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A Tidbit from Dave Rosenberg on Inflation
- Thread starter PAPA ROACH
- Start date
Quote from PAPA ROACH:
For all those inflation bugs-
IS BOOMING MONEY SUPPLY REALLY INFLATIONARY?
Not when you are in a liquidity trap, which is where we are. The problem with
the Fed's monetary experiment is that the money supply boost is still not
circulating through the economy but rather sitting on bank balance sheets. At
least there's no delinquency risk with net free reserves.
Paul Krugman uses some great historical examples in his Monday column in the
NYT (Stay the Course). Between 1929 and 1939, the monetary base doubled
(and the dollar devalued) and yet prices deflated 19%. In fact, despite seven
years of New Deal stimulus and rampant FDR incursion into the economy, the
1930s ended with the unemployment rate at 15%, the CPI declining at a 2%
annual rate and the level of GDP still below its 1929 peak. Between 1997 and
2003, Japan's monetary base surged 85% â deflation pressures remained
intact. We just do not believe it is still appreciated that when the economy slips
into a deleveraging phase, which by its nature involves asset liquidation, debt
repayment and rising private sector savings rates, it takes years before the
economy makes the transition to the next up-cycle and only then with massive
amounts of fiscal and monetary stimulus.
From Braekfast with Dave, today.
.......................................................
Good post ....
Here's the logic....
$30 Trillion was lost from a $70 Trillion economy....
There have been efforts to make partial replentishments to banks.....
However only a fraction of the lost $30 Trillion has been put back in the system....
So here it is....
$30 Trillion is lost from $70 Trillion
This means $40 Trillion is left to price all goods and services....
All prices must fall....
....................................................
The day when there are additions to $70 Trillion....then prices will rise.....reflecting whatever the higher number is....
...................................................
So the question becomes where are we now....?
At $52 Trillion....?
Ok....
......................................................
Oil is being singled out as a dollar hedge....and oil is reflected in many inelastic products....
Therefore it is possible that some prices can rise temporarily....
But know this....
If one has $70....one can buy $70....
If one has $40....one can buy $40....
........................................................
This is also when tax receipts in a progressive structure will decline precipitously....
Thus making necessary a more reliable broad based tax that will also boost the economy....
The fastest route to a $100 Trillion economy would be a 10% State 5% Fed C tax....
The current system will dupe Japan's case at best....
Quote from libertad:
.......................................................
Good post ....
Here's the logic....
$30 Trillion was lost from a $70 Trillion economy....
There have been efforts to make partial replentishments to banks.....
However only a fraction of the lost $30 Trillion has been put back in the system....
$30 trillion wasn't just "lost" (oops, I left my $30 trillion at the dry-cleaners, sorry hun).
It was wiped out because a corresponding $30 trillion of real economic value that was thought to exist simply did not exist -- It was a function of over-leveraging, financial scams, overly easy cheap credit and optimism.
Sure, printing money to replenish the system of its liquidity will be of proximate aid in backstopping excessive deflation and keeping businesses reliant on cash alive.
However, there is never a free lunch in economics.
Every dollar created and given to a business is a redistribution of wealth from those who are not given these free dollars.
Every dollar created will artificially inflate the stock market and allow people to think their "wealth" has improved when in fact it's just smoke and mirrors. People will keep borrowing against this "wealth" in a low interest rate climate only to have their wealth dissapear when the Fed has to suck in all of the excess liquidity that was injected into the system or when interest rates spike.
Every dollar created will and has been weakening the US dollar's value and has made it more difficult for the government to repay its debts and resulted in spiking commodity prices even when demand across the globe has shrunk and supply has remained stable.
So basically excessive money creation is certainly a politically convenient route to take in that its side effects are largely unseen whereas its benefits (more liquidity, businesses/banks staying afloat) are clearly visible.
Quote from PragmaticIdeals:
$30 trillion wasn't just "lost" (oops, I left my $30 trillion at the dry-cleaners, sorry hun).
It was wiped out because a corresponding $30 trillion of real economic value that was thought to exist simply did not exist -- It was a function of over-leveraging, financial scams, overly easy cheap credit and optimism.
Sure, printing money to replenish the system of its liquidity will be of proximate aid in backstopping excessive deflation and keeping businesses reliant on cash alive.
However, there is never a free lunch in economics.
Every dollar created and given to a business is a redistribution of wealth from those who are not given these free dollars.
Every dollar created will artificially inflate the stock market and allow people to think their "wealth" has improved when in fact it's just smoke and mirrors. People will keep borrowing against this "wealth" in a low interest rate climate only to have their wealth dissapear when the Fed has to suck in all of the excess liquidity that was injected into the system or when interest rates spike.
