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Author Topic:   The Giant Pool Of Money. Implications
Jon
Inactive Member


Message 91 of 423 (615801)
05-16-2011 10:25 PM
Reply to: Message 88 by crashfrog
05-16-2011 7:14 PM


Re: What Is Money?
In an economy with 9% [un]employment or more, factories lying idle, goods languishing in warehouses, printing money stimulates demand and puts people back to work. Inflation happens when there's more money to chase the same amount of goods and services. But when people are unemployed, you can increase the amount of goods and services and prevent inflation.
Still on with this, are we?
What is there to buy? What do you need? What do I need? I could use a vacuum, that's for sure. But my needs are pretty much met. All I need is enough money coming in to replace the stuff that goes out on consumable expenses. Any extra money is spent on junk; wasted on non-essentials; thrown into causes and products that provide no real return.
Driving an economy by encouraging people to spend money on useless junk? Not a plan.
And even worse: buying more useless junk still won't help with your idle factories and unemployed people, since little of the junk bought is actually manufactured domestically.
Currently inflation is at less than 2%, despite several decades of deficit spending and three years of economic stimulus.
The fact that there is any inflation at all should tell you that more money thrown blindly into the system is not the answer. A consumption-driven approach is not the solution.
But we've been over this before; you seem dead-set in thinking the world is run by bunny rabbits in marshmallow hats. I don't see that changing.
Jon

Love your enemies!

This message is a reply to:
 Message 88 by crashfrog, posted 05-16-2011 7:14 PM crashfrog has replied

Replies to this message:
 Message 94 by crashfrog, posted 05-17-2011 10:18 AM Jon has seen this message but not replied
 Message 96 by xongsmith, posted 05-17-2011 3:35 PM Jon has seen this message but not replied

  
Buzsaw
Inactive Member


Message 92 of 423 (615827)
05-17-2011 8:55 AM
Reply to: Message 88 by crashfrog
05-16-2011 7:14 PM


Re: What Is Money?
crashfrog writes:
I was told that its silly to think of what the conspiracy theorists say about the dollar being at risk of being stripped of its role as a global reserve currency, but, also, others have told me that indeed this is true.
Just printing new money doesn't mean that the currency is debased. Increasing the money supply is only inflationary when production is at its capacity.
In an economy with 9% employment or more, factories lying idle, goods languishing in warehouses, printing money stimulates demand and puts people back to work. Inflation happens when there's more money to chase the same amount of goods and services. But when people are unemployed, you can increase the amount of goods and services and prevent inflation.
Currently inflation is at less than 2%, despite several decades of deficit spending and three years of economic stimulus.
LOL on 2% Factoring in groceries and clothes etc the realistic rate is, conservatively, 10% and rising rapidly.
quote:
It is no secret that the Consumer Price Index has been "improved" 24 times since its inception in 1978, each time to help calculate things to smooth out inflation. Using the original method, inflation right now would be at a 10% rate, which is more plausible when you buy groceries or a pair of pants.
QE2 is set to end in July, and some economists believe that the inflation people have noticed will slow and end after that, but with gas prices going up and layoffs increasing, it is unlikely that this will bring any relief, even if inflation does slow.
Google is working on an index of online prices, which will give us a very different story from the official word, soon. Yet even that will be skewed because online shopping tends to follow different economic pressures and usually does not include staples like bread and milk.
The truth is, we're facing much greater inflation than the official word out of the White House, and everyone who goes shopping knows it. The Obama administration is gambling that by keeping the official word (and thus most news reporting) low on inflation perception won't create worse conditions and the problem will just go away in a few months.
The last year you could take your paper notes to the bank and trade for solid silver was 1964. Just about everyting you buy today is at least 10 times higher than that period. Many things are much higher.
Gasoline was about thirty cents in 1964. A barrel of crude oil was $3.
If you pay $4 for a gallon of gas you are paying about 40 cents in real money. A dozen eggs at $1 are 10 cents in real money.
If you are paid $30 an hour for work, that would be $3 in real money but that hour's work would buy 10 gallons of gasoline or 30 dozen eggs in real money as per 1964.
Currently, grocery prices are rising by weeks and months rather than years and decades, yet they are not included in the CPI of the Obama Administration.

