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Old 08-28-2019, 09:36 AM
 
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Quote:
Originally Posted by EDS_ View Post
Is your point that other economies function in ways besides people buying stuff?

I'd like to learn more about how your ideal economy would work.
Our US economy is fully mature, so our main source of GDP is in consumerism. Tending toward more in service than industrial production. So optionally relying on imports more.

China is still on its way up to the first world. And as we speak their central command is working to pivot its economy away from massive industrial/infrastructure/exports and towards its people as consumers. Has to be if they are to continue on up.

It seems to me that Trump is still focused on this old China with his tariffs. I of course could be wrong as Trump is bound to be smarter than I am.
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Old 08-28-2019, 09:41 AM
 
1,307 posts, read 649,573 times
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Quote:
Originally Posted by Mircea View Post
The Federal Reserve actually caused the 1952-53 Recession.

I always assumed they caused all of them, intentionally.
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Old 08-28-2019, 09:44 AM
 
3,617 posts, read 2,228,150 times
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Quote:
Originally Posted by lieqiang View Post
I've learned from this forum that inflation is when someone decides, without actually tracking anything, that their grocery prices have doubled in whatever years. They then extrapolate that haphazard guess to be their entire cost of living, then take it farther and decide the entire country is suffering the same ruinous inflation and all the statistics on inflation are fake and generated by nefarious government entities.
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Old 08-28-2019, 10:48 AM
 
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Quote:
Originally Posted by Mircea View Post
That would be the definition of Monetary Inflation, but not Wage Inflation, Cost-push Inflation or Demand-pull Inflation.



Stop right there. That's your error. The money did not go into the economy.



Unfortunately, the government makes no attempt to differentiate between the various forms of Inflation.

For example, from January 1990 to June 2019 the government reported rate of Inflation is 98%.

Is that Monetary Inflation? Nope. It breaks down like this:

11% Monetary Inflation
19% Cost-push Inflation
68% Demand-pull Inflation
------------------------------
98% Inflation

The Federal Reserve actually caused the 1952-53 Recession.

You have to understand that rationing had just ended in 1946 and not even 4 years later the Korean War breaks out in June 1950.

Americans -- meaning households and businesses -- were in total tizzy because they thought the government would start rationing again.

Flour, sugar, coffee, tea, cheese, alcohol, and a host of other things are flying off grocery store shelves, because housewives are scarfing it up thinking the government is going to start rationing again. Businesses are buying and hoarding rubber, steel and many other items, even paper, because they fear rationing.

Within 6 months Inflation had jumped 10% and rising but it was 1% Cost-push and Monetary Inflation and 9% Demand-pull Inflation.

When Demand exceeds Supply prices rise.

You can't touch it. Doesn't matter if you increase/decrease the money supply or increase/decrease interest rates.

You can't touch it.

The only way to stop Demand-pull Inflation is increase Supply to match Demand or hope consumer demand ceases or subsides.

The Federal Reserve stupidly raised interest rates which had no effect, except to crash your economy and that's the 1952-53 Recession.

Monetary Inflation increases the price of everything as in every thing as in every single thing and that includes wages.

When you look at the CPI and you see the prices of everything rising, that's a clue you have Monetary Inflation.

But, when you look at the CPI and you see some prices rise while others remain unchanged and still others decrease in price, that's your first clue Monetary Inflation is either non-existent or so negligible as to have no impact.

Much of what you wrote is right on.

The Fed. will "cause" a recession to ward off spiking general price inflation. A recession every now and again is better than persistent high inflation. The Fed. has caused more than one recession. The early '50s recession was preferable to the alternative which would have been very high inflation most likely lasting many years.

As we are a net exporter of money and our economy grows nearly every year ergo we must have a proportionally increasing money supply.

As a technical matter central banks can starve out demand induced inflation but the risk is deflation which is worse - by reducing the effective money supply/increasing rates enough to dry out capital markets and main street.
Further, in a rational capitalistic economy producers will fill high demand low supply sectors/pathways with close substitutes quickly. Plus, most times demand only outstrips supply in oddball situations like say a hurricane approaching and you decide to buy a generator.

