Current Events

Re: Inflation vs. Deflation FINAL

bearing01 — Tue, 21 Apr 2009 02:38:21 GMT

No, that's not inflation. With a fixed quantity of money, if holders of money suddenly all choose to buy one item then the price of that single item will go up. But money won't simultaneously be buying other things so prices of other things will drop. Overall, big picture, the prices will be stable. With expanding money supply everyone has money to buy everything else while prices are rising for the single item. So no prices fall while single item prices rise.

Re: Inflation vs. Deflation FINAL

realbuffet — Tue, 21 Apr 2009 02:19:07 GMT

even if money supply does not chage, due to increased productivity in one item people would have that x dollars to spend extra. thus they would be willing to bid (X ammount) higher price for other product which is inflation (rite?)

Re: Inflation vs. Deflation FINAL

nirgrahamUK — Mon, 20 Apr 2009 20:21:30 GMT

inflation is shorthand for inflation of the money supply. if productivity increases and money supply is unchanged then there will be price deflation.

Re: Inflation vs. Deflation FINAL

realbuffet — Mon, 20 Apr 2009 03:56:14 GMT

debtus:

Ryan L Morelli:
I'm not sure I changed my view. It can be debated what 'printing means'. My version of printing is taking on debt from the world at just about zero interest in short term Gov’t bonds which the auctions are still oversubscribed and then going to buy their own long term bonds to drive down rates, buy off callable bonds and so forth. The credit they are giving the banks for bailouts is not being loaned, therefore printing AT THIS TIME, is not happening. The banks in turn are buying Treasuries as to what their Charters and regulations require. You try and get a loan and see what the terms are. Now could banks end up loaning the money? Could there be hyperinflation? Could the US Government monetize and devalue the dollar to worthless paper? Sure they could but I strongly believe that will not happen. I read John Williams Inflation report and I don't have the time, nor am I getting paid to discuss it line and verse but the very first line says it all.

The Federal Reserve is expanding it's balance sheet. The only way it can do this is by printing money.

Ryan L Morelli:

You say,

I'm not sure what the entire media is saying. It does not matter to me.

Then you say,

So because people talk about inflation on TV, that means it won't happen? Well, I hate to break it to you, but I've heard countless stories about deflation on TV.

I can't follow.

In terms of me, 'not wanting to hear about inflation'

That's not the case, I wanted to see if anyone here is different to anything else I hear in the mainstream about inflation. …..Not really.

The point is what the media says is irrelevant to the entire matter. You made it a point to bring up how the media is talking about inflation, and how that it somehow makes the argument that we may actually have inflation illegitimate.

Ryan L Morelli:
Question: What is more logical? The Fed ruining the dollar to honor the FDIC or nationalizing the banks and telling people their money is there but they can’t have it now? Duh.

Logic rarely has anything to do with decisions made by governments and central banks. Actually, I would argue fallacious thinking more often motivates the government/Fed to action rather than logical thinking.

You must have read Bernanke's helicopter speech. I may be wrong, but I haven't heard him, Geithner, or Obama talk about bank nationalization as a serious possibility.

Ryan L Morelli:
Please explain how prices can go to the moon if no one has any dollars? The first chapter of econ 101 explains supply and demand. If the supply decreases which I'm sure it will in a panic some prices may go up BUT if no one has dollars to purchase goods then what? What is in oversupply will fall to meet dollars/demand. Cars are going to see a super inflation? Homes are going to see a super inflation? With no jobs oil and gold are going to see a super inflation? Please help me understand, what are you talking about?

1. The Fed prints money.

2. The Fed buys X with printed money. (X=Oil,gold,wheat,houses,bad debt, anything!!!)

3. Sellers of X receive new money

4. Sellers of X start spending new money.(Sellers may hoard money, but at some point, the marginal utility of hoarding dollars will become less than the marginal utility of spending dollars.

