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Author Topic:   Inflation: The Basics
Jon
Inactive Member


Message 31 of 47 (588490)
10-26-2010 2:47 AM
Reply to: Message 25 by crashfrog
10-25-2010 10:07 PM


This is the End...
As before, you've made no attempt to honestly address the points and questions brought up against your position. This is typical of your behavior at EvC, and I've no interest in becoming involved. There's hardly any point in anyone continuing a discussion with one so unwilling to participate.
When ready to address the matter and the topic in a reasonable, civil manner that encourages the understanding of one another's positions, then please let me know and we can continue. If you don't want to, that's fine; we can call it quits and there will be no hard feelings on my end.
Enjoy,
Jon

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This message is a reply to:
 Message 25 by crashfrog, posted 10-25-2010 10:07 PM crashfrog has replied

Replies to this message:
 Message 35 by crashfrog, posted 10-26-2010 12:22 PM Jon has not replied

  
Jon
Inactive Member


Message 32 of 47 (588491)
10-26-2010 2:49 AM
Reply to: Message 30 by Iblis
10-26-2010 1:45 AM


Re: Things Not Accounted For
If I had my druthers, we would print a shitload of new cash into infrastructure development as well as a good chunk in welfare/unemployment/dividends of some kind.
You cannot be serious...
Can you?
Edited by Jon, : No reason given.

Check out the Purple Quill!

This message is a reply to:
 Message 30 by Iblis, posted 10-26-2010 1:45 AM Iblis has replied

Replies to this message:
 Message 39 by Iblis, posted 10-26-2010 6:39 PM Jon has not replied

  
hotjer
Member (Idle past 4624 days)
Posts: 113
From: Denmark
Joined: 04-02-2010


Message 33 of 47 (588521)
10-26-2010 11:12 AM


huh.....
I must say: as an economic student I am very confused with what everyone says.
The topic is the basic of inflation then let us discuss/debate the basic of inflation.
Inflation is a macro economic phenomenon that represent increasing level of price of goods and services so the buying power decrease (nominal money value).
According to monetarism inflation is a result of growth in the total amount of money. Some economists disagree.
From a rational point of view, inflation is viewed as a problem because it results in real loses on the money holding and can cause redistributions between debitors and creditors. Furthermore inflation cause variation in relative prices, thus market mechanism price signal are disturbed.
Low inflation rate is not always good, but it is mostly a good mechanism in the real world.
From the debate in the thread it seems like you disagree on how inflation affects the market mechanism. I suggest you support your argument with empirical data and theories to explain the selected data, otherwise, I guess, we will see no progress.

  
crashfrog
Member (Idle past 1546 days)
Posts: 19762
From: Silver Spring, MD
Joined: 03-20-2003


Message 34 of 47 (588527)
10-26-2010 12:19 PM
Reply to: Message 30 by Iblis
10-26-2010 1:45 AM


Re: Things Not Accounted For
These two things are functionally equivalent at the bottom level of the economy.
Except for the fact that they're absolutely nothing alike.
How do we do this? I mean, what will be the most effective way?
One of the most effective ways was what Obama did in 2009 as part of the stimulus; lower everybody's taxes, but not really tell them about it.
It's saved about 3 million jobs, by the estimates of most economists. Another really effective way would be to work with the banks and have a couple hundred dollars just show up in people's bank accounts (not fair to people who don't bank, of course.)
The new guy's bailouts and buyups and so forth have been even worse, in my opinion, thus far.
Your opinion is demonstratively wrong. Objectively Obama's stimulus efforts have been much more effective than Bush-era tax cuts for the rich and one-off tax rebates. The bailouts made money. How about that? Not only did they save the corporate paper process - meaning thousands of American corporations were able to continue to access the short-term credit they need to make payroll every two weeks - but they actually made money on the repayment terms.
So I think we want to try to get some of the money starting closer to the bottom than the top.
Agreed. The best thing we could do would be to extend unemployment benefits and invest in infrastructure. Both of those things put money in "at the bottom."
But the US government in particular doesn't seem to have anyone with the intitiative to accomplish that
Why do you say that? Bills to accomplish all of the above - my ideas (not mine specifically, I'm just cribbing) and yours - passed the House months ago, and have the support of majorities in the Senate.
There's just this little problem where the Senate doesn't pass legislation by majority rule anymore. It's not for a lack of anybody's initiative, it's that 41 Senators have decided that the Senate will do absolutely no business at all.
So what do we do? Put more Democrats in the Senate. It's pretty simple. The Senate was passing things, after all, when it had 60 Democrats.

