Masses expect inflation, masses are always wrong = deflation coming?
- Thread starter crgarcia
- Start date
Bonds (corporate and public) do not price in inflation. Money velocity has been trending down for the past three years and has only recently started to correct upwards.
Inflation is essentially a byproduct of money velocity and not, as is often claimed, a product of an increase in the money supply. Money supply, like interest rates, lags increases in the rate of money velocity.
Money velocity can be seen as a proxy for the aggregate decisions that people make on what they do with their money. If they start hoarding money then money velocity drops. If they start burying it in their back yards then MV drops to zero. If the mantra becomes "cash is trash" then it increases as people try to spend it as fast as possible.
Inflation is essentially a byproduct of money velocity and not, as is often claimed, a product of an increase in the money supply. Money supply, like interest rates, lags increases in the rate of money velocity.
Money velocity can be seen as a proxy for the aggregate decisions that people make on what they do with their money. If they start hoarding money then money velocity drops. If they start burying it in their back yards then MV drops to zero. If the mantra becomes "cash is trash" then it increases as people try to spend it as fast as possible.
100% correct.
why central banks are printing money in line with the growth in production of goods and services globally? only 1 reason:
to keep the status quo, to keep the monetary system alive!
in other words, to prevent the economy from massive deflation.
rapid advancement in technology combined with the shift of millions of people from agriculture into other industries (in Brazil, India, China and many other asian countries) results in immense deflation pressure. You simply cannot have a constant monetary base in such situation. Or money backed by gold...
its all a desperate move. bernanke perfectly knows what happened to japan during its fast technological development. and to this date they have a strange phenomenon - in monetary (or stock prices) terms there is no growth in japan. but in REAL terms - quality of living, better infrastructure, computers, cell phones, etc. etc. the number of LV bags
- life standards and overall wealth are clearly advancing.
all that hyperinflation talk is fear-mongering.
it only happens when there's little production, in times of major wars or in socialist/communist economies where more energy is allocated into beurocracy, politics and army than real economy.
why central banks are printing money in line with the growth in production of goods and services globally? only 1 reason:
to keep the status quo, to keep the monetary system alive!
in other words, to prevent the economy from massive deflation.
rapid advancement in technology combined with the shift of millions of people from agriculture into other industries (in Brazil, India, China and many other asian countries) results in immense deflation pressure. You simply cannot have a constant monetary base in such situation. Or money backed by gold...
its all a desperate move. bernanke perfectly knows what happened to japan during its fast technological development. and to this date they have a strange phenomenon - in monetary (or stock prices) terms there is no growth in japan. but in REAL terms - quality of living, better infrastructure, computers, cell phones, etc. etc. the number of LV bags
- life standards and overall wealth are clearly advancing.all that hyperinflation talk is fear-mongering.
it only happens when there's little production, in times of major wars or in socialist/communist economies where more energy is allocated into beurocracy, politics and army than real economy.
think about it from a perspective.
we need means of exchange (money) only when there's a scarcity of things required to live. in current times, technologically speaking, there's a capacity to provide abundance of everything for all people on the planet. scarcity is artificially imposed on customers by the companies for it is the only way to have a monetary profit. money is printed, taxes are constantly rising to pick up the price of all goods and services as much as possible.
Just look what the ruling elite is trying to do with the carbon / global warming tax!!! this is, again, a desperate effort to save the banking system, which produces nothing by the way ;-)
do you know how much fuel will cost at a station without corporate profits and taxes? 1/100 of what it costs now!
we need means of exchange (money) only when there's a scarcity of things required to live. in current times, technologically speaking, there's a capacity to provide abundance of everything for all people on the planet. scarcity is artificially imposed on customers by the companies for it is the only way to have a monetary profit. money is printed, taxes are constantly rising to pick up the price of all goods and services as much as possible.
Just look what the ruling elite is trying to do with the carbon / global warming tax!!! this is, again, a desperate effort to save the banking system, which produces nothing by the way ;-)
do you know how much fuel will cost at a station without corporate profits and taxes? 1/100 of what it costs now!
Quote from fickletrader:
The idea that all you have to do to win is guess which way everybody is leaning and go the other way is ridiculous. Nice trading strategy
The idea that the direction of the masses is not important to a trading strategy is a winner. I encourage you to follow this path.
Best comment I read today. But... if the force of raising production needs more paper money to be bought at same price, which I agree, why we're experiencing an increasing amount of low quality products? More competition should give us more quality, don't you agree?
I can give you a couple of example of companies focused on high quality products that shut down because people prefer cheap crap from abroad (nad change their mind only a couple of year after buying, when they really understand what reliability worth).
Do you believe this is because a high profit for stockholders and managers is always preferred to a low profit rate together with very happy customers and employers? Or what else?
But the real question is: if in China and India and Brasil production is increasing, and in EU and USA is shrinking, why paper money is created in USA and EU and not in that countries?
What happen when a country has a trade deficit for long, long time?
Quote from DT-waw:
its all a desperate move. bernanke perfectly knows what happened to japan during its fast technological development. and to this date they have a strange phenomenon - in monetary (or stock prices) terms there is no growth in japan. but in REAL terms - quality of living, better infrastructure, computers, cell phones, etc. etc. the number of LV bags
Do you believe that we're able to mantain the highest quality we can produce while profits plunge as japanese did? Do you believe we should keep our employees for life as japanese did, and mostly continue to do (mantaining a stable consume rate)?
What happen if we can't or won't?
Its like a dam where the water is just building up behind it. Sooner or later, the dam will break, or spill over.
The money will find its way into circulation one day. They are not just going to burn it.
For the very same reason. High quality = people buy stuff less often = less profit. It's called "Planned obsolescence"
http://www.youtube.com/watch?v=N2KLyYKJGk0&feature=related
http://www.youtube.com/watch?v=yEi0vsAGEB4&feature=related
as a result, these products quickly are thrown away as garbage and there's a great deal of wasted:
-time
-energy
-human potential
-resources
to produce the same shitty stuff over and over again.
but! on paper, the profits are rising... the interests on debts generate money...
The whole system oriented on profits is like a giant parasite.
commercial and central banks are sucking the blood (money) from all people and other industries, yet banks produce nothing.
Yes, it's fear mongering by folks who don't understand money and capital. The value of a fiat currency is tied to taxation. A government can ensure that there's always a demand for their paper currency by demanding that you pay your taxes in that currency. Hyperinflation can only occur if a government's no longer able to levy taxes. This occured in 1920's Germany when France occupied the Ruhrgebiet and imposed capital restrictions on goods moving to and from the rest of Germany. This collapsed the tax base and thus it collapsed the currency that was tied to it. In countries like Zimbabwe hyperinflation occurs because the economy shifts to the black market and nobody has any use for Zimbabwean dollars anymore.