I'll simplify my position to clarify.

The likelihood of the fed monetizing debts is not 100% (even now).

When they monetize the debts (tomorrow, next year, in 10 years) matters.

Releasing into the economy in 1 day money that would normally circulate through the economy over a much longer time period and under much larger constraints on its velocity would cause hyper-inflation.

Nothing that has been posted has addressed the issue that the mass repudiation of debt under Boro's plan would completely and totally change individuals time preference and spending preference for their money, and that it would do so in a manner that would dramatically shorten their time preferences.

think about the things the fed backs. take the treasury, the fdic, etc. lets say the fed creates an account and prints all the money these funds need to satisfy their obligations, but only releases that money when those debts are threatened to be destroyed to prevent destruction. Is that more inflationary than what is going on right now?

well you dont need to take as many risks if you are not constantly losing to inflation. this will encourage less spending on consumption and investment, so not necessarily effecting time preferences besides taking away the discouragement to avoid cash holdings. Banks distorted time preferences, by oversupplying loan markets in the past, so if they did shorten, it would be a return to sounder state. This just a reflection of the interest rate returning to normal once banks can no longer suppress it.

Anybody care to guess when the Bernank will throw in the towel and start raising interest rates?

Anyone know of some good works? I'm researching on the effect of minimum wage on poverty.

edit: 420th post brb

this could be unrelated if I'm not understanding the differences between what's being discussed here and what I had posted asking about some time back... but it seems like what Prechter said as well, although admittedly I didn't fully understand everything Borodog/Zygote posted and will need to re-read it.. anyhow:

in terms of borodog's example where the fed steps in and buys the loans using gold.. I guess i'm not seeing how that would happen since the fed wouldn't be paying with gold and would be paying with printed dollars?

http://www.youtube.com/watch?v=Fr4q8ldTnSk

http://mises.org/rothbard/mes/chap15...._Minimum_Wage

boooooo at academy

I haven't even read the rest of your post, but I had to stop here, because this is wrong. Fundamentally wrong. When the bank "loans" you $10,000, it doesn't actually loan you $10,000 existing dollars. It simple creates an account for you and credits it with $10,000. There are now $10,000 more in existence than before the loan. That is inflation of the money supply, the moment the account is created and credited. How that money makes it's way into the economy and bids up various prices (price inflation) is a separate issue.

This is exactly why I said "general CPI inflation" to differentiate. What is fundamentally wrong is taking all money creation as equal which is what you did in your example.

Whatever. Just explain to me how gold can hyperinflate.

Also, I think I fixed the hole in the plan that had me confused, the fact that the day before Operation Bernanke Freedom goes into effect, the price of gold is (for example) $1500/oz. After Ben recapitalizes the banks and raises the reserve ratio to 100%, we assume the Fed has $9T in liabilities and 300,000,000 oz of gold (again, for example). To fully back the dollar would the be 1 oz == $30,000. What to do about the discrepancy?

Simple. Ben starts buying gold. And not paper gold, either. He takes physical delivery. He buys at market price. He will rapidly drive the market price of gold up to where it balances his books. Then he ceases gold purchases, announces that dollars are now fully convertible warehouse receipts, opens the gold window, and hopefully watches every single dollar get redeemed for specie.

If your a baker on Sunday selling bread for $2 a loaf- and Sunday night the Fed announces this change.

What do you sell your bread for on Monday?

How do you even guess at the right price?

Well, everybody will probably eat the same amount of bread, and everybody has the same amount of dollars, so my best guess would be $2.

Is this true, though? What's happened is that we've moved from a situation where it is IMPOSSIBLE for everybody to withdraw their savings in cash, to a situation where it is possible (i.e. from fractional reserve to full reserve). In some sense, this does mean there are more dollars out there, even if that sense is only that dollars which previously didn't exist outside of a number in a computer database now have corporeal form.

Maybe the question I'm trying to ask is, what money supply does the market currently use to price goods? If it's m1, then we would see inflation under Boro's plan. If it's the full money supply (M3?) then prices should stay the same.

I think.

So the price of gold goes jumps to 8,000-100,000 an ounce literally overnight, all mortgage debt in the country is wiped clean and the banking system that has been used for 100 years is done away with and replaced by something that no one living has any real experience with- and the price of bread remains the same?

If your mortgage debt was wiped clean wouldn't your spending habits change?

I said it would be my best guess.

Sure spending habits will change. That doesnt imply hyperinflation.

Also where are you getting that all mortgage debt is wiped away? Are all mortgages held by commercial banks?

oh noes we can't unenslave the world because spending habits will change.

http://www.zerohedge.com/news/must-r...othing-changes

Bump.

Plus a motherf'n thousand.

The whole world is basically a sea of debt fueled malinvestment right now. If but one thing is to be taken from that excellent piece, it is this: I understand the dubious nature of GDP numbers, but I'd be really interested to see a graph of total government, corporate, and household debt to GDP over the last 60 years. I have a feeling it would essentially confirm Lees' thesis about the diminishing marginal impact of each new dollar of debt on real economic growth.