Well, future consumption has less utility to me NOW than current consumption. Later on when I consume it will be current consumption, and then they will be the same.

You hear this argument a lot and it's bs. First of all, if inflation didn't erode your purchasing power you wouldn't have to "put your money to work" to stay afloat - the fact that (to some extent) you can beat inflation by investing (especially if you're rich!) doesn't mean it's ok, or it doesn't matter - you shouldn't have to, money is a store of value. Secondly it's all smoke and mirrors anyway. The cash doesn't disappear when you "put it to work", it's all still out there, losing value, and whoever owns each bill at any given time is getting screwed.

Just wondering, can I get a prop bet from anyone that thinks the economy is in the tank against a positive GDP in the Q2?

"You have to put your money to work somewhere otherwise it will lose its value to inflation"

"That's bull****! Inflation exists!"

...

Not what I said, can you read?

This words it better. Future consumption provides less current utility than presnt consumption. I remeber an econ class once when the first day the prof said "write down on a piece of paper how much money I would have to give you in a year for you to give me $100 right now." There were some that tried to give a "right answer" and write $107 or $108 and then there were others that "got it" wrote $200 or $300 (they were broke college students).

When I don't consume resources people that are consuming them will pay me for not consuming in the present time so they can. You seem to have no understanding of where the purchasing power comes from.

and this is exaclty why you need to stay here and talk about econ rather than run off and hide in some econ circle jerk forum. we need you here.

True enough. No inflation would be great. But a growing population and finite resources almost guarantee a certain level of inflation. Yes money is a store of value. A dollar today is a dollar tomorrow. It isn't that the stored value of a dollar changes, it's that the prices of goods and services change. A Zero Inflation Economy is possible though. The last time we were very close to it was in 1998 after 6 years of Clintonian Fiscal Policy and a healthy economy. If FRB banking were somehow responsible for runaway inflation, then you would have seen it then.

Why can't we all just wake up and see that when Bush mushroom clouded the U.S. budget in 2003 by slashing taxes and cranking up spending he put the dollar into a tailspin causing the price of oil to skyrocket and causing international and oil related goods (almost everything) to price inflate, although core inflation is still fairly low thanks to a sluggish economy. Those pension or Social Security cola's don't quite offset it though. Don't listen to me or take my word for it. Listen to Warren Buffet. He will tell you that the Bush tax cuts and budget mismanagement were unprecedented in their stupidity and ineptitude.


Notice when the dollar starts its' dive.



You could overlay some other charts here like the rise in oil's price. Wake up and smell the coffee. Unless you are making 250K plus you are fooling yourself if you think that you will be better off with Johnny McNuts. Even if you are making 250K plus, you like Buffet, Gates, Soros, Pritzkers (all gazillionaires) will be better off with Obama. These rich bastards realize that they were far better off with Clinton and near Zero Inflation and a strong dollar than they were with either of the Bushes or Reagan who started this whole spend and don't tax vodoo econ crap.

Yes, you said the dollar loses its value over time.

What are you talking about??

I already said that you perform and are rewarded for "not consuming in the present" by keeping inflation low. But other than that, if you fail to show up at the market and attempt to bid up the price of goods, I'm not paying you squat for staying at home.

Please explain why I or anyone else would pay you for not consuming in the present?? This is the most bizarre thing I have ever heard.

Assuming finite resources, a growing population and growing production and everything left unchanged, we would expect deflation. Long-run inflation is mainly a function of a greater increase in the money supply relative to an increase in available goods and services.

Depends on your definition of value. If yours is "value = dollar amount" then you're right in a tautological sort of way.

I think we'll start seeing the inflationary effects of near-zero FRB interest rates.

I don't want to be an apologist for Republicans or Bush, because I hate them both, but it would be dishonest to post that budget graph and hail Clinton as savior and Bush as expensive devil. Actually Bush as expensive devil is an honest and accurate portrayal, but that's beside the point. The fact is that the huge stock run up closely coincides with Clinton's eventual budget surplus. The treasury was taking in huge capital gains taxes. Those gains were projected into the future, as if the stock market would continue growing at double digits (or just grow at all), and both republicans AND democrats found plenty of projects to spend that phantom surplus on.

oil has increased disproportionately relative to the dollar.

don't entirely disagree with your post... obviously deficit spending is bad and bush is incompetent.

I have some resources. I would enjoy consuming them. You want to consume some resources. You would enjoy consuming more than the resources you have. I don't consume some of mine, so you can consume them. At some point in the future you have to return my resources to me, plus some extra resources for using my resources. In a banking system we call this money, but we could call it gold or widgets.

I have $10 and you have $10 dollars. There is a $10 case of beer down at the corner store. You say that you don't feel like drinking today. I run down to the store knocking down an old lady trying to cross the street to make it to the store before you change your mind. I spend all my money and buy the beer. I pay you nothing for not drinking/consuming today. I give the old lady a beer on the way home. She follows me. I call the cops. The cops come and take my beer. They tell me that I forgot to pay my Security Fee this month and that you paid two months in advance. They give my beer to you. I hate this AC stuff.

Are there any threads in this forum where you don't embarrass yourself?

Not sure how you work this out. If you have finite or limited oil and the population increases over time, then the price is going to rise. Deflation, or falling prices, is certainly not going to be seen in such a scenario. If it is, then they have developed some new economic theories.


Please elaborate. You mean low interest will eventually stoke the economy? Is that a bad thing?

Either you balance the budget or you don't. Cutting the capital gains tax along with every marginal rate while simultaneously increasing war spending will result in huge debt.

