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How Fake Money Saved Brazil

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Re: How Fake Money Saved Brazil

#61

Post by jacobolus »

diego_moita wrote: post #52
sethg wrote: post #42

Earlier quoted context omitted.

The people who are asking for more inflation in the USA are asking for something in the 2% range, or (for those who are truly bold) asking for prices to rise to the level they would be at if inflation had remained in the 2% range for the past five years or so. Stable money is good, but so is providing people with an incentive to spend and invest, rather than incentives to hoard cash and default on their debts.

Sorry, but this is playing with fire. What scientists, technocrats and economists forget is that public policy is rarely driven by rationality. It is driven mostly by private interests, demagoguery, blind ideology, prejudice and the public misconceptions. The idea of taking a little bit of a very dangerous medicine is something that no one should take lightheartedly.

It’s also “playing with fire” to, in the name of keeping inflation down, depress demand so much that it plunges the whole country into a massive recession. In other words, any economic policy can be taken too far, and the dangers of any approach can be caricatured and exaggerated. It’s not like the policy of inflation fighting isn’t equally driven by “private interests, demagoguery, blind ideology,” &c.

Re: How Fake Money Saved Brazil

#62

Post by TGJ »

joe_the_user wrote: post #58
rbanffy wrote: post #48

Earlier quoted context omitted.

> It only works the first time you try it. Once for every generation. Don't overestimate people's ability to remember. Besides, if you do it correctly, you only need to do it once. I don't trust the current favorite candidate to keep doing it right, BTW.

No, It really only works once. Just like the New Deal only worked once and now every scam just claims it's the New, New Deal. Sure, the populace might have a memory of a generation but the technocrats have a longer memory and after first success, the next effort is dogged by the realization, "look what I'm going to get, look who I get to be..." (as the gp said, it's the careers of the technocrats one has to look at).…

The New Deal never worked but oddly enough, it's trying to happen again. Bad deals happen over and over. The ones that work, the ones that require effort only happen once.

http://newsroom.ucla.edu/portal/ucla/FDR-s-Policies-Prolonge...

Re: How Fake Money Saved Brazil

#63

Post by jaaron »

diego_moita wrote: post #52
sethg wrote: post #42

Earlier quoted context omitted.

The people who are asking for more inflation in the USA are asking for something in the 2% range, or (for those who are truly bold) asking for prices to rise to the level they would be at if inflation had remained in the 2% range for the past five years or so. Stable money is good, but so is providing people with an incentive to spend and invest, rather than incentives to hoard cash and default on their debts.

Sorry, but this is playing with fire. What scientists, technocrats and economists forget is that public policy is rarely driven by rationality. It is driven mostly by private interests, demagoguery, blind ideology, prejudice and the public misconceptions. The idea of taking a little bit of a very dangerous medicine is something that no one should take lightheartedly.

Inflation is preferable to deflation. And the goal of no inflation is unrealistic from both practical and theoretical perspectives. There are a number of inherent incentives for a minimal inflation policy: to hedge against deflation, to reduce the real value of debt, to induce spending, etc.

Re: How Fake Money Saved Brazil

#64

Post by swaits »

guelo wrote: post #28
brc wrote: post #7

It's an interesting story but the frightening thing is the comments of people wondering out loud what's wrong with inflation, or asking for more inflation in the USA. Out of control inflation is a terrifying, society-destroying phenomenon. Stable and prosperous societies rely on stable money values.

True but there is also such a thing as money being too tight which is the current situation in the US.

Money isn't tight in the US. It may not be flowing as much as it once did, but it's still loose and cheap.

Re: How Fake Money Saved Brazil

#65

Post by btilly »

diego_moita wrote: post #52
sethg wrote: post #42

Earlier quoted context omitted.

The people who are asking for more inflation in the USA are asking for something in the 2% range, or (for those who are truly bold) asking for prices to rise to the level they would be at if inflation had remained in the 2% range for the past five years or so. Stable money is good, but so is providing people with an incentive to spend and invest, rather than incentives to hoard cash and default on their debts.

Sorry, but this is playing with fire. What scientists, technocrats and economists forget is that public policy is rarely driven by rationality. It is driven mostly by private interests, demagoguery, blind ideology, prejudice and the public misconceptions. The idea of taking a little bit of a very dangerous medicine is something that no one should take lightheartedly.

The problem is that if you try to maintain no inflation, you run the risk of succeeding too well and getting deflation. Deflation is known to lead to persistent recessions, and is very, very difficult to fix once it sets in. (Just ask Japan how deflation has been for them. Or the USA how we liked the Great Depression.)

Therefore it isn't as simple as inflation bad, no inflation good. Rather it is too much inflation bad, any deflation bad, and you need to be in the middle. Which means that you want to maintain a small amount of persistent inflation - just enough to avoid the risk of miscalculating and going into deflation, but no more.

A big worry for the USA at the moment is that the current credit issues could lead to deflation.

Re: How Fake Money Saved Brazil

#66

Post by smokeyj »

jacobolus wrote: post #61
diego_moita wrote: post #52

Earlier quoted context omitted.

Sorry, but this is playing with fire. What scientists, technocrats and economists forget is that public policy is rarely driven by rationality. It is driven mostly by private interests, demagoguery, blind ideology, prejudice and the public misconceptions. The idea of taking a little bit of a very dangerous medicine is something that no one should take lightheartedly.

