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Originally posted by Lebezniatnikov You adjust the goalposts so frequently that it's actually quite funny when you pick and choose a battle and lose.

So you admit to not understanding what adjusted for inflation means.

This argument is as good as saying that no one in the roman empire was as wealthy as people are today, simply because they didn't have a printing press.

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Originally posted by DOOMBOT Simple, you spread out what you are trying to buy into fixed payments. How do you think houses and cars, for example, are bought? Look at Brazil, their dollar is so weak that they resorted to this exact type of system for buying goods that us US citizens would consider very common purchases, such as clothing or electronics. Funny because as I write that, we have resorted to this type of payment for some electronics as well.

that's still not inflation. The money supply has expanded dramatically over the past 12 months, HOWEVER we have seen a rather drastic DECREASE in certain consumer prices (i.e., DEFLATION). I believe that the broad based CPI has remained at around 0% for a few months. Explain that one please!

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Originally posted by DOOMBOT It can definitely be the cause of inflation. If a banks lending practices are loose and the interest rates are low, you've just made money very easy and cheap to come by. So when the loan is made, the money supply increases, otherwise known as inflation.

An increase in money supply is not inflation. Inflation, again, is an increase in CONSUMER PRICES. In theory, the increase in money supply should cause an increase in prices because there is more money chasing the same amount of goods, but that ignores other macroeconomic factors.

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Originally posted by DOOMBOT I'm more concerned with why, when the question "What is inflation" is asked, people answer with "rise in consumer goods", without thinking further, or, how that is made possible.

Your statement was that inflation caused consumers to fuel the economy. That's simply wrong. Inflation has been at historically low levels for a very long time, and high inflation generally has a negative impact on the economy (see the recession of 81-82). Noone here is denying that inflation has many causes, one of which is the expansion of money supply. If your statement, instead, was that the expansion of cheap financing lead to our consumer fueled economic growth i would be in total agreement.

you have to distinguish between (1) inflation, which is a rise in consumer prices that has many factors one of which may be an increase in money supply, and (2) the steps that increase money supply. They are lightly connected, but certainly not the same thing. Your argument is very imprecise.

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Originally posted by DOOMBOT If you dig deeper you find that it happens because the money supply was increased and if it is increased too much, you have what happened Argentina or Zimbabwe take place, to name a couple examples.

you can't compare the US to argentina or zimbabwe. First, neither of those countries were issuing debt in their currency (as the US does). So, when those countries defaulted on their debts (something that is almost inconceiveable because the US can print US dollars to repay the US dollar debt, so it must consciously default by will), the world lost confidence in their overall economy and the depreciation in their currency was largely a result of the traders in the fx markets.

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Originally posted by jerZ07002 that's still not inflation.

I wasn't defining inflation with that response. You asked "How can we reduce purchasing power and increase consumerism?"

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The money supply has expanded dramatically over the past 12 months, HOWEVER we have seen a rather drastic DECREASE in certain consumer prices (i.e., DEFLATION). I believe that the broad based CPI has remained at around 0% for a few months. Explain that one please!

You're seeing a decrease in asset prices that were never in high demand in the first place. Housing, for example. Take energy prices though and you will see that they have been rising. There is a real demand for energy, where there was an artificial one in housing.

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An increase in money supply is not inflation. Inflation, again, is an increase in CONSUMER PRICES. In theory, the increase in money supply should cause an increase in prices because there is more money chasing the same amount of goods, but that ignores other macroeconomic factors.

See my dictionary.com link and quote.

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Your statement was that inflation caused consumers to fuel the economy. That's simply wrong. Inflation has been at historically low levels for a very long time, and high inflation generally has a negative impact on the economy (see the recession of 81-82). Noone here is denying that inflation has many causes, one of which is the expansion of money supply. If your statement, instead, was that the expansion of cheap financing lead to our consumer fueled economic growth i would be in total agreement.

We are simply disagreeing on what inflation is. You believe that inflation is the rise in consumer goods and I believe it is the increase in money supply. Again, see my dictionary.com definition of inflation.

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you can't compare the US to argentina or zimbabwe. First, neither of those countries were issuing debt in their currency (as the US does). So, when those countries defaulted on their debts (something that is almost inconceiveable because the US can't print money, so it must consciously default by will), the world lost confidence in their overall economy and the depreciation in their currency was largely a result of the traders in the fx markets.

You've lost me. The US can't print money?

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Originally posted by DOOMBOT We are simply disagreeing on what inflation is. You believe that inflation is the rise in consumer goods and I believe it is the increase in money supply. Again, see my dictionary.com definition of inflation.

unfortunately for you, you can't unilaterally change the universally accepted definition of inflation.

