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Old 08-20-2008, 06:31 PM
 
Location: Los Angeles Area
3,306 posts, read 3,659,972 times
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Even the M3 is showing a major contraction in the money supply. So, lets see all indicators of the money supply are contracting, credit is contracting...yet there is going to be high inflation. Something doesn't add up.

Sharp US money supply contraction points to Wall Street crunch ahead - Telegraph

Inflation can't get out of control without "wage inflation", wages are decreasing. Welcome to deflation....1930's style.
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Old 08-20-2008, 07:29 PM
 
Location: Raleigh, NC
9,043 posts, read 12,037,068 times
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Quote:
Originally Posted by Humanoid View Post
Even the M3 is showing a major contraction in the money supply. So, lets see all indicators of the money supply are contracting, credit is contracting...yet there is going to be high inflation. Something doesn't add up.

Sharp US money supply contraction points to Wall Street crunch ahead - Telegraph

Inflation can't get out of control without "wage inflation", wages are decreasing. Welcome to deflation....1930's style.
Wouldn't disagree at all, in the short term.

If government doesn't mind millions literally starving on the street and can cope with the civil unrest resulting from 25% unemployment and nearly all government programs cut, including the liquidation of social security and medicare...then I would agree that money will contract over the long term.

Just wait until the next prez takes office. Kids might be playing with money, making cute forts out of them.
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Old 08-20-2008, 08:13 PM
 
Location: Texas
4,936 posts, read 7,153,689 times
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Didn't this guy say we'll never experience a deflationary period like the great depression ever again? Wasn't this guy a student of the depression? Didn't this guy suggest that we rain dollars from the sky to combat deflation?
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Old 08-20-2008, 08:31 PM
 
10,903 posts, read 8,900,961 times
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What is the 52-week rate of growth in the M3?

Alternate Data Series

Inflation or deflation isn't something that occurs in just three months or even six months. It's experienced on a persistent basis over years. It took nearly five years of continual rises in the cost of living before people realized that there was an inflation problem.
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Old 08-21-2008, 12:05 AM
 
Location: Ohio
22,798 posts, read 16,011,243 times
Reputation: 19288
Quote:
Originally Posted by Humanoid View Post
Even the M3 is showing a major contraction in the money supply.
The US ceased publication of the M3 in March 2006, so there's no possible way you could know what the M3 is.

For many countries, the amount of foreign currency reserves is a matter of national security, and thus "classified." That's done largely to prevent people like George Soros, or countries like the US, from manipulating and destroying their economies and controlling their governments.

Quote:
Originally Posted by Humanoid View Post
So, lets see all indicators of the money supply are contracting, credit is contracting...yet there is going to be high inflation. Something doesn't add up.
Yes, I've explained it layman's terms a half dozen times, but you don't seem to be able to grasp the concept of inflation.

There are different types of inflation. Each has its own cause. It is precisely because each has its own cause that each has its own solution, which is independent of the others.

If there's Wage Inflation -- rising wages resulting in rising prices -- playing with the money supply is not going to resolve the issue, because the money supply is not the cause. Rising wages are the cause.

The only solution to Wage Inflation is Wage & Price Freezes (or Wage & Price Controls is you prefer). FDR and Nixon used them and they were successful, at least to a point.

Prices have been rising of late because of Cost Inflation. The money supply has no bearing on Cost Inflation. Cost Inflation occurs when there are shortages of commodities, resulting in rising prices as the input costs rise.

Everyone seems to forget that there's over 100 ethanol plants sucking corn off of the market. 7 are under expansion, 23 are starting production now, 48 next year, and 100+ between 2010 and 2012. There isn't enough surplus corn to meet the demand. So food prices rise, because everything that is not fresh or canned vegetables has corn in it. And it has oil in it. And its transported by diesel oil, which is still quite high.

Businesses can absorb costs in the short term, but after that they have to pass on the costs to consumers, which comes in the form of rising prices, or you get less. Some people have noted they're paying the same price, but getting 8 ounces instead of 10 ounces or whatever.

The solution to Cost Inflation is simple: Stop consuming. That'll cause the economy to contract (yeah, no kidding).

Cost Inflation will continue indefinitely as demand continues to increase while the supply of commodities on the world market continues to remain stagnant or not increase sufficiently to meet demand.

