Inflation. Is it so bad for the AVERAGE American?

NoDrama said:
You may want to reread your and my posts again and really see if I didn't answer them, because I DID. If you don't understand inflation after it was taught to you like you were a 5 year old you never will.

Its not my Model, Maybe you were unaware that the authors name is right after the title after the "By" word.

There is no need to attack me, your understanding of inflation is totally whack, your WRONG WRONG WRONG, get over trying to win your argument. God damned people and their precious fucking ego's.
Click to expand...

You got quite pithy. I never attacked you - but I find it amusing that right after you say "there is no need to attack me" you follow up with calling me "whack" "wrong" "get over trying" and "god damn people and their precious fucking egos." :clap:

Thanks for explaining that you did not author the article. Unlike your lack of ability to answer a question which is willful; I don't know your legal name or psyudonyms so for all I know you could have authored the article - Sorry for the confusion; when I said "your model," I was reffering to the model that "you" chose to cite.

LOL Thanks for the laugh. You didn't answer any of them; either because you can't with your limited knowledge or because you would have to admit that I am right. Is your ego getting in the way?

Telling someone they have a lack of understanding when you think that the world would be able to function with the same unaltered money supply from the times of Jesus is more than laughable.

It is amazing that you can deduce my lack of knowledge of a topic when you seemingly do not understand the effect of a double shifting supply and demand curve.

NoDrama said:
In Zimbabwe they don't accept cash for items, they only accept gold/silver for the majority of your day to day must have items like food. Even if you had 1 trillion dollars, the inflation is so bad that in 8 hours the price of things will double so no one will take the cash, it has NO VALUE because they printed too much of it, not because of the population.
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LOL again - Do you just make assumptions that since they have inflation that precious metals are the only way to conduct transactional business? Is that what Ron Paul and Peter Schiff have told you happens?

So good I must quote twice.
"they only accept gold/silver for the majority of your day to day must have items like food." LOLOLOLOLOLOLOL!!! :clap:

You are a absolute fool if you believe that statement. They barter!!! Enlighten yourself and your ego with this article. http://www.npr.org/templates/story/story.php?storyId=97393070
 
TheBrutalTruth said:
You are saying that those that have saved, been frugal, and have been diligent in their saving should be punished while those that have bee stupid, slothful, and careless should be rewarded.

And then you fail to address the fact that inflation causes prices to increase and thus everyone will ultimately get hurt, just those that have saved and invested will get hurt more, because they will be stolen from (their savings will be devalued) so that those that are in debt will see their loans amortize themselves.

Of course, you failed to address that for the average American the majority of their debt is their home, which really makes a lot of sense when you consider how much a home costs, even after the bubble burst.
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I am not saying it is right or good. I myself am not an "average" American anymore - Unlike everyone I know I own every tangible thing I have - the only debt that I have is my student loan, I have a nice savings account, and a checking account that we use responsibly.

The price of housing is outrageous, but I feel that is a factor of society. I think my parents and my grandma are the only people I know that own their homes. People only put 20% MAX and they want a house yesterday. Can you imagine how few people would own a home if they had to pay 100% cash upfront and no banks would finance a house?

I am friends with a developer that was making money hand over fist - he initially financed the land which he paid off, contracted the houses with his own workers including supervisors, sales staff, and carpenters, he had a "preferred" mortgage guy that was kicking him points on the backside. He did no work other than making a few smart business decisions up front; but nothing that warranted the amount of profit per house that he was making (he would be the first to tell you that).

TheBrutalTruth said:
Other than that nice post, I mean, at least you seem to be able to think for yourself, and that is something that is truly rare.
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Thanks for the compliment.
 
tnrtinr said:
I am not saying it is right or good. I myself am not an "average" American anymore - Unlike everyone I know I own every tangible thing I have - the only debt that I have is my student loan, I have a nice savings account, and a checking account that we use responsibly.

The price of housing is outrageous, but I feel that is a factor of society. I think my parents and my grandma are the only people I know that own their homes. People only put 20% MAX and they want a house yesterday. Can you imagine how few people would own a home if they had to pay 100% cash upfront and no banks would finance a house?

I am friends with a developer that was making money hand over fist - he initially financed the land which he paid off, contracted the houses with his own workers including supervisors, sales staff, and carpenters, he had a "preferred" mortgage guy that was kicking him points on the backside. He did no work other than making a few smart business decisions up front; but nothing that warranted the amount of profit per house that he was making (he would be the first to tell you that).



