RE: Why do Prices Keep Rising? (Full Version)

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MasterSlaveLA -> RE: Why do Prices Keep Rising? (12/30/2011 2:42:39 PM)

 
Hmmm... I wonder how much the value of the Dollar factors into inflation -- anyone know?!!


[image]local://upfiles/687741/AF0EC8446FD846B49B72F3370FD84E59.jpg[/image]



Termyn8or -> RE: Why do Prices Keep Rising? (12/30/2011 3:51:31 PM)

quote:

So if a job is added then everyone's wages must decline or the money supply must expand which is inflation.


No, in a good world that "extra" person's work would actually create wealth. Wealth is NOT money. They can be inerchanged in some discussions, but they are definitely different things.

Take an agrarian society to keep it simple. That eleventh person can work some land or whatever and increase the food output enough to be fed without taking from any other.

The use of money can fuck this all up if it is not handled properly, and believe me it has not been handled properly. Whether ten more dollars should be printed just for this one extra person or if the same amount gets split up matters not.

Until there are savings, which is where you fell on your face in the other post, to which I almost responded. When the money constantly circulates, adjustment happens gradually. But if you have someone who works all their life and saves, they get ripped off when they take it out and use it if significant "inflation" has occurred.

Interest in a bank cannot offset inflation these days, therefore the only alternative is venture capital. Well assuming no loss on the venture(s) it still doesn't work out because the dividends or whatever have to be paid and pretty much amount to a tax on the goods sold by whoever made the goods. Every penny of that money comes from the comsumer.

Inflation is therefore it's own catalyst.

If we had pegged the value of a dollar hard (they did actually) and never came off of it, things would of course be different. They would be better actually, however the good days of the past would not have been so good. The bad days coming would not come actually.

We are now paying for the excesses of the past, and piling our own excesses on top of it.

And it is not going to change because people aren't going to change until it's too late. Case in point, I have alot of junk, but it is useful junk. So I look on craigslist for example to see who is buying what, because I REALLY have alot of junk.

You know what people are advertising for alot ?

Toys.

Do these people really think they are going to make a profit selling HO scale model trains and the like to people in the bread line ?

One guy might have a clue, advertises for foreign money. Maybe I should do the same.

T^T



DomKen -> RE: Why do Prices Keep Rising? (12/30/2011 8:29:07 PM)


quote:

ORIGINAL: Termyn8or

quote:

So if a job is added then everyone's wages must decline or the money supply must expand which is inflation.


No, in a good world that "extra" person's work would actually create wealth. Wealth is NOT money. They can be inerchanged in some discussions, but they are definitely different things.

Take an agrarian society to keep it simple. That eleventh person can work some land or whatever and increase the food output enough to be fed without taking from any other.

The use of money can fuck this all up if it is not handled properly, and believe me it has not been handled properly. Whether ten more dollars should be printed just for this one extra person or if the same amount gets split up matters not.

It matters a great deal and if you don't understand it then you will never understand economics.

Take your solution, simply expand the money supply by 10 dollars. Now supply and demand kicks in. Previously with everything static supply equaled demand. Now demand exceeds supply, for some goods at least. So the value, price, of those goods increases. If the new worker is producing some good already produced in the market the supply will exceed demand and prices of that good will fall. Since the new worker demands more kinds of goods than he supplies this has the net effect of causing prices to inflate.

As to the agrarian example, a farmer cannot be self sufficient except in the most primitive conditions. He'll need someone to make his tools, someone to mine the ore to make his tools, someone to smelt the ore into metal to make his tools, etc. etc.



Musicmystery -> RE: Why do Prices Keep Rising? (12/30/2011 8:58:38 PM)

quote:

ORIGINAL: DomKen


quote:

ORIGINAL: Musicmystery

quote:

ORIGINAL: DomKen


quote:

ORIGINAL: Musicmystery

quote:

the reality of the last few years where the money supply shrunk drastically


The money supply did not shrink. Velocity did, as a result of tight credit and low investment. In fact, increasing the money supply was an attempt to encourage velocity.

