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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

#41

Post by jayfuerstenberg »

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.

How does a government pay the interest on the money the fed prints for it though? The government can't print its own money so technically there is no way out of debt, except perhaps its creditors letting it off the hook in full.

The US$ is like all the other fiat currencies in history, doomed to fail in the long run.

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

#43

Post by Mikeb85 »

jayfuerstenberg wrote: post #33
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, u…

Really? Is this a joke or one of those terrible 'end-of-the-world' advertisements you hear on Bloomberg radio? Precious metals and real estate haven't done very well compared to equities in the last year or two...

Yes, inflation reduces purchasing power if you assume that wages don't track inflation, but historically they do.

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

#44

Post by jswinghammer »

nazgulnarsil wrote: post #37
jswinghammer wrote: post #16

Earlier quoted context omitted.

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.

Loans are not evil and I will challenge anyone who suggests that Mises or any other Austrian believes so. That loans under a fractional reserve constitute fraud is something that is debated a bit. I think at this point the consensus is that it does constitute fraud and should be illegal.

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

#45

Post by hudibras »

Any comment in this thread that doesn't contain the words "liquidity trap" can safely be ignored.

I know that a lot of HNers don't believe that economics is a real science and would rather go with gut feelings or whatever Ron Paul says, but please take a few minutes to read the seminal paper on liquidity traps: http://www.brookings.edu/~/media/projects/bpea/1998%202/1998...

You may not agree with it, but at least you can understand what the other side of the argument is.

EDIT: Wow, this thread really brought out the goldbugs, bitcoin-ers, and the "FIAT MONEY!" crowds. Just need some mentions of Zimbabwe and wheelbarrows-full-of-Weimar-Republic-marks and I'll win this round of Economics Crackpot Bingo.

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

#46

Post by emperorhadrian »

Mikeb85 wrote: post #43
jayfuerstenberg wrote: post #33

Earlier quoted context omitted.

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, u…

Really? Is this a joke or one of those terrible 'end-of-the-world' advertisements you hear on Bloomberg radio? Precious metals and real estate haven't done very well compared to equities in the last year or two... Yes, inflation reduces purchasing power if you assume that wages don't track inflation, but historically they do.

> Yes, inflation reduces purchasing power if you assume that wages don't track inflation, but historically they do.

This is not only factually false, but if it were true it would invalidate the argument being made by the economists quoted in the NYTimes article.

I strongly recommend that you read The Creature from Jekyll Island or other materials on the history of the Fed and its role in US monetary policy.

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

#47

Post by tokenizer »

jswinghammer wrote: post #35
jellicle wrote: post #28

Earlier quoted context omitted.

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 t…

I'd recommend Peter Schiff or Max Kaiser for an interesting look into the Fed's QE policy minus Mainstream Media hype/

The problem with the FED, and every Keynesian economist is that they think the US will indefinitely be the world currency reserve, and that 5,000 years of gold based monetary policy is less stable than the post war economics that have given us rising inequality, lowering employment, indefinite QE, China calling for a de-Americanized world, and an interest rate ceiling of 1% (look it up, Bernanke said it!) that was the bottom rate of Greenspan.

I just love when current economists tell me I'm naive, and that government debt isn't the same a debt debt... Or that there isn't a borrowing limit. The limit, is when other governments stop buying your currency. See China-Australia trading deal, China's ease on buying bonds, and look up an interesting theory on how Japan will soon stop buying US bonds, due to it's self-inflicted inflationary policy, which will force it do invest in it's own money supply soon.

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

#49

Post by oakwhiz »

oakwhiz wrote: post #24
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.…

I never thought of inflation in that way. That's rather interesting. I guess a simple way of describing this would be to say that if you are the sole printer of money, and existing money becomes worth less over time, then you can simply continue to print more money every year in order to cement yourself as the person with the most money.

To elaborate... I suppose it's more about being the person with the most wealth, and you are actually causing a net motion of wealth away from everyone's pockets and toward yourself.

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

#50

Post by lake99 »

a5seo wrote: post #39
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.

> you have options such as commodities, non-US currencies, and hard assets like real estate.

True, except that buying and selling of these is taxed. If the govt. had said, "buy and sell as much glass as you want, and you won't get taxed for its trade", I's switch to glass in a heartbeat.

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