Where we are & where we`re going

Hawkeye123

In recent years, we have seen the systemic failure of the banking system here in Ireland and the international credit crunch of 2008. Economists speak of “when” the European peripheral countries will default on their debt – not “if”. When these defaults happen, German and French banks will be in serious trouble, so why are the Germans throwing good money after bad by giving it to countries that will default? Are they not just postponing the inevitable and won’t the inevitable be even worse when it happens? This illogical behaviour can be explained by a common human defect – cowardice. By postponing the inevitable the French and German Ministers are hoping they will be dead or in opposition by the time the consequences have to be faced up to. This head-in-the-sand approach to dealing with the debt crises will lead to a systemic failure in Europe. Bailouts are a bad idea - be they for countries, banks or individual borrowers. In short, bailouts are for Bolsheviks.

Corruption and incompetence is also very much a feature of politics here in Ireland. In a recent interview, former Taoiseach Bertie Ahern said “… if it had not been for the collapse of Lehman Brothers we’d have gotten away with it a bit longer.” Unfortunately, the interviewer did not ask Mr Ahern who he was referring to by “we”. It would also be interesting to know what “we” were trying to “get away with” and also how long “we” were planning to get away with it for. In a different interview, Mr Ahern implied that he did not know what was going on in the banks, which is remarkable giving that a lowly janitor like yours truly was keenly aware of this growing problem. At a time of unprecedented abundance, the state was spending every cent it got while mortgages for housing stock were financed with borrowed money from abroad. Anyone pea-brain could have told Mr Ahern that the economy could and should have been financing its own housing stock, not wasting it on overpaid and underworked civil servants.

Meanwhile, in the US, the Obama administration has been competing with Mugabe of Zimbabwe to see who can print the most paper money. Interestingly, Mugabe is a die-hard communist. The reason behind all this paper printing is simple – by printing money Obama and Mugabe get to allocate it to their cronies while everyone else sees the value of their money depreciate. The plummeting US dollar is yet another systemic failure in the making. With inevitable twin systemic failures due in both the US and Europe – the outlook for Asia looks far from rosy. When the economies of the US and Europe collapse, who will buy Asian produce and how will we in the west repay the billions we already owe to China? The answer – we can’t, at least not unless we adopt immediate fiscal austerity on a massive scale. If we in the west do not make this adjustment, the consequence will probably result in the collapse of capitalism as we know it and a re-emergence of some form of Communism.

In early 2004, the Celtic tiger was roaring and the economy of the western world in general was growing strongly. Back then it would have seemed absurd had someone predicted that the world would see a re-emergence of Bolshevism. This timing may be the reason the 3rd Fatima secret seemed to fizzle out like a damp squid after it was revealed. The rise of Bolshevism? Never again!

SupaNova

Our monetary system is in its late life, there is going to have to be some sort of international agreement with creditor nations to deal with the bankruptcy of western governments. There has been hints from the IMF of using a basket of currencies as the reserve currency, and even moving back to some sort of gold standard. If there is a loss of faith in all fiat and a global bankrun, its very hard to see how people would accept a completely fiat currency especially in the wake of a dollar hyperinflation.

Interesting you mention Zimbabwe, Here is an interview with their central banker:
http://www.newsweek.com/2009/01/23/it-can-t-be-any-worse.html

In November you shut down Zimbabwe's stock exchange. Will you open it again?

The stockbrokers were creating a money supply that wasn't there. I printed Z$1.5 quadrillion, but the exchange was operating with Z$100 sextillion. So I said, "Who is doing my job?" Unless there is more discipline and honor, the exchange will stay closed. I can't be bothered. I don't know when it'll open. It's a free market, a business which must be allowed to succeed or fail.

This part made me laugh. Printing endless money whilst trying to implement price controls.

Sheldon Cooper

Good post Hawkeye, apart from the almost paranoid fear of some sort of Communist society emerging from ruins of the collapse of Capitalism.

The fact is that Communism, Bolshevism and workers unions had nothing to do with the economic collapse, or indeed the ongoing failures of our capitalist system. In fact, in Ireland in particular, unions have been so far up the backsides of their Capitalist masters for so long now it is impossible to distinguish one from the other and the British “Labour” Party consists almost exclusively of Cambridge and Oxford graduates who are as far removed from the workers they claim to represent as is possible to be. There is no workers army waiting to feast on the carcass of Capitalism, not since Capitalism destroyed the unions 30 years ago.

However, that said, I agree in broad terms with the main body of your post.
The problems we are experiencing at present are not caused so much by the failure of Capitalism as by the failure of governments to enforce the rules of Capitalism. By refusing to allow banks, developers, investors and speculators to pay the price for their misguided and reckless behaviour the burden of supporting these failed enterprises has fallen on the shoulders society in general. The problem is that the burden is proving too much even for the tens of millions of hard working individuals in the countries worst affected by the economic collapse.

