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I've told you before that I don't do line by line rebuttles but that is irrelevant anyway.
What you mean is that you'll use this excuse when it suits you.
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Originally Posted by lumbollo
Consistent inflation kills an economy.
The average annualized rate of inflation has been 3.2% for almost 100 years and it has not killed the economy. Why is it going to in the next 25, 50, etc years?
Quote:
Originally Posted by lumbollo
using that totally ignores a number of spikes over time that make this issue much worse.
The spikes are not ignored, I'm giving an average. The spikes are included, but averaged with periods of lower inflation. Most years the the annualized rate of inflation is less than 3.2%. In the last 100 years there has only been two modest spikes, one in th3 1920's and another in the late 70's. There has been one spike in deflation during the depression as well.
Quote:
Originally Posted by lumbollo
If you inflate something on a consistent basis over time, it explodes.
There is no explosion. If the FED keeps inflation at 3% over the next 100 years $1 today will be worth around $19 in 100 years. What is problematic about that? $20 bills will function much like $1 bills do today. Just as 5 cents 100 years ago use to function as a dollar does today.
There is nothing problematic about this. Anyhow, it is important for the FED to target a consistent but low inflation rate each year. Doing so gives the FED much more power to implement necessary policies and a low predictable rate of inflation is unproblematic for the economy.
.....
There is no explosion. If the FED keeps inflation at 3% over the next 100 years $1 today will be worth around $19 in 100 years. What is problematic about that? $20 bills will function much like $1 bills do today......
Go back and read above. You still absolutely don't get it. Assuming you won't I will restate it one more time.
A periodic percentage increase of any system results in exponential growth.
Any system growing exponentially is doomed to fail. This is the problem. Your system, as stated by you, is doomed to fail. Go do the math. We are already close to 100 years on this curve, and it you can't reset it by restating that today T=0. In order to do this, you have to make current liabilities = 0.
On you second contention that it doesn't matter, it absolutely does. It punishes savers and forces them to risk their savings.
A periodic percentage increase of any system results in exponential growth.
Sure, the growth curve is exponential rather than linear. And....?
Quote:
Originally Posted by lumbollo
Any system growing exponentially is doomed to fail.
The growth curve for everything in the economy is exponential. GDP, stock market returns, interest rates, and so on. European GDP has been increasing exponentially for thousands of years, hell the global GDP has been increasing exponentially for hundreds of thousands of years!
So I ask again, what is problematic about $20 bills functioning as $1 today in 100 years? What is problematic about $100 bills function as $1 today in ~160 years? The currency will adjust, new bills will be created, etc. Also, there is a realistic sense in which you can "reset" matters. You simply create a new unit, say a "megadollar". Where 1 mega dollar = 100 dollars and take cents out of circulation. This can be repeated again and again and again and again...
Quote:
Originally Posted by lumbollo
It punishes savers and forces them to risk their savings.
It does not punish savers. Savers will demand (as they do) positive real interest rates rather than just positive nominal rates. The real interests are the same whether you have 3% inflation or 0% inflation. The key here is that the rate is predictable.
The real rate of inflation for the items that people need to purchase is far in excess of 3%. Food costs have more than doubled when package size reductions, substitutions of inferior quality ingredients for higher quality ones and out rate price increases are taken into account.
Energy and commodity costs have risen impacting the cost of the end products.
I have price comparisons of two similar-sized homes. One home I constructed in 2002 and the other that is being built today. The electrical cost is 70% higher today, the plumbing is 80% higher (even without the higher-priced copper piping), and the insulation is 75% higher.
The compounded rate over eight years (at 3%) should be 27%. The real cost is averaging 3x this amount.
Health-care and education are two other areas that far exceed the 3% inflation rate.
The experts will keep their convenient qualifier that the prices haven't materialized in the labor costs. This is very true and reflective of the fact that purchasing power has diminished for many Americans over the past decade.
The real rate of inflation for the items that people need to purchase is far in excess of 3%. Food costs have more than doubled when package size reductions, substitutions of inferior quality ingredients for higher quality ones and out rate price increases are taken into account.