BUZSAW B 4 U 2 C Y BUZ SAW.
The Immeasurable Present Eternally Extends the Infinite Past And Infinitely Consumes The Eternal Future.

This message is a reply to:
 Message 88 by crashfrog, posted 05-16-2011 7:14 PM crashfrog has replied

Replies to this message:
 Message 93 by Modulous, posted 05-17-2011 10:05 AM Buzsaw has not replied
 Message 95 by crashfrog, posted 05-17-2011 10:26 AM Buzsaw has not replied
 Message 97 by Taq, posted 05-17-2011 4:45 PM Buzsaw has not replied

  
Modulous
Member
Posts: 7801
From: Manchester, UK
Joined: 05-01-2005


Message 93 of 423 (615830)
05-17-2011 10:05 AM
Reply to: Message 92 by Buzsaw
05-17-2011 8:55 AM


Re: What Is Money?
Just about everyting you buy today is at least 10 times higher than that period.
Then again, you earn about ten times more.
Money has to drop in value over time, Buz, otherwise capitalism fails.
If, I offered you $100 in 1964 but gave you the choice of $100 today instead - you'd wisely take the $100 in 1964. But why is it worth more in 1964? Because in 1964 you have more of your life to invest it and make it grow into something bigger. Let's say you think that if you invest the money wisely you think you can make it $5000 by today. That means, in your estimation (ignoring risk for the time being), you value $100 as in 1964 being worth $5,000 by 2011. This makes $100 in 1964 worth more than $100 in 2011, and this is a good thing.
1964 prices are no more 'real' than today.

This message is a reply to:
 Message 92 by Buzsaw, posted 05-17-2011 8:55 AM Buzsaw has not replied

Replies to this message:
 Message 98 by Straggler, posted 05-17-2011 4:49 PM Modulous has seen this message but not replied

  
crashfrog
Member (Idle past 1467 days)
Posts: 19762
From: Silver Spring, MD
Joined: 03-20-2003


Message 94 of 423 (615831)
05-17-2011 10:18 AM
Reply to: Message 91 by Jon
05-16-2011 10:25 PM


Re: What Is Money?
I could use a vacuum, that's for sure.
Sure, but you're not buying one, for the very simple reason that you don't have the money to spend on one right now. That, or you consider the future value of money to be greater than the present value of a vacuum cleaner, which is stupid, since here you are talking about how inflation is going to screw us all. I mean, you can't have it both ways - either inflation is going to kill us, in which case present goods are way more valuable than future dollars, or future dollars are more valuable than present goods, in which case what you're afraid of is deflation, and you should believe that the government should be printing money and giving it to people like you, so you can buy a vacuum cleaner.
You'd benefit from owning one. The store that sold it to you would benefit from having sold it to you. The factory that made it would benefit, marginally, from having constructed it and sold it to the store. The workers and store owner, now with a little extra money in their pockets, might have frequented other businesses, including yours. Just about everybody in the supply chain would be better off if you spent your money on a vacuum, but you've not done so simply because you lack the scratch. All for the want of a horseshoe nail, indeed!
Giving you some money to buy a vacuum seems like a good idea - a net benefit. And it's impossible for it to be inflationary during a demand-driven recession.
Driving an economy by encouraging people to spend money on useless junk?
Are vacuums useless? Are yoga lessons useless? Is it useless to eat out at a restaurant with your friends instead of cooking by yourself at home? "Useless junk" isn't a substantial or even noticeable part of the economy. Predominantly people are spending their money on things that improve the quality of their own lives. Is that useless?
The fact that there is any inflation at all should tell you that more money thrown blindly into the system is not the answer.
There's always inflation, and should always be; it's a necessary buffer against incredibly destructive deflation and the indicator of a growing economy. Recall that during the Reagan "Morning in America" inflation was over 5%.
But we've been over this before; you seem dead-set in thinking the world is run by bunny rabbits in marshmallow hats.
You seem dead-set in thinking that everybody who's not you is a gaping moron. (Never mind that you're the one who thinks vacuum cleaners are "useless junk.")
Edited by crashfrog, : No reason given.

