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To some extent - yes. Comparing to America - not really. Only Americans consider debt as leverage, and mass insane amounts of it.
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Inflation is the tool used by banks to discourage savings, and encourage debt.
Neoliberals (anarcho-capitalists) are strongly against inflation. Because inflation deteriorates the value of the capital - which is what capitalists possess.
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Why would you save if you know those savings will buy less in the future?
But to save something, you gotta have an excessive capital - which is not something most people have.
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Why would you not purchase something with credit today if you know you will be paying back the loan with money that is worth less?
Because interest is usually higher than inflation.
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It is debt creation that causes inflation.
But money printing the right way also causes job and wealth creation - mitigating inflation and creating growth. Yes, it's not what you are witnessing, but only because it's not done even remotely the right way. America is printing money to spend on "fish", not on "fishing rods".
That's what Soviet Union did in 1980's...
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Russia is facing a huge problem itself right now with bonds issued decades ago that are now due. Eventually the government there will have to deal with those bonds by rolling them into new debt which will in turn devalue the currency.
Russian gold-currency reserves equal all foreign debt, including private. This may sound great, but in reality it's the way Russian oligarchs rape people - lending foreign countries (including America) for, lets say, 1%, while Russian banks and corporations loan the same amount abroad at 2%.
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I do not know how it is in Russia, but here in the US there is only a very small minority of people who understand what is happening or have any interest in knowing. We have become victims of our own prosperity. Too comfortable and too many distractions to bother educating ourselves or becoming involved in our local government.
Unfortunately for me, in Russia things may be even worse - at least for now. There's a saying that "Russians await the kind king" (Stalin managed to meet the definition of "kind"). It's really pathetic, but it's true.
Bolsheviks tried to change this by giving people power. You know what - people refused to take it.
Many decades later neoliberals forced people to take power - same result...
Recently, people began to show the signs of life... I hope it will grow.
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I am sorry to be pessimistic, but I just do not see that ever happening.
Revolution is always a choice. If you are not aware - revolutions are not really commited by the majority.
It is constantly used to make legitimate inflation discussions and analysis seem less credible.
Doing an 8X on the monetary base in 4 years makes a discussion of hyper inflation legitimate. That is what the fed has done.
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Originally Posted by jimhcom
Inflation is now and will continue to be the mechanism by which the average American will lose their wealth.
This I agree with you completely.
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Originally Posted by jimhcom
The government has absolutely no option but to continue to print ever increasing amounts of dollars to cover its unfunded obligations.
This is what drives hyper inflation.
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Originally Posted by jimhcom
While corporate CEO's will continue to give themselves multi-million dollar bonuses to keep ahead of inflation, the working person will continue to fall behind and see their standard of living eroded despite the continuous increases in productivity and technical advancements that decrease the cost of living.
Over the last 30 years the fed has targeted 5% unemployment. This has kept the average male worker's buying power just about the same give or take a bit. The average woman's buying power went up a bit over this time frame.
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Originally Posted by jimhcom
The monetary system is designed for one purpose, which is to keep working people constantly in debt
This I don't agree with. Your personal choice to get more debt is on you. You could save money if you wanted too.
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Originally Posted by jimhcom
and needing to work to support themselves.
On average every member of a group needs to do enough to support themselves and to make up for the losses. Are you saying the we are entitled to a free ride?
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Originally Posted by jimhcom
After all, it is labor and not dollars which is the real measure of wealth.
And with the outsourcing we are becoming a poor country.
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Originally Posted by jimhcom
The wealthy derive the lion’s share of what labor produces, and without labor, the wealthy earn nothing.
What is your point here? The test of weather something should be done in this country is weather or not it leaves you with more units of exchange when you are done than when you started.
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Originally Posted by jimhcom
Hyperinflation in the sense of what happened in Germany post WW1 will never happen,
We are printing 2/3 of the dudget short fall each year. This is what drives hyper inflation so do you have anything to back up this assertion? What is the mechanism that will keep unlimited printing of money from getting unlimited price increases?