Thanks for the compliment.
Click to expand...

If we all had to pay 100% cash upfront it is likely that home ownership would climb. The idea that you own your house when you have a mortgage is a joke pushed by Madison Avenue for the banks' profit. You do not own your house until the note is paid off, and if you have a mortgage on it then you are not going to see any profit in your house (unless you are an imbecile that just jumps from house to house.)

First, there's the $150,000 that you start out owing, by the time you include interest you have paid 2 - 3x that, or $450,000. So any profit from the sale is eliminated. Of course in cities the congestion and density make it not even worth the effort of owning a house as anything more than a place to sleep as there is practically no land that you can really do anything with.

About the only way I'd purchase a house would be 20 - 30 miles outside of the city limits with 4 - 5 acres that I can either do subsistence farming on or turn into a nice escape from the city. Of course with inflation my pay is consistently being deprived of its value, yet another point against inflation.

It is a grave disservice to the poor and the working and middle classes for the government to pursue the insipid policy of inflation, as it pushes prices up faster than pay, because pay is both bottom and top sticky. Instead of increasing the quality of life inflation decreases the quality of life. While loans do self-amortize the cost of food, shelter, water and other essentials go up.

It is a catch 22, but ultimately as those that are poor rarely have the debt loads of the average american it does them a greater disservice. Once again it ignores those that either A. own everything outright, or B. have a minimal amount of wealth and robs them of purchasing power. It also deprives those that have saved and gathered wealth of the ability to use the wealth that they have saved to make other purchases. Ultimately inflation will probably be found to have a drastic cumulative slowing effect on the economy as the effects of inflation are not linear or geometric but are exponential, thus the savings from 10 years ago lose 21.8% of their purchasing power, the savings from 9 years ago lose 19.5% of their purchasing power, and down the line at a cumulative 2% rate of inflation. As inflation is rarely held at 2% due to the irresponsibly policies of the Federal Reserve (which ironically states that one of its goals is to maintain the value of the dollar) the effects are drastically worse than those shown above.

Being punished for hardwork, diligence and thrift is absurd, because those are the habits of a prosperous nation that owns its own homes outright with out mortgages from the bank. They are the habits of an industrious nation that is gathering wealth instead of a slothful nation that is increasingly pursuing credit and attempting to get something for nothing.

It also hurts those that have retired and are on fixed incomes.
 
Maybe this guy is whack, WRONG WRONG WRONG too. Afterall he says EXACTLY what I have been saying.

http://www.marketoracle.co.uk/Article4482.html
"Now, there is no exact way to determine the right size of the money supply. It definitely needs to grow each year by at least the growth in the size of the economy, new population and productivity or deflation will appear. But if money supply grows too much then you would have inflation."

It is a higher reading material than the article NoDrama posted - but I promise you will enjoy it if you are at all interested in what is going on in our economy.

This guy too!

http://books.google.com/books?id=qR...LtkcEB&sa=X&oi=book_result&ct=result&resnum=4
 
"Now, there is no exact way to determine the right size of the money supply. It definitely needs to grow each year by at least the growth in the size of the economy, new population and productivity or deflation will appear. But if money supply grows too much then you would have inflation."
Click to expand...
Who are you talking about?

Oh well, as far as the quote above. Not so much, even if it grew with the population there would still be inflation. For the most part what determines economic activity is not money supply but the vectors of the money supply. That is how fast, and how far it travels before it is taxed out of existence, or held onto either in Checking Accounts or Under Mattresses. In the case of the former (Checking Accounts) it is likely that the money will sit temporarily before re-entering the money supply to start moving around again.

The economy is defined by the movement of money, not the quantity of money, so arguing that it should be always increased to keep up with population growth is a flawed argument. Very rarely does any one have all of their earnings for a year shoved under their mattress, or even any sizable fraction. For the most part as soon as they get it they give it to some one else, who gives it to some one else, repeated until the money gets taxed out of existence, or leaves the country (of course it then does the same thing outside of the country where it does not do a damn thing for the National, Regional or Local Economies.)
 
As far as paying off debt, I think a little inflation could be good for the NATIONAL debt... but the "average" american? Nope.
 
TheBrutalTruth said:
Who are you talking about?