5. Continue ad infinitum.

I'm not sure you understand how printing + monetization works. If I hold 10 ounces of gold and can currently receive ~$9000 for 10 ounces, what happens if the Fed comes out and offers $10000 of new money/ounce for gold (which they can at any time)? Suddenly, I have $100000 which came from printed money. I then begin to spend that money on food, gas, possibly housing or cars. It doesn't have to be gold that they buy, it could be ANYTHING! The supply of dollars can be easily increased through monetization of assets.

It does NOT matter if there is unemployment. Take a look at Zimbabwe. Their hyperinflation occured with 20%+ unemployment and now they have somewhere around 80% unemployment. Unemployment hasn't done a damn thing to stop inflation aka increases in the money supply.

Ryan L Morelli:
Lastly, I'm not 'dismissing' a runaway boom, I'm just damn sure we first have a deflationary depression and that's where my money is. ....what happens after that, I don't know, I'll tell you after this chapter unfolds.

Well, since you have little idea of how monetization works, I wouldn't expect you to expect anything other than deflation.

I agree with your comments.

However there are cases where inflation occurs due to a sudden increase in productivity of economy. As people will have that extra saved resources which may cause price increase. therfore there is some truth to the comment "employment increases inflation". But that is a very exceptional case.

Most of times its increased suply of money that causes inflation. which is what you have pointed out.

Re: Inflation vs. Deflation FINAL

auctionguy10 — Sun, 19 Apr 2009 19:12:44 GMT

I think perhaps he has his mises account set to receive e-mail replies whenever someone replies to his thread? Maybe that's why he was asking people to stop e-mailing him and why he responded that way.

Re: Inflation vs. Deflation FINAL

debtus — Sat, 18 Apr 2009 18:28:11 GMT

Ryan L Morelli:

Ryan L Morelli wrote Wake up.

on Fri, Apr 17 2009 7:14 PM

1. Tell me I'm wrong about my predictions about you?

2. Sometimes the root is so poisoned the an Ad Hominem attack is necessary in an attempt to shake the foundation.

What you are being told is a lie. What you are reading is a lie. Wait and see what we have is greater than the great depression and watch it be an unprecedented deflationary spiral. It won't be long, contact me then. AND after you get a little more practical experience.

Mr. Morelli, if you would still like to make logical arguments regarding deflation vs. inflation, please post it here on this thread.

Until then, don't privately message me as if we have some personal rivalry.

Re: Inflation vs. Deflation FINAL

onebornfree — Sat, 18 Apr 2009 18:16:30 GMT

mpablazer:

from my understanding, inflation can be caused by several things. 1. An increase in the supply of money in circulation. 2. A decrease in the overall supply of goods while the supply of money in circulation holds constant. 3. Some semi-magical set of circumstance including mass irrationality.

So, even though the FED is absolutely and inarguably inflating the supply of money (monetary base) that does not necessitate a general price inflation. I think that lgoically however, it is easy to deduce that if the excess monetary base is not pulled back by the FED, or if reserve ratio requirements are not raised, that the additional reserves sitting in banks will eventually be lent out. If it is lent out to similar ratio levels of just 2 years ago we will absolutely see a hyperinflation UNLESS productivity and supply of goods shoots up as well. It seems unlikely that productivity and supply of goods would shoot up at a similar pace to circulation credit.

Now, in another post you talk about a long deflation and then a hyperinflation. I don't think anyone on this board thinks that we are in a hyperinflation, just that the supply of money is being increased laying the foundation for price inflation.

I hope my thoughts are not too disjointed, I rarely post on message boards, but found this topic interesting.

"from my understanding, inflation can be caused by several things. 1. An increase in the supply of money in circulation. 2. A decrease in the overall supply of goods while the supply of money in circulation holds constant. 3. Some semi-magical set of circumstance including mass irrationality."

1] may be true, but only under certain conditions, depending on whether your phrase "in circulation" means, what was put into circulation [ie. what is supplied _for_ circulation- that is, the actual money supply], or, if you mean what remains in circulation after demand has taken some out [of circulation].

