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The fed certainly tries not to grow money supply too fast but like all institutions of central planning they have imperfect knowledge and aren't very good at what they do. That imperfect knowledge resulted in a prolonged period of easy credit in the early 2000s which led to the massive bubble of 07.. And the extraordinary actions being taken today in response to it's collapse guarantee that we will face the MOAB (mother of all busts) once the next inflationary "boom" cycle hits a peak. Call me chicken little if you want, but I gotta say it..the sky is about to f*cking fall!

Uber-inflation (15%+ annually) by 2014.. Great depression #2 2015-2020

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Originally posted by Capitalizt The fed certainly tries not to grow money supply too fast but like all institutions of central planning they have imperfect knowledge and aren't very good at what they do. That imperfect knowledge resulted in a prolonged period of easy credit in the early 2000s which led to the massive bubble of 07.. And the extraordinary actions being taken today in response to it's collapse guarantee that we will face the MOAB (mother of all busts) once the next inflationary "boom" cycle hits a peak. Call me chicken little if you want, but I gotta say it..the sky is about to f*cking fall!

That doesn't address why you posted that graph before - if the Fed wasn't outpacing GDP growth before, are you basing your Chicken Little theory only on economic data gathered since September 2008?

lebez, I don't recall ever posting these charts before last year. I've been harping on how inefficient and destructive fed policy can be for a while now..but I never expected to see what we've seen over the past 12 months. I never believed that we are in for a world of hellish inflation until I saw the extreme measures we've taken recently...private companies being taken over, partial nationalization of the banking industry..trillions spent in the blink of an eye on bailout and stimulus plans, the money supply doubled in a matter of weeks..$13 trillion in committed stimulus + trillion dollar deficits as far as the eye can see, etc.

The government/fed have upped the ante on an extreme scale never seen before..far worse than I could have imagined. I've always expected a slow devaluation of the dollar but until I witnessed these events, I never predicted a complete collapse in the currency. Now I'm afraid it's inevitable.

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Originally posted by Capitalizt I don't think there's any way to overstate what's already been done. The US alone has already implemented more than $12.8 Trillion in stimulus. Even if we're completely done with bailouts, I don't think that amount of stimulus can be unwound in a reasonable amount of time to prevent inflation. I'm rootin for Bernanke though. Hopefully he will have the balls to choke off the cocaine supply before the party gets out of control.

You do realize that roughly that amount of capital has been lost right?

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Originally posted by Lebezniatnikov I think I see what you mean now as well when you talk about personal choices trumping the structural nature of some of these, but I would still argue that even in matters of "personal choice" the deck is stacked in favor of a particular outcome. Unfortunately, this is true in the US, but in the developing world we've discovered ways to circumvent the role of government in this equation. http://www.microfinancegateway.org/...le/detail/25590 I agree that this is a result of poor choices in some segments of society, but you have to take into account that 22 million Americans don't even have a bank account. Pawn Shops and places where you can trade in car titles for loans become the only way of securing funds in times of economic shock - with no savings and no means of securing a loan, people can be forced into bad financial decisions. Another thing that plays into this is another trap altogether - The Institutional Knowledge Trap - when a family is poor chances are that education is low and the resources available (internet, books, etc.) to learn about opportunities are scarce. The social network is largely in the same boat, so this is a reason why we see poor people not even knowing about the opportunities that are available to them or how to secure them (such as Medicare, microfinance loans, etc.). Their lack of knowledge becomes a trap. This is why community organizers often focus on community education programs. This is indeed more common in the agricultural sector, where laws governing child labor and mandatory schooling aren't adhered to as closely. It's very common in the Midwest to hold back students in Middle School and High School from attending class in order to help out at home with harvests. Eventually many of these students drop out - some rural public school districts have much higher drop-out rates than the most "ghetto" neighborhoods in urban centers. That said, I watched an interesting independent film this weekend about immigrant families in the Bronx and their propensity to have children forgo education in order to help earn enough money to put food on the table, so I assume it does happen. This is a bigger issue in the developing world, but it isn't really correct to view it as a poor personal choice on behalf of the parents. They're viewing it in a coldly practical way - the more children, the better off they will be in the future. That's more children able to contribute to household income in the near future, and a higher likelihood that someone will be able to take care of them when they can no longer work. It's like blindly rolling a dice 12 times to ensure that you roll at least one 6. The unintended economic consequence of course is that by bearing more children into poverty who will likely go on to make the same fertility choices, you're substantially increasing the number of people in poverty. Yes, I didn't phrase this in terms of a trap. Collective action is a problem, because most people are more concerned with securing food and shelter than taking steps that are available to them through collective action. It's mostly a time and energy concern, though lack of institutional knowledge is also key. I can't remember the economist who writes about it, but this is more a case of economic coercion, where economic choices are dictated by circumstances. If you had a choice between working as a janitor for 5.15/hour or joining an organized crime group where your food and shelter for your entire family was covered, which would you choose? If we view opportunity cost as important, the only "smart" economic decision is to become a criminal. Much higher returns. And gangs are about the only groups in most poor communities to collectively share risks in an effective manner.

