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Old 05-13-2010, 11:29 PM
 
Location: Conejo Valley, CA
12,470 posts, read 18,192,512 times
Reputation: 4343

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Quote:
Originally Posted by DSOs View Post
Is this a trick question? That’s right, so increase the money supply (inflation) to adjust/reflect/keep up with population growth.
Well, I did not ask a question. The point is that inflation is not the natural result of population growth (or more generally a growing economy), its the result increasing the money supply. If you just increase the money supply inline with economic growth you'll have 0% inflation, if the money supply is increased faster than economic growth you get inflation.

Quote:
Originally Posted by DSOs View Post
IMHO ‘shrinkage’ of products is a reaction to increase in demand (arguably population increase only). Because of population increase manufacturing & transporting capabilities (supply) are becoming more expensive/laborious to maintain even with advanced technology!
This makes little sense, why would production become more expensive if there were new technologies that increased productivity?

So you think food was cheaper back when people were using horses, etc to plow fields? New technologies enable a farmer to farm more acres and produce more food per acre, that is they increase the supply of food per unit of labor. In other words, its cheaper.

Companies shrink food containers for a number of reasons, but none of it has to do with an increased in demand. Increases in demand will only result in higher costs if there is not a similar increase in supply. Also, demand and price are not independent variables. An increase in price may result in less consumption.
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Old 05-13-2010, 11:34 PM
 
Location: Conejo Valley, CA
12,470 posts, read 18,192,512 times
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Quote:
Originally Posted by lchoro View Post
The Fed has been using interest rates to stimulate cash-out refi's to spur spending in recessions for the last 20 years. That tool should not have been used so aggressively by the Fed. It's a path to impoverishment to encourage people to mortgage their homes to the hilt.
Most equity is withdrawn when the economy is booming, not when the economy is in recession. Equity withdrawn is currently negative.

The FED did not create the housing bubble, it did fail to control it though.
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Old 05-14-2010, 09:00 AM
 
10,712 posts, read 8,791,779 times
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They were actively promoting the housing bubble and trying to extend it. Remember that Greenspan urged homeowners to use ARMs so they could get lower rates and pay more for homes.
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Old 05-14-2010, 12:07 PM
 
Location: 3rd Rock fts
749 posts, read 1,004,868 times
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I understand that shrinkage is done for a number of reasons including deception. Let’s say an industry (coffee) calculates that every 7 years they have 10% growth just because of population increase (working age adults starting to drinking coffee). So the coffee companies adjust the sizing to incorporate this built-in demand/consumption. The same goes for other products such as soda & toilet paper.

Quote:
This makes little sense, why would production become more expensive if there were new technologies that increased productivity?
JOBS! Companies have the burden of supplying new jobs to meet the population increase, but as they modernize, they require less workers (relatively speaking). Increasingly, more & more of these new jobs being created are just bodies/driftwood, which is costing the taxpayer & the company more money.
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Old 05-14-2010, 12:50 PM
 
10,712 posts, read 8,791,779 times
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Housing bubble was intentional. Here's transcript of testimony from Donald Kohn, #2 at the FOMC, in 2004 during the height of the real estate bubble.

Quote:
Policy accommodation – and the expectation that it will persist – is distorting asset prices. Most of the distortion is deliberate and a desirable effect of the stance of policy. We have attempted to lower interest rates below long-term equilibrium rates and to boost asset prices….
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Old 05-14-2010, 04:35 PM
 
Location: Conejo Valley, CA
12,470 posts, read 18,192,512 times
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Quote:
Originally Posted by lchoro View Post
They were actively promoting the housing bubble and trying to extend it. Remember that Greenspan urged homeowners to use ARMs so they could get lower rates and pay more for homes.
How in the world was the FED promoting the housing bubble? They noticed the increase in prices, but the majority position (some were very worried about it) was that the FED should leave the free markets alone. After the housing bubble became obvious they did start to raise interest rates but it had little effect on mortgage rates. To quote Greenspan on this:

"Unless there is a societal choice to abandon dynamic markets and leverage for some form of central planning, I fear that preventing bubbles will in the end turn out to be infeasible. ....Assuaging their aftermath seems the best we can hope for."

Greenspan never told homeowners to get ARMs so they could pay more for homes, rather he suggested that ARMs could (and would have in the past) save Americans money. He actually is not that wrong, someone that bought a home with an ARM today would be paying less in interest than someone that purchased a home with a fixed rate mortgage.
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Old 05-14-2010, 04:38 PM
 
Location: Conejo Valley, CA
12,470 posts, read 18,192,512 times
Reputation: 4343
Quote:
Originally Posted by lchoro View Post
Housing bubble was intentional. Here's transcript of testimony from Donald Kohn, #2 at the FOMC, in 2004 during the height of the real estate bubble.
The date you are citing does not match the facts, the FED raised interest rates 5 times in 2004!
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Old 05-14-2010, 04:50 PM
 
Location: Conejo Valley, CA
12,470 posts, read 18,192,512 times
Reputation: 4343
Quote:
Originally Posted by DSOs View Post
I understand that shrinkage is done for a number of reasons including deception. Let’s say an industry (coffee) calculates that every 7 years they have 10% growth just because of population increase (working age adults starting to drinking coffee). So the coffee companies adjust the sizing to incorporate this built-in demand/consumption. The same goes for other products such as soda & toilet paper.
Why would the companies adjust the sizing instead of you know...producing more coffee, soda, and toilet paper? Generally speaking production becomes cheaper the more you produce due to economics of scale.


Quote:
Originally Posted by DSOs View Post
JOBS! Companies have the burden of supplying new jobs to meet the population increase
Companies have no such burden, rather companies increase employment when there is an increase in demand for their product (e.g., when there is population growth).


Quote:
Originally Posted by DSOs View Post
but as they modernize, they require less workers (relatively speaking).
In other words production becomes cheaper, contrary to what you said earlier.

Quote:
Originally Posted by DSOs View Post
Increasingly, more & more of these new jobs being created are just bodies/driftwood, which is costing the taxpayer & the company more money.
Do you think you live in the soviet union or something? Companies in the US don't hire driftwood, rather they hire people when they actually need them. Nobody forces a company to hire against its will.
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