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Originally Posted by jimhcom
but the continual every-day inflation that keeps you in debt, discourages you from saving, and makes it nearly impossible to escape the modern day institution of wage slavery, will.
What we have is stagflation the worst of deflation with ever higher prices. Real inflation tends to bring with it full employment.
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Originally Posted by jimhcom
The rich will get richer, and the peasants will continue toil in ignorance to produce that wealth.
If you get inflation by having the minimum wage go up and a tax structure that keeps the top from getting more compensation then you can us inflation to get wealth redistribution.
Hyperinflation in the sense of what happened in Germany post WW1 will never happen....
Never huh? 25 countries have experienced hyperinflation in the world in the last 25 years, 4 in the last 10 years. But this is the United States, that can't happen here. Well it has, twice in fact. Currency collapse occurred in 1812-1814 and 1861-1865. ANY government that spends more than it takes in will eventuality experience hyperinflation, it's just a question of when, not if.
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Originally Posted by jimhcom
From the time the US was formed until 1913 there was no inflation, because there was no central bank. After the creation of the Federal Reserve, it only took 16 years to flood the economy with enough debt to create the great depression.
You obviously do not know your history. There was a severe recession or depression roughly every 5 to 8 years from the 1880's until 1913. Not to mention two currency collapses in the past. The Evil Federal reserve stabilized the economy for 16 years and each recession from the 1930's until the present date has been much less severe then before it existed. I would carefully consider what your planning on replacing the Federal Reserve before you go ahead and get rid of it.
Last edited by TechGromit; 09-08-2012 at 06:52 AM..
Do you have anything to support this?
Doing an 8X on the monetary base in 4 years makes a discussion of hyper inflation legitimate. That is what the fed has done.
That is a red herring. I can think of no time banks were reserve constrained. In fact why did we have a housing bubble before all this expansion of the monetary base? As of now banks loan money secure by assets. Asset inflation with the leverage ratios of 30 to 1 make the monetary base a joke. When assets are debt saturated it does not matter what the monetary base is because their is no equity to support a loan. So now deflation asset prices trump monetary base up or down.
The Fed action actually has a perverse influencing in a rent seeking environment. If a factory site sits on a ground rent of 200k and low interest rates inflate the ground rent to 250k, then a capital enterprise needs to pay more or borrow more for the ground rent which will becomes a dead weight. It stimulates nothing. Even worse is it keeps rent high as well for workers who would work in the factory. This is where neo classical economist are blind. They pretend rents don't exist and call it capital which is of such a fundamentally different nature it makes their theory absurd. So it kills new business.
Yet the down side is as the property drops then its in negative equity and can't even sell out or move. So now its a debt saturated pig. So all they are doing is saving old industry and quit poorly at that. Fed policy cannot help the goods and services economy. It should not only be obvious after my explanation, but it should be more obvious after we are going on 5 years after the crisis with nothing but inept Fed policy of an expanding monetary base.
Never huh? 25 countries have experienced hyperinflation in the world in the last 25 years, 4 in the last 10 years. But this is the United States, that can't happen here. Well it has, twice in fact. Currency collapse occurred in 1812-1814 and 1861-1865. ANY government that spends more than it takes in will eventuality experience hyperinflation, it's just a question of when, not if.
You obviously do not know your history. There was a severe recession or depression roughly every 5 to 8 years from the 1880's until 1913. Not to mention two currency collapses in the past. The Evil Federal reserve stabilized the economy for 16 years and each recession from the 1930's until the present date has been much less severe then before it existed. I would carefully consider what your planning on replacing the Federal Reserve before you go ahead and get rid of it.
Your knowledge of history is bizarre. The depressions staring in the 1870s was caused buy deflation after they retired greenbacks and demonetized silver. To call that hyperinflation is ridiculous.
Did you happen to notice both those event around confidence in bank notes happened during two major US wars, the War of 1812 and the Civil War?