Every dollar created will and has been weakening the US dollar's value and has made it more difficult for the government to repay its debts and resulted in spiking commodity prices even when demand across the globe has shrunk and supply has remained stable.
So basically excessive money creation is certainly a politically convenient route to take in that its side effects are largely unseen whereas its benefits (more liquidity, businesses/banks staying afloat) are clearly visible.
..........................................................
Exactly.....
It does not matter how the money is made available....as long as it is available....
It does not have to have a "wealth label"....
It is what it is....
..................................................
The other item of course is distribution....and to whom is money available....
A broad based economy requires a broad based remedy....
..................................................
And the other item is "the cart before the horse" syndrome....
ie I need something that costs $x.....but I cannot identify the source of it.....ie why structural broad based tax changes are needed....
..................................................
Another item is valuation....
Perhaps the most efficient way to produce higher numbers is to provide for a de-fragmented better electronic worldwide stock exchange.....with core based Wiki type information....more players....more bidders....more compiled numbers .....thus a much faster route to bigger numbers to plug back into the total economy....
.....................................................
Want big numbers fast ?
Then do this....
10% State 5 % Fed C tax only....no other taxes....
Unencumbered worldwide electronic exchange...all instruments....truly universal.....with solid factual information....any language....
No taxes for doing anything on the exchange....
..............................................
Then one will see the $70 Trillion number become small....while also having the most efficient source of capital known to mankind....with the possibility of better wealth distribution....
Most importantly the people ....not the Fed would own the numbers....
Quote from zdreg:
Quote from pspr:
I
I don't see the economy slipping back into a steep decline because Americans are innovative enough to have adjusted to the current/past crisis.
_____
you are not talking about the greatest generation but the feely good generation.
on the recent D- Day celebration they asked a veteran of that attack what made it possible for the GIs to succeed against great odds. His answer was that they were children of the Great Depression who grew up with little and had to make do with what little they had. They were "tough and resilient" as a result.
the current generation, whose teachers tell them how smart and clever they are,
is completely clueless. ask them to fix something they will throw the object out.
I am no real fan of many of the generations that followed the WWII generation. That said, I get tired of hearing this stuff. Do you really think Americans now would not fight the same way as those Americans did if faced with an equal threat? I absolutely believe they would. Circumstances such as this would "make the man" in my opinion.
Quote from PragmaticIdeals:
Every dollar created will artificially inflate the stock market and allow people to think their "wealth" has improved when in fact it's just smoke and mirrors.
not to mention the final or later recipients of those dollars don't enjoy nearly the benefits or purchasing power of the first users or recipients, thus somewhat invisibly hurting the unsuspecting common people even more.
Quote from bozwood:
I am no real fan of many of the generations that followed the WWII generation. That said, I get tired of hearing this stuff. Do you really think Americans now would not fight the same way as those Americans did if faced with an equal threat? I absolutely believe they would. Circumstances such as this would "make the man" in my opinion.
I'm not sure.
The generation of instant gratification, WoW, Doritos and pot may not be able to hold up under conditions our grandfathers faced in places like Iwo Jima or Omaha Beach.
They'd be fine firing off munitions with a game-like controller, but Iwo Jima and Omaha Beach, The Battle of The Bulge or The Battle of the Aleutians in WWII, or The Battle of Chosin Reservoir in the Korean War?
Big question mark.
Quote from ByLoSellHi:
I'm not sure.
The generation of instant gratification, WoW, Doritos and pot may not be able to hold up under conditions our grandfathers faced in places like Iwo Jima or Omaha Beach.
They'd be fine firing off munitions with a game-like controller, but Iwo Jima and Omaha Beach, The Battle of The Bulge or The Battle of the Aleutians in WWII, or The Battle of Chosin Reservoir in the Korean War?
Big question mark.
To me it just comes down to: what choice would they have?
Quote from ByLoSellHi:
I'm not sure.
The generation of instant gratification, WoW, Doritos and pot may not be able to hold up under conditions our grandfathers faced in places like Iwo Jima or Omaha Beach.
They'd be fine firing off munitions with a game-like controller, but Iwo Jima and Omaha Beach, The Battle of The Bulge or The Battle of the Aleutians in WWII, or The Battle of Chosin Reservoir in the Korean War?
Big question mark.
Given that its pretty unlikely that we are going to see that kind of fighting again, I don't think the point is relevant. It will get to nukes before that point, unfortunately.