Oh well, as far as the quote above. Not so much, even if it grew with the population there would still be inflation. For the most part what determines economic activity is not money supply but the vectors of the money supply. That is how fast, and how far it travels before it is taxed out of existence, or held onto either in Checking Accounts or Under Mattresses. In the case of the former (Checking Accounts) it is likely that the money will sit temporarily before re-entering the money supply to start moving around again.

The economy is defined by the movement of money, not the quantity of money, so arguing that it should be always increased to keep up with population growth is a flawed argument. Very rarely does any one have all of their earnings for a year shoved under their mattress, or even any sizable fraction. For the most part as soon as they get it they give it to some one else, who gives it to some one else, repeated until the money gets taxed out of existence, or leaves the country (of course it then does the same thing outside of the country where it does not do a damn thing for the National, Regional or Local Economies.)
Click to expand...

The link is there now - RIU became temporarily unavailable while posting. The first article deals with Velocity and explains why there is an influx of cash now. There is a second link as well now.

Is it flawed? So our economy when the population is 2x what it is now should have the same money supply?
 
TheBrutalTruth said:
If we all had to pay 100% cash upfront it is likely that home ownership would climb. The idea that you own your house when you have a mortgage is a joke pushed by Madison Avenue for the banks' profit. You do not own your house until the note is paid off, and if you have a mortgage on it then you are not going to see any profit in your house (unless you are an imbecile that just jumps from house to house.)

First, there's the $150,000 that you start out owing, by the time you include interest you have paid 2 - 3x that, or $450,000. So any profit from the sale is eliminated. Of course in cities the congestion and density make it not even worth the effort of owning a house as anything more than a place to sleep as there is practically no land that you can really do anything with.

About the only way I'd purchase a house would be 20 - 30 miles outside of the city limits with 4 - 5 acres that I can either do subsistence farming on or turn into a nice escape from the city. Of course with inflation my pay is consistently being deprived of its value, yet another point against inflation.

It is a grave disservice to the poor and the working and middle classes for the government to pursue the insipid policy of inflation, as it pushes prices up faster than pay, because pay is both bottom and top sticky. Instead of increasing the quality of life inflation decreases the quality of life. While loans do self-amortize the cost of food, shelter, water and other essentials go up.

It is a catch 22, but ultimately as those that are poor rarely have the debt loads of the average american it does them a greater disservice. Once again it ignores those that either A. own everything outright, or B. have a minimal amount of wealth and robs them of purchasing power. It also deprives those that have saved and gathered wealth of the ability to use the wealth that they have saved to make other purchases. Ultimately inflation will probably be found to have a drastic cumulative slowing effect on the economy as the effects of inflation are not linear or geometric but are exponential, thus the savings from 10 years ago lose 21.8% of their purchasing power, the savings from 9 years ago lose 19.5% of their purchasing power, and down the line at a cumulative 2% rate of inflation. As inflation is rarely held at 2% due to the irresponsibly policies of the Federal Reserve (which ironically states that one of its goals is to maintain the value of the dollar) the effects are drastically worse than those shown above.

Being punished for hardwork, diligence and thrift is absurd, because those are the habits of a prosperous nation that owns its own homes outright with out mortgages from the bank. They are the habits of an industrious nation that is gathering wealth instead of a slothful nation that is increasingly pursuing credit and attempting to get something for nothing.

It also hurts those that have retired and are on fixed incomes.
Click to expand...

Great post! Poetic.
 
I am not saying it is right or good. I myself am not an "average" American anymore - Unlike everyone I know I own every tangible thing I have - the only debt that I have is my student loan, I have a nice savings account, and a checking account that we use responsibly.
Click to expand...


the only thing that i will concede on in your argumet is that if you owe money, you will make out, but only for a short time.

you said you r not an average american and u have savings. if you use that savings to pay off previous debt then u make out. but any future debt or products you buy are now costing X times inflation. if you dont immediately use your savings, it quickly becomes useless.

as for using your money responsibly, inflation takes that ability away from you. i dont think you will find any economists tryign to convince people that inflation is good.
 
tnrtinr said:
The link is there now - RIU became temporarily unavailable while posting. The first article deals with Velocity and explains why there is an influx of cash now. There is a second link as well now.

Is it flawed? So our economy when the population is 2x what it is now should have the same money supply?
Click to expand...