Between 1811 and 1816 the value of bank notes in circulation increased from $28,000,000 to $68,000,000. The obvious import of this development was a steady depreciation in the value of currency. When the British seized Washington, banks throughout the country, except those in New England, suspended specie payments. The result was a crazy quilt of currency values throughout the nation. In Boston the quoted value of the dollar was 100 cents and in New York 93 cents, while in Washington it was 75 cents. Public confidence waned. Congress authorized bond issues of $61,000,000 between 1812 and 1814, but only $45,000,000 worth was sold, and most of that for less than par value. The credit of the federal government had reached bottom. At one point in the war the Department of State's funds were so low that it was unable to pay even its stationery bill.
Suspending specie payment is sort of going to be a problem as is the lack of political confidence in having your capital seized. Now there is no specie at all. In those days people just defaulted to using specie which was a ready replacement and they could dump notes pronto What will they do now? What readily available replacement is there? We also have much more prominent taxing powers which can suck up any excess cash, unlike then.
Inflation is a deliberate political act, not an economic one.
I'd really like to know why the middle class who carries both mortgage debt and student debt has inflation to fear rather than deflation and economic stagnation. Yes I'd really like to know that. The long Depression and the great Depression show much longer and more damaging effects that inflation. Why? Who cares when someone's cash hoard devalues? Its nothing but an economic instrument meant to facilitate trade, not grow in value. That is why Silvio Gesell wanted to destroy currency appreciation by expiring it. Debt expiration was a common all through history. Money is nothing but a debt and when there is too much of it in few hands, its got to go.
If you are afraid the value of your dollar us going to go down, then buy something with it. If inflation hurts the poor, then its not really just inflation. Its inflating in a particular part of the economy and shifting wealth sort of like now. One cure for that is wage inflation, but that would make too much sense.
Your knowledge of history is bizarre. The depressions staring in the 1870s was caused buy deflation after they retired greenbacks and demonetized silver. To call that hyperinflation is ridiculous.
I never claimed the recessions/depressions were caused by hyperinflation. My point is the Federal reserve did more to stabilize the countries economy than any system before it.
That is a red herring. I can think of no time banks were reserve constrained. In fact why did we have a housing bubble before all this expansion of the monetary base?
Because the world's monetary base went from $3 trillion to $10 trillion During the housing bubble. The sale of debt to third parties removes the constraint imposed by the requirement for reserves on the banks. The limit is the availability of working capital.
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Originally Posted by gwynedd1
As of now banks loan money secure by assets. Asset inflation with the leverage ratios of 30 to 1 make the monetary base a joke. When assets are debt saturated it does not matter what the monetary base is because their is no equity to support a loan. So now deflation asset prices trump monetary base up or down.
Asset saturation is income limited. The price of houses has stopped falling and started climing. Housing bubble 2.0. The fed was driving world wide inflation with its buying of the government's deficit spending.
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Originally Posted by gwynedd1
The Fed action actually has a perverse influencing in a rent seeking environment. If a factory site sits on a ground rent of 200k and low interest rates inflate the ground rent to 250k, then a capital enterprise needs to pay more or borrow more for the ground rent which will becomes a dead weight. It stimulates nothing. Even worse is it keeps rent high as well for workers who would work in the factory. This is where neo classical economist are blind. They pretend rents don't exist and call it capital which is of such a fundamentally different nature it makes their theory absurd. So it kills new business.
I'm more inclined to think in terms that there is a difference between debt and savings for starting a business. With our negative savings environment we have a strong disincentive for starting a business here. Wages need to go up and lead the land price increase.
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Originally Posted by gwynedd1
Yet the down side is as the property drops then its in negative equity and can't even sell out or move. So now its a debt saturated pig. So all they are doing is saving old industry and quit poorly at that. Fed policy cannot help the goods and services economy. It should not only be obvious after my explanation, but it should be more obvious after we are going on 5 years after the crisis with nothing but inept Fed policy of an expanding monetary base.