The so called austerity measures have only led to stagnation of our economies because of reduction in disposable incomes and therefore less demand for goods and services and further austerity measures, that you appear to be calling for, that are required because of the economic stagnation will only lead us deeper into recession and deeper into the sh1t. I’m surprised that our much worshipped “economic commentators”, who incidently didn’t see all this coming until it was way too late, don’t seem to see the problems that austerity is causing.

oscarBravo

Sheldon Cooper wrote: »

...in Ireland in particular, unions have been so far up the backsides of their Capitalist masters for so long now it is impossible to distinguish one from the other...

I pretty much stopped reading at this point.

Nodin

Hawkeye123 wrote: »

................

Meanwhile, in the US, the Obama administration has been competing with Mugabe of Zimbabwe to see who can print the most paper money. Interestingly, Mugabe is a die-hard communist. The reason behind all this paper printing is simple – by printing money Obama and Mugabe get to allocate it to their cronies while everyone else sees the value of their money depreciate. .................!

That makes no sense whatsoever. If the currency is devalued the money you allege would be 'allocated to cronies' would also lose worth. It isn't spared if its kept in a box and not allowed come into contact with other notes.

Sheldon Cooper

oscarBravo wrote: »

I pretty much stopped reading at this point.

Meethinks thou didst not appreciate my writing style. My apologies.

I will make sure to send you any further writings before I post them so that so that you can proof read them and make sure they are up to your condescending standards. Or better still, why don't you just write them for me to ensure your eternal happiness and avoid making a troll of yourself.

simplistic2

Nodin wrote: »

That makes no sense whatsoever. If the currency is devalued the money you allege would be 'allocated to cronies' would also lose worth. It isn't spared if its kept in a box and not allowed come into contact with other notes.

It makes perfect sense. Let's say you have a counterfeiting machine like the FED or the ECB in your local village. When you print your first million you will be able to buy goods at a far lower cost then when after the money is spent. Once the new million has filtered into the economy the local shop owners will have to raise prices to compete for the extra currency. All the while you have a nice stock pile of capital good that you bought before the market had the information of the extra million.

Those closest to the cash, the bankers, the large multi nationals all reap the benefits and the Joe blogs takes the hit.

oscarBravo

Sheldon Cooper wrote: »

Meethinks thou didst not appreciate my writing style. My apologies.

I will make sure to send you any further writings before I post them so that so that you can proof read them and make sure they are up to your condescending standards. Or better still, why don't you just write them for me to ensure your eternal happiness and avoid making a troll of yourself.

It was nothing to do with your writing style, but with the content. What you said is objectively untrue, and if you believe it then you adhere so firmly to a radical extreme position that there's nothing to be gained by debating the topic with you.

As an aside, before you accuse anyone else of trolling, you should probably read the forum charter.

Nodin

simplistic2 wrote: »

It makes perfect sense. Let's say you have a counterfeiting machine like the FED or the ECB in your local village. When you print your first million you will be able to buy goods at a far lower cost then when after the money is spent. Once the new million has filtered into the economy the local shop owners will have to raise prices to compete for the extra currency. All the while you have a nice stock pile of capital good that you bought before the market had the information of the extra million.

Those closest to the cash, the bankers, the large multi nationals all reap the benefits and the Joe blogs takes the hit.

So Obama will sneakily get the Fed to print money and he and his 'cronies' will get to spend it before the rest of the US and the world cops on.....

You're not making me a believer, if I'm to be honest.

SupaNova

Nodin wrote: »

So Obama will sneakily get the Fed to print money and he and his 'cronies' will get to spend it before the rest of the US and the world cops on.....

You're not making me a believer, if I'm to be honest.

Its simple, inflation is a means of transferring wealth, hyperinflation is an extreme extension of that. As long as people hold and use a currency they can be taxed by inflation.

oscarBravo

SupaNova wrote: »

As long as people hold and use a currency they can be taxed by inflation.

You would prefer barter?

SupaNova

oscarBravo wrote: »

You would prefer barter?

Troll question me thinks, but if you must know I would prefer people were educated as to the mechanism by which inflation transfers wealth and see it for what it is. I would prefer if restraints were put on government making it law to have a surplus budget, and making it illegal for government to go into debt.

As well as inflation being a tax in itself, it also over time pushes people into higher tax brackets in a progressive tax system allowing government to take a larger % of citizens income. This increases government at the expense of the private sector in a way the average Joe doesn't recognize.

Governments haven't found a way to tax deflation, which would result in a windfall for the private individual gradually pushing back the % of tax he pays. Also wages usually lag inflation and deflation in the price of goods and services, another reason deflation is far better than inflation for the private citizen. Unfortunately we have a school of economics that fits perfect with the governments desire to inflate.

If people were educated as to how the mechanisms of inflation work and a referendum was held to pass laws to force governments to run surplus's and ban them from going into debt, how would they vote? How would you vote?

Nodin

Credit (and thus debt) is nessecary for any sort of economy to function, as far as I'm aware.

SupaNova

Nodin wrote: »

Credit (and thus debt) is nessecary for any sort of economy to function, as far as I'm aware.

Credit ALWAYS comes from savings. Savings are the lifeblood and the necessary foundation for an economy to sustain itself.

It is not a necessity for Governments or economies to indebt themselves to function. A sign of a well run government is that of one running surplus's. Surplus's can in turn be used to invest in infrastructure and keep aside funds for a rainy day. And the sign of a well run company is one making healthy profit. Policies of cheap credit and inflation favor bias for expansion through debt than the far healthier way of expanding through equity.