Actually when all those derivatives and CDS went belly up and all those people got foreclosed the money supply definitely shrank. Money does not equal currency.

Yes, money doesn't equal currency. No, the money supply did not shrink. However, loans are down.



That's M2 not M3. M3 is the appropriate measure for the total money supply not just that in circulation. M3 is where the big institutions', that lost trillions in 2008, money is measured.

NOW he cherry picks. Somebody's been drinking Ron Paul's Kool-Aid.

OK. Given the sharp contraction of the money supply, as you postulate, and since velocity certainly hasn't increased, we should be experiencing *de*flation.

Let me guess. There's some kooky conspiracy reason why the "real" data we don't see supports this.

[8|]

You'll note here, from the rate of change--M3 has been in positive territory throughout, since 1935; sometimes growing more slowly, but always in the positive rate of change...i.e., increasing.




Musicmystery -> RE: Why do Prices Keep Rising? (12/30/2011 9:42:35 PM)

quote:

Take a simple example. In this economy there is 100 dollars and 10 workers. Each one is earns 10 dollars per month and each one spends 10 dollars per month. With everything static there is no need for inflation. However what happens when one of their kids reaches working age and no one dies? Now there are 11 workers competing for the same 100 dollars. So if a job is added then everyone's wages must decline or the money supply must expand which is inflation. The same happens if one of the original 10 workers gets a raise to 11 per month, the extra dolar has to come from somewhere and with no expansion of the money supply it comes from the rest of the economy.


The dollar doesn't "have to come from somewhere" in a banking economy that creates money. You are also assuming Velocity is flat.

And an increase in the money supply does not equal inflation. MV = PQ. If M increases to balance Q, that's not inflation, though it is a necessary increase in M (to avoid deflation).



Musicmystery -> RE: Why do Prices Keep Rising? (12/30/2011 9:46:09 PM)

quote:

Take your solution, simply expand the money supply by 10 dollars. Now supply and demand kicks in. Previously with everything static supply equaled demand. Now demand exceeds supply, for some goods at least. So the value, price, of those goods increases. If the new worker is producing some good already produced in the market the supply will exceed demand and prices of that good will fall. Since the new worker demands more kinds of goods than he supplies this has the net effect of causing prices to inflate.


Supply isn't "exceeded'; supply is a range of prices/quantities producers are willing and able to sell at a given time, not a point. Similarly with demand. You are arguing for an increase in supply, not "exceeding" it. You're also ignoring elasticity as a factor.



Real0ne -> RE: Why do Prices Keep Rising? (12/31/2011 6:36:58 AM)

quote:

ORIGINAL: Musicmystery

If people really are looking for a cause of inflation, look no further than fuel prices. It impacts all goods, and agriculture doubly so.

It will also continue to rise (on average over time), despite what nutso or dishonest candidates may promise (and regardless of domestic drilling).


for some reason you continually seem to get it backwards.

inflation drives prices not the other way around as you would claim.

Monetary inflation drives all means of exchange (except under the table and trading with oats for berries etc), as well as all soft assets which include all 401k, wall street investments.

If you do not believe me this prof has many lessons on the matter. 



DomKen -> RE: Why do Prices Keep Rising? (12/31/2011 6:38:36 AM)


quote:

ORIGINAL: Musicmystery

quote:

ORIGINAL: DomKen


quote:

ORIGINAL: Musicmystery

quote:

ORIGINAL: DomKen


quote:

ORIGINAL: Musicmystery

quote:

the reality of the last few years where the money supply shrunk drastically


The money supply did not shrink. Velocity did, as a result of tight credit and low investment. In fact, increasing the money supply was an attempt to encourage velocity.

Actually when all those derivatives and CDS went belly up and all those people got foreclosed the money supply definitely shrank. Money does not equal currency.

Yes, money doesn't equal currency. No, the money supply did not shrink. However, loans are down.



