argue for additional stimulus and see little risk in such activist policymaking.

I see risks altogether differently. We are in the late-phase of a multi-decade historic Credit Bubble. The greatest risk at this point is that massive issuance of non-productive governmental debt foments a crisis of confidence at the very heart of our monetary system. The top priority must be to ensure that such a devastating outcome is avoided – and at significant unavoidable cost. It is imperative that we as a nation come to the recognition that real financial and economic pain must be endured to protect the long-term viability of our monetary system. The inflation rate is not the key issue. And efforts to try to inflate our way out of structural debt problems are a lost cause. We must instead move forcefully to rein in our deficits and avoid further debt monetization in order to protect the soundness of our money and Credit – or else risk a financial crash.”

http://www.safehaven.com/article/17675/quantitative-easing-two%5B/quote%5D

Yes, Noland is fantastic imho. Though in this case I think he is more describing the fight between the Krugman types and the austerity types, basically saying that they are arguing over the wrong thing (ie which of their plans will help economic growth better, when in fact the actual topic should be, how do we prevent a crisis in our currency and debt?)

That said, the inflation vs deflation debate is for the most part a waste of time because the participants are usually using a different vocabulary from one another and it’s all cross-talk.

[Rich Toscano]

[quote=pencilneck]Doug Noland’s latest puts a good perspective on this inflation/deflation discussion:

“And I find myself increasingly frustrated by the ongoing “inflation vs. deflation debate.” With today’s low level of consumer price inflation, those arguing that deflationary forces are the paramount systemic risk now dominate policy dialogue. Most tend to be inflationists. Most argue for additional stimulus and see little risk in such activist policymaking.

I see risks altogether differently. We are in the late-phase of a multi-decade historic Credit Bubble. The greatest risk at this point is that massive issuance of non-productive governmental debt foments a crisis of confidence at the very heart of our monetary system. The top priority must be to ensure that such a devastating outcome is avoided – and at significant unavoidable cost. It is imperative that we as a nation come to the recognition that real financial and economic pain must be endured to protect the long-term viability of our monetary system. The inflation rate is not the key issue. And efforts to try to inflate our way out of structural debt problems are a lost cause. We must instead move forcefully to rein in our deficits and avoid further debt monetization in order to protect the soundness of our money and Credit – or else risk a financial crash.”

http://www.safehaven.com/article/17675/quantitative-easing-two%5B/quote%5D

Yes, Noland is fantastic imho. Though in this case I think he is more describing the fight between the Krugman types and the austerity types, basically saying that they are arguing over the wrong thing (ie which of their plans will help economic growth better, when in fact the actual topic should be, how do we prevent a crisis in our currency and debt?)

That said, the inflation vs deflation debate is for the most part a waste of time because the participants are usually using a different vocabulary from one another and it’s all cross-talk.

[Rich Toscano]

[quote=pencilneck]Doug Noland’s latest puts a good perspective on this inflation/deflation discussion:

“And I find myself increasingly frustrated by the ongoing “inflation vs. deflation debate.” With today’s low level of consumer price inflation, those arguing that deflationary forces are the paramount systemic risk now dominate policy dialogue. Most tend to be inflationists. Most argue for additional stimulus and see little risk in such activist policymaking.

I see risks altogether differently. We are in the late-phase of a multi-decade historic Credit Bubble. The greatest risk at this point is that massive issuance of non-productive governmental debt foments a crisis of confidence at the very heart of our monetary system. The top priority must be to ensure that such a devastating outcome is avoided – and at significant unavoidable cost. It is imperative that we as a nation come to the recognition that real financial and economic pain must be endured to protect the long-term viability of our monetary system. The inflation rate is not the key issue. And efforts to try to inflate our way out of structural debt problems are a lost cause. We must instead move forcefully to rein in our deficits and avoid further debt monetization in order to protect the soundness of our money and Credit – or else risk a financial crash.”

http://www.safehaven.com/article/17675/quantitative-easing-two%5B/quote%5D

Yes, Noland is fantastic imho. Though in this case I think he is more describing the fight between the Krugman types and the austerity types, basically saying that they are arguing over the wrong thing (ie which of their plans will help economic growth better, when in fact the actual topic should be, how do we prevent a crisis in our currency and debt?)

That said, the inflation vs deflation debate is for the most part a waste of time because the participants are usually using a different vocabulary from one another and it’s all cross-talk.

[Rich Toscano]

[quote=sdduuuude]Is inflation related to the money supply or the rate of change in money supply ?[/quote]

Just focusing on the money->inflation relationship (ie disregarding other things like velocity etc etc), the rate of inflation would be related to the rate of money supply growth, and the price level (not its rate of growth, the actual price level) would be related to the money supply.