The money supply would not make a difference, if you double the money supply you halve the value of each unit. There might be an increase in the size of the pie, but it is not through the money supply, the money supply is nothing more than the equivalent of a thermometer that can be used for gauging economic temperatures at best.
 
jeff f said:
the only thing that i will concede on in your argumet is that if you owe money, you will make out, but only for a short time.

you said you r not an average american and u have savings. if you use that savings to pay off previous debt then u make out. but any future debt or products you buy are now costing X times inflation. if you dont immediately use your savings, it quickly becomes useless.

as for using your money responsibly, inflation takes that ability away from you. i dont think you will find any economists tryign to convince people that inflation is good.
Click to expand...

Do agree with the second link a bit more, but I don't have time to read too much, just that there's another factor that effects prices, independent of money supply and that's productivity. As productivity rises prices trend down, and thus there are multiple factors that effect prices ranging from demand for money, demand for goods (which ranges from proportional to population, to highly elastic depending on price.) to how much time is spent producing a good. The more time a good requires to produce the more is going to be charged for it.
 
TheBrutalTruth said:
The money supply would not make a difference, if you double the money supply you halve the value of each unit. There might be an increase in the size of the pie, but it is not through the money supply, the money supply is nothing more than the equivalent of a thermometer that can be used for gauging economic temperatures at best.
Click to expand...

If you double the population without increasing the money supply what happens?
 
tnrtinr said:
If you double the population without increasing the money supply what happens?
Click to expand...

I would imagine deflation, but seeing as how it has historically been the prerogative of corrupt kings to clip coins and remint them less gold or silver content I can not think of any examples that come to mind.

Of course there is also the effect of gold and silver production in historical models.

But I don't think increased population would actually cause the value of money to change. It would cause the value of other commodities relative to money to change, but its effect on money would likely be an increase in velocity in some industrial sectors and a decrease in other industrial sectors.

Of course, there is a chance that deflation would happen as farmers compete on price to sell what they can produce, or up their production to compete.

Too many variables and no real world examples that I can think of that illustrate a closed money system and an expanding population. Of course, if population was expanding the value of labor would go down, which would result in downward pressure on prices.

Hard to predict what would happen.
 
TheBrutalTruth said:
I would imagine deflation, but seeing as how it has historically been the prerogative of corrupt kings to clip coins and remint them less gold or silver content I can not think of any examples that come to mind.

Of course there is also the effect of gold and silver production in historical models.

But I don't think increased population would actually cause the value of money to change. It would cause the value of other commodities relative to money to change, but its effect on money would likely be an increase in velocity in some industrial sectors and a decrease in other industrial sectors.

Of course, there is a chance that deflation would happen as farmers compete on price to sell what they can produce, or up their production to compete.

Too many variables and no real world examples that I can think of that illustrate a closed money system and an expanding population. Of course, if population was expanding the value of labor would go down, which would result in downward pressure on prices.

Hard to predict what would happen.
Click to expand...

Do you agree? Deflation is correct because money would have greater value due to scarcity, while demand has doubled.
 
tnrtinr said:
Do you agree? Deflation is correct because money would have greater value due to scarcity, while demand has doubled.
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Yes, but that's assuming that the extra production capacity made available could be swallowed. There would be deflation in non-mechanicized industries, and perhaps even mechanized industries as the value of their outputs would decrease, but in industries that are not as labor intensive the value of their outputs might increase, so you'd have a varying effect depending on how the extra labor is distributed.

Of course, assuming that all industries are similarly labor intensive, then you are going to see prices fall as production increases, which means of course deflation. Deflation in that case however is not a bad thing as it is a result of increased availability of resources due to increased production.

Of course once prices hit a floor they will stabilize again thus meaning that the quality of life would not be effected as the prices would have fallen to respond to the new amount of labor available. Velocity of money might swing either way (increase or decrease) though I'm inclined to say that it would actually increase as more people would be spending the money that they are earning.

Taxation, if left at similar rates (assuming a flat tax) would not effect velocity once the market had reached a new equilibrium. Money would be "more" valuable, but not necessarily because of any effect on its supply, but because of the decreasing value of labor due to increased availability.
 
Thebiglungblowski said:
this is a video each and everyone of you need to see.. and once you finish seeing it you need to tell each and every American that you truly love and care for. and MAKE sure they see this too.. spread the knowledge..

http://www.youtube.com/watch?v=1gKX9TWRyfs
Click to expand...