Hierarchy of grief:
The old Friedman targets of 2% inflation in the face of 3% growth seems to be ideal but fleeting.
Inflation close to or greater than growth is bad. The little guy gets squeezed.
Inflation much greater than growth is very bad. The little guy gets killed.
Any amount of deflation lasting over a few months is worse. Investment stalls. Markets falter. Real estate dies.
Very high inflation and significant and long last deflation are the worst - it's a push. Both are nightmare scenarios.
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Old 08-28-2019, 10:50 AM
 
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Quote:
Originally Posted by Sunbiz1 View Post
I always assumed they caused all of them, intentionally.
Not all. The Fed. did not cause '08. At least not intentionally - in hindsight though The Fed. mishandled things just before.


The banking system was in a state of low level chaos leading up to the bust The Fed. should have managed all that better.
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Old 08-28-2019, 10:53 AM
 
8,513 posts, read 9,263,285 times
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Quote:
Originally Posted by Hoonose View Post
Our US economy is fully mature, so our main source of GDP is in consumerism. Tending toward more in service than industrial production. So optionally relying on imports more.

China is still on its way up to the first world. And as we speak their central command is working to pivot its economy away from massive industrial/infrastructure/exports and towards its people as consumers. Has to be if they are to continue on up.

It seems to me that Trump is still focused on this old China with his tariffs. I of course could be wrong as Trump is bound to be smarter than I am.
Good post.

Industrial production involves people buying stuff usually to make something that allows consumers to buy something.
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Old 08-28-2019, 12:08 PM
 
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Quote:
Originally Posted by EDS_ View Post
Good post.

Industrial production involves people buying stuff usually to make something that allows consumers to buy something.
Unless you are the 'old China' exporter. Relatively speaking of course.
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Old 08-28-2019, 01:05 PM
 
8,513 posts, read 9,263,285 times
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Quote:
Originally Posted by Hoonose View Post
Unless you are the 'old China' exporter. Relatively speaking of course.
Sure. But the "Old China" exporter is selling to someone/someone's proxy ultimately.
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Old 08-28-2019, 03:04 PM
 
Location: Ohio
20,288 posts, read 14,439,814 times
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Quote:
Originally Posted by EDS_ View Post
The Fed. will "cause" a recession to ward off spiking general price inflation. A recession every now and again is better than persistent high inflation.
Recessions don't stop Demand-pull Inflation.


Neither do interest rates. In the 1970s the prime rate was as high as 19% and it sat 13% for a while and it had no affect on the housing market. People still bought homes.


Quote:
Originally Posted by EDS_ View Post
The early '50s recession was preferable to the alternative which would have been very high inflation most likely lasting many years.
But that would never have happened.

Truwoman screwed up. Period.

In 1950, nobody did polls/surveys. Those were for political elections, only.

If 1950 were 2019, you'd have dozens of pollsters asking, "Do you think the government is going to start rationing again?"

And then all the bloggers and vloggers on the internet are talking about rationing and "news" websites have quick polls, "Do you think the government is going to start rationing again?" or "Should the government start rationing again?"

Right here on City-Data there'd be a dozen threads in the P&OC and Economics Forums discussing rationing.

Once the government realizes there's ration-induced panic, it can take corrective action.

Truwoman should have gone on radio and TV and said, "I am not going to start rationing."

That would have stopped Demand-pull Inflation dead in its tracks and prices start immediately falling.

But, he doesn't do that, and neither does Eisencoward.

By the time the recession starts, households and businesses have figured out the government isn't going to start rationing and both demand and prices start dropping back to normal.

Even if that didn't happen, there was a cease-fire in July 1953, so there's no way spiking prices would have continued on for years and years.
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Old 08-28-2019, 03:13 PM
 
Location: Ohio
20,288 posts, read 14,439,814 times
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Quote:
Originally Posted by homelessinseattle View Post
Yes you are correct. Our whole economy is based on people buying stuff. Our government and banking system will do everything in their power to make sure that continues.
Um, that's every economy for the last 125,000 years.

An economy is commerce and commerce is an economy.

If you're not buying something, then you're bartering/trading for something.
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