i don't think our views on this issue are really that far apart. You just view collective actions of extremely poor individuals as a structural element of society holding them back. On the other hand, i take the view that their individual actions do not form a structural blockage for their ascension from poverty. Nevertheless, I understand there is an interconnection among elements in society that may cause impoverished individuals to act a certain way with greater frequency. For example, poor education and lack of access to other resources (which i agree exists) will lead to higher crime among that population. So, in a way, the personal choices are a result of some structural flaws. In my view, however, attributing most of the blame to something that is beyond the control of an individual does nothing to help those individuals. They can't change the structure of society, but hopefully they can change individual behaviors that will lead to better results. If they are indoctrinated as children that their situation is beyong their control then it is highly likely they will simply fall right back into the same cycle of their parents. In a way, we are creating a structural blockage by telling them it is not their fault they can't succeed.

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Originally posted by jerZ07002 So, in a way, the personal choices are a result of some structural flaws.

Yeah, I think this is the basis of both of our points, and I agree that we are just looking at policy prescriptions differently.

I side with the likes of John Rawls who argue that just societies remove structural barriers to allow everyone to have full potential - they needn't realize that potential to live in a just society, but they have to have equal access.

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In a way, we are creating a structural blockage by telling them it is not their fault they can't succeed.

You're probably right about this. Perhaps in poverty, as in everything semantics are important.

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Originally posted by Lebezniatnikov I side with the likes of John Rawls who argue that just societies remove structural barriers to allow everyone to have full potential - they needn't realize that potential to live in a just society, but they have to have equal access.

Like i said, our positions aren't too far off. My position is that everyone should have equal access to societal resources so that they have the opportunity available. I think this is different than saying we need to remove all structural barriers because certain barriers you noted appear to result largely as a result of poor personal choices (for purposes of this statement i assume they are all in fact structural flaws in our system - but as i stated, i'm not convinced that we should label all of them as structural). Like you, I'm more concerned with the opportunity than the achievement.

Inflation is the least of our worries right now...

http://finance.yahoo.com/news/Consu...2&asset=&ccode=

Krugman > Cap

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Originally posted by Capitalizt The fed certainly tries not to grow money supply too fast but like all institutions of central planning they have imperfect knowledge and aren't very good at what they do. That imperfect knowledge resulted in a prolonged period of easy credit in the early 2000s which led to the massive bubble of 07.. And the extraordinary actions being taken today in response to it's collapse guarantee that we will face the MOAB (mother of all busts) once the next inflationary "boom" cycle hits a peak. Call me chicken little if you want, but I gotta say it..the sky is about to f*cking fall! Uber-inflation (15%+ annually) by 2014.. Great depression #2 2015-2020

I have to agree with Capitalizt here. I've been concerned for a long time and on the edge of my seat since the start of September. Most recently I've gone on a very strict watch of news papers for articles about money supply and hints of inflationary news. By the same token I've been sure to try and find articles that would refute this fact.

I've got 12 articles in the folder in front of me that all point to inflation, none that say otherwise.

In particular the Germans would probably agree with Capitalizt the most, all the other countries seem to be mostly concrned with trying to inflate away thier debts.

I like the time line of 2015 - 2020 although it's not easy to really call things that far ahead. What I thought might have been a blip in March could certainly gain some stability and hold out for a couple of years. The problem is that nothing has been fixed. Mark-to-market accounting standards have been changed so now no one knows what a company is worth, money has been printed, and there is a cheering section saying 'we did it!'.

The bottom has not been hit hard enough to change anything. If there's any recovery it will be a false one built on the back of deception. I fully expect capital flight to continue in the US until there is more balence in the global standard of living.

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Originally posted by Krypton Inflation is the least of our worries right now... http://finance.yahoo.com/news/Consu...2&asset=&ccode=

Of course they are dipping, there weren't any sales over Christmas. The retail sector is forced to sell at reduced prices to clear winter inventory and re-stock with summer goods. Unfortunately the combination of forced price reductions and unavailable credit is going to put some companies out of business.

Others might cope by only partly re-filling thier inventory, waiting for the economy to pick up again. But by the time they are ready to buy again inflation will have hit and they won't be able to re-stock.