Nodin

SupaNova wrote: »

Credit ALWAYS comes from savings. ................

....nope.

SupaNova

Explain to me how someone can borrow what someone else has not saved???:rolleyes:

Sheldon Cooper

oscarBravo wrote: »

It was nothing to do with your writing style, but with the content. What you said is objectively untrue, and if you believe it then you adhere so firmly to a radical extreme position that there's nothing to be gained by debating the topic with you.

As an aside, before you accuse anyone else of trolling, you should probably read the forum charter.

Debate involves offering opinions and/or examples to explore subjects and not simply delivering snide one line comments and put downs. If you disagree with my comment offer an argument against it, if you are able.

Oh, and don't be a big girls blouse and be reporting me for calling you a troll when you are acting like a condescending pr1ck.

If you can't take it, don't dish it out.

Nodin

SupaNova wrote: »

Explain to me how someone can borrow what someone else has not saved???:rolleyes:

I cannot pay the 10 bushels of wheat due this year as I haven't grown enough. Instead of this I propose paying 8 this year and 11 for the next three. Thus, debt, credit.

Sheldon, you were warned to stop insulting other members already. 24h ban.

oscarBravo

Sheldon Cooper wrote: »

Debate involves offering opinions and/or examples to explore subjects and not simply delivering snide one line comments and put downs. If you disagree with my comment offer an argument against it, if you are able.

Oh, and don't be a big girls blouse and be reporting me for calling you a troll when you are acting like a condescending pr1ck.

If you can't take it, don't dish it out.

Thank you for the object lesson in how to debate politely without snide comments or put-downs. For your information, I didn't report your post. It's clear that you didn't read the charter. I strongly recommend you go and do so now.

I'll repeat: what you said is objectively untrue. If you shift your perspective even marginally to the right (assuming you're capable of doing so), you'll see that that is the case. There's no point arguing against something that doesn't even make the effort to pretend to be based in reality.

oscarBravo

SupaNova wrote: »

...the sign of a well run company is one making healthy profit.

But given a change of circumstances to the point where it runs out of cash, it should immediately fold its tent rather than borrow to tide itself over?

SupaNova

Nodin wrote: »

I cannot pay the 10 bushels of wheat due this year as I haven't grown enough. Instead of this I propose paying 8 this year and 11 for the next three. Thus, debt, credit.

Yes and how has the credit extended to you any value? Its value comes from other people saving and freeing up resources, making them available to you. Goods and capital that have not been produced and saved cannot be lent out. Its no different with currency, people save in currency. Any new currency created gets its value by taking purchasing power away from existing currency/savings. Credit can only come from someone else saving.

SupaNova

oscarBravo wrote: »

But given a change of circumstances to the point where it runs out of cash, it should immediately fold its tent rather than borrow to tide itself over?

If it has run out of cash because it is a poor business it should be allowed to fold tent. If it is a successful business that has just run into some unfortunate circumstances people will be willing to lend to it. I am not saying we should abolish credit!

Feel free to answer my questions:
If people were educated as to how the mechanisms of inflation work and a referendum was held to pass laws to force governments to run surplus's and ban them from going into debt, how would they vote? How would you vote?

Do you not think a government that's honest and up front about how it raises its revenue would be a good thing, rather than the double slight of hand of inflation paired with a progressive tax system?

oscarBravo

SupaNova wrote: »

If it has run out of cash because it is a poor business it should be allowed to fold tent. If it is a successful business that has just run into some unfortunate circumstances people will be willing to lend to it. I am not saying we should abolish credit!

Oh, OK. So a business borrowing is OK, but a government borrowing is not. Why the distinction?

Feel free to answer my questions:
If people were educated as to how the mechanisms of inflation work and a referendum was held to pass laws to force governments to run surplus's and ban them from going into debt, how would they vote? How would you vote?

I would vote against it. I would be vehemently opposed to any move to deny my business credit; I don't see why I should be a hypocrite and deny my government credit.

Do you not think a government that's honest and up front about how it raises its revenue would be a good thing, rather than the double slight of hand of inflation paired with a progressive tax system?

I don't see inflation as a means of raising revenue.

oscarBravo

SupaNova wrote: »

Goods and capital that have not been produced and saved cannot be lent out.

Unless I'm picking you up wrong, you seem to envisage a world where there is a fixed and immutable amount of money. All commerce is a zero-sum game. If someone gets richer, it's inevitably as a consequence of someone else getting poorer.

Am I misunderstanding?

SupaNova

oscarBravo wrote: »

Oh, OK. So a business borrowing is OK, but a government borrowing is not. Why the distinction? I would vote against it. I would be vehemently opposed to any move to deny my business credit; I don't see why I should be a hypocrite and deny my government credit. I don't see inflation as a means of raising revenue.

The distinction is because governments are not credit worthy, unfair perhaps.

I don't see inflation as a means of raising revenue.

Can you clarify:

Do you not see inflation as a means of raising revenue because you don't understand it/don't want to understand it?