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crashfrog
Member (Idle past 1546 days)
Posts: 19762
From: Silver Spring, MD
Joined: 03-20-2003


Message 35 of 47 (588528)
10-26-2010 12:22 PM
Reply to: Message 31 by Jon
10-26-2010 2:47 AM


Re: This is the End...
As before, you've made no attempt to honestly address the points and questions brought up against your position.
Completely wrong. I've addressed all of your points; you've failed to respond in any substantive way, preferring to simply repeat absurd questions that you know I've answered.
Clearly my points are so self-evident and compelling that you have no reply.
There's hardly any point in anyone continuing a discussion with one so unwilling to participate.
I'm perfectly willing to participate, and will continue to do so. You're the one who's declining to participate with me. The debate will continue at such time as you're prepared to hold up your end. It's too bad you began a thread before you were ready to do so.
Edited by crashfrog, : No reason given.

This message is a reply to:
 Message 31 by Jon, posted 10-26-2010 2:47 AM Jon has not replied

  
New Cat's Eye
Inactive Member


Message 36 of 47 (588557)
10-26-2010 3:01 PM
Reply to: Message 29 by crashfrog
10-26-2010 1:14 AM


Stop producing?
I admittedly don't know shit about Econ, never took one of those classes. But your position is strange to me, and thus interesting. I don't particularly "disagree" with you, simply because I'm unable to tell who is correct, but I do have a question.
If there's no greater demand for the TV dinners than before, the price won't go up. Supply and demand, remember? Things aren't priced as a function of what a dollar is worth; they're priced as a function of demand vs. supply.
Too, they're priced by how much they cost to make, so:
If prices of the materials to make TV dinners go up but demand for TV dinners doesn't, then they'll just make less TV dinners until the rarity of a TV dinner raises the price back to profitability.
Do you really think that'd work? Isn't it more likely that doing that would just put them out of business?

This message is a reply to:
 Message 29 by crashfrog, posted 10-26-2010 1:14 AM crashfrog has replied

Replies to this message:
 Message 40 by crashfrog, posted 10-26-2010 6:51 PM New Cat's Eye has replied

  
1.61803
Member (Idle past 1583 days)
Posts: 2928
From: Lone Star State USA
Joined: 02-19-2004


Message 37 of 47 (588569)
10-26-2010 3:46 PM


My backyard economic view
I personally feel like many of the US manufacturing companies where sold out to allow for foreign companies to use a cheaper labor force, and the American public always looking for the cheapest price perpetuated this cycle.
Corporations are in business to make money. They can't be blamed. But somehow I think the short sightedness in taking profit out stripped the jobs at the bottom shrinking paychecks Thus Banks allowing marginal income brackets to borrow into the middleclass caused bubbles bubble bubbles.
I feel Americas economic troubles are deeper than just our pockets. We have wars to pay for, tremendous debt massive unemployment and a polarized government.
No one wants to go back to the stone ages and start over. So we just pass it on. I do agree that investing in infrastructure is the way to go. The economy will improve once people have money to spend again, and this will again spurn industry to expand creating more jobs. Lets see how cheap large screen TVS are this holiday season. There is a demand, just no money to buy them and banks and credit card companies arent playing that game anymore.

