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M
morganist
I don't know if you are interested but I discuss some money supply theory in the end of the Euro Crisis book I wrote. I addressed correctly I think that the issue in Europe is insolvency and demand not liquidity, which is or was the view of the ECB.
If you would like to see the arguments and explanations I made you can read them on page 49 onwards. The beginning of the book is a good primer to the extent of the debt and there is some analysis to indicate which countries might be next.
It is available on Kindle instant download.
http://www.amazon.com/dp/B007U9JJ0G
If you would like to see the arguments and explanations I made you can read them on page 49 onwards. The beginning of the book is a good primer to the extent of the debt and there is some analysis to indicate which countries might be next.
It is available on Kindle instant download.
http://www.amazon.com/dp/B007U9JJ0G
Quote from morganist:
Currency value creates inflation because the main factor that will determine prices is the price of foreign goods. You have to understand the role of currency as an investment vehicle and the impact any kind of debasement has in destroying that. I think the article below will explain that point.
http://morganisteconomics.blogspot.co.uk/2012/01/investment-currency-mechanism-uk-and.html
The key to economic success is something that creates enough stability to make foreign investors use its currency as an investment vehicle. Then the ability of that country to buy goods from abroad is increased. If that is damaged that is the main driver of inflation, if the stability of the economy or currency goes then you will get high inflation because investors will take out their money from that country and invest in another country's currency.
Think about it as a shift in the stock of investment. If there is so much saved that saved money or capital will shift to the safest place with the best return. If a currency devalues all investments made in that country are devalued against the global economy. So if a currency is weakened enough or the stabilising factor that created that currency strength goes the investment capital will shift and the price of the currency will fall and the ability to purchase goods will go creating inflation.
This is the real mover of international economics. The ability to attract investment and sustain a stable currency. Another article you might like in relation is below.
http://morganisteconomics.blogspot.co.uk/2012/05/consequence-of-tax-on-foreign.html
It is basically a international game. This is the reason there will always be rich and poor countries people will look for the best investment and money will shift from the weaker countries to the richer. I think we are seeing that shift in Europe, which may help the US in the short term at least.
I don't have a problem with any of this. What you have written here reflects my own view. What i have a little problem with is understanding your paragraph I quoted earlier. Especially this sentence:
"Quantitative Easing will have a more dramatic impact on the currency value than a reduction in the interest rate because it is a real term loss not an increase in the domestic money supply of one nation through credit expansion..."
What do you mean by "real term loss"?
To be very clear, I don't understand your argument in support of this: "Quantitative Easing will have a more dramatic impact on the currency value than a reduction in the interest rate..."
To be direct: Is it because when the fed expands its balance sheet it is necessarily creating more fiat money? Is that always the case? What is the effect of the assets on the balance sheet appreciating in value and the Fed later selling them for cash at a profit?
M
morganist
Quote from piezoe:
I don't have a problem with any of this. What you have written here reflects my own view. What i have a little problem with is understanding your paragraph I quoted earlier. Especially this sentence:
"Quantitative Easing will have a more dramatic impact on the currency value than a reduction in the interest rate because it is a real term loss not an increase in the domestic money supply of one nation through credit expansion..."
What do you mean by "real term loss"?
To be very clear, I don't understand your argument in support of this: "Quantitative Easing will have a more dramatic impact on the currency value than a reduction in the interest rate..."
To be direct: Is it because when the fed expands its balance sheet it is necessarily creating more fiat money? Is that always the case? What is the effect of the assets on the balance sheet appreciating in value and the Fed later selling them for cash at a profit?
No it is because there is an expectation that an increase in credit will be paid back in the future. QE is a sign that the debt will not be paid and that the currency in itself is in trouble and that could cause a investment shift.
It basically undermines the currency as an investment vehicle. A lower interest rate does not necessarily do that.
Quote from oldtime:
the big bang? Almost everything we see created from practically nothing.
It's not like the earth doesn't have enough resources to support all it's inhabitants. As a matter of fact, there is plenty left over.
Tell me, just give me one concrete reasonable answer why a poor kid in Africa should be hungry? Is there some law of physics I am missing?
Matter and energy are inter-convertible. It is not out of practically nothing. It is out of an unimaginable quantity of energy.
In Western philosophy we believe in self determination. A person is in large part responsible for their own fate, or the fate of their offspring in specific cases.. This may not be true, or it may be sometimes true and other times not. In any case, this philosophy virtually guarantees that some people will go hungry. Some will starve.
Quote from piezoe:
Matter and energy are inter-convertible. It is not out of practically nothing. It is out of an unimaginable quantity of energy.
In Western philosophy we believe in self determination. A person is in large part responsible for their own fate, or their fate of their offspring in specific cases.. This may not be true, or it may be sometimes true, and other times not. In any case, this philosophy virtually guarantees that some people will go hungry. Some will starve.
under communism nobody eats well except the leadership and the criminal element.
Quote from morganist:
No it is because there is an expectation that an increase in credit will be paid back in the future. QE is a sign that the debt will not be paid and that the currency in itself is in trouble and that could cause a investment shift.
It basically undermines the currency as an investment vehicle. A lower interest rate does not necessarily do that.
Thank you. I don't know if I would agree with that. I'll have to think about it. I see QE as an exchange of a liquid asset for a less liquid asset. Not as a debt that will not be paid. Even though there is greater risk associated with the less liquid asset, the risk is countered by the opportunity for asset appreciation.
you have a lot of faith in the wisdom of manQuote from piezoe:
And, it seems to be working, The Fed is re-inflating the balloon, but this time they don't what it to leave the Earth's surface. Just puff it up a bit.
I'm kind of more natural
Since that is what has been working for like 2 million years