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In Fed and Out, Many Now Think Inflation Helps

nytimes.com

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Re: In Fed and Out, Many Now Think Inflation Helps

#31

Post by Mikeb85 »

ams6110 wrote: post #18
greenyoda wrote: post #7

"Rising prices help companies increase profits" I don't see how that could be true. If prices are rising, all of a company's expenses rise along with their revenues: raw materials, salaries, benefits, rents, etc. (Unless the company wants to screw their employees and give them raises that are less than the rate of inflation.) Inflation does benefit debtors, the biggest being the U.S. government: they can repay their…

Exactly. Inflation is a painless (for the government) way out of the debt problem the government itself has created. That's why they favor it, nobody has to make any hard choices, and the middle and lower income families get screwed, again, because everything now costs more.

Inflation actually favours the middle and lower income families if they own a house, have any debt, or any investments. Which of course is most of them.

Re: In Fed and Out, Many Now Think Inflation Helps

#32

Post by nazgulnarsil »

nhebb wrote: post #20
jswinghammer wrote: post #8

Given that the entire point of the Federal Reserve is to promote inflation it's probably good that they think it's a good idea-otherwise why do they think that they exist? The whole problem is that inflation is theft. You are basically having your property taken out from under you without realizing it. It's historically been very popular as a means of taxing the public without them realizing that's what you're doing.…

> Given that the entire point of the Federal Reserve is to promote inflation I can't tell if you're being sarcastic, but the Fed has three mandates [1], one of which is to stabilize prices: "maximum employment, stable prices, and moderate long-term interest rates." [1] http://www.law.cornell.edu/uscode/text/12/225a

Stable prices is a euphemism for inflating just enough to keep nominal prices the same even as productivity in the economy dramatically increases.

Re: In Fed and Out, Many Now Think Inflation Helps

#33

Post by jayfuerstenberg »

Mikeb85 wrote: post #25

Inflation encourages spending, rewards investment, and discourages hoarding of cash. Inflation leads to all the positive outcomes that economists want. Not to mention, inflation is necessary in a society with a growing population, since there needs to be enough currency to spread amongst the population, otherwise it will be held in a finite amount of hands, and increase inequality.

You have a lot of learning to do my friend.

Inflation steals purchasing power away from people who contributed their labor to the market in exchange for the money they received.

The cash hoarding that inflation is supposed to solve continues because people want to hold on to their money in risky times.

Smart people are moving away from cash assets and into precious metals and real estate. These are tangible things, unlike fiat currency that keeps losing value over time.

The US dollar in particular has lost more than 90% of its value since abandoning the gold standard in the early 70s.

Re: In Fed and Out, Many Now Think Inflation Helps

#34

Post by nazgulnarsil »

yetanotherphd wrote: post #15
jswinghammer wrote: post #8

Given that the entire point of the Federal Reserve is to promote inflation it's probably good that they think it's a good idea-otherwise why do they think that they exist? The whole problem is that inflation is theft. You are basically having your property taken out from under you without realizing it. It's historically been very popular as a means of taxing the public without them realizing that's what you're doing.…

Your theory lacks predictive power. There is huge debate about what inflation should be, and all you can say is "all the bad guys like inflation". The argument for inflation is very old, and goes back to Milton Friedman at least (who was no Keynesian).

The argument goes back to ancient Rome at least, with the devaluing of the denarius.

Re: In Fed and Out, Many Now Think Inflation Helps

#35

Post by jswinghammer »

jellicle wrote: post #28
nhebb wrote: post #20

Earlier quoted context omitted.

> Given that the entire point of the Federal Reserve is to promote inflation I can't tell if you're being sarcastic, but the Fed has three mandates [1], one of which is to stabilize prices: "maximum employment, stable prices, and moderate long-term interest rates." [1] http://www.law.cornell.edu/uscode/text/12/225a

And even a minimal knowledge of history would suggest that the Federal Reserve works very hard to minimize inflation, even at the expense of high unemployment. Poster's statement is along the lines of "Given that the entire point of firefighters is to promote fires". It's nonsense.

