quote:

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.

quote:

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.

Last edited by DOOMBOT on Sep-25-2009 at 03:27

quote:

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.

quote:

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!

quote:

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:

quote:

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.

quote:

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.

quote:

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?

quote:

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.

Last edited by DOOMBOT on Sep-25-2009 at 18:33