Or do you not see it as a legitimate way of raising revenue because it is dishonest like i pointed out?

SupaNova

oscarBravo wrote: »

Unless I'm picking you up wrong, you seem to envisage a world where there is a fixed and immutable amount of money.

You are picking me up wrong. I am saying that there should be honesty and education as to how inflation and credit shuffles resources from one group to another. Junior cert students rote learn a definition 'inflation is rising prices', rather than being thought the cause and the effects.

All commerce is a zero-sum game. If someone gets richer, it's inevitably as a consequence of someone else getting poorer.

You'll have to clarify, are you saying this is my view, or is this yours?

Am I misunderstanding?

Yes

oscarBravo

SupaNova wrote: »

The distinction is because governments are not credit worthy, unfair perhaps.

Creditworthiness is a measure of the ability to repay debt. You seem to be working on the blanket assumption that sovereign nations are intrinsically uncreditworthy, which doesn't seem like a sound assumption on which to base an argument.

Do you not see inflation as a means of raising revenue because you don't understand it/don't want to understand it?

Or do you not see it as a legitimate way of raising revenue because it is dishonest like i pointed out?

I don't see inflation as a simplistic revenue-raising exercise, as you seem to. You complain about the simplistic definition of inflation as "rising prices"; you'll have to accept that I disagree with the equally simplistic definition of "raising revenue".

SupaNova wrote: »

You are picking me up wrong. I am saying that there should be honesty and education as to how inflation and credit shuffles resources from one group to another. Junior cert students rote learn a definition 'inflation is rising prices', rather than being thought the cause and the effects.

I don't disagree with this, but it's not a straightforward corollary of your assertion that money can't be lent unless it is saved.

You'll have to clarify, are you saying this is my view, or is this yours?

I'm trying to establish whether it is yours, and I'm having trouble figuring out what it is you'd like to achieve.

You say that money can't be lent unless it has been saved, indicating that you have an issue with the idea of fractional reserve banking. But now you're saying that you don't believe that money should be a finite resource, indicating that you believe it should be possible to increase the money supply.

In short, I haven't a clue what it is you actually want, beyond a vaguely-expressed dissatisfaction with how the world works.

SupaNova

oscarBravo wrote: »

Creditworthiness is a measure of the ability to repay debt. You seem to be working on the blanket assumption that sovereign nations are intrinsically uncreditworthy, which doesn't seem like a sound assumption on which to base an argument.

Fair enough i wasn't clear, but again you put words in my mouth. I never said sovereign nations are intrinsically uncreditworthy. In theory their is no reason why they are uncreditworthy, but in reality, most governments are and historically have been.

I don't see inflation as a simplistic revenue-raising exercise, as you seem to. You complain about the simplistic definition of inflation as "rising prices"; you'll have to accept that I disagree with the equally simplistic definition of "raising revenue".

My definition is not "raising revenue". From an Austrian view "Inflation is an increase in the money supply", which was the original definition. What's overly simplistic about this definition, where or why should it be made more complicated?

I don't disagree with this, but it's not a straightforward corollary of your assertion that money can't be lent unless it is saved. I'm trying to establish whether it is yours, and I'm having trouble figuring out what it is you'd like to achieve.

The same economic law holds for money, if no-one saves in a currency, its because it's worthless, you have a hyperinflation, no-one lends a hyper-inflating currency. I repeat you cannot lend what has not been saved. Whats really being lent is saved excess production, money is a way of keeping score, the unit of account. Inflation may throw a veil over the process, but it doesn't overturn the reality.

You say that money can't be lent unless it has been saved, indicating that you have an issue with the idea of fractional reserve banking. But now you're saying that you don't believe that money should be a finite resource, indicating that you believe it should be possible to increase the money supply.

Whether i agree or not with fractional reserve banking does not change the fact, that what is not saved cannot be lent, which people seem to have trouble understanding.

In short, I haven't a clue what it is you actually want, beyond a vaguely-expressed dissatisfaction with how the world works.

All i've tried to do over the last few posts is explain a simple fundamental law of the way the world works. Also I have stated some reasons as to why policies of inflation are very destructive, i could give many more, and go into far more detail. I'd rather not given the difficulty explaining something as simple as saving and lending.

I really don't know what your goal is? Maybe to purposefully annoy me perhaps?

SupaNova

For example when i stated a simple fact that people can be taxed by inflation as long as they hold currency i get this response.

oscarBravo wrote: »

You would prefer barter?

That's a pretty absurd leap of faith to make. If someone states a simple fact about how inflation of currencies are a hidden tax, that must imply they want barter???

Maybe the poster who thanked this post has difficulty understanding what is a reasoned intelligent post worthy of thanks, and thus it is not surprising he has trouble understanding saving and lending. Or if i give him some credit, perhaps he thanked the question for its deliberate stupidity and intent.

oscarBravo

Maybe I am as stupid as you suggest, or maybe you're being unclear, but I'm still at a loss as to what you actually want.

Inflation is an increase in the money supply - yes, it is. Is this a good thing? Is this a bad thing? Is this something you think people don't know? Is it something you think people don't understand? What would you change, if you had the power to do so?