This message is a reply to:
 Message 91 by Jon, posted 05-16-2011 10:25 PM Jon has seen this message but not replied

  
crashfrog
Member (Idle past 1467 days)
Posts: 19762
From: Silver Spring, MD
Joined: 03-20-2003


Message 95 of 423 (615832)
05-17-2011 10:26 AM
Reply to: Message 92 by Buzsaw
05-17-2011 8:55 AM


Re: What Is Money?
LOL on 2% Factoring in groceries and clothes etc the realistic rate is, conservatively, 10% and rising rapidly.
That's not inflation, that's actually an increase in the price of groceries and clothes primarily driven by the increasing demand for the same amount of oil.
Inflation isn't when the price of something goes up. Inflation is when the price of everything goes up, and factoring in everything, inflation is only at 2%, less than half of what it was during the Reagan Revolution.
The last year you could take your paper notes to the bank and trade for solid silver was 1964.
Remember how we explained that metal-based currency was inherently inflationary because they're still mining silver?
Currently, grocery prices are rising by weeks and months rather than years and decades, yet they are not included in the CPI of the Obama Administration.
Right, which is proof that they're not considered a very good indicator of inflation due to price volatility and dependency on an underlying asset that is in high demand. If inflation is "really" at 10%, Buz, why aren't people's wages going up? Inflation should raise the price of everything, including labor. Are you making any more at your job than you were before?

This message is a reply to:
 Message 92 by Buzsaw, posted 05-17-2011 8:55 AM Buzsaw has not replied

  
xongsmith
Member
Posts: 2578
From: massachusetts US
Joined: 01-01-2009
Member Rating: 6.8


Message 96 of 423 (615850)
05-17-2011 3:35 PM
Reply to: Message 91 by Jon
05-16-2011 10:25 PM


Re: What Is Money?
Jon writes:
What is there to buy? What do you need? What do I need? I could use a vacuum, that's for sure. But my needs are pretty much met. All I need is enough money coming in to replace the stuff that goes out on consumable expenses. Any extra money is spent on junk; wasted on non-essentials; thrown into causes and products that provide no real return.
Driving an economy by encouraging people to spend money on useless junk? Not a plan.
And even worse: buying more useless junk still won't help with your idle factories and unemployed people, since little of the junk bought is actually manufactured domestically.
Jon
After you have covered food & clothing & shelter & medical needs, and you are looking for ways to spend money, may I suggest supporting your local musicians & artists?
Agreed - don't buy shit.
RULE OF THUMB: The more you see it advertised in the main stream mediot world, the more unmitigated shit it is.

- xongsmith, 5.7d

This message is a reply to:
 Message 91 by Jon, posted 05-16-2011 10:25 PM Jon has seen this message but not replied

  
Taq
Member
Posts: 9973
Joined: 03-06-2009
Member Rating: 5.6


Message 97 of 423 (615856)
05-17-2011 4:45 PM
Reply to: Message 92 by Buzsaw
05-17-2011 8:55 AM


Re: What Is Money?
The last year you could take your paper notes to the bank and trade for solid silver was 1964. Just about everyting you buy today is at least 10 times higher than that period. Many things are much higher.
I've never understood why people think paper money that is backed by an equally useless and much heavier element is somehow better. You can't eat silver. You can't build a house with it. You can't water your crops with it. You can't clothe your children with it. What practical use does silver have that paper money does not, other than making pretty shiny things?
And if you think that there was no inflation when the dollar was backed by silver or gold, think again. Why don't you compare prices between 1964 and 1914. Using the inflation calculator here $3.20 in 1964 was the same as $1.00 in 1914. Yep, inflation even with currency backed by gold and silver.

