More QE... Exactly what we don't need...

[Frank Shoemaker]

Originally Posted by bale002

I am trying to pinpoint a precise definition for the term hyper-inflation as has been used here in this thread, especially by Frank Shoemaker ...

If you have the price of commodities going up doing a 2x in six months and they don't stop then would be hyper inflation. Gold is blowing a nice bubble.


I'll stick with this one. Food if the price of that goes up and keeps going up then we have hyperinflation. A 100% year on year increase.


There is a lot of cash sitting on the sidelines If that cash moves into commodities: gold, silver, oil, pork bellies etc. then those prices will go up. Wages would tend not to move. So economic contraction. Printing money tends to push commodities higher. Get a panic going no one wants to hold onto cash and everyone wants to have gold, silver etc. The cash on the sidelines starts moving. Now the government is obliged to spend money on food stamps. That money is currently printed.

Originally Posted by gwynedd1

I wouldn't say that. Keynesian economics was the criticism of classical economics, and it assumptions that were being exposed during the depression. It also rejected the basic ideas of monetarism. Its either true or not. That it can be abused by government may indeed be true, but so are a great many other useful things. Where I fully agree with Keynes is that finance matters. The classical theories and monetarism act like banks and debt play no roll, and that fiance is transparent. Its known as Ricardian barter model . Hyman Minsky took this even further which assumes inherent instability of debt and finance. His view, the correct one, is that the interdependent nature of debt is like a web and when there is too much it becomes unstable as well as becoming unstable overtime. Valuations become distorted which is the root of all economic evil.

Take the minimum wage law.


Set the minimum wage at a fraction of the top total compensation packages.


Set it so that the price of houses is no more than three time the house hold income.


Set it so that the total debt in America is no more than 125% Of GDP.


Think this one though Gwynedd.

Originally Posted by gwynedd1

I would compare it to WWI and the interlocking treaties which simply could not be understood on their own. Breaking one treaty may not have intended to break a bunch of others but that is what happened. The neo liberal theories assume that a Greek default does not revalue everything else. However, it does. If you owe me because I lent to you because you are worth <sum> because you own <x> which is worth <sum> because person <y> rents it. Its all dependent on person y.

OK do a 4x on person y's income and the unstable debt structure is stabilized. That is the fix that isn't being looked at.

Originally Posted by gwynedd1

We have that school of thought to thank for showing finance matters. The Democratic party represents Keynes about as well as Stalin would represent Georgian wine.

Worse than this since there is no metallic specie anymore, government debt does not really even represent leverage. Now deficits work like metal mines.



Not really that at all. Keynesian economics if actually applied would pay labor for work in more of a command style to use the idle surplus. Everything they have done thus far is monetarism to a T. Even the deficits were spent on bailouts which is supposedly so banks will lend. That is as faux Keynesian as it gets.

As far as Japan goes what they should have done is stop taxing. Why tax when consumption was low? Instead they exported the Japaneses surplus. The reason is the same.

Japan built a debt structure that was unsustainable. They hit 6 times their average household income as average house price. (Our bubble peaked at 4.5X) (Total debt % GDP.) In simple terms they needed twice the income to pay for those houses. Or More. Turning an asset bubble into inflation is far easier to deal with than deflation on the other side.

Originally Posted by gwynedd1

Few people know that debt is the money supply and they want to pay it back, which is a lot like throwing gold and silver back into the mine shaft.

You and I see things a bit differently. I don't have a good explanation for what I am looking at. But if you pay back debts then you can re-borrow the money. No loss. If you default on the debt then you can't re-loan the money, loss. We live on an exponential debt curve. We need more debt each year. The government can pay back its debts but the privet sector then needs to pick up the slack. If you up the minimum wage then you can use the new wages to repay the national debt. If you pay it all back then you can use bits of paper that say I am worth one $ instead of IUO one $. Not at all like throwing gold and silver back into the mine.


Where we are at now is debt saturation. More debt makes the system contract. QEIII will tend to contract the economy. More $ same amount of stuff makes the stuff cost more in terms of $s. With downwards pressure on wages less excess income to spend. Less not more consumer consumption.