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Originally posted by atbell Of course they are dipping, there weren't any sales over Christmas. The retail sector is forced to sell at reduced prices to clear winter inventory and re-stock with summer goods. Unfortunately the combination of forced price reductions and unavailable credit is going to put some companies out of business. Others might cope by only partly re-filling thier inventory, waiting for the economy to pick up again. But by the time they are ready to buy again inflation will have hit and they won't be able to re-stock.

ok, so inflation fear mongers really need to put a sock in it.

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Originally posted by atbell I've got 12 articles in the folder in front of me that all point to inflation, none that say otherwise.

The article Krypton posted is a good start, but basically you need to read more Krugman, Reich, and Sachs, because they've all been pretty prolifically vocal about the impending deflationary threat.

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Originally posted by Krypton ok, so inflation fear mongers really need to put a sock in it.

you seem to be concerned about only today, while those worried about inflation are concerned about today and years from now. Inflation concerns are very relevant. The fed has utilized measures to expand the money supply that it has never used before, i.e., the purchase of corporate debt. When the fed needs to contract money supply it normally sells government securities. In 4 or 5 years from now when the fed needs to contract money supply it will have to sell the corporate debt instead of the treasuries. That isn't going to be as effective as when the fed sells treasuries. People have legitimate concerns about how the fed is going to unwind its portfolio and whether there will be purchasers waiting to buy the fed's assets.

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Originally posted by Lebezniatnikov The article Krypton posted is a good start, but basically you need to read more Krugman, Reich, and Sachs, because they've all been pretty prolifically vocal about the impending deflationary threat.

I'm not sure about the threat of deflation. Use the core inflation numbers (which excludes volatile energy costs) to determine the real threat. The article provides core inflation way up almost 2% over the past year.

Aside from the volatility aspect of excluding energy from inflation discussion, excluding energy is preferable because lower cost of energy is bad mainly for energy producing nations. In the aggregate, lower energy costs would be good for the american economy, outside of Exxon and the oil companies. As a result, if the primary component of deflation was a reduction in energy prices that wouldn't necessarily be a bad thing for the economy. At worst, companies would see declining revenue (most likely stable revenue) with an increase in net income because of lower expenses.

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Originally posted by Lebezniatnikov The article Krypton posted is a good start, but basically you need to read more Krugman, Reich, and Sachs, because they've all been pretty prolifically vocal about the impending deflationary threat.

Krugman and Reich? *cringe* Dear God man, broaden your horizons.. You've been watching too much West Wing I think. And sorry, but the "deflation threat" is an absolute joke in light of the amount of stimulus we've seen. We might have a temporary dip in prices but regardless of what Krugman says, this is NOT a symptom of deflation. We can't have true deflation while the money supply is soaring to all time highs. What we have now is disinflation..an unpleasant but necessary consequence of the preceding inflationary boom. The market is trying to throw off past excess and to wash symptoms of the previous intervention out of the economic system. It's trying to purge the malinvestment and distortions of the past few years, and this means prices that were too high to begin with need to fall. They need to return to normality.

I hate to use a nasty analogy but think of it this way.. If you eat a pound of rat poison then puke it up, the experience can be very unpleasant..but it's not harmful to your body..It is not making you thinner than you should be or reducing your lean muscle mass.. On the contrary, it's simply a purge of the bad stuff that shouldn't have entered your body in the first place...Puking may be an unpleasant thing, but it is nature's way of correcting the mistakes you've made, and it is ultimately a healthy process.

The fact is that the past few years of growth in America were built on ceaseless credit expansion. Our prosperity was built on debt and massive leverage rather than savings and sound investment. It is perfectly possible to have a temporary credit-based boom..a strong GDP with rising income and asset prices. This is indeed what happened, but that type of growth is NOT healthy and not sustainable.. It was a phony economy loaded with malinvestments that needed to be purged. The economy is attempting this unpleasant process now.. Some of the poison has been purged, but unfortunately the fed and treasury are refusing to let nature take it's course. They are refusing to let the process finish and have instead decided to make the patient feel better by giving him massive amounts of painkillers and anti-regurgitation drugs (stimulus plans, loans, bailouts, nationalization, debt monetization, etc). They are doing whatever it takes to get the patient walking around and feeling ok in the present, while leaving that pesky poison in his stomach for future generations to worry about. Their actions might buy a little time and happiness for the America, but the patient (us) is going to be in a much worse state over the long run.

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Originally posted by Capitalizt let failed companies go down and not to prop them up

Everybody loves this in theory, but think of the real life implications here. If you have already, are you really comfortable with them?

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Originally posted by Krypton ok, so inflation fear mongers really need to put a sock in it.

I don't think it's that simple.

Both inflation and deflation are presenting risks and from what I've read I don't get the feeling that anyone would say differently.