That's M2 not M3. M3 is the appropriate measure for the total money supply not just that in circulation. M3 is where the big institutions', that lost trillions in 2008, money is measured.

NOW he cherry picks. Somebody's been drinking Ron Paul's Kool-Aid.

OK. Given the sharp contraction of the money supply, as you postulate, and since velocity certainly hasn't increased, we should be experiencing *de*flation.

Let me guess. There's some kooky conspiracy reason why the "real" data we don't see supports this.

[8|]

You'll note here, from the rate of change--M3 has been in positive territory throughout, since 1935; sometimes growing more slowly, but always in the positive rate of change...i.e., increasing.



We did experience deflation throughout 2009. You're welcome to look up the numbers yourself.
http://www.usinflationcalculator.com/inflation/current-inflation-rates/

Moving average over a 10 year period is not very effective for showing actual quantity or showing short spikes. You're welcome to keep believing that the money supply didn't decline but the facts are quite different.



DomKen -> RE: Why do Prices Keep Rising? (12/31/2011 6:43:21 AM)


quote:

ORIGINAL: Musicmystery

quote:

Take a simple example. In this economy there is 100 dollars and 10 workers. Each one is earns 10 dollars per month and each one spends 10 dollars per month. With everything static there is no need for inflation. However what happens when one of their kids reaches working age and no one dies? Now there are 11 workers competing for the same 100 dollars. So if a job is added then everyone's wages must decline or the money supply must expand which is inflation. The same happens if one of the original 10 workers gets a raise to 11 per month, the extra dolar has to come from somewhere and with no expansion of the money supply it comes from the rest of the economy.


The dollar doesn't "have to come from somewhere" in a banking economy that creates money. You are also assuming Velocity is flat.

And an increase in the money supply does not equal inflation. MV = PQ. If M increases to balance Q, that's not inflation, though it is a necessary increase in M (to avoid deflation).


An increase in the money supply is one definition of inflation. If you had watched the video at the top you'd know that is the definition the professor in question is using. Price inflation is simply a consequence of inflation of the money supply in this view of theory.



DomKen -> RE: Why do Prices Keep Rising? (12/31/2011 6:50:19 AM)


quote:

ORIGINAL: Musicmystery

quote:

Take your solution, simply expand the money supply by 10 dollars. Now supply and demand kicks in. Previously with everything static supply equaled demand. Now demand exceeds supply, for some goods at least. So the value, price, of those goods increases. If the new worker is producing some good already produced in the market the supply will exceed demand and prices of that good will fall. Since the new worker demands more kinds of goods than he supplies this has the net effect of causing prices to inflate.


Supply isn't "exceeded'; supply is a range of prices/quantities producers are willing and able to sell at a given time, not a point. Similarly with demand. You are arguing for an increase in supply, not "exceeding" it. You're also ignoring elasticity as a factor.

No!

If the economy was static with 10 people producing and consuming adding an aditional consumer and producer will obviously have an effect on supply and demand. For simplicity assume 5 goods in the marketplace each produced by 2 people and consumed equally by all 10. The new worker enters and either adds a new good which must compete against the entire market for the money in circulation or he starts making one of the 5 existing goods in which case supply of that good increases. Now likewise demand for the 5 original goods has increased from 10 people to 11 people. So the price of an over supplied good might decline but demand throughout the rest of the economy has increased so some price inflation can be expected along with the inflation of the money supply.



Real0ne -> RE: Why do Prices Keep Rising? (12/31/2011 7:33:26 AM)

quote:

ORIGINAL: Musicmystery

Somebody's been drinking Ron Paul's Kool-Aid.

OK. Given the sharp contraction of the money supply, as you postulate, and since velocity certainly hasn't increased, we should be experiencing *de*flation.

Let me guess. There's some kooky conspiracy reason why the "real" data we don't see supports this.

[8|]

You'll note here, from the rate of change--M3 has been in positive territory throughout, since 1935; sometimes growing more slowly, but always in the positive rate of change...i.e., increasing.