In the 2nd., narrower definition your statement would correct as by talking about an end result it already accounts for demand.

2] is wrongheaded.

Back to statement [1]

My Definitions: "inflation": a general decrease in the relative per unit purchasing power of the currency.

"Deflation": a general increase in the relative per unit purchasing power of the currency

"money supply" : the rate at which new money is produced , relative to the previous rate.

"money demand" the general demand to hold onto cash/money and not spend it, [i.e to keep it out of circulation] by individuals, businesses etc. ,relative to the previous general demand to so do.

Assuming you meant the broader [pure pre-demand supply] definition and are talking about the actual supply of money [i.e new money creation] you say :

1] "inflation can be caused by several things 1. An increase in the supply of money in circulation. " :

It is not quite as simple as that.

An increase in supply that occurs when demand holds steady or is falling would be inflationary, however, an increase in supply that occurs when demand is increasing at an even faster clip, will not cause inflation, but would have deflationary implications .

Even if supply were falling, but demand for that supply is falling even faster, then inflation is the result, not deflation as might at first be thought.

Also, an increase in supply which occurred when the demand was also increasing, but demand was not increasing as fast as the supply , would also be inflationary.

2]: "inflation can be caused by several things 2. A decrease in the overall supply of goods while the supply of money in circulation holds constant. " :

No , wrongheaded, i believe, however a decrease in the demand for money under those circumstances [i.e. a steady supply of new money] will have inflationary effects.[i.e steady supply+ falling demand for that supply= inflation, or decreased value per currency unit].

And even if supply were falling, if demand falls even faster, inflation is the result.

As Von Mises showed in "The Theory of Money and Credit" the inherent value of all money [its final price/worth] at any point in time, no different from any other economic goods, is wholly dependent on the outcome of the interaction of the 2 factors: 1] the supply of the goods and 2] the demand for that supply.

From my examples, it should be clear that when the demand factor is properly considered, that there are several circumstances when increasing or decreasing money supply alone does not /will not have the "normally" presumed effects.

Re: Inflation vs. Deflation FINAL

limitgov — Fri, 17 Apr 2009 19:57:53 GMT

"Hyperinflation does not require borrowing by consumers/businesses at all. All it requires is sustained printing of money by the Federal Reserve. They can buy whatever they like with their dollars including oil, gold, houses, commodities, etc."

Most of the huge sums probably aren't even printed anymore....its just changed on a computer somewhere.

Re: Inflation vs. Deflation FINAL

debtus — Fri, 17 Apr 2009 19:41:07 GMT

Ryan L Morelli:
YOU PEOPLE ARE CRAZY TO THINK THE GOVERNEMENT IS GOING TO ATTEMPT TO PRINT ITS WAY OUT. THEY'VE READ THE BOOKS TOO, YOUR NOT SMARTER THEN THEM; THEY KNOW EXACTLY WHAT THEY ARE DOING. YOU ALL ASSUME, 'THEY'RE STUPID THEY DON'T KNOW WHAT THEY ARE DOING, YOU ARE WRONG!!!

Wow, this is a quote to remember.

Truly, though, I'm sorry to see this thread degenerate into ad hominem attacks.

I enjoy hearing both the deflation and inflation viewpoint as it helps me to see possible problems with my logic and make my arguments stronger.

That's unfortunate that you do not feel the same.

Re: Inflation vs. Deflation FINAL

bearing01 — Fri, 17 Apr 2009 15:41:14 GMT

If the government knew what it was doing we wouldn't be in this mess... unless you believe they deliberately created this financial problem. Why? Because they want a crisis in order to seize more power from the state? If course, if you believe that, then you believe in conspiracy theories.

Bernanke already said he'd drop money from a helicopter to flood us with dollars. So far he's been living up to his promises.

