Any thoughts on this article? It seems to contradict what a lot of Austrians have been saying. http://blogs.forbes.com/beltway/2011/06/20/the-myth-that-the-fed-is-printing-money/
Actually, it doesn't contradict what money supply expansion means, exept for the timing. When the perception that the economy is again on the mend takes hold, - and it will- banks will shovel out money in loans and you will see the money supply take off. Ben "Kevorkian" Bernanke is right now pushing on the proverbial sring...If you have any doubt, check the FRED's chart corresponding to the the M1 Money Multiplier and you will see it has fallen under 1 something not seen I believe since 1959. In short, M1 is not growing so much because banks are not lending but the next boom cycle stands inexorable before us....and after that another bust, this time of unfathomable depth.
Since 2008, the Fed has increased bank reserves at a rate not seen in this country ever since the creation of the FED in 1913....Not a good.record to brag about
Of course the Fed doesn't print the money. Of course, the Treasury prints and coins the money. Anyone claiming or believing otherwise hasn't done enough research. They are not doing it right. Btw, "printing money" is a euphemism.
To paraphrase Marc Faber: We're all doomed, but that doesn't mean that we can't make money in the process. Rabbi Lapin: "Let's make bricks!" Stephan Kinsella: "Say you and I both want to make a German chocolate cake."
I don't get it.
Is he denying that the Fed bought Treasuries with newly printed money? No.
Is he denying that the US govt spends the newly printed money? I hope not. After all, they want to increase the debt ceiling, meaning they spent everything they got already.
Is he denying the laws of supply and demand? I hope not.
Is he denying that tons of newly printed money spent by anyone, US govt included, causes price inflation, sooner or later, by the laws of supply an demand? I hope not.
Is he denying that gas prices have jumped so high Obama feels it necessary to do something [however ill conceived] about it? I hope not.
Is he denying that food prices are about 10% higher across the board? I hope not.
Is he saying that high inflation has to happen the day after the Fed prints money, as opposed to it taking a year or two sometimes until the effects are felt by everyone? If yes, then he should read some Hazlitt on Inflation.
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It's easy to refute an argument if you first misrepresent it. William Keizer
I think the point is that all the quantitve easings didn't increase the actualy money supply available to people and businesses. All this money is just sitting idle in the banks. So unless it gets out there won't be serious inflation, and since the Fed and the government can control everything, they can take that money from the banks if they see that there is serious inflation.
- The Fed buys treasuries with money created electronically.
- The government is not spending newly printed money. Your statement that the government "spent everything they got already" shows how little you know about fiscal policy. We already had considerably huge deficits, but the deficit is financed by Treasury securities (t-bill, t-bonds), and the United States has no problem paying back its creditors - we have a AAA bond rating.
- Price inflation has nothing to do with the laws of supply and demand. As Milton Friedman said, inflation is always and everywhere a monetary phenomenon.
-Higher gas prices are due to increasing demand for oil from emerging markets, such as India and China.
-Food prices are 10% higher? I don't know if you got that from a Ron Paul soundbite, or just pulled it out of your ass. Either way, the truth is commodity prices are not rising. Ben Bernanke is targeting inflation to be around 2%, and the GDP deflator and the monthly CPI index all indicate that inflation is less than that.
- High inflation the day after the Fed prints money? Go to a business owner and ask him/her, "Did you raise your prices because Ben Bernanke printed more money?"
I think the point is that all the quantitve easings didn't increase the actualy money supply available to people and businesses. All this money is just sitting idle in the banks.
What sitting idle in the banks? What happened to the QE2 money the US govt got from selling its Treasuries to the Fed? Do you think the US govt just put them in some bank to sit idly? With what money are they paying the soldiers?
As for the QE1 money that was a gift to the banks, they lend it right back to the Fed. Do you think the Fed just lets it sit? They are spending it like drunken sailors.
Sure, people and businesses aren't getting the money. Cause it's all going to the govt.
...since the Fed and the government can control everything, they can take that money from the banks if they see that there is serious inflation.
They will TAKE AWAY money from the banks? Really?
I'm glad we agree on something. That high inflation doesn't happen the day after.
So "Inflation is a monetary phenomenon" means that inflation has nothing to do with supply and demand.
I see I was perhaps really missing the boat, thinking it meant the opposite.
Can you please tell me where you learned all the things in your post, that I may be enlightened as well?
Was it from books you read, courses you took? Can you please give details?
Jesus...there you go talking out of your ass again. Do you know what quantitative easing is? It's when the Fed buys long term treasuries from commercial banks thereby increasing bank reserves. The Fed selling treasuries would be contractionary policy.
I must say a lot of guys here hold views I disagree with, but nonetheless are intelligent. You just can't stop talking out of your ass, can you? Or wait, maybe the location of your ass and mouth are not mutually exclusive.
What's the point of all this crying? This'd be an interesting conversation to view if you could just keep egos out of it.
Either way, the truth is commodity prices are not rising.
Commodity prices aren't rising? Where?
claudius:the truth is commodity prices are not rising.
Funny.
I'm saying commodity prices aren't rising due to inflation. Commodity prices are high now because of supply shocks in agricultural markets. For this rise to be considered inflation, it would have to be a continual rise in prices over the long run. How do you explain the decline in prices of food and other commodities in mid 2009, when the Fed was in the midst of its asset purchases?
Mises explained in the 1930s that you can have a recession/depression/panic/etc without increases in prices. The Fed is buying 70% of US Gov Bonds. The checks that pay the banks for these bonds is money created out of nothing which Murray Rothbard called inflation. Note that Mises only considered money created above the demand for money as inflation. But like any money unbacked by private savings, it is causing distortions in the capital structure throughout the economy. It is actually going to the worst possible use which is to buy government bonds so the government can keep operating/squandering scarce resources. Absent the actions by the Fed the government would have to raise interest rates and devote more of its budget to paying interest on the current debts. As these debts roll over into new debts the interest rates will be higher causing the government to either cut back spending or raise taxes.
Also the distortions are becoming more obvious. For example, the prices of homes and cars would collapse absent the Fed creating money that props up bad business models like Fannie, Freddie and GM.
The money supply is inflated though fractional reserver banking as well. That can happen very quickly. Without all the money pumped into banks, housing prices would be much lower.
Even if you could show that commodity prices aren't rising, you have to ask, compared to what? Perhapse a deflationary correction in the dollar is what the market is calling for. If so, steady prices would be inflationary in comparision to what the market would otherwise demand.
claudius: I must say a lot of guys here hold views I disagree with, but nonetheless are intelligent. You just can't stop talking out of your ass, can you? Or wait, maybe the location of your ass and mouth are not mutually exclusive.
claudius, this kind of discourse is unacceptable here.
claudius: - The government is not spending newly printed money. Your statement that the government "spent everything they got already" shows how little you know about fiscal policy. We already had considerably huge deficits, but the deficit is financed by Treasury securities (t-bill, t-bonds), and the United States has no problem paying back its creditors - we have a AAA bond rating.
You sound like this guy.
Yes the U.S. has absolutely no problem paying back U.S. dollars it owes. It can print up just as many as it needs. It could put a dozen zeros on a bill, print 15 of them and pay off the national debt tomorrow. Paying the dollars back isn't the issue.
Wow. And you want to berate other people for not understanding what they are talking about?
Wait a minute. Didn't you just tell me "Price inflation has nothing to do with the laws of supply and demand"?
-Food prices are 10% higher? I don't know if you got that from a Ron Paul soundbite, or just pulled it out of your ass. Either way, the truth is commodity prices are not rising.
Um. K.
For anyone who's actually interested, this should provide some useful insight: