quote:

Originally posted by DOOMBOT Of course, with everything you just posted, political policies must be taken into account. So even though there may have been less money then, then there is today, it doesn't mean that the citizens of that society were much better off. There are many variable to consider when answering the questions that you did. With that being said, your questions don't have anything to do with my initial point, but that's not surprising.

exactly my point mate. looking at relative purchasing power of the dollar in isolation is a pointless exercise. but, that's what you guys do- post a stupid graph and lament the 93%+ decrease in the value of the dollar over 100 years, as if it means something. you can't have it both ways.

with regards to you point, the money supply is but one of the factors that influences inflation, albeit probably the most important one over the longer term. As you guys love to point out, the Fed has hugely increased its balance sheet over the last few years, so where is all the inflation that should be happening right now?

today, more people have more money and can buy more things, and much of that economic growth occured because governments abandoned gold and were no longer limited by an arbitrary pegging of their currency. the gold standard had a contractionary bias, it didnt prevent governments from debasing the value of the currency (see FDR) by changing the value of gold on a whim, and it was completely useless at being able to respond to changes in productivity and population in an economy. fiat is more elastic and created a FREE market where a currency is worth what you're willing to pay for it. I thought you liked the free market huh?

just because the money supply increases does not mean an automatic increase in inflation. plenty of people, myself included, have salary increments that keep pace with inflation, so im not losing anything to the dreaded "regressive tax" you guys are so obsessed about. im not concerned about australia's ~2% inflation when my next salary raise is 5%.

that doesn't mean there aren't losers due to inflation. of course there are. there are winners and losers in all kinds of economic activities. welcome to capitalism! i thought you loved capitalism?

quote:

Originally posted by DOOMBOT Wrong. I start with saying that creating more money then you had before devalues the money that was in circulation prior to the new money made. So let's work with that point.

Not to attack you but this is where I feel like this discussion is heading:

When in actuality the discussion should be about this:

M*V = P*Q

Where:

* M is the total dollars in the nation’s money supply
* V is the number of times per year each dollar is spent
* P is the average price of all the goods and services sold during the year
* Q is the quantity of assets, goods and services sold during the year

In other words, an increase in the money supply does not necessarily devalue a currency when one considers that it's not a simple single variate equation (although yes the function of printing money does have a devaluationary impact ... which is not necessarily a bad thing as evidenced by the past decade or so of China's macroeconomic policy to deliberately devalue their currency).

___________________
Retro ...

Last edited by occrider on Jul-17-2010 at 14:05

Don't simplify it! Armageddon is so much more buzzworthy!

___________________
There are more things in heaven and earth, Horatio,
Than are dreamt of in your philosophy.

The last two pages of stalin & PKC

___________________

Ran out of arguments did you.

___________________

good old communism.

so yeah, are we gonna be responding to occrider's annihilation of your silly and poorly-grasped position or can we assume you've bowed out of that one?

quote:

Originally posted by occrider In other words, an increase in the money supply does not necessarily devalue a currency when one considers that it's not a simple single variate equation

Sure it does. If you have 5 of something and then create 10 more, for example, the 5 original items become less valuable.

quote:

(although yes the function of printing money does have a devaluationary impact ... which is not necessarily a bad thing as evidenced by the past decade or so of China's macroeconomic policy to deliberately devalue their currency).

Ah, ok. So you do agree that an increase in the money supply devalues the currency.

lol

quote:

Originally posted by DOOMBOT Sure it does. If you have 5 of something and then create 10 more, for example, the 5 original items become less valuable.

holy shit you're thick...Don't you understand the argument buddy? Yes, money is devalued when printed. WE GET IT. This problem comes when the amount of money being printed vastly exceeds the market demand for the money. When money is printed explicitly for political reasons or to finance massive deficits, that can lead to epic inflation. The USA has done this recently and we are likely going to pay a price in the coming years..but we will return to sanity eventually. With a sane/responsible government, printing is not inherently bad. If money supply growth keeps pace with population and market demand, wages keep pace with inflation and there is no "robbery" involved. The purchasing power of the average income is what matters..not the purchasing power of an arbitrary amount like $1.00

quote:

Originally posted by Capitalizt holy shit you're thick...Don't you understand the argument buddy? Yes, money is devalued when printed. WE GET IT. This problem comes when the amount of money being printed vastly exceeds the market demand for the money. When money is printed explicitly for political reasons or to finance massive deficits, that can lead to epic inflation. The USA has done this recently and we are likely going to pay a price in the coming years..but we will return to sanity eventually. With a sane/responsible government, printing is not inherently bad. If money supply growth keeps pace with population and market demand, wages keep pace with inflation and there is no "robbery" involved. The purchasing power of the average income is what matters..not the purchasing power of an arbitrary amount like $1.00

No one person or entity could ever know the right amount of money to "print", to meet market demand, which is why there has never been a government in the history of the world that has been successful in doing so. This is why a free market system is advocated. It would allow competing currencies and more room for adjustment when necessary.

The Federal Reserve system is 100% political. That is how it came into being. So by your own admission, the system will always lead to massive deficits and epic inflation, which is absolutely correct and of course proven with our very own deficits and inflation. So we agree!

Last edited by DOOMBOT on Jul-17-2010 at 15:42

quote:

Originally posted by DOOMBOT No one person or entity could ever know the right amount of money to "print", to meet market demand, which is why there has never been a government in the history of the world that has been successful in doing so. This is why a free market system is advocated. It would allow competing currencies and more room for adjustment when necessary.

I used to think that...then I realized it was f*cking impossible. The most practical method of restraining inflation is to raise awareness of what causes it.. If and when it happens, hopefully the public will direct their anger at the right place..so we can eventually restrain the government by demanding low inflation targets, balanced budgets, greater accountability/transparency in both fiscal and monetary policy, etc.

quote:

Originally posted by Capitalizt I used to think that...then I realized it was f*cking impossible. The most practical method of restraining inflation is to raise awareness of what causes it.. If and when it happens, hopefully the public will direct their anger at the right place..so we can eventually restrain the government by demanding low inflation targets, balanced budgets, greater accountability/transparency in both fiscal and monetary policy, etc.

Of course, as we can all clearly see, restraining the government from printing money for political reasons never happens. I do agree that raising awareness and education is crucial. We can only hope that people, one day, get enough guts to take back this responsibility and work it out just like any other good or service exchanged in the market place!