Re: Inflation vs. Deflation FINAL

wilderness — Fri, 17 Apr 2009 15:05:27 GMT

Ryan L Morelli:

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I'm not sure why I'm still getting emails, I want off. WE ARE NOT IN INFLATION. YOU PEOPLE ARE CRAZY TO THINK THE GOVERNEMENT IS GOING TO ATTEMPT TO PRINT ITS WAY OUT. THEY'VE READ THE BOOKS TOO, YOUR NOT SMARTER THEN THEM; THEY KNOW EXACTLY WHAT THEY ARE DOING. YOU ALL ASSUME, 'THEY'RE STUPID THEY DON'T KNOW WHAT THEY ARE DOING, YOU ARE WRONG!!! IT IS ALL ORQUESTRATED AND RUINING THE ONLY MEDIUM THEY HAVE, THE DOLLAR, IS NOT GOING TO HAPPEN. JUST BECAUSE YOU READ MISES AND AUSTRIAN ECONOMICS IT DOES NOT GIVE YOU AN AUTOMATIC PLAYBOOK OF WHAT THEY ARE DOING, IT’S SO SHORTSIGHTED THINK YOU KNOW AND THEY DON’T. I WILL NOT CONTINUE THIS DISCUSSION WITH YOU PEOPLE, STOP ADDRESSING ME, PLEASE.

lol And the State says jump and we're supposed to say how high!

gotta love it...lol

Re: Inflation vs. Deflation FINAL

Ryan L Morelli — Fri, 17 Apr 2009 14:31:41 GMT

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I'm not sure why I'm still getting emails, I want off. WE ARE NOT IN INFLATION. YOU PEOPLE ARE CRAZY TO THINK THE GOVERNEMENT IS GOING TO ATTEMPT TO PRINT ITS WAY OUT. THEY'VE READ THE BOOKS TOO, YOUR NOT SMARTER THEN THEM; THEY KNOW EXACTLY WHAT THEY ARE DOING. YOU ALL ASSUME, 'THEY'RE STUPID THEY DON'T KNOW WHAT THEY ARE DOING, YOU ARE WRONG!!! IT IS ALL ORQUESTRATED AND RUINING THE ONLY MEDIUM THEY HAVE, THE DOLLAR, IS NOT GOING TO HAPPEN. JUST BECAUSE YOU READ MISES AND AUSTRIAN ECONOMICS IT DOES NOT GIVE YOU AN AUTOMATIC PLAYBOOK OF WHAT THEY ARE DOING, IT’S SO SHORTSIGHTED THINK YOU KNOW AND THEY DON’T. I WILL NOT CONTINUE THIS DISCUSSION WITH YOU PEOPLE, STOP ADDRESSING ME, PLEASE.

Re: Inflation vs. Deflation FINAL

onebornfree — Fri, 17 Apr 2009 13:41:17 GMT

Knowledge is finite. We can never even have full knowledge of what occurred in the past, let alone the present ....... and the future? Forget it.

Re: Inflation vs. Deflation FINAL

ChampionoftheConstitution — Fri, 17 Apr 2009 13:35:37 GMT

Dear Ryan and all -

While I can understand all the interest in what the future will bring, I don't think there is enough data to decide. If somehow all the dark derivatives were exposed, then I think it would be possible. Without it, we are in monetary inflation - by the strictest Austrian definition, price X-flation is completely different story - and what I termed credetary deflation. If you want to read Parts 9 and 11 here you can decide for yourself. I can be reached in the comments fields.

Jake

http://www.nolanchart.com/article6260.html

Re: Inflation vs. Deflation FINAL

auctionguy10 — Thu, 16 Apr 2009 23:50:44 GMT

Ryan L Morelli:

The Goodbye Post

No one has been attacking you but all you've done so far is say "Oh you must be 22- you must earn no money- you can't think for yourself- I'm right you're all wrong hahahahahah inflation lol hahaha". I don't know why you're so hostile-just relax and make your points without the nonsense. Everytime I read a post by you most of it is a bunch of garbage about how the poster you're replying to is an idiot- then there's maybe one or two sentences about a deflationary depression.

What specific predictions have you made that is new to anyone here? No one here is disagreeing that there is a deflationary bust after an inflationary boom.