Someone PLEASE watch this... this is as clear as anyone could explain it to you.. and it explains how the system is built to your DISADVANTAGE
 
TheBrutalTruth said:
Yes, but that's assuming that the extra production capacity made available could be swallowed. There would be deflation in non-mechanicized industries, and perhaps even mechanized industries as the value of their outputs would decrease, but in industries that are not as labor intensive the value of their outputs might increase, so you'd have a varying effect depending on how the extra labor is distributed.

Of course, assuming that all industries are similarly labor intensive, then you are going to see prices fall as production increases, which means of course deflation. Deflation in that case however is not a bad thing as it is a result of increased availability of resources due to increased production.
Click to expand...

If a fixed money supply causes deflation and a rapidly expanding money supply creates inflation then would that mean that a money supply that is adaquate for its population and production would have zero inflation or deflation?
 
tnrtinr said:
If a fixed money supply causes deflation and a rapidly expanding money supply creates inflation then would that mean that a money supply that is adaquate for its population and production would have zero inflation or deflation?
Click to expand...

Adequate in what regard?

If its stable and the population is stable then there is no inflation, if the money supply is stable and the population is growing you will have increased quantities of labor which result in deflation. Increased demand will however possibly counter that resulting in inflation in some industries and deflation in others. To try making a blanket statement as to what exactly would happen if population was growing and money remained stagnant is impossible. Though, if money supply was growing and population was growing it is likely that there would be inflation, because some sectors are guaranteed to benefit from increases in population, specifically agriculture and some service industries such as QSRs, Restaurants, Clothing, and etc. Increasing the money supply is always inflationary, as the natural trend of labor is to increase and thus the natural trend is for prices to decline relative to the value of the dollar increasing the quality of life through decreased prices and bottom sticky wages. The market would of course eventually deflate far enough to hit a bottom, but as the process continues prices would continue to fall.

There's also aspects such as activity in the mining sector which could result in more labor producing more currency which then results in additional growth of the money supply, as the dollar is just one commodity of many that can be used like money. That is, the dollar, gold, silver, platinum and other precious metals and gems are not consumable (in general) and thus endure longer than other commodities such as food, which is eaten, or water which is dranken.

Your question does not actually have a simple, or correct, answer as there are a multitude of other variables that have to be examined. About the only thing your question can be stated to do is illustrate the flawed mindset engaged in by those that believe in the ability of macro-economists to do anything other than record trends and attempt to predict future events based off of them.
 
TheBrutalTruth said:
Adequate in what regard?

If its stable and the population is stable then there is no inflation, if the money supply is stable and the population is growing you will have increased quantities of labor which result in deflation. Increased demand will however possibly counter that resulting in inflation in some industries and deflation in others. To try making a blanket statement as to what exactly would happen if population was growing and money remained stagnant is impossible. Though, if money supply was growing and population was growing it is likely that there would be inflation, because some sectors are guaranteed to benefit from increases in population, specifically agriculture and some service industries such as QSRs, Restaurants, Clothing, and etc. Increasing the money supply is always inflationary, as the natural trend of labor is to increase and thus the natural trend is for prices to decline relative to the value of the dollar increasing the quality of life through decreased prices and bottom sticky wages. The market would of course eventually deflate far enough to hit a bottom, but as the process continues prices would continue to fall.

There's also aspects such as activity in the mining sector which could result in more labor producing more currency which then results in additional growth of the money supply, as the dollar is just one commodity of many that can be used like money. That is, the dollar, gold, silver, platinum and other precious metals and gems are not consumable (in general) and thus endure longer than other commodities such as food, which is eaten, or water which is dranken.

Your question does not actually have a simple, or correct, answer as there are a multitude of other variables that have to be examined. About the only thing your question can be stated to do is illustrate the flawed mindset engaged in by those that believe in the ability of macro-economists to do anything other than record trends and attempt to predict future events based off of them.
Click to expand...

Increasing the money supply is NOT ALWAYS inflationary. I don't pretend to know the exact equation to keep inflation / deflation at 0. But if you agree that keeping the Money Supply fixed creates deflation EVENTUALLY and you agree that if the money supply is too large creates inflation - then you should also agree that some increase in the money supply is appropriate to keep inflation / deflation in check in a growing economy.

Read this.
http://www.marketoracle.co.uk/Article4482.html
 
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