Improper interpretation of charts.

Here I will show you;

Velocity has nothing to do with inflation anymore than speed has anything to do with going uphill or downhill.

This is the fav graph everyone likes to use to show that inflation is not a bad thing after all.  (oh and as always they stop these charts before the line goes straight up.)  That is if they took it out another year.

[image]http://i123.photobucket.com/albums/o296/nine_one_one/fed%20reserve/inflation.jpg[/image]

At most increased velocity would only "shorten" the PAIN, not prevent it nor fix it.  the notion that it would fix it is a total misnomer.  the only way to fix it is to keep it as flat as possible at the no-flation line.

Again we can see that the federal reserve has done absolute nothing to keep our line on the no-flation line, and instead is leading us to money with no value about 1.1 cents right now, was 1.7 in 2001!

Here is your chart with the deflation cycles unequivocally pointed out.

Keeping it on the violet is the sole purpose for the existence of the federal reserve as it was sold to the people.  Do I hear koolaide?

[image]http://i123.photobucket.com/albums/o296/nine_one_one/fed%20reserve/m2m3_cpi_money_supply1.png[/image]

but that cheap sounding lazy 3% will kill an economy over time as it compounds the inflation rises faster!

[image]http://i123.photobucket.com/albums/o296/nine_one_one/fed%20reserve/Currency_component_of_the_US_money_.gif[/image]

roughly every doubling of money/currency/bonds/et al above population growth equals a doubling in inflation hence a doubling in price hence the money you made is worth only 1/2 as much.

You could have a job with 1/2 the wage or work 1/2 as much if there were noflation and buy the same amount of stuff..  its robbery and there is not way to write it off!

Iflation steals it you keep earning more to replace it and then you pay taxes on the money et al that you earn to replace the money et al that inflation via the federal reserve monetary system stole from you in the first place.

I see nothing to do with velocity or oil.

I see continual reduction of the value of the dollar to infinity as a direct result of monetary inflation.

There is no need for prices to ever increase, it just sounds good to get a raise and all that raise REALLY does is kinda but NOT REALLY help you keep up with inflation and even with the board, late though and at hefty loss to you as it may be.   

Meaning the inflation evolved over the year prior to your getting that raise, (IF you get one at all) hence you paid higher prices for a year with no wage compensation at all!

People do not get raises to pay them more for their work they get them to "help" somewhat compensate for losses!!!

All the rest is koolaid



Musicmystery -> RE: Why do Prices Keep Rising? (12/31/2011 8:06:14 AM)

quote:

We did experience deflation throughout 2009. You're welcome to look up the numbers yourself.
http://www.usinflationcalculator.com/inflation/current-inflation-rates/


That's not deflation, Ken, as your own linked graph shows; it's a sharp drop in the inflation rate, but still inflation.



Musicmystery -> RE: Why do Prices Keep Rising? (12/31/2011 8:08:09 AM)

quote:

An increase in the money supply is one definition of inflation.


No, it's not. Inflation is an increase in general price level.

An increase in the money supply is one potential cause of inflation--or to the monetarists, always the cause, right from Milton Friedman.



Musicmystery -> RE: Why do Prices Keep Rising? (12/31/2011 8:10:13 AM)

quote:

If the economy was static with 10 people producing and consuming adding an aditional consumer and producer will obviously have an effect on supply and demand. For simplicity assume 5 goods in the marketplace each produced by 2 people and consumed equally by all 10. The new worker enters and either adds a new good which must compete against the entire market for the money in circulation or he starts making one of the 5 existing goods in which case supply of that good increases. Now likewise demand for the 5 original goods has increased from 10 people to 11 people. So the price of an over supplied good might decline but demand throughout the rest of the economy has increased so some price inflation can be expected along with the inflation of the money supply.


You are confusing increases in demand/supply (curve shifts) with increases in quantity demanded/supplied (through the existing demand/supply curves).

And you're still ignoring elasticity.