So much to learn, you still have. A most basic study of the Federal Reserve would lead you to the exact opposite conclusion. They try to keep interest rates as loan as possible until price inflation gets out of control. I spend a lot of time caring about this issue and all the hype about what the Federal Reserve cares about is just that-hype. They want to inflate the monetary supply all day every day and that's why they buy debt every month as part of QE-infinity. That it hasn't worked does not mean that they do not desire inflation but rather that they have no clue as to what they're doing.

Re: In Fed and Out, Many Now Think Inflation Helps

#36

Post by clarkm »

nwj wrote: post #3

Scott Sumner over at http://www.themoneyillusion.com/ has played a big part in changing peoples's views on this. He is definitely worth reading regularly if you are interested in or want to learn more about monetary policy.

A good overview of his viewpoint can be found here:

http://en.wikipedia.org/wiki/Market_monetarism

Re: In Fed and Out, Many Now Think Inflation Helps

#37

Post by nazgulnarsil »

jswinghammer wrote: post #16
aortega wrote: post #14

Inflation is a tax. Its the result of somebody creating money from nothing (usually it's the government). Also, it's a great way for an employer to lower your salary by actually increasing it, by doing it at a lower rate than inflation. My country has a 25% inflation rate, that's going on for the last 4 years. Not pretty.

It is a tax. It actually occurs the moment anyone takes out a loan in a fractional reserve system. The money is created from nothing at that moment. Government just tends to borrow huge sums of money through this mechanism.

Thinking that loans are evil is where misean ideology really breaks down. If you give me a piece of paper that says you will pay me X dollars a month for Y months, that piece of paper has value depending on how likely you are to honor the obligation.

Re: In Fed and Out, Many Now Think Inflation Helps

#38

Post by nazgulnarsil »

nwj wrote: post #3

Scott Sumner over at http://www.themoneyillusion.com/ has played a big part in changing peoples's views on this. He is definitely worth reading regularly if you are interested in or want to learn more about monetary policy.

Actually, noticing that inflation and the quantity of dollars in the system have a non-linear interaction is the core of his point if I understand him correctly. He preaches de-emphasizing inflation in favor of NGDP, but this is not the same as saying that inflation should be higher. Rather, he says that NGDP and inflation are more orthogonal than previously thought.

Re: In Fed and Out, Many Now Think Inflation Helps

#39

Post by a5seo »

jswinghammer wrote: post #8

Given that the entire point of the Federal Reserve is to promote inflation it's probably good that they think it's a good idea-otherwise why do they think that they exist? The whole problem is that inflation is theft. You are basically having your property taken out from under you without realizing it. It's historically been very popular as a means of taxing the public without them realizing that's what you're doing.…

"You are basically having your property taken out from under you without realizing it."

If your definition of property is US fiat currency, then OK, but if you're concerned about it, you have options such as commodities, non-US currencies, and hard assets like real estate.

Re: In Fed and Out, Many Now Think Inflation Helps

#40

Post by firstOrder »

greenyoda wrote: post #7

"Rising prices help companies increase profits" I don't see how that could be true. If prices are rising, all of a company's expenses rise along with their revenues: raw materials, salaries, benefits, rents, etc. (Unless the company wants to screw their employees and give them raises that are less than the rate of inflation.) Inflation does benefit debtors, the biggest being the U.S. government: they can repay their…

Salaries don't rise along with inflation, it's one of the reasons why inflation is being propounded by the Fed. If the inflation rate is 3%, you give all your employees a 2% raise at the end of the year. You've given them a 2% raise but have effectively cut their salary. Of course unions were wise to this in the 1970s, one of the reasons there was such massive inflation then, because wages were keeping up with inflation to some extent. But this is not the 1970s, private company unionization rates are only 6.6%, so wages can be cut in this way in a manner unorganized workers will feel more psychologicially at ease with, since technically they're getting a raise when their salary is cut.
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