You claim that people can be "taxed" by inflation as long as they hold currency - leaving aside the conflation of tax and inflation, so what? Yes, if I keep a tenner in my wallet, it is worth less after a year of inflation. What's your point? What's the problem, and what's your solution to it?

Assume, for the sake of argument, that I accept that inflation is a hidden tax. What do you want to change? Do you want to eliminate inflation? Clearly not, as you've denied wanting money to be a finite resource, and therefore accept inflation as a given. So, do you want to break the alleged connection between inflation and tax? If so, you'll have to explain more clearly how governments benefit from inflation, and explain how you propose to have inflation that doesn't benefit government.

In short, I'd appreciate if you'd explain exactly what it is you would like to see changed. Small words, please, as you've already pointed out how stupid I am.

SupaNova

oscarBravo wrote: »

Maybe I am as stupid as you suggest, or maybe you're being unclear, but I'm still at a loss as to what you actually want.

I said you are deliberately asking stupid questions. There is nothing unclear about what i said. The thread title is "where we are & where we are going" and i gave my opinion, i see a new international monetary system without the dollar at the helm with its exorbitant privilege in the near future. This will be a good thing and something that people should want.

Inflation is an increase in the money supply - yes, it is. Is this a good thing? Is this a bad thing? Is this something you think people don't know? Is it something you think people don't understand? What would you change, if you had the power to do so?

It's a bad thing for multiple reasons, i stated some reasons already, i could state multiple other reasons and explain in detail but it sounds tiresome.

You claim that people can be "taxed" by inflation as long as they hold currency - leaving aside the conflation of tax and inflation, so what? Yes, if I keep a tenner in my wallet, it is worth less after a year of inflation. What's your point? What's the problem, and what's your solution to it?

I stated problems of inflation, and solutions already.

Assume, for the sake of argument, that I accept that inflation is a hidden tax. What do you want to change? Do you want to eliminate inflation? Clearly not, as you've denied wanting money to be a finite resource, and therefore accept inflation as a given. So, do you want to break the alleged connection between inflation and tax? If so, you'll have to explain more clearly how governments benefit from inflation, and explain how you propose to have inflation that doesn't benefit government.

In short, I'd appreciate if you'd explain exactly what it is you would like to see changed. Small words, please, as you've already pointed out how stupid I am.

I would ultimately like to see the powers and privileges given to governments to inflate severely limited or removed. The euro is a big step in the right direction at least in theory, in practice it hasn't lived up fully to its intentions.

oscarBravo

SupaNova wrote: »

There is nothing unclear about what i said.

[...]

...i see a new international monetary system without the dollar at the helm with its exorbitant privilege in the near future.

The phrase "exorbitant privilege" means nothing to me. You claim that there's nothing unclear in what you're saying, then use phrases like that as if their meaning is self-evident.

It's a bad thing for multiple reasons, i stated some reasons already, i could state multiple other reasons and explain in detail but it sounds tiresome.

Again, maybe I'm just being stupid, but if inflation is inherently a bad thing, why do you deny being opposed to the idea of a finite money supply?

I'm not trying to be deliberately obtuse; I just can't figure out what it is you want (in practical terms). You say you don't want a fixed money supply, thereby implying that you want inflation. You then say that inflation is a bad thing, implying that you think that there should be no increase in the money supply.

Can you see why I'm confused?

I stated problems of inflation, and solutions already.

I'll re-read the thread and see if I can figure out what you want, so.

I would ultimately like to see the powers and privileges given to governments to inflate severely limited or removed. The euro is a big step in the right direction at least in theory, in practice it hasn't lived up fully to its intentions.

Again, I'm forced to draw conclusions from the vague hints you're offering, but it seems that you're taking a one-dimensional approach that consists largely of "inflation bad, mkay?" (except when you're saying that you don't have a problem with inflation, but I'm still trying to reconcile that with the other things you've said).

Or maybe this goes back to the idea that governments are inherently uncreditworthy (which you've denied saying, while still basically saying it), compared to the inherent creditworthiness of businesses; maybe you're saying that increasing the money supply should be left entirely to private enterprise, which can be trusted to do so for the right reasons, compared to governments which only ever do so for sneaky and underhanded reasons.

I'll sit here and wait for you to tell me that I've drawn some more stupid conclusions and asked some more stupid questions.

SupaNova

oscarBravo wrote: »

The phrase "exorbitant privilege" means nothing to me. You claim that there's nothing unclear in what you're saying, then use phrases like that as if their meaning is self-evident. Again, maybe I'm just being stupid, but if inflation is inherently a bad thing, why do you deny being opposed to the idea of a finite money supply?

Google the phrase, read the thread title. The thread is not for me to teach basic economics, the history of money or monetary theory. The thread is for people to give their opinions on where we're going. Understanding that phrase and the history that brought us to where we are should help you give a reasonable opinion as to where we are going. And even without familiarity of the phrase it doesn't take much thought to gather i was talking about the US dollar and its privilege of being the world reserve currency.

I'm not trying to be deliberately obtuse; I just can't figure out what it is you want (in practical terms). You say you don't want a fixed money supply, thereby implying that you want inflation. You then say that inflation is a bad thing, implying that you think that there should be no increase in the money supply.