It’s also “playing with fire” to, in the name of keeping inflation down, depress demand so much that it plunges the whole country into a massive recession. In other words, any economic policy can be taken too far, and the dangers of any approach can be caricatured and exaggerated. It’s not like the policy of inflation fighting isn’t equally driven by “private interests, demagoguery, blind ideology,” &c.

Fiat currency is used by the State to demand an equity stake in your money, and they define the terms. Any entrepreneur should know this is a bad deal, and it will always result in inflation. Imagine if VC's used a "living document" to govern your deal terms, their share will always get BIGGER, and your share will eventually dwindle to nothing.

Re: How Fake Money Saved Brazil

#67

Post by jj_aa »

TGJ wrote: post #62
joe_the_user wrote: post #58

Earlier quoted context omitted.

No, It really only works once. Just like the New Deal only worked once and now every scam just claims it's the New, New Deal. Sure, the populace might have a memory of a generation but the technocrats have a longer memory and after first success, the next effort is dogged by the realization, "look what I'm going to get, look who I get to be..." (as the gp said, it's the careers of the technocrats one has to look at).…

The New Deal never worked but oddly enough, it's trying to happen again. Bad deals happen over and over. The ones that work, the ones that require effort only happen once. http://newsroom.ucla.edu/portal/ucla/FDR-s-Policies-Prolonge...

More accurately, some of the New Deal (deposit insurance, fiscal & monetary expansion, leaving the gold standard) worked, but some of it hurt. The fact that many countries suffered for just as long and worse, if not longer, without analogous policies makes me wary of the authors' modeling.

> Recovery came only after the Department of Justice dramatically stepped enforcement of antitrust cases nearly four-fold and organized labor suffered a string of setbacks, the economists found.

That wouldn't have been around 1939-45 or so, would it?

Re: How Fake Money Saved Brazil

#68

Post by dsspence »

TGJ wrote: post #62
joe_the_user wrote: post #58

Earlier quoted context omitted.

No, It really only works once. Just like the New Deal only worked once and now every scam just claims it's the New, New Deal. Sure, the populace might have a memory of a generation but the technocrats have a longer memory and after first success, the next effort is dogged by the realization, "look what I'm going to get, look who I get to be..." (as the gp said, it's the careers of the technocrats one has to look at).…

The New Deal never worked but oddly enough, it's trying to happen again. Bad deals happen over and over. The ones that work, the ones that require effort only happen once. http://newsroom.ucla.edu/portal/ucla/FDR-s-Policies-Prolonge...

What part of the New Deal is 'oddly' happening again? $300 billion of the $862 billion dollar stimulus were either tax cuts or credits.

Here is a link seemingly debunking that guise of an academic study: http://www.openleft.com/showDiary.do?diaryId=10644 Fair warning it might cause cognitive dissonance.

Re: How Fake Money Saved Brazil

#69

Post by nandemo »

diego_moita wrote: post #37

The article doesn't tell lies, but it certainly spices up a lot the story. Some points to clarify: * The "finance minister who knew nothing about economics" was actually a very respected sociologist, a senator and a very intelligent and skilled politician. He later became known as president Fernando Henrique Cardoso. I.M.O. one of the best 3 presidents this country had. * What Edmar Bacha, Pedro Malan and others did…

Diego, thanks for the much necessary clarification.

Besides the monetary policy that you mention, Cardoso also implemented a stricter fiscal policy. There's no way they could have defeated hyperinflation without cutting government spending. He also continued the trend -- started by the previous administration -- of opening the economy (slashing the tariffs, etc) and privatizing state companies.

Re: How Fake Money Saved Brazil

#70

Post by brc »

sethg wrote: post #42
brc wrote: post #7

It's an interesting story but the frightening thing is the comments of people wondering out loud what's wrong with inflation, or asking for more inflation in the USA. Out of control inflation is a terrifying, society-destroying phenomenon. Stable and prosperous societies rely on stable money values.

The people who are asking for more inflation in the USA are asking for something in the 2% range, or (for those who are truly bold) asking for prices to rise to the level they would be at if inflation had remained in the 2% range for the past five years or so. Stable money is good, but so is providing people with an incentive to spend and invest, rather than incentives to hoard cash and default on their debts.

The party was had, the hangover must be endured. Bad investments were made, they must be liquidated and written off, and these are deflationary.

True inflation (not the manipulated government statistics) is really a measure of the market. To say that inflation is at the wrong value is to say the market is wrong. The Fed has been striking matches for a while now trying to get inflation to catch on and stand by with the wet blankets when it starts to get out of control. The banks are stuffed full of cash but don't want to lend. If they throw any more fuel onto the fire it might catch and spread faster than they can deal with. Then it's the 1970's all over again and your lifetime savings are decimated in the space of a few years.

People believe that more inflation is needed, then you believe the market is wrong and more intervention by central powers is right. It's ok to believe that, but I'll never agree. High inflation punishes the savers, lenders and investors, and rewards the speculators and borrowers.

I'll admit, my investment strategy is biased towards a breakout of inflation. But that's because I believe the central banks are so wedded to the idea they won't let it go, not because I agree with them. You can't double the money supply in under 2 years without a flow-on effect, even if it's not immediate.

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