Yes, the soaring 90's stock market filled the U.S. Treasury with additional revenue. It's interesting though that the bubble didn't burst until the capital gains tax rate was lowered in '97. Might the sell off of positions so that long term cap gain investors could take advantage of the lower tax rate have caused the bubble to burst? It is my belief that lowering capital gains does exactly that. Another sell off occurred after Bush further lowered the cap gains in 2003. Additionally, it's an easy matter to take income through stock options at 15% than continue to pay 30+%.
Yes, I'm not saying that all of oil's run-up can be attributed to the dollar. But I would say that about 50% of oil's price increase is due to the weakening dollar. Ok, I'm off by 10%, or maybe these guys are off by 10%:

If you agree with this it is a start. Recall that for the first 6 years of Bush's administration, the Republicans had control of Congress and the White House. Even now the Dems only have a slim majority which makes it next impossible to get things done with the Texas Dingbat clinging to insanity.

You are not talking about "Purchasing Power" here; you are talking about putting your money to work and earning interest. And you tell me that "I have no understanding of Purchasing Power"?? I guess you enjoyed that case of beer.

I also stated why I disagree with his argument - which I took to be that unless you're like Borodog who buries his money in the backyard, you don't have to worry about the dollar losing purchasing power.

No, they don't. Inflation (in the sense of rising prices) is the result of an expanding money supply. If the money supply was constant, the supply of goods was constant, the price of goods wouldn't go up just because the population increased. There are more people competing for the same amount of money AND goods. And if there's economic growth (per capita) then there are MORE goods, the same amount of money, so prices should come down.

If there's a general rise in prices accross the board, then the value of the dollar has decreased. What would you think of a store of value that loses 95% of its value over 100 years, and 1/4 of it over the last ten? That dog don't hunt.

Not the least bit interested in the "democrats good, republicans bad" stuff.

Do you see the money supply anywhere on this graph?



Price is a function of supply and demand (ECON 101, day 1). If you have a finite resource and a growing population, then supply will diminish over time thereby raising the price. An increasing money supply will only cause inflation if the growth of the money supply is greater than the growth of real GDP. This is not even guaranteed but only likely.


Good Night.

What kind of work do you think money can do? Money doesn't work, it merely represents the ability (or right) to consume resources. If you want to consume more resources than you own right now somebody has to lend you some resources. That person would rather consume them right now, but if you are willing to compensate them enough they will wait and consume them later.

LOLz.

Perhaps you missed the bit where the fed started to take ****ty collateral in return for funds. The idea this is just about insured deposits is laughable.

The Fed itself is now the holder of loads of dubious bonds etc, that ultimately make the taxpayer liable if they default.

Im not talking about deposits, Im talking about leveraged derivates that if they start to look shakey because the system over extended itself by lending billions to ninjas (no income no job) the fed steps in to buy a load and therefore prop up there value because the fed would never default am I right.
Thereby creating a one way bet for elite bankers.

Its funny how in supposedly socialist Europe, the CB is putting interest rates up and doing its best to avoid moral hazard, and in Britain the CB is structuring its bail outs (of collateral) with massive haircuts and in built gaurentees that the tax payer wont become liable. Yes the Government bailed out Nothern Rock but the CB resisted that as much as it could.

However in so called Capitalist America the Fed is dropping its knickers like a cheap whore.

The federal Reserve: An Economists Nightmare
http://www.bloomberg.com/avp/avp.htm...SLFncnzYHc.asf

This video says it all, a bit boring and technical but hey you might learn something. Its also worth noting that everything the commentator says has got a lot worse since this interview which was in March.

Oh. I've reread your post like 10 times but still can't see anything else... my bad I'm sure, sorry.

If the money supply remains constant there will be an increasing number of things relative to the pool of money. That doesn't rule out the possibility that something has exponentially growing demand (like oil) that outpaces general deflation, but we'd still see a deflationary economy on the whole.


No, low rates will lead to higher inflation, which in general is bad, though may be superior to a collapse we might see if Fed started raising rates right now.


Agreed.

That's not really responsive to my point about irrationally anticipated surpluses. You could say cutting capgains pops bubbles, or enhances them by hiking profit incentives for new investors, whatever. Either way it's still a bubble and the timing of the pop doesn't matter. The point is that democrats were equally ambitious in their pursuits to spend that non-existent surplus, and trying to pin all the blame on Bush ignores the more chronic problem we're dealing with: politicians who have every incentive to spend and no disincentive not to. Obama's really no exception, he just wants to spend on different things.


If you stayed awake for ECON 101, day 1, you probably would've heard professor qualify those simplified graphs with ceteris paribus, or "other things equal"... that includes a static money supply.

Ok? So now we're on the same page that if the money supply outpaces real growth we get inflation?



Look at M3 %changes. It's not "correlation", it's just common sense. When your quote refers to "a modern economy", it's referring to the short term which can be volatile due to transaction turnover and individual products like oil affecting a broad category of goods. In the long run, though, it's undeniably commonsensical that infusing cash into an economy faster than the rate of real growth produces inflation.

good night

You're ignoring the fact that even if the amount of oil is constant, the total amount of wealth in the economy is increasing (well, usually). If the total amount of money in the economy is roughly constant, then prices (in the aggregate, you're shifting the goalposts by now specifying you're only concerned with oil) necessarily MUST fall. DUCY?

I will only repeat this one more time: Price is a function of supply and demand.

If you cannot accept this, then you should study Numerology instead of Economics.

At any rate, the preceding responses make me realize why it is so easy to make money in the stock market and at the tables. Trading or playing with a Numerologist have got to be the easiest games in town.

You're not water-boarding me today PVN, even if you are the King in Tights.