In theory i am for a money supply decided by the market not by decree of a small group of individuals. I'm done with teaching theory in the thread, its painful to me that understanding the basic theory is elusive to some. In reality, a strict ECB that stuck to its original mandates would be fine by me.

you're taking a one-dimensional approach that consists largely of "inflation bad, mkay?" (except when you're saying that you don't have a problem with inflation, but I'm still trying to reconcile that with the other things you've said).

Yes inflation is bad. The ECB a politically constrained central bank independent of sovereign nations with a bearable inflation target, is a whole lot less bad.

Or maybe this goes back to the idea that governments are inherently uncreditworthy (which you've denied saying, while still basically saying it), compared to the inherent creditworthiness of businesses; maybe you're saying that increasing the money supply should be left entirely to private enterprise, which can be trusted to do so for the right reasons, compared to governments which only ever do so for sneaky and underhanded reasons.

People never chose fiat paper as money, and never granted the right to counterfeit to anyone, private or public. The right to counterfeit was always brought about by force, against the wishes of people that held money. When private banks counterfeit they subjected themselves to bank runs and bankruptcy. Central Banks have protected this privilege. People chose gold over time for many reasons, its counterfeiting constraints being one. I am not going to describe how gold worked in the past, the problems with it, or how it should work.

oscarBravo

SupaNova wrote: »

Google the phrase, read the thread title.

OK, I've looked it up. Now I know what the phrase means, which means I need to re-read what you've posted in the context of that knowledge. Now I need to try to figure out whether to substitute "US Dollar" (the only currency to which the phrase applies) for "currency" every time you've used it, and whether or not you're talking about inflation in a US-only context; or whether you used the phrase as a throwaway remark in that one post in order to look clever or underline a single point, or what exactly you were trying to hint at instead of just coming out and saying.

I hope you're enjoying having your teeth pulled in this fashion; I'm not enjoying pulling them.

The thread is not for me to teach basic economics, the history of money or monetary theory. The thread is for people to give their opinions on where we're going. Understanding that phrase and the history that brought us to where we are should help you give a reasonable opinion as to where we are going. And even without familiarity of the phrase it doesn't take much thought to gather i was talking about the US dollar and its privilege of being the world reserve currency.

I'm still wary of rhetorical traps. Were you just talking about the US dollar in that one post? When you talk about inflation in the context of currency, are you only talking about dollars? If you're talking about a broader relationship between currency and inflation, why are you bringing the specific case of the US dollar into it?

In theory i am for a money supply decided by the market not by decree of a small group of individuals.

And if a market-dictated policy was inflationary, then inflation would be good? Inflation is only bad because central banks (as distinct from governments - have you missed that distinction?) control the money supply?

I'm done with teaching theory in the thread, its painful to me that understanding the basic theory is elusive to some.

If basic theory could solve all our problems, we could put first-year economics students in charge of central banks and solve all our problems.

Anyway, don't be so bloody snooty. If all you're interested in is espousing theories (and only those theories you agree with, as it happens) then I'll go and read them for myself.

In reality, a strict ECB that stuck to its original mandates would be fine by me.

So low inflation - at any cost whatsoever - is the only goal that matters?

Yes inflation is bad.

...but you don't want a finite money supply. You still haven't explained that dichotomy to me.

The right to counterfeit...

...is an oxymoron. If you're going to talk down at people about not understanding basic economic theory, make sure that the phrases you use make sense without having to re-define English words first.

SupaNova

From reading between the lines i guess that you believe that:

-An expanding money supply is necessary for an economy to grow
-Low inflation comes at the cost of jobs

Both are false and both are apologetic propaganda for inflationary central banking. Before Central Banking the people kept checks and balances on private bankers inflating via bank runs. The 19th century was a deflationary period of booming economic growth.

If basic theory could solve all our problems, we could put first-year economics students in charge of central banks and solve all our problems.

Central banks have more to do with protecting private banks privilege to counterfeit, and being a tool for governments to fund themselves than their slogan of stability which you seem to swallow whole. The FED by flooding the world with artificially cheap credit was the root cause of the biggest boom bust since the great depression. Hundreds of years of operating the printing presses at variable speeds, what have central bankers learned? Have central banks provided the promised stability?

-To counterfeit means to *illegally* imitate something. Counterfeit products are often produced with the intent to take advantage of the superior value of the imitated product.

Pardon me Central banks creating currency fits perfectly with Wikipedia's definition except it has been legalized.

oscarBravo

SupaNova wrote: »

From reading between the lines i guess that you believe that:

-An expanding money supply is necessary for an economy to grow
-Low inflation comes at the cost of jobs

I haven't espoused a view. I'm trying to understand the views you're expressing, and also trying to disentangle the contradictions you continue to refuse to explain.

The 19th century was a deflationary period of booming economic growth.

I'm prepared to accept that you have a different definition of economic growth from me, but can you explain how there can be less money at the end of a period of economic growth than at the start?

Central banks have more to do with protecting private banks privilege to counterfeit, and being a tool for governments to fund themselves than their slogan of stability which you seem to swallow whole.