More than doubled since when? For the last year or so food prices have been decreasing, though they did increase a bit during the commodity boom 2~3 years ago.
Regardless, the rates I'm talking about include food. They include everything.
Quote:
Originally Posted by Lincolnian
The compounded rate over eight years (at 3%) should be 27%. The real cost is averaging 3x this amount.
Food has not increased ~60% since eight years ago. Not even close. Oil was rather cheap in the late 90's and early 2000's though, I remember paying $.99 gallon in Los Angeles back then.
Anyhow, it makes little sense to talk about the areas that have exceeded 3% a year while ignoring the areas that are below it. CPI is a weighted aggregate of ALL goods and services, not all the components are increasing (or decreasing) at the same rate.
Sure, the growth curve is exponential rather than linear. And....?.
Haha, you don't know what this means? It's not surprising, as your own example tripped you up on the math, and once that was pointed out, and you spent a day attempting to google up a response, you simply came back and changed the argument.
You first argued that inflation was low and OK. Now having been caught in that one with the math, you have changed your tact that OH, it doesn't matter $20 bills can be used like $1 bills. The only way to argue this point is to admit there is a lot of inflation, inflation that is growing exponentially. As ususal you have shot yourself in the foot and now seek to distract with a different argument. Now you want to know why this high inflation punishes savers. If you really believed that inflation wasn't a problem, didn't exist, wasn't significant, should be a concern to anyone, etc, etc etc, you wouldn't need to ask this question.
Son, you fail to prove yet again any point that you argue and not only that, it takes rather simple elementary math to do it. Amazing that you have consumed 50% of the posts in this topic trying to explain otherwise.
The compounded rate over eight years (at 3%) should be 27%. The real cost is averaging 3x this amount.....
Indeed Lincolnian, I agree with you 100%. It's the example I gave above on how seemingly small amounts of yearly inflation end up being disastrous over time. It amazes me at how many still refuse to believe it. That somehow the American economy is doing fine for the ordinary person.
This of course doesn't even take into account how the government continues to rig the reporting so that it puts on the happiest face possible. Real inflation is much worse.
It's not surprising, as your own example tripped you up on the math, and once that was pointed out...
My example was not "tripped" on anything, to say it once again I just stated the average annualized rate. Pointing out that it compounds is like pointing out that the sky is blue. No idea why you think you're saying something important here.
Quote:
Originally Posted by lumbollo
You first argued that inflation was low and OK. Now having been caught in that one with the math
Trying to debate with you is like trying to debate with a 5 year old. When I say "low inflation" I'm referring to the annualized rate, not the compounded rate (which is irrelevant) over X amount of years.
I have price comparisons of two similar-sized homes. One home I constructed in 2002 and the other that is being built today. The electrical cost is 70% higher today, the plumbing is 80% higher (even without the higher-priced copper piping), and the insulation is 75% higher.
The compounded rate over eight years (at 3%) should be 27%. The real cost is averaging 3x this amount.
Health-care and education are two other areas that far exceed the 3% inflation rate.
Yes, thank you, very well said. Anyone paying attention and with half a brain has noticed this by now, funny how much of the population that still leaves out!
Well the deflationists are still beating on the poor inflationists right now, although I heard my mother complain recently about recent large price increases on pet food and other grocery store items.
In the meantime, I have just GOT to share this article with y'all:
One thing I wonder about a lot, if there is a hyper-inflationary tsunami coming our way in the near future, is the current period merely just the deflationary "drawing out and receding of the tides and sea" before the wave crashes ashore? Do you catch my drift (hah hah)? I fear that in the case of the hyper-inflationary tsunami, this receding of the sea is of a much longer duration than the corresponding phenomenon happening in the natural world.
In any case, the Fed is still monetizing like a Bernard Madoff high on meth. They just printed up about $100 billion to ship over to Greece via the IMF. I'm sure a few Grecian major automobile manufacturing executives will be able to slip a cool billion or two into their pockets. Heck, who would notice at such a punch-bowl party? Oh well, might result in some more good free porn heading our way!
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