Replies to this message:
 Message 38 by Jon, posted 10-26-2010 5:47 PM 1.61803 has replied

  
Jon
Inactive Member


Message 38 of 47 (588594)
10-26-2010 5:47 PM
Reply to: Message 37 by 1.61803
10-26-2010 3:46 PM


Re: My backyard economic view
Thanks for the great reply! I am wondering, though, if you'd be able to tell us how you see Inflation as fitting in to this overall picture that you've described. I notice one thing that might certainly be relevant:
The economy will improve once people have money to spend again
Increasing the amount of money in circulation is the essential cause of inflation. With more money and an equivalent amount of goods and services, the cost of each of those goods and services goes up, and the value of the money (the amount of goods/services for which each unit of money can be exchanged) decreases. This impacts everyone; not just the folk who are throwing more money into circulation, but also the folk who do not have any extras to throw. How do you propose this be balanced?
An increase in the number of goods/services may well offset this, so long as there is a demand for the new amount, which cannot be guaranteeda person only eats so much bread. Furthermore, if the demand is being met by outsiderswhich is increasingly the case, will this have the effect of off-setting the inflation of our own currency?
Does more money being spent in general really help fix the problems you've brought up?
I've my own take on things, of course, but I'm interested in hearing yours!
Thanks,
Jon

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This message is a reply to:
 Message 37 by 1.61803, posted 10-26-2010 3:46 PM 1.61803 has replied

Replies to this message:
 Message 42 by 1.61803, posted 10-27-2010 12:00 PM Jon has not replied

  
Iblis
Member (Idle past 3975 days)
Posts: 663
Joined: 11-17-2005


Message 39 of 47 (588599)
10-26-2010 6:39 PM
Reply to: Message 32 by Jon
10-26-2010 2:49 AM


Re: Things Not Accounted For
You cannot be serious...
Of course! But only in the context there, of a better way of distributing than simply dropping it from helicopters, and a better way of fixing the current malaise than introducing a Great Deflation.
You seem to be objecting to my reference to printing it rather than the current ruse of raising or lowering interest rates by the central bank. That's fine, I fully expect we would have to come up with a similar bit of jibber-jabber.
Now, seriously yourself, if you are genuinely championing a negative number where we calculate inflation: how do you propose to prevent this from collapsing the economy outright? In what sense can a depression be a good thing?

This message is a reply to:
 Message 32 by Jon, posted 10-26-2010 2:49 AM Jon has not replied

  
crashfrog
Member (Idle past 1546 days)
Posts: 19762
From: Silver Spring, MD
Joined: 03-20-2003


Message 40 of 47 (588600)
10-26-2010 6:51 PM
Reply to: Message 36 by New Cat's Eye
10-26-2010 3:01 PM


Re: Stop producing?
Do you really think that'd work? Isn't it more likely that doing that would just put them out of business?
Well, they can't make more TV dinners, because they can't sell more TV dinners because demand is the same. Making the same amount of TV dinners simply nets a lot less profit. Since it means less profit to be in the TV dinner business we should expect some businesses to get out of the business altogether, which presumably means less TV dinner production.
We were using "TV dinners" as a synonym for "widget", but if we want to talk specifically about TV dinners what they're most likely going to do is put less food in a TV dinner and conceal the difference with marketing. You may have noticed the same thing happen to other items in your grocery store; Consumerist.com calls it the "grocery shrink ray", the propensity for items at the grocery store to contain less product but look and cost the same. Frequently voids or indentations are introduced in the packaging, so you wind up with less peanut butter (for instance) in a jar that looks just as big as before.