[Rich Toscano]

[quote=sdduuuude]Is inflation related to the money supply or the rate of change in money supply ?[/quote]

Just focusing on the money->inflation relationship (ie disregarding other things like velocity etc etc), the rate of inflation would be related to the rate of money supply growth, and the price level (not its rate of growth, the actual price level) would be related to the money supply.

[Rich Toscano]

[quote=sdduuuude]Is inflation related to the money supply or the rate of change in money supply ?[/quote]

Just focusing on the money->inflation relationship (ie disregarding other things like velocity etc etc), the rate of inflation would be related to the rate of money supply growth, and the price level (not its rate of growth, the actual price level) would be related to the money supply.

[Rich Toscano]

[quote=sdduuuude]Is inflation related to the money supply or the rate of change in money supply ?[/quote]

Just focusing on the money->inflation relationship (ie disregarding other things like velocity etc etc), the rate of inflation would be related to the rate of money supply growth, and the price level (not its rate of growth, the actual price level) would be related to the money supply.

[Rich Toscano]

[quote=sdduuuude]Is inflation related to the money supply or the rate of change in money supply ?[/quote]

Just focusing on the money->inflation relationship (ie disregarding other things like velocity etc etc), the rate of inflation would be related to the rate of money supply growth, and the price level (not its rate of growth, the actual price level) would be related to the money supply.

[Rich Toscano]

[quote=Eugene]
It’s not exactly “in circulation”. If you have $10,000 sitting in an interest-bearing bank account that you pulled out of the stock market in 2007, that money is part of M2. Truth is, we don’t have any perfect measures of money in circulation, because the distinction between checking accounts (in circulation) and savings accounts (not in circulation) became too blurred.
[/quote]

The money was never “in” the stock market. To the extent you “pulled [money] out” of the stock market, that means that you sold your stocks — which means that someone else took money from their bank account and gave it to you in exchange for your stocks. It just moved from their bank account to yours.

Regarding the concept of circulation, how is money in a checking account any more “in circulation” than money in a savings account? In fact, depending on how you are defining it, money is never really in “circulation” — that is to say, it goes immediately from one owner (in their bank acct or whatever) to another.

I was assuming by circulation, JP meant “money that is available to be spent in the economy.” Checking and savings accounts would both account for that.

I agree that there is no clear cut definition. The most logical one I have heard comes from the Austrians (regardless of what you think of their policy prescriptions, their views on money and credit make the most sense imno) — they define money as anything that is immediately redeemable at par. So savings accounts would count, but money markets would not (bc money markets are in fact debt instruments). It includes only checking accounts, savings accounts, and currency (plus a few other things but they only account for a tiny percentage of the overall supply).

Here’s a chart of the Austrian TMS fwiw… I haven’t updated this for a couple months but as of that point it was still growing at double digits YOY:

[img_assist|nid=13720|title=tms|desc=|link=node|align=left|width=400|height=272]

[Rich Toscano]

[quote=Eugene]
It’s not exactly “in circulation”. If you have $10,000 sitting in an interest-bearing bank account that you pulled out of the stock market in 2007, that money is part of M2. Truth is, we don’t have any perfect measures of money in circulation, because the distinction between checking accounts (in circulation) and savings accounts (not in circulation) became too blurred.
[/quote]

The money was never “in” the stock market. To the extent you “pulled [money] out” of the stock market, that means that you sold your stocks — which means that someone else took money from their bank account and gave it to you in exchange for your stocks. It just moved from their bank account to yours.

Regarding the concept of circulation, how is money in a checking account any more “in circulation” than money in a savings account? In fact, depending on how you are defining it, money is never really in “circulation” — that is to say, it goes immediately from one owner (in their bank acct or whatever) to another.

I was assuming by circulation, JP meant “money that is available to be spent in the economy.” Checking and savings accounts would both account for that.

I agree that there is no clear cut definition. The most logical one I have heard comes from the Austrians (regardless of what you think of their policy prescriptions, their views on money and credit make the most sense imno) — they define money as anything that is immediately redeemable at par. So savings accounts would count, but money markets would not (bc money markets are in fact debt instruments). It includes only checking accounts, savings accounts, and currency (plus a few other things but they only account for a tiny percentage of the overall supply).

Here’s a chart of the Austrian TMS fwiw… I haven’t updated this for a couple months but as of that point it was still growing at double digits YOY:

[img_assist|nid=13720|title=tms|desc=|link=node|align=left|width=400|height=272]

[Rich Toscano]

[quote=Eugene]
It’s not exactly “in circulation”. If you have $10,000 sitting in an interest-bearing bank account that you pulled out of the stock market in 2007, that money is part of M2. Truth is, we don’t have any perfect measures of money in circulation, because the distinction between checking accounts (in circulation) and savings accounts (not in circulation) became too blurred.
[/quote]

The money was never “in” the stock market. To the extent you “pulled [money] out” of the stock market, that means that you sold your stocks — which means that someone else took money from their bank account and gave it to you in exchange for your stocks. It just moved from their bank account to yours.