This message is a reply to:
 Message 92 by Buzsaw, posted 05-17-2011 8:55 AM Buzsaw has not replied

Replies to this message:
 Message 99 by crashfrog, posted 05-17-2011 5:43 PM Taq has replied

  
Straggler
Member
Posts: 10333
From: London England
Joined: 09-30-2006


Message 98 of 423 (615858)
05-17-2011 4:49 PM
Reply to: Message 93 by Modulous
05-17-2011 10:05 AM


Good Inflation......? Bad Inflation.....?
I ask this question to all economically savvy EvC members...
Mod writes:
Money has to drop in value over time, Buz, otherwise capitalism fails.
I understand enough to understand that this is true.
But what is a 'good' rate of inflation? And at what point does inflation become a bad thing?
Is inflation something whose good/bad effects should be determined in relation to growth/GDP? Or something else?
Basically can someone explain the role of inflation, what is good and what is bad, in Capitalist economics to me?

This message is a reply to:
 Message 93 by Modulous, posted 05-17-2011 10:05 AM Modulous has seen this message but not replied

Replies to this message:
 Message 100 by crashfrog, posted 05-17-2011 5:49 PM Straggler has replied
 Message 113 by Buzsaw, posted 05-18-2011 12:33 AM Straggler has not replied

  
crashfrog
Member (Idle past 1467 days)
Posts: 19762
From: Silver Spring, MD
Joined: 03-20-2003


Message 99 of 423 (615864)
05-17-2011 5:43 PM
Reply to: Message 97 by Taq
05-17-2011 4:45 PM


Re: What Is Money?
Not only is inflation present during the period when the US was on a precious metals standard, it's higher then than at any subsequent point.

This message is a reply to:
 Message 97 by Taq, posted 05-17-2011 4:45 PM Taq has replied

Replies to this message:
 Message 102 by Taq, posted 05-17-2011 6:14 PM crashfrog has replied

  
crashfrog
Member (Idle past 1467 days)
Posts: 19762
From: Silver Spring, MD
Joined: 03-20-2003


Message 100 of 423 (615867)
05-17-2011 5:49 PM
Reply to: Message 98 by Straggler
05-17-2011 4:49 PM


Re: Good Inflation......? Bad Inflation.....?
But what is a 'good' rate of inflation? And at what point does inflation become a bad thing?
There's a zero-bound problem where central banks can't, obviously, loan money at negative interest, so a positive (but low) interest rate gives a central bank room to maneuver.

This message is a reply to:
 Message 98 by Straggler, posted 05-17-2011 4:49 PM Straggler has replied

Replies to this message:
 Message 101 by Straggler, posted 05-17-2011 6:04 PM crashfrog has replied

  
Straggler
Member
Posts: 10333
From: London England
Joined: 09-30-2006


Message 101 of 423 (615869)
05-17-2011 6:04 PM
Reply to: Message 100 by crashfrog
05-17-2011 5:49 PM


Re: Good Inflation......? Bad Inflation.....?
OK. So whether inflation is good or bad is directly related to interest rates? Is that right?
Can you explain more fully?
I am asking from a position of genuine ignorance here. Not because I have some axe to grind.

This message is a reply to:
 Message 100 by crashfrog, posted 05-17-2011 5:49 PM crashfrog has replied

Replies to this message:
 Message 110 by crashfrog, posted 05-17-2011 8:08 PM Straggler has replied

  
Taq
Member
Posts: 9973
Joined: 03-06-2009
Member Rating: 5.6


Message 102 of 423 (615870)
05-17-2011 6:14 PM
Reply to: Message 99 by crashfrog
05-17-2011 5:43 PM


Re: What Is Money?
Not only is inflation present during the period when the US was on a precious metals standard, it's higher then than at any subsequent point.
Judging from the graph, the economy was less stable while on the precious metal standard. One of the advantages of being off a gold/silver standard is that it is easier to manipulate the economy to prevent big swings in inflation/deflation. In my notoriously uninformed opinion, if we were still on a gold standard the current recession may have turned into this generation's Great Depression.