I haven't espoused a view. You're betraying your fundamentalism through your "with us or against us" style of argument.

Pardon me Central banks creating currency fits perfectly with Wikipedia's definition except it has been legalized.

You can dress it up however you like, but you're still forced to re-define words in order to make them fit your position, which to me is generally a sign of weakness in an argument.

Sheldon Cooper

Correct me if I'm wrong SuperNova, but you appear to be suggesting that the current economic crisis was deliberately created and not just reckless speculating and investment by the banks and property developers.

SupaNova

oscarBravo wrote: »

I'm prepared to accept that you have a different definition of economic growth from me, but can you explain how there can be less money at the end of a period of economic growth than at the start?

Apologies posting on different forums where people have differing views has me criss-crossing my use of the word inflation and its definition. Money supply rose in the 19th Century but prices decreased. If the money supply had remained constant prices would have fell more. Inflation(increasing the money supply) is not needed for economic growth.

----

"Contrary to popular belief inflation is not rising prices but an expansion of the money supply, which results in higher, though not necessarily rising prices. As the Federal Reserve creates more dollars, the purchasing power of each dollar diminishes, causing prices to rise to compensate for the dollar’s diminished value. On the other hand, as the economy becomes more productive, the purchasing power of each dollar increases. If the Federal Reserve inflates (creates dollars) faster than the economy expands production prices will rise. Alternatively, if production accelerates at about the same rate as inflation (money supply growth) then prices will remain stable. However, the latter is not indicative of an absence of inflation but of rising productivity. Had there been no inflation prices would have fallen to reflect that increase. By inflating (creating dollars) the Federal Reserve prevents prices from falling, thus transferring productivity gains from the consuming public to government, whose agencies are able to spend the newly created dollars into circulation. Inflation, therefore, transfers purchasing power from the private to the public sector without the need for politically unpopular tax increases..

In a growing free market economy the natural tendency for prices is to decline. Improvements in productivity have always put downward pressure on prices. However, during most of the twentieth century the Federal Reserve created so much inflation (printed money) that prices actually rose despite productivity gains. During the past several years, even though the Federal Reserve created more inflation than at any time in its history, consumer prices increases have been relatively modest. Many economists mistakenly attribute this phenomenon to a “new era.” However, a closer examination of the facts reveals a more realistic explanation." - Peter Schiff

----

SupaNova

Sheldon Cooper wrote: »

Correct me if I'm wrong SuperNova, but you appear to be suggesting that the current economic crisis was deliberately created and not just reckless speculating and investment by the banks and property developers.

I am stating that policies of inflation or need to increase the money supply for economic growth is merely propaganda. Increasing the money supply is all about transferring wealth. If there was an actual need for the money supply to increase and there was solid well reasoned theory to support this, why not give everyone an equal % pay rise yearly? Clearly that would not work as a way of transferring wealth.

Oscar Bravo believes the official line that Central banks are there to control money supply(because it would otherwise be out of control) and provide stability. I have said they are their to protect banks ability to inflate and to transfer wealth to governments. Actions speak louder than words:

Have CB's protected private banks ability to inflate? YES
Have CB's been a tool for governments to transfer wealth? YES
Have CB's provided stability? NO

Now Oscar Bravo will tell you increasing the money supply is a complicated business and those benevolent CB's haven't figured it out yet. You don't have to take my word for it.

How about a central banker:
"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value." -Alan Greenspan

Or governments favorite economist:
"By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens." - John Maynard Keynes

Sheldon Cooper

But surely increasing the amount of money in circulation to create artificially high inflation also decreases the value of the money that governments collect.

If that is so, what is the point?

SupaNova

You can dress it up however you like, but you're still forced to re-define words in order to make them fit your position, which to me is generally a sign of weakness in an argument

I have stated the realities of saving and lending along with inflation. Both are reality. Stating and explaining how things actually work doesn't equate to making weak arguments. You also said you haven't espoused any of your own views but you previously stated you don't see inflation as a means of raising revenue for governments. So you have espoused that view and it is one that denies reality.

Likewise if there was a Nodin school of economics students would be taught to deny the reality that we have to produce and save before we can lend.

Another criticism of yours was that my explanations of saving and lending, as well as inflation were too basic. I'm sorry if reality is too basic for you.

SupaNova

Sheldon Cooper wrote: »

But surely increasing the amount of money in circulation to create artificially high inflation also decreases the value of the money that governments collect.

If that is so, what is the point?

Correct, but getting money with slightly less value than it would have if there was no inflation, is better than none at all and having that means of raising revenue closed off to you.

oscarBravo

SupaNova wrote: »

Oscar Bravo believes the official line that Central banks are there to control money supply(because it would otherwise be out of control) and provide stability.

Please cite the post where I stated this.

Now Oscar Bravo will tell you increasing the money supply is a complicated business and those benevolent CB's haven't figured it out yet.

Will he? When will he do so, and why? You wouldn't be putting words in my mouth, would you? You wouldn't be falling for the most basic of all logical fallacies, that someone who doesn't 100% agree with you must therefore 100% disagree with you?

Man, arguing with fundamentalists is hard work.

How about a central banker:
"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value." -Alan Greenspan

Is it your assertion that inflation is impossible with a gold standard?