This message is a reply to:
 Message 36 by New Cat's Eye, posted 10-26-2010 3:01 PM New Cat's Eye has replied

Replies to this message:
 Message 41 by New Cat's Eye, posted 10-27-2010 11:55 AM crashfrog has replied

  
New Cat's Eye
Inactive Member


Message 41 of 47 (588677)
10-27-2010 11:55 AM
Reply to: Message 40 by crashfrog
10-26-2010 6:51 PM


Re: Stop producing?
Well, they can't make more TV dinners, because they can't sell more TV dinners because demand is the same.
Couldn't make more and take a lower margin and try to drive the demand with lower pricing?
Making the same amount of TV dinners simply nets a lot less profit.
But less is still better than none. They shouldn't stop making them.
Since it means less profit to be in the TV dinner business we should expect some businesses to get out of the business altogether, which presumably means less TV dinner production.
Well that's no good at all!
We were using "TV dinners" as a synonym for "widget",
Yes, of course. We can use widget if you want, but I like have more specifics to attach analogies to.
but if we want to talk specifically about TV dinners what they're most likely going to do is put less food in a TV dinner and conceal the difference with marketing. You may have noticed the same thing happen to other items in your grocery store; Consumerist.com calls it the "grocery shrink ray", the propensity for items at the grocery store to contain less product but look and cost the same. Frequently voids or indentations are introduced in the packaging, so you wind up with less peanut butter (for instance) in a jar that looks just as big as before.
I hadn't heard that term, but I have noticed that (I think the first thing I noticed was when Gobstoppers got smaller)
And actually, in a sense, wouldn't that just be one of the ways that the dollar has become worth less? Or is that just the value of the food increasing?
How's that impact inflation? Throwing more money out there would help that?

This message is a reply to:
 Message 40 by crashfrog, posted 10-26-2010 6:51 PM crashfrog has replied

Replies to this message:
 Message 43 by crashfrog, posted 10-27-2010 2:06 PM New Cat's Eye has replied

  
1.61803
Member (Idle past 1583 days)
Posts: 2928
From: Lone Star State USA
Joined: 02-19-2004


Message 42 of 47 (588678)
10-27-2010 12:00 PM
Reply to: Message 38 by Jon
10-26-2010 5:47 PM


Re: My backyard economic view
Hi Jon,
Does more money being spent in general really help fix the problems you've brought up?
Economics so so complicated due to the variables. One facet may have no bearing on another and yet impact some other whole can of worms.
For instance where I live is somewhat insolated from some of the current US economic crisis due to the US Army base Ft Hood. Lots of cash every month floating around. Lots of industry growth in the form of resturants and stores. But just 50 miles to the north is a completely different scenario. Since in my area there is a group of consumers with a steady monthy paycheck and some disposible income to tap, Yes the number of resturants and stores has increased and with that the number of jobs for folks to run them.
But the hotel industry here is flagging. Not to many big companies are sending employees out of they're regions for meetings and marketing or conventions. Since those dollars are not being spent here for lodging 2 large hotels here have went bankrupt with a third on the way. So all those jobs are being lost.
I can not see how there can be one economic formula to fix our problems. Every state, city and town in this country will have different sets of problems. the one common thread I see is the middle class has curbed back borrowing and spending due to several impacts.
One being uncertainty, another is banks not freely lending as before, the reduction in consumer spending reduces the need for increased production. But also leads to a increase in durable goods setting on shelves and warehouses. This I assume further reduces company profits which leads to yet more job losses. The stock market reacts to all this news and the fed is putting out fires everywhere they can to no avail. I think this whole thing is one big market correction. It will take quite some time I think before our economy is stable again. My 2 cents.

This message is a reply to:
 Message 38 by Jon, posted 10-26-2010 5:47 PM Jon has not replied

  
crashfrog
Member (Idle past 1546 days)
Posts: 19762
From: Silver Spring, MD
Joined: 03-20-2003


Message 43 of 47 (588690)
10-27-2010 2:06 PM
Reply to: Message 41 by New Cat's Eye
10-27-2010 11:55 AM