This message is a reply to:
 Message 99 by crashfrog, posted 05-17-2011 5:43 PM crashfrog has replied

Replies to this message:
 Message 111 by crashfrog, posted 05-17-2011 8:14 PM Taq has not replied

  
Phat
Member
Posts: 18262
From: Denver,Colorado USA
Joined: 12-30-2003
Member Rating: 1.1


Message 103 of 423 (615872)
05-17-2011 6:42 PM
Reply to: Message 87 by jar
05-16-2011 6:45 PM


Re: What Is Money?
jar writes:
Which has more value, a dollars worth of gold or a dollars worth of lead?
they have the same value "in dollars". What if we used Euros? Which has more value? An ounce of gold, a loaf of bread, or a giant stone from Yak?The bread is the only item that we can gauge based on our unchanging human need. But wait...human need even changes. Should a garment worker in Indonesia expect the same wage as a garment worker in Atlanta? (No, because the wage is based on need...on what that individual needs to buy and purchase for their survival. 30 cents an hour goes farther for one than for the other.)
jar writes:
I imagine that Phat started this thread because he was listening to Christian Radio yet again. It seems that the folk selling vitamins and health foods and gold and prayer hankies know their demographics and so sell where they know the suckers are lined up.
Actually I was listening to Alex Jones but am keeping an open and skeptical mind. It was here that I first heard of the alarm being sounded if the dollar was dropped globally for being a reserve currency. The way it was explained, other nations have to be more disciplined since they cant simply print more of their own currency and have it pass muster globally...whereas the US can and does and has increased our money supply and not be forced to be accountable as much. Beyond that, I dont know how or why this all works.
jar writes:
What value is added by being a Global Reserve Currency and do you even know what that means?
This is all I have:
Ron Paul explains that the free ride since Breton Woods has come to and end and that we wont be able to exploit as much with a new reserve currency system that we cant control. Paul claims that such a new system would "crash the dollar" and this is what rightly worries me and should worry every American.
Edited by Phat, : No reason given.

This message is a reply to:
 Message 87 by jar, posted 05-16-2011 6:45 PM jar has replied

Replies to this message:
 Message 104 by Straggler, posted 05-17-2011 6:54 PM Phat has seen this message but not replied
 Message 105 by jar, posted 05-17-2011 6:57 PM Phat has replied

  
Straggler
Member
Posts: 10333
From: London England
Joined: 09-30-2006


Message 104 of 423 (615873)
05-17-2011 6:54 PM
Reply to: Message 103 by Phat
05-17-2011 6:42 PM


Re: What Is Money?
Is your base concern that US economic hegemony is at an end and that other nations wil take economic precedence?

This message is a reply to:
 Message 103 by Phat, posted 05-17-2011 6:42 PM Phat has seen this message but not replied

  
jar
Member (Idle past 394 days)
Posts: 34026
From: Texas!!
Joined: 04-20-2004


Message 105 of 423 (615875)
05-17-2011 6:57 PM
Reply to: Message 103 by Phat
05-17-2011 6:42 PM


Re: What Is Money?
Oh good grief. People actually listen to Alex Jones??????
Does ANYTHING in your post have ANYTHING to do with the topic?
What value is added by being a Global Reserve Currency and do you even know what that means?
Would it make any difference if we abandoned the dollar and adopted the Euro?

Anyone so limited that they can only spell a word one way is severely handicapped!

This message is a reply to:
 Message 103 by Phat, posted 05-17-2011 6:42 PM Phat has replied

Replies to this message:
 Message 106 by Phat, posted 05-17-2011 7:00 PM jar has replied

  
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