Question on Austrian Economics and Inflation

[cable]

Quote from davidlynch2000:
There is also some worry that if inflation gets too high, people will start substituting real goods for money. This is seen as bad because it adds layers of complexity, and a lack of transparency onto an already confusing economic situation. (Try calculating the GDP in sandwiches or cars.)

Even better: Try TAXING sandwiches or cars, if we substitute bartering goods for fiat currency. Perhaps the government doesn't like inflation because it is 'looking out for Number One.'

 

[cable]

Quote from FireWalker:
inflation is NOT normal, not "OK". it is conscious THEFT. but as long as it's hidden and small enough... noone will ever notice

I totally agree. Your comment is especially scary since they just discontinued publishing the M3 money supply numbers (the numbers are "hidden"). Couple that with Bernanke's "Helicopters of money" speech and we could be looking at something really scary. Any guesses as to what they're up to?

 

[nononsense]

Question on Austrian Economics and Inflation
What the heck is going on here? Two posters mention Rand / Randian under a heading of "Austrian (School of) Economics". Typical for the confusion and nuttiness of our days, with or without Greenspan.

Paraphrasing Hernri Poincarre:
"If you want to become a good Economist, it is sufficient to read the Masters"

(1) Ludwig von Mises;
(2) Friedrich A. Hayek.
(the second Titan was a student of the first Titan)

Rand, or even today's Ludwig von Mises Institute are only poor ants in comparison.
Hayek's final trilogy: "Law, Legislation and Liberty" is the testament of a brilliant civilization disappearing with astonishing speed, only to rise again after perhaps a few of thousand years of misery will have gone by. If you can't understand what's happening in America right now (shutting up about Europe), Hayek tells you everything you need to know. He might very well be the Montesquieue - spiritual father of the US Constitution - of the 20th century.

nononsense

 

[gundamzeta]

Quote from FireWalker:


but when those same rules are applied to dollars people become so confused. the gullability of people is amazing. [/B]

it's simple. a man named john maynard keynes sold us a government-friendly-junk science called macro economics.

 

[citrus]

It's hard to imagine that a thread that started by asking the question "why is 20% inflation bad" has only one decent response and a fair amount of people actually arguing in favor. Let's grow up people and get to know our business. High inflation is bad because it imparts volatility into the system. People are hesistant to enter into long term contracts because of the uncertainty. Liquidity dries up, economy dies. What's best for the economy is steady, low inflation, and that is what Greenspan has delivered. That's why he's a god. Yes, there's a little bit of a housing bubble because he kept rates too low too long. Oh well. Imagine life back when Carter was president and the peanut Phd tried using quotas to cap prices. Idiots can do a lot of damage when they get in the way of the invisible hand.

 

[kowboy]

Quote from citrus:

...... What's best for the economy is steady, low inflation, and that is what Greenspan has delivered. That's why he's a god....

If there is any correlation between M3 and inflation, M3 went from 3.6 trillion when he was appointed in June 1987, to 10 trillion today.

Do the math and it comes up to an average annual rate of expansion of M3 of 3.15% for his entire term.

However the situation recently is totally out of control since about 1997 as M3 expanded at an average annual rate of 8.1% (5.358 trillion to 10 trillion) A horrifying rate of expansion.

For the investor this means you must make the 8% on your investments plus the applicable taxes just to stay even with the dollar devaluation, much less get ahead of the game. Think about that one if you will.

http://research.stlouisfed.org/fred2/series/M3NS/28/Max

http://research.stlouisfed.org/fred2/data/M3NS.txt

The published data for the CPI in the same 8 year period would have you believe that everything is ok. The CPI increased from 161.6 to 199.2, or an average annual rate of 2.7%. Of course the published CPI is thought to be skewed (fudged, massaged, manipulated) and throws out energy, food, and other items considered to be anomalies(ie, anything that makes the number look too big).

http://inflationdata.com/Inflation/Consumer_Price_Index/CurrentCPI.asp

So is the Chairman to be considered an esteemed icon, or perhaps the devil in disguise ( just like the numbers are disguised)? Perhaps another reason the Fed is ok with eliminating the reporting of M3 so that you will believe their story line.

 

[citrus]

What dollar devaluation are you talking about? You claim 8% per year for the last 9 years. Name a currency (including gold) which has appreciated by 100% against the dollar in that time. As for CPI, how much of what you buy today is actually more expensive than it was 9 years ago wihtout a commensurate increase in quality? Housing is the big item and I mentioned it. Are you living in the real world? Why not make up a fictitious money aggregate even more irrelevent than M3 and say that it went up even faster?