Re: Stop producing?
Couldn't make more and take a lower margin and try to drive the demand with lower pricing?
I don't see how the math works out on that.
But less is still better than none. They shouldn't stop making them.
Well, there's capital costs. Keeping the lights on in the factory has a fixed cost no matter how few TV dinners they make. Their workers get paid by the hour, not by the dinner. Eventually they're selling so few TV dinners that they're not getting enough in net to pay for the factory and the labor. That's when it makes more sense to get out of the business altogether than to make six TV dinners a day, or whatever. Less can actually be worse than none because of fixed costs that don't scale down by just making less dinners.
And actually, in a sense, wouldn't that just be one of the ways that the dollar has become worth less? Or is that just the value of the food increasing?
Well, there's more people, and they have to eat. That's an increase in demand for food. Doesn't that indicate the rising value of food?
If you measure the distance between New York and London, you find that it increases at a rate of about a half-inch per year.
Does that indicate that our rulers are all shrinking, or that the plates are moving? Don't be so quick to assume that measurements are changing because the things we use to measure them are changing. More often we measure change because the things we're measuring really are changing.

This message is a reply to:
 Message 41 by New Cat's Eye, posted 10-27-2010 11:55 AM New Cat's Eye has replied

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New Cat's Eye
Inactive Member


Message 44 of 47 (588704)
10-27-2010 3:38 PM
Reply to: Message 43 by crashfrog
10-27-2010 2:06 PM


static dollars?
Couldn't {they} make more and take a lower margin and try to drive the demand with lower pricing?
I don't see how the math works out on that.
Assuming the widget costs $1 to make and they sell 100 at $2, then they've made $100.
With the same cost of $1, if they could increase sales to 250 by pricing it at $1.50, then they've made $125.
Making the same amount of TV dinners simply nets a lot less profit.
But less is still better than none. They shouldn't stop making them.
Well, there's capital costs. {snip} Eventually they're selling so few TV dinners that they're not getting enough in net to pay for the factory and the labor.
Well then they're no longer making a profit. Assuming they're making a profit, making something would be better than not:
quote:
Since it means less profit to be in the TV dinner business we should expect some businesses to get out of the business altogether, which presumably means less TV dinner production.
Well that's no good at all!
I think we'd want the producers to continue producing stuff, even if they're making less profit (so long as they're not losing money).
And actually, in a sense, wouldn't that just be one of the ways that the dollar has become worth less? Or is that just the value of the food increasing?
Well, there's more people, and they have to eat. That's an increase in demand for food. Doesn't that indicate the rising value of food?
Yes. But too, if the cost of food production has gone up, but the demand is the same, then that same $1 would be worth less food. No?
If you measure the distance between New York and London, you find that it increases at a rate of about a half-inch per year.
Does that indicate that our rulers are all shrinking, or that the plates are moving?
Are you saying that the value of the dollar is as static as the length of an inch? The value of the dollar can't change?
Don't be so quick to assume that measurements are changing because the things we use to measure them are changing. More often we measure change because the things we're measuring really are changing.
But if the cost to make the food goes up and then they start putting in less for the same price, how can you tell if the value of the food increased or if the value of the dollar decreased if the demand stays the same?
Edited by Catholic Scientist, : 150 --> 250

This message is a reply to:
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Replies to this message:
 Message 45 by Minnemooseus, posted 10-28-2010 3:43 AM New Cat's Eye has replied

  
Minnemooseus
Member
Posts: 3946
From: Duluth, Minnesota, U.S. (West end of Lake Superior)
Joined: 11-11-2001
Member Rating: 10.0


Message 45 of 47 (588760)
10-28-2010 3:43 AM
Reply to: Message 44 by New Cat's Eye
10-27-2010 3:38 PM


Math error
Assuming the widget costs $1 to make and they sell 100 at $2, then they've made $100.
With the same cost of $1, if they could increase sales to 150 by pricing it at $1.50, then they've made $125.
Unfortunately, 150 at $1.50 is 150 x $0.50 = $75
Now, if they sold 300, then 300 x $0.50 = $150
Moose

This message is a reply to:
 Message 44 by New Cat's Eye, posted 10-27-2010 3:38 PM New Cat's Eye has replied

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