Originally Posted by bale002

My best guess is that the Fed is trying to prevent housing prices from cratering further, which would again threaten to trigger a payments system crisis like in 2008-2009. This latest and specificially MBS purchase program is designed to buy more time, probably a long time, to smooth out the ongoing structural changes in the global and US economies and the damage caused by the policy blunders that US policymakers have made in the throes of these changes.

The Fed has a presidential mandate to keep things from going gown. (Google plunge protection team.) How they chose to interpret that mandate is the big Q? They may be shooting for re-inflating the bubble.

[gwynedd1]

Originally Posted by Frank Shoemaker

If you have the price of commodities going up doing a 2x in six months and they don't stop then would be hyper inflation. Gold is blowing a nice bubble.


I'll stick with this one. Food if the price of that goes up and keeps going up then we have hyperinflation. A 100% year on year increase.


There is a lot of cash sitting on the sidelines If that cash moves into commodities: gold, silver, oil, pork bellies etc. then those prices will go up. Wages would tend not to move. So economic contraction. Printing money tends to push commodities higher. Get a panic going no one wants to hold onto cash and everyone wants to have gold, silver etc. The cash on the sidelines starts moving. Now the government is obliged to spend money on food stamps. That money is currently printed.

Actually if the cash goes into pork bellies more people will be needed to make more. So it will tend to move wages. Land on the other hand can go up in price and no amount of labor will make more of it where it is being inflated. It reaches the point until all the surplus goes to the land owner and none to goods and services sector. Once an economic stress comes along then goods and services have no place to go and run into deficits given their fixed rentier driven expenses. After that it shuts production down which of course creates more negative equity. Thats the problem. Thats why the Phillips curve does not work on rents. However they forgot about economic rents for the sake of the rentier class so they didn't know how that works either. Oil while requiring labor to extract will not make this adjustment because its also a resource rent.

Take the minimum wage law.


Set the minimum wage at a fraction of the top total compensation packages.


Set it so that the price of houses is no more than three time the house hold income.


Set it so that the total debt in America is no more than 125% Of GDP.


Think this one though Gwynedd.
OK do a 4x on person y's income and the unstable debt structure is stabilized. That is the fix that isn't being looked at.

I agree but a default and general devaluation of real estate would be preferable.

Japan built a debt structure that was unsustainable. They hit 6 times their average household income as average house price. (Our bubble peaked at 4.5X) (Total debt % GDP.) In simple terms they needed twice the income to pay for those houses. Or More. Turning an asset bubble into inflation is far easier to deal with than deflation on the other side.
You and I see things a bit differently. I don't have a good explanation for what I am looking at. But if you pay back debts then you can re-borrow the money. No loss. If you default on the debt then you can't re-loan the money, loss. We live on an exponential debt curve. We need more debt each year. The government can pay back its debts but the privet sector then needs to pick up the slack. If you up the minimum wage then you can use the new wages to repay the national debt. If you pay it all back then you can use bits of paper that say I am worth one $ instead of IUO one $. Not at all like throwing gold and silver back into the mine.

The only reason they cannot loan is because of counterfeit laws. A bank can't just print money. The way to inject money into the economy is not to collect taxes. If that is not enough then tax "rebates" going all the way back to 1776 if needed. That will replace the money supply short fall from bank credit that will ensue with defaults. Banks not solvent could become public property and run as "zombies".

Where we are at now is debt saturation. More debt makes the system contract. QEIII will tend to contract the economy. More $ same amount of stuff makes the stuff cost more in terms of $s. With downwards pressure on wages less excess income to spend. Less not more consumer consumption.

Defaults cancel debts. Can't pay then liquidate. You do at least know the problem but why you are so fixated on wage inflation? Its just one way and its not how the system was designed. It was designed to default and liquidate. Why aren't we allowing the bankruptcies, defaults, and cancellations as designed? If the banks decide to hold us hostage then give money to people to spend but I don't know why they would since they would become da guberment property because the big ones would not be solvent.

The Fed has a presidential mandate to keep things from going gown. (Google plunge protection team.) How they chose to interpret that mandate is the big Q? They may be shooting for re-inflating the bubble.

Of course they are and that is the problem. We should junk the Fed. Fiscal policy and the treasury make much more sense.