Back in 2009 someone told me about the term liquidity trap. When I understood the concept I said we are in one. The fed can't loan out enough money to get the economy going. We are debt saturated. The banks can't make money by writing new loans. System collapse.
Hyper inflation is not fast normal inflation. It is not debt driven. Hyper inflation runs on cash. With a 100% a day increase in prices I get paid and then take my pay check and buy something to hold the value of my money overnight. I suffer a loss in the time it takes to go from work to where I get an overnight store of wealth. The cash in circulation changes hands several times a day. The viscosity of money is so high that the loan writing process is too slow to drive it.
To some extent - yes. Comparing to America - not really. Only Americans consider debt as leverage, and mass insane amounts of it.
Leverage is a very useful tool used correctly, I have personally benefited greatly from its use, and it is not just a American tool, it is used by people where ever credit is available. It is important though not to use it for supporting your lifestyle.
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Neoliberals (anarcho-capitalists) are strongly against inflation. Because inflation deteriorates the value of the capital - which is what capitalists possess.
Bankers are neither Neoliberals or Anarcho Capitalists. Both these terms have been misused by the majority of people who do not really understand their principals.
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But to save something, you gotta have an excessive capital - which is not something most people have.
Actually most people in the US, Europe, and most of Asia have some disposable income they can choose to spend or to save. Most choose to continually improve their lifestyle in lieu of investing in their future.
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Because interest is usually higher than inflation.
That is true, but people are both emotional and greedy. Given the opportunity to own something they really cannot afford at the cost of future savings is something most have a hard time resisting.
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But money printing the right way also causes job and wealth creation - mitigating inflation and creating growth. Yes, it's not what you are witnessing, but only because it's not done even remotely the right way. America is printing money to spend on "fish", not on "fishing rods".
Money printing the right way means adjusting money creation to increases or decreases in GDP. That is not what bankers do. Their money creation is tied to artificial valuations of assets in order to increase profits. If assets were actually worth what banks loan on them, there would be no severe recessions.
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Russian gold-currency reserves equal all foreign debt, including private. This may sound great, but in reality it's the way Russian oligarchs rape people - lending foreign countries (including America) for, lets say, 1%, while Russian banks and corporations loan the same amount abroad at 2%.
Russia's gold currency reserves are small in relation to the overall world economy, (less than 45 billion for Russia and over 400 billion for the US) and the only foreign reserves that have real value in times of crises is the dollar. It's reserve currency status is supported not by production as most people believe, but by military ability. When all other forms of diplomacy break down, the country with the most military power is who is expected to remain standing. The Russian banks are playing the same game as the rest of the world banking community. They use the money of both the people and the government to enrichen themselves.
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Unfortunately for me, in Russia things may be even worse - at least for now. There's a saying that "Russians await the kind king" (Stalin managed to meet the definition of "kind"). It's really pathetic, but it's true.
I am truly sad to hear that. I would have hoped that the suffering and hardships of the people of Russia would have over the decades impressed the importance of awareness and education.
Oligarchs can only exploit people when they are ignorant of the game they play.
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Bolsheviks tried to change this by giving people power. You know what - people refused to take it.
Many decades later neoliberals forced people to take power - same result...
Recently, people began to show the signs of life... I hope it will grow.
Revolution is always a choice. If you are not aware - revolutions are not really commited by the majority.
Here the people once had the power, but they became complacent with prosperity. They no longer wanted to sacrifice their time and efforts to be a part of the process. They allowed the politicians and the wealthy to conspire to take their power from them. They did not care as long as they were comfortable.
It saddens me to think of the sacrifice and efforts that went into creating this country and the principals of the forefathers who believed government should be subservient to the people, and that a citizen was equal in rights to a king. Today we are just well kept peasants. Our Constitution and our Bill of Rights trampled by the criminals in government and their masters on Wall St. Our people do not care as long as they have the material comforts they desire.
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