When someone finally gets smart and plows under the coffee plantations in West Africa and starts growing corn, rice and wheat again, supplies will rise enough to offset demand and keep price increases much smaller. Sure, you'll be paying more for coffee, but you have to choose: cheap food or cheap coffee.

Quote:
Originally Posted by Humanoid View Post
Inflation can't get out of control without "wage inflation", wages are decreasing. Welcome to deflation....1930's style.
Sure it can. As I've explained a dozen times, wages rise with prices for all forms of inflation except one: Cost Inflation.

Prices will continue to rise while wages stagnate (which is why Cost Inflation is so perverse).
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Old 08-21-2008, 12:08 AM
 
20,194 posts, read 21,584,223 times
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I don't know about you... but I see rising prices everywhere... not only that, I am paying more for a lot less... I really don't care what "statistics" say, my pocketbook is a better indicator than any person or statistic...
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Old 08-21-2008, 01:15 AM
 
Location: Los Angeles Area
3,306 posts, read 3,659,972 times
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Quote:
Didn't this guy suggest that we rain dollars from the sky to combat deflation?
Sure, but combating deflation isn't the not the same as inflation. We are unlikely to see depression like deflation because monetary policy is more sophisticated this time. But they won't be able to completely stop deflation without destroying the whole economy.

Quote:
For many countries, the amount of foreign currency reserves is a matter of national security, and thus "classified."
Okay, good thing that has little to do with M3 huh? M3 = M2 + large CDs, large money market, deposits of eurodollars held by citizens and some other things. You can estimate M3.

Quote:
There are different types of inflation. Each has its own cause
What you are talking about is Keynesian, I thought this stuff was discredited back in the 1970's? There is only one type of inflation, monetary inflation. Everything else is simply changes in price due to supply and demand.

Quote:
If there's Wage Inflation -- rising wages resulting in rising prices -- playing with the money supply is not going to resolve the issue, because the money supply is not the cause. Rising wages are the cause.

The only solution to Wage Inflation is Wage & Price Freezes (or Wage & Price Controls is you prefer). FDR and Nixon used them and they were successful, at least to a point.
Seriously, this is just funny. What causes the "wage inflation"? Magic? You talk about a way to fix it but what is the cause? Saying "increasing wages" is circular. Wage and price fixing attack the effect not the cause (and it never works, I may add), what is the cause? How did they ultimately fix the problem after Nixon's idiotic ideas? Attacking the supply of money and credit:

http://en.wikipedia.org/wiki/Paul_Volker


Its funny that you make your comments with such an attitude, because what you are talking is a largely discredited economic theory. Namely Keynesianism. Read up on Monetarism or hell even the Austrian theory. You'll soon find that most economics don't believe a word of what you are typing, not even the modern Keynesians do.

Quote:
I really don't care what "statistics" say, my pocketbook is a better indicator than any person or statistic...
These things work with a lag. But even in a deflationary environment some prices can go up, they did during the depression. Regardless, the price increases you're seeing have more to do with what happened a year ago then what is happening now.
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Old 08-21-2008, 07:04 AM
 
Location: Raleigh, NC
9,043 posts, read 12,037,068 times
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You not only have to look at the supply of money, but the set of goods available. Mish seems to conveniently avoid this while arguing for deflation. Schiff points out quite readily that foreign governments will simply stop sending food our way when we default on our debt obligations, decreasing the amount of available consumer goods to purchase with inflated dollars.

Weimar Republic was a good example of what stripping productive capacity (due to the humiliating conditions of the Treaty of Versailles) plus the seemingly endless flood of money to foolishly attempt to preserve purchasing power.

Oh yeah, it can happen here.

http://content.answers.com/main/content/wp/en/thumb/5/5f/200px-Inflation-1923.jpg (broken link)
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Old 08-21-2008, 09:11 AM
 
Location: Heartland Florida
9,324 posts, read 24,738,425 times
Reputation: 4969
What else to you expect from a UK based source? That's another huge bubble waiting to burst.
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Old 08-21-2008, 04:34 PM
 
Location: Great State of Texas
86,068 posts, read 76,896,419 times
Reputation: 27652
Quote:
Originally Posted by Mircea View Post
The US ceased publication of the M3 in March 2006, so there's no possible way you could know what the M3 is.
The data is still available from the government and there are still people who do calculate it so it's not true to say there's "no possible way to know what M3 is".

Alternate Data Series
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