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Originally posted by DOOMBOT You've lost me. The US can't print money?

that was a mistake that i corrected, apparently after you already quoted my post. Initially i was going to say that zimbabwe and argentina can't print money to repay their debt (because it would result in decreasing the value of the peso and whatever is used in zimbabwe) as can the US. But i decided to state it in the affirmative (that the US can print money to repay its debt), but i goofed and didn't remove the 't

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Originally posted by jerZ07002 unfortunately for you, you can't unilaterally change the universally accepted definition of inflation.

I can live with the fact that a lot of people still believe it is the rise of prices, without understanding why or how that happens. You may want to contact dictionary.com and let them know they have it all wrong, while you're at it.

Well thank God for dictionaries. I don't know how we'd understand economic concepts without them.

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Originally posted by Brahman You must be a gullible character.

you are stupid.

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Originally posted by Kinezi you are stupid.

If you don't have anything to add to the forum, get the fuck out..

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Originally posted by DOOMBOT So to go back to my main point, our over consumption came from the increase in the money supply. Without fractional reserve banking, we simply wouldn't have had the ability to consume as much as we do or did, as a nation. People wouldn't have bought houses they couldn't afford without the loans that they received. They wouldn't have had the ability to buy 3 cars, without the ability of a loan as well. And what does a loan, in our current banking system, do? Increases the supply of money, also known as, inflation.

Loans are an issue with money supply. I'm not sure if they were considered correctly in the past. In Dec. 2008 the Federal Reserve discussed the capital reserve ratios of banks in thier meeting, reported in the Financial Times in January after the release of the minutes from the Dec. meeting.

In March 2009 Alan Greenspan came out and said he flet the tier one capital reserve ratio's should be increased from to 12-13 % for all banks.

Most recently the OECD and the G20 have released reports covering the topic (which I have not read), that was earlier this month.

Finally there was a meeting of central bankers around the end of August which had capital reserve ratios as one of the major topics (another thing I've yet to read).

...

oh, and at the start of Dec. 2008 yours truely suggested to the Fed. that they up the reserve ratio's of banks to 12-14%.

Yeah, I beat Greenspan by 4 months

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Originally posted by DOOMBOT What do you believe causes the increase in consumer prices?

If you beleive in the model of supply and demand it is both that cause changes in prices.

Factors that shift either curve will move the equilibrium price level which will then put pressure on prices. The further prices are from thier equilibrium price the more pressue (the faster) that actuall prices will adjust toward that equilibrium.

There is a significant amount of difficulty in figuring out the lag between the two dynamic processes though.

George Soros has made most of his money from identifying instances where the actual price levels of a comodity are massively different than thier equilibrium price level. After the correction happens he cleans up. (I think his biggest bet was against the UK pound)

There are also crazy notions about the fact that currency value changes will have effects on price levels. If the US dollar were to fall in value all price levels would go up. This is more confusing and I have yet to completely come to an understanding about to what extent currency fluctuations will change the price levels but I'm certain they do...

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Originally posted by DOOMBOT You need the money to buy the product, which allows you to act on the demand. A homeless person doesn't have any influence on the price of a Ferrari just because he wants one.

He does in a high minded theoretical sense. If the utility of his Ferrari possesion / not posession were higher he would work more and buy a Ferrari.

Clearly that's a bit obsurd but it demonstrates the principle that is used in economics (to the best of my understanding). The Ferrari is not worth the time and effort of collecting enough money to pay for it for most of the population, the homelsess dude included.

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Originally posted by Atmos Yea after reading many posts, I can't see why you guys are arguing over the little details of what text-books define inflation as. An increase in the printing and distribution of money leads to the devaluation of the currency, therefore causing prices to rise which then hands it off to the "textbook" definition of inflation.

argh, ah, yes, kind of....

Don't forget that the demand for a currency also has a lot to do with price levels.

If the demand for a currency falls suddenly and the supply of currency is the same then the price levels of everything will increase ... inflation.

In a similar way, if the demand for a currency strengthens then printing money can be a way to avoid deflation.

One of the things argued by the fellow in the clip is that small policy changes have a massive margin of error with respect to price level fluctuations. aka: policy errors are easy and can cause unexpectedly large changes in price levels (in either direction)

A key premise of his argument, which I agree with if it is actually what he's trying to say, is that those who have been working in finance do not have the intelectual capacity to understand relationships more complicated than single order equations. This is a very bad assumption because the world works in all kinds of odd ways that aren't linear.

One example of a non-linear relationship would be an exponential growth relationship. This is about as simple a polynomial as can be but it is A. not well understood / considered and B. not used often enough. Other more complex polynomical relationships are probably quite valid and should be used in financial analysis if they are not already.

Another example is the frequent use of logarithmic relationships. These are mostly used to make things look straight, yet they are not. This mis-understanding is proabably responsible for a lot of mistaken research. The scary thing about this mistake is that it spans so many different feilds.

http://www.clevelandfed.org/Researc...y/1997/1015.pdf
http://www.clevelandfed.org/researc...y/2002/0515.pdf

Since a few here believe I need a masters degree from an expensive school to talk economics, I figure I'll let the "vice president and economist in the Research Department of the Federal Reserve Bank of Cleveland" do the talking for me.