I think the real problem with concern about price levels right now, and probably since September, is that deflation apears quickly and takes effect quickly yet any attempts to balance it could easily over shoot because of the uncertain time lag between monetary intervention and the effects on the economy.

I'm also of the opinion that the problems with deflation are not as bad as those with inflation. All of the case studies of inflation seem to have really nasty social concequences associated with them where as the only case of deflation that I'm aware of (Japan) just meant a slow economy, not a war.

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Originally posted by Clovis Everybody loves this in theory, but think of the real life implications here. If you have already, are you really comfortable with them?

Yep...I know it's not a popular idea but we need to take our medicine. A recession/depression is the cure. By continuing to delay the pain we are only going to make it worse when it finally hits. The country has been on the same path for a while now..blowing credit bubbles untill they pop..then reinflating them with more credit..causing the bubbles grow larger and larger each time. The cycle can't go on forever. We need to allow all of the bad assets to be purged..bad companies to go under..bad debts to be written off.. We can't keep propping up failed enterprises and papering over mistakes of the past with new money and more debt. The cancer needs to be cut out before we can have a healthy recovery. It's absolutely necessary, but cancer surgery is never pleasant.

So we can put the discussion in a bit more context here's the Federal Reserves description of the money supply as of April 2009:

http://www.federalreserve.gov/releases/h6/Current/

You will notice that it grew 9% over the 12 month period of Feb 08 to Feb 09. From the Econ text I've been studying this translates exactly into a 9% price rise once equilibrium is reached, ... yeah, so I think what the means in real terms is that inflation is going to trend toward 9% over say a year before the effects of the growth in money supply wear off.

This is in the middle of a credit crunch, a time when money supply is supposed to be shrinking if deflation is really an issue. That makes me think that the increase in money supply is odd considering how many people / businesses are said to be deleveraging.

To late in the day to think about this more. I definately recomend taking a look at the h-6 report, it gives a good sense of exactly how big the bailouts are relative to the existing money supply (8.2 Trillion M2 means that the two bailouts, ~1.4 trillion, increase money supply by about 17%, assuming they are paid off by printing money)

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Originally posted by Capitalizt Yep...I know it's not a popular idea but we need to take our medicine. A recession/depression is the cure. By continuing to delay the pain we are only going to make it worse when it finally hits. The country has been on the same path for a while now..blowing credit bubbles untill they pop..then reinflating them with more credit..causing the bubbles grow larger and larger each time. The cycle can't go on forever. We need to allow all of the bad assets to be purged..bad companies to go under..bad debts to be written off.. We can't keep propping up failed enterprises and papering over mistakes of the past with new money and more debt. The cancer needs to be cut out before we can have a healthy recovery. It's absolutely necessary, but cancer surgery is never pleasant.

+++

You want change you have to let things fail, not just cast a balot for the person who seems most different every 4 years.

All of the past case studies say pretty much exactly what is said above, the longer reality is held at bay the worse things get.

That's todays worry (fuck, I've got to get out and party a bit so I don't just jump from worry to worry), that a rally will have legs and just add to a bigger bubble.

If the bubble gets to big unwinding it goes from a year or two without Christmas presents to massive civil unrest. Figuring out where on things lay on that scale is extremely difficult. I just hope things aren't that far already.

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Originally posted by Capitalizt Yep...I know it's not a popular idea but we need to take our medicine. A recession/depression is the cure. By continuing to delay the pain we are only going to make it worse when it finally hits. The country has been on the same path for a while now..blowing credit bubbles untill they pop..then reinflating them with more credit..causing the bubbles grow larger and larger each time. The cycle can't go on forever. We need to allow all of the bad assets to be purged..bad companies to go under..bad debts to be written off.. We can't keep propping up failed enterprises and papering over mistakes of the past with new money and more debt. The cancer needs to be cut out before we can have a healthy recovery. It's absolutely necessary, but cancer surgery is never pleasant.

But that's not what you're talking about. You're talking about not treating the cancer at all in the hopes that the patient's immune system takes over and fixes itself.

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Originally posted by Groundhog Boy "Go back to bed america your government is in control Here's American Gladiators, here is 56 channels of it, Watch these picturary retards bang their fuckin' skulls together and congratulate you on living in the land of freedom, Here you go America you are free to do as we tell you We want your soul Your cash, your house, your phone, your cash, your house, your life" -Adam Freeland - We Want Your Soul

That's Bill Hicks!

http://www.youtube.com/watch?v=eR3KwODDzeY

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Originally posted by meriter That's Bill Hicks! http://www.youtube.com/watch?v=eR3KwODDzeY

Part of it is. The song samples it.

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