Regarding the concept of circulation, how is money in a checking account any more “in circulation” than money in a savings account? In fact, depending on how you are defining it, money is never really in “circulation” — that is to say, it goes immediately from one owner (in their bank acct or whatever) to another.

I was assuming by circulation, JP meant “money that is available to be spent in the economy.” Checking and savings accounts would both account for that.

I agree that there is no clear cut definition. The most logical one I have heard comes from the Austrians (regardless of what you think of their policy prescriptions, their views on money and credit make the most sense imno) — they define money as anything that is immediately redeemable at par. So savings accounts would count, but money markets would not (bc money markets are in fact debt instruments). It includes only checking accounts, savings accounts, and currency (plus a few other things but they only account for a tiny percentage of the overall supply).

Here’s a chart of the Austrian TMS fwiw… I haven’t updated this for a couple months but as of that point it was still growing at double digits YOY:

[img_assist|nid=13720|title=tms|desc=|link=node|align=left|width=400|height=272]

[Rich Toscano]

[quote=Eugene]
It’s not exactly “in circulation”. If you have $10,000 sitting in an interest-bearing bank account that you pulled out of the stock market in 2007, that money is part of M2. Truth is, we don’t have any perfect measures of money in circulation, because the distinction between checking accounts (in circulation) and savings accounts (not in circulation) became too blurred.
[/quote]

The money was never “in” the stock market. To the extent you “pulled [money] out” of the stock market, that means that you sold your stocks — which means that someone else took money from their bank account and gave it to you in exchange for your stocks. It just moved from their bank account to yours.

Regarding the concept of circulation, how is money in a checking account any more “in circulation” than money in a savings account? In fact, depending on how you are defining it, money is never really in “circulation” — that is to say, it goes immediately from one owner (in their bank acct or whatever) to another.

I was assuming by circulation, JP meant “money that is available to be spent in the economy.” Checking and savings accounts would both account for that.

I agree that there is no clear cut definition. The most logical one I have heard comes from the Austrians (regardless of what you think of their policy prescriptions, their views on money and credit make the most sense imno) — they define money as anything that is immediately redeemable at par. So savings accounts would count, but money markets would not (bc money markets are in fact debt instruments). It includes only checking accounts, savings accounts, and currency (plus a few other things but they only account for a tiny percentage of the overall supply).

Here’s a chart of the Austrian TMS fwiw… I haven’t updated this for a couple months but as of that point it was still growing at double digits YOY:

[img_assist|nid=13720|title=tms|desc=|link=node|align=left|width=400|height=272]

[Rich Toscano]

[quote=Eugene]
It’s not exactly “in circulation”. If you have $10,000 sitting in an interest-bearing bank account that you pulled out of the stock market in 2007, that money is part of M2. Truth is, we don’t have any perfect measures of money in circulation, because the distinction between checking accounts (in circulation) and savings accounts (not in circulation) became too blurred.
[/quote]

The money was never “in” the stock market. To the extent you “pulled [money] out” of the stock market, that means that you sold your stocks — which means that someone else took money from their bank account and gave it to you in exchange for your stocks. It just moved from their bank account to yours.

Regarding the concept of circulation, how is money in a checking account any more “in circulation” than money in a savings account? In fact, depending on how you are defining it, money is never really in “circulation” — that is to say, it goes immediately from one owner (in their bank acct or whatever) to another.

I was assuming by circulation, JP meant “money that is available to be spent in the economy.” Checking and savings accounts would both account for that.

I agree that there is no clear cut definition. The most logical one I have heard comes from the Austrians (regardless of what you think of their policy prescriptions, their views on money and credit make the most sense imno) — they define money as anything that is immediately redeemable at par. So savings accounts would count, but money markets would not (bc money markets are in fact debt instruments). It includes only checking accounts, savings accounts, and currency (plus a few other things but they only account for a tiny percentage of the overall supply).

Here’s a chart of the Austrian TMS fwiw… I haven’t updated this for a couple months but as of that point it was still growing at double digits YOY:

[img_assist|nid=13720|title=tms|desc=|link=node|align=left|width=400|height=272]

[Rich Toscano]

Yes, that is money in circulation. There are big and unpredictable lags (on the scale of years) between money supply growth and inflation. In the meantime lots of other things can impact inflation, eg recessions etc.

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