SupaNova wrote: »

I have stated the realities of saving and lending along with inflation. Both are reality.

If I'm required to move into your frame of reference before discussing the topic, there's nothing to discuss.

You've previously claimed that money that hasn't been saved can't be lent. According to this frame of reference, every dollar that has ever been lent by a bank was first deposited in that bank. That doesn't sound like reality to me.

You also said you haven't espoused any of your own views but you previously stated you don't see inflation as a means of raising revenue for governments. So you have espoused that view and it is one that denies reality.

I guess it depends to some extent on what definition of "inflation" you're using. Given that you seem to use whatever definition suits the particular argument you happen to be making at the time, I'm quickly arriving at the realisation that winning arguments is more important to you than actually having an intelligent discussion, so I'll save myself the bother and concede defeat.

Hopefully, for all our sakes, the world will see sense and start managing economies through bank runs instead of central banks. While we're at it, maybe we could manage population growth through famine and plague.

SupaNova

oscarBravo wrote: »

Man, arguing with fundamentalists is hard work. Is it your assertion that inflation is impossible with a gold standard?

Did you read what Alan Greenspan said? Where is his assertion that inflation is impossible under a gold standard? Where is mine? Where is anyone's assertion that inflation is impossible under a gold standard?

Care to enlighten me about what fundamentalist views you believe i have, and why they would matter when describing the realities of inflation or saving and lending?

Since your fundamental position seems to be one of deliberate stupidity, awkwardness and pedantry:

crane = a type of machine used for lifting
crane = large, long-legged bird

If we have the following sentence:
The crane flew low overhead.

When reading this sentence how do we know which definition of crane is most likely or makes most sense??? Being a staunch fundamental pedantic pest you know, right?

Now go back over the thread. If you find uses of the word inflation where it isn't obvious which definition is used in the context of the sentence, that i haven't already clarified, let me know.

Sheldon Cooper

SupaNova wrote: »

Correct, but getting money with slightly less value than it would have if there was no inflation, is better than none at all and having that means of raising revenue closed off to you.

Again, correct me if I am picking this up wrong, but if you keep inflation running at artificially high levels year on year does there not come a point, as with the banking crisis, where the system eventually collapses due to consumers not being able to afford the high prices being charged for goods and services??

Hawkeye123

Nodin wrote: »

That makes no sense whatsoever. If the currency is devalued the money you allege would be 'allocated to cronies' would also lose worth. It isn't spared if its kept in a box and not allowed come into contact with other notes.

Hi Nodin. It makes sense, think it through carefully - you will figure it out.

AhSureTisGrand

Nodin wrote: »

That makes no sense whatsoever. If the currency is devalued the money you allege would be 'allocated to cronies' would also lose worth. It isn't spared if its kept in a box and not allowed come into contact with other notes.

Actually the principle does work on a basic level. Say there are $100 in the country. Jim owns all of them. Then the State prints $100 and keeps them for itself. Now Jim has gone from having all the money to having half the money. It's the same as would be if the State had simply confiscated $50 off Jim in the first place

An Consal

Perhaps the path Ireland needs to take for recovery is not Democratic or Socialist but Autocratic. Our nation needs a strong leader who can get things done quickly and efficiently, without the slow and awkward process of Democracy. What I suggest is something similar to the old Roman Republic. A 'Dictator' would be elected in times of emergency by the Senate, and once that emergency has been dealt with the power of the Senate would be restored.

I see our current economic situation as the emergency, and a elected Dictatorship as the solution.

oscarBravo

An Consal wrote: »

I see our current economic situation as the emergency, and a elected Dictatorship as the solution.

Leaving aside echoes of the 1930s, and the inherent contradiction in proposing an elected dictator in the place of democracy: if the problem is economic, then the solution isn't merely political. A dictator with a catastrophic economic plan isn't going to solve the problem. The solution to an economic problem is ipso facto economic, and the form of government isn't going to change that.

Yahew

AhSureTisGrand wrote: »

Actually the principle does work on a basic level. Say there are $100 in the country. Jim owns all of them. Then the State prints $100 and keeps them for itself. Now Jim has gone from having all the money to having half the money. It's the same as would be if the State had simply confiscated $50 off Jim in the first place

Except the money is transferred into the economy, not held by government.

This libertarian stuff is the ideology of the rich masquerading as the protection of the poor ( i.e. the use of the word "savings" rather than wealth).

Lets say that the economy needs a $500B stimulus. If that is achieved by printing money, it is ( by SN's definition) inflationary even if prices stagnate due to productivity increases, because there is more money in circulation. If the money printed is 1% of the total supply the cost to wealth holders is 1% of their holdings ( even if there were no inflation in goods, as there should've been deflation). All this is by SN's definitions.

Who pays this?

The owners of wealth: now, given the fact that 80% of wealth is held by 20% of the population, the tax is largely on the top 20%. The transfer is to, via eased credit and subsequently wages, the bottom 80%.

An income tax for this stimulus would not work as it would be merely robbing the consumer to pay the consumer. Borrowing would, but printing in moderation is the best option - except for the top 20%, in particular the top 1%.