Why do you say that? If I borrow money to build a farm and grow carrots, how does that necessarily result in price inflation/asset bubbles?
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US Treasury accused of manipulating markets - again?
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Quote from Martinghoul:
Why do you say that? If I borrow money to build a farm and grow carrots, how does that necessarily result in price inflation/asset bubbles?
If the money is printed (QE or fractional reserve lending) you increase the volume of currency in circulation, which means higher prices somewhere.
But won't I also be increasing the volume of carrots in circulation? Which, in turn, would imply that carrot prices will actually go down... Moreover, if my carrot production is marginally efficient, the total effect, including the rise in prices due to printing, will be to lower aggregate prices.Quote from Specterx:
If the money is printed (QE or fractional reserve lending) you increase the volume of currency in circulation, which means higher prices somewhere.
Quote from Martinghoul:
But won't I also be increasing the volume of carrots in circulation? Which, in turn, would imply that carrot prices will actually go down... Moreover, if my carrot production is marginally efficient, the total effect, including the rise in prices due to printing, will be to lower aggregate prices.
be honest how much can you increase the volume of carrots you can plant, harvest and pack. from history, the demise of every major country, civilisation, monarchy, has the associated traits of deficit, excessive gov't spending then printing and hyperinflation, poverty, war
I think the spike was to help kickstart a move back into Treasuries because of the fear of a failed auction.
It doesn't matter to me how much I will increase the volume of carrots, as long as the yield on my carrot project exceeds the interest costs I am incurring. It's a completely different question whether the ultimate benefit to society from a marginal increase in carrot production is worth the money being borrowed or whether a "carrot bubble" is being created. My point is that lending obviously doesn't necessarily have to result in inflation and/or bubbles.Quote from dtan1e:
be honest how much can you increase the volume of carrots you can plant, harvest and pack. from history, the demise of every major country, civilisation, monarchy, has the associated traits of deficit, excessive gov't spending then printing and hyperinflation, poverty, war
As to your point about the demise of countries/civilizations, there's also a plethora of counterexamples. Moreover, the view that it's all about excessive gov't spending etc is, in my view, far too simplistic.
How certain are you that it wasn't Britney the Alien?Quote from jficquette:
I think the spike was to help kickstart a move back into Treasuries because of the fear of a failed auction.
Quote from Martinghoul:
It doesn't matter to me how much I will increase the volume of carrots, as long as the yield on my carrot project exceeds the interest costs I am incurring. It's a completely different question whether the ultimate benefit to society from a marginal increase in carrot production is worth the money being borrowed or whether a "carrot bubble" is being created. My point is that lending obviously doesn't necessarily have to result in inflation and/or bubbles.
As to your point about the demise of countries/civilizations, there's also a plethora of counterexamples. Moreover, the view that it's all about excessive gov't spending etc is, in my view, far too simplistic.
How certain are you that it wasn't Britney the Alien?
It's about u can print faster and more than u can produce carrots, rabbit !
Quote from Martinghoul:
But won't I also be increasing the volume of carrots in circulation? Which, in turn, would imply that carrot prices will actually go down... Moreover, if my carrot production is marginally efficient, the total effect, including the rise in prices due to printing, will be to lower aggregate prices.
There are inputs to produce carrots, inputs that cannot be printed and do have to be accounted for when you go to sell your carrots. Their costs experience demand when you go to buy them due to the printed currency and hence the price increases.
You're trying to reach for a conclusion that somehow money printed out of thin air and given as a debt investment somehow creates real goods without any inflationary effect. It has never worked, for obvious reasons, so what exactly is your reasoning behind promoting it as if it is some kind of magical solution?
Quote from Specterx:
If the money is printed (QE or fractional reserve lending) you increase the volume of currency in circulation, which means higher prices somewhere.
IF the money is used to directly to buy assets then yes inflation will result, but if that money was used to increase production capacity in a good or service that is in demand then on inflation will result. this is a common error by most armchair economists.
leverage by big banks almost always go directly into assets and not production. which causes huge inflation in land and commodities at particular times