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Originally posted by DOOMBOT http://www.clevelandfed.org/Researc...y/1997/1015.pdf http://www.clevelandfed.org/researc...y/2002/0515.pdf Since a few here believe I need a masters degree from an expensive school to talk economics, I figure I'll let the "vice president and economist in the Research Department of the Federal Reserve Bank of Cleveland" do the talking for me.

No.

I believe you need to be knowledgable about your subject matter and to have done a good deal of research and reading into the subject.

I also beleive anyone would be well served by taking a few years of advanced calculus, logic, and ethics before even saying a word about the economy.

What are those links you posted, give us some opinion, tell us what you think you are linking too. Tell us what parts of the stories you've posted you agree with and what parts you disagree with. Critical thought is absolutely necessary when dealing with economics.

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Originally posted by atbell No. I believe you need to be knowledgable about your subject matter and to have done a good deal of research and reading into the subject. I also beleive anyone would be well served by taking a few years of advanced calculus, logic, and ethics before even saying a word about the economy. What are those links you posted, give us some opinion, tell us what you think you are linking too. Tell us what parts of the stories you've posted you agree with and what parts you disagree with. Critical thought is absolutely necessary when dealing with economics.

I have gotten into many arguments on this forum with those who believe that inflation is the rise in price of goods, where I have said it was actually the increase in money. These articles back up what I am trying to say and figured that since, like I said, some have claimed because I don't have an economics degree I can't discuss economics, I'd link them to these two articles, where the author should be able to hold more respect on the topic then I, for those who have disagreed with me.

Your opinions are respected but you sound exactly like those who oppose my views and have made some extremely wild claims against me. So I leave you the two articles for YOU to tell me what parts you agree or disagree with. I'm stepping back from here to see what you and some others have to say in regards to the 2 articles. Enjoy your read!

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Originally posted by DOOMBOT Without fractional reserve banking, we simply wouldn't have had the ability to consume as much as we do or did, as a nation.

without fractional reserve banking, nobody but the wealthy would be able to access credit, and interest rates would be through the roof:

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Originally posted by occrider Yup and the fractional reserve banking system is what enables you to take out a loan to buy a car or a mortgage to purchase a house. Reduce the money supply by requiring banks to hold 100% reserves and several things would happen: A)Banks would not be able to give out the amount of loans people demand due to restrictions in supply. B)Consequentely banks would be selective over who they grant loans to ... effectively reducing loans to be class selective. C)Simple supply and demand would allow banks to charge a premium and raise interest rates to phenomenal levels.

http://www.tranceaddict.com/forums/...d=&pagenumber=4

In other words, people would have to live within their means.

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Originally posted by DOOMBOT In other words, people would have to live within their means.

In other words, the economy would be in a perpetual state of stagnation.

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Originally posted by Communist In other words, the economy would be in a perpetual state of stagnation.

The industrial revolution in the US happened during a time when notes were tied to a fixed amount of gold. Not exactly a 100% reserve banking system but not a free for all like we basically see today. I would say that this pretty much goes against your stagnation theory.

You're arguing against credit?

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Originally posted by Sunsnail You're arguing against credit?

Nope. Don't put words in my mouth. Credit can still be obtained without a fractional reserve banking system or at least the type of fractional reserve banking system that we have today. Again, see US Industrial Revolution.

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Originally posted by DOOMBOT The industrial revolution in the US happened during a time when notes were tied to a fixed amount of gold. Not exactly a 100% reserve banking system but not a free for all like we basically see today. I would say that this pretty much goes against your stagnation theory.

The 1800's were marked by extremely high cyclical volatility and protracted recessions, inadvertently caused by...the gold standard. I think everyone agrees that too much credit is bad. But one must realize business cycle occur in all economies, no matter what system is in place. To blame the system for a natural business cycle, seems na�ve. If you are so caught up in making people live within their means that the people who really need a loan can't get one, you'v pretty much killed the economy. The solution is to find the right balance in credit levels. Recessions such as this one does that as people are saving and lenders tightening standards, without having a radical and devolutionary switch to a now defunct monetary system (gold standard). There is a reason every country in the world abandoned the gold standard.

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Originally posted by Communist The 1800's were marked by extremely high cyclical volatility and protracted recessions, inadvertently caused by...the gold standard.

http://en.wikipedia.org/wiki/List_o...e_United_States

None of which were the fault of gold. Excess credit, inflation, default on debt, manipulation of interest rates, and loose monetary and fiscal policies lead to these panics/recessions/whatever you want to call them. Gold didn't cause any of these issues.

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Originally posted by Communist There is a reason every country in the world abandoned the gold standard.

It's called, force and control.

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