Musicmystery -> RE: Why do Prices Keep Rising? (12/31/2011 8:11:23 AM)

quote:

as you would claim


No such claim. Learn to read.



Real0ne -> RE: Why do Prices Keep Rising? (12/31/2011 8:13:52 AM)

quote:

ORIGINAL: Musicmystery

quote:

as you would claim


No such claim. Learn to read.


I make a lot of money reading charts [8|]

quote:

ORIGINAL: Musicmystery

quote:

We did experience deflation throughout 2009. You're welcome to look up the numbers yourself.
http://www.usinflationcalculator.com/inflation/current-inflation-rates/


That's not deflation, Ken, as your own linked graph shows; it's a sharp drop in the inflation rate, but still inflation.


more erroneous chart reading.

down = deflation.

all stock, fund, monetary et all charts are relative to the previous history NOT how sharp it rises or falls.

Its very simple.

Down = deflation = higher value = lower prices

Up = inflation = lower value = higher prices.

Everything else is bullshit noise and static.



Musicmystery -> RE: Why do Prices Keep Rising? (12/31/2011 8:16:11 AM)

quote:

Velocity has nothing to do with inflation


If you're going to embrace the monetarist view that inflation is always a monetary phenomenon, you're stuck with MV = PQ. Velocity is very much a factor. And, velocity dropped like a stone from 2008 to present.

Banks and businesses are sitting on cash. We aren't poor. We have all the assets we had before, and then some--though the accounting of them is fucked up. What we lack is monetary assets circulating in forms of loans and business investment. That's actually why we are in fact flirting with deflation, even as we're not there yet. At the same time, fuel prices are high (and going to go higher on average), driving up several market sectors, particularly agriculture, and of course, transported goods.



Musicmystery -> RE: Why do Prices Keep Rising? (12/31/2011 8:17:28 AM)

quote:

down = deflation.


If inflation is 5%, and drops to 1%, prices are still rising--just not as quickly.

A drop in the rate of increase is still an increase.



Real0ne -> RE: Why do Prices Keep Rising? (12/31/2011 8:24:57 AM)

quote:

ORIGINAL: Musicmystery

quote:

Velocity has nothing to do with inflation


If you're going to embrace the monetarist view that inflation is always a monetary phenomenon, you're stuck with MV = PQ. Velocity is very much a factor. And, velocity dropped like a stone from 2008 to present.

Banks and businesses are sitting on cash. We aren't poor. We have all the assets we had before, and then some--though the accounting of them is fucked up. What we lack is monetary assets circulating in forms of loans and business investment. That's actually why we are in fact flirting with deflation, even as we're not there yet. At the same time, fuel prices are high (and going to go higher on average), driving up several market sectors, particularly agriculture, and of course, transported goods.


Long term inflation is strictly a monetary matter.  

I have a monetary formula that predates all that shit they use today.

its expansion of money beyond the requirements of trade based on population is inflation.

I could expand your formula and add several more variables to th epoint of adding curved space for all I care and it would be just as meaningless as your insistence that velocity has anything DIRECTLY to do with inflation.

It is a controlling mechanism to help reduce the pain of poor management as I stated not part of the elements that CREATE inflation.

Maybe you should learn how to read, look back at the charts post.



quote:

ORIGINAL: Musicmystery

quote:

down = deflation.


If inflation is 5%, and drops to 1%, prices are still rising--just not as quickly.

A drop in the rate of increase is still an increase.


again as I said it has nothing to do with the creation of inflation.



Musicmystery -> RE: Why do Prices Keep Rising? (12/31/2011 8:39:12 AM)

quote:

expansion of money beyond the requirements of trade based on population is inflation


Yes. And obvious.

quote:

your insistence that velocity has anything DIRECTLY to do with inflation


Again, learn to read. It's a variable.

Back to the original point before the Ego Twins started their Tangent Dance...

In this case, banks and businesses aren't lending/investing, and that drop is slowing the economy, even as fuel prices will continue to exert upward price pressure.



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