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RE: Why do Prices Keep Rising? - 12/31/2011 8:40:31 AM

Musicmystery

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quote:

quote:

ORIGINAL: Musicmystery

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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.

Creation of inflation? It *IS* inflation--it's the inflation rate.

< Message edited by Musicmystery -- 12/31/2011 9:39:05 AM >

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RE: Why do Prices Keep Rising? - 12/31/2011 8:43:58 AM

Musicmystery

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Long term inflation is strictly a monetary matter.

And this is monetarist dogma. As is their formula, MV = PQ.

Look. Suppose we increase the monetary supply 10%. But people start spending half what the spend now, consistently, and over time. M is up....but V is way down. If Q remains the same or grows sluggishly, the result will be dropping prices as inventory is cleared.

< Message edited by Musicmystery -- 12/31/2011 9:39:21 AM >

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RE: Why do Prices Keep Rising? - 12/31/2011 10:28:45 AM

DomKen

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ORIGINAL: Musicmystery

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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.

scroll down the page to the chart of monthly rates and you'll see that we had deflation in 2009.

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RE: Why do Prices Keep Rising? - 12/31/2011 10:32:55 AM

DomKen

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ORIGINAL: Musicmystery

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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.

There is no confusion. I'm using a simple model precisely so there can be no confusion. In that economy there are no other consumers or producers. Changing quantity demanded/supplied is a direct shift in supply and demand. I chose the model for precisely that reason.

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RE: Why do Prices Keep Rising? - 12/31/2011 10:58:00 AM

Real0ne

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quote:

ORIGINAL: Musicmystery

quote:

Long term inflation is strictly a monetary matter.

And this is monetarist dogma. As is their formula, MV = PQ.

Look. Suppose we increase the monetary supply 10%. But people start spending half what the spend now, consistently, and over time. M is up....but V is way down. If Q remains the same or grows sluggishly, the result will be dropping prices as inventory is cleared.

why are you proving my point and arguing I am incorrect?

Thats twice now in this thread.

if

M=1
Q=1
V=1

then P=1

M=10
Q=1
V=1

then P=10

changes nothing I have said even a little bit. You seem to want to slice into this and look at tiny pieces rather than macro which is my point after all

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RE: Why do Prices Keep Rising? - 12/31/2011 11:16:55 AM

Real0ne

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ORIGINAL: Musicmystery

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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.

again you simply keep trying to do an end run around my point. how do you think anything you said here invalidates monetary inflation as I stated it.

< Message edited by Real0ne -- 12/31/2011 11:19:21 AM >

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RE: Why do Prices Keep Rising? - 12/31/2011 11:17:40 AM

Musicmystery

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Of course. Because it's one of the variables. Why are you denying the SAME math if we change V instead of M?

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RE: Why do Prices Keep Rising? - 12/31/2011 11:18:56 AM

Musicmystery

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Changing quantity demanded/supplied is a direct shift in supply and demand.

No, it's not. One is a movement along an existing curve. The other is changing the position of that curve.

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RE: Why do Prices Keep Rising? - 12/31/2011 11:20:46 AM

Real0ne

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ORIGINAL: Musicmystery

Of course. Because it's one of the variables. Why are you denying the SAME math if we change V instead of M?

look at the math!

v does not supercede or negate M. its an accessory to M

in other words it merely describes the imbalance but does nothing to eliminate it nor is it in its most fundamental form.

< Message edited by Real0ne -- 12/31/2011 11:27:09 AM >

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RE: Why do Prices Keep Rising? - 12/31/2011 11:22:22 AM

Musicmystery

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we had deflation in 2009

Because of a sharp drop in Velocity.

The title of this thread, Ken, is why prices keep rising. It's because fuel prices are keeping transport/agriculture costs high. Not a drop in M3 (which increased throughout, just more slowly), not minor deflation two years ago, both of which should otherwise *lower* prices.

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RE: Why do Prices Keep Rising? - 12/31/2011 11:26:21 AM

Musicmystery

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quote:

ORIGINAL: Real0ne

quote:

ORIGINAL: Musicmystery

Of course. Because it's one of the variables. Why are you denying the SAME math if we change V instead of M?

look at the math!

v does not supercede or negate M. its an accessory to M

This may be the most willfully ignorant posture yet.

M and V have the same impact as variables. Keep M at 1, raise V to 10, get the same result.

Right now, M is up, V is down, Q is up slightly. That's intentionally (good idea or not) by the Fed to try to get V up again. It's only working in the top segments of the economy (which never has trickled down, despite the old myth, or we'd all have been prosperous in the Victorian Age), and fuel prices are squeezing the hell out of middle and lower class consumers who can't avoid high increases in fuel and food over the past decade.

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RE: Why do Prices Keep Rising? - 12/31/2011 11:34:12 AM

Real0ne

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quote:

ORIGINAL: Musicmystery

quote:

ORIGINAL: Real0ne

quote:

ORIGINAL: Musicmystery

Of course. Because it's one of the variables. Why are you denying the SAME math if we change V instead of M?

look at the math!

v does not supercede or negate M. its an accessory to M

This may be the most willfully ignorant posture yet.

M and V have the same impact as variables. Keep M at 1, raise V to 10, get the same result.

Right now, M is up, V is down, Q is up slightly. That's intentionally (good idea or not) by the Fed to try to get V up again. It's only working in the top segments of the economy (which never has trickled down, despite the old myth, or we'd all have been prosperous in the Victorian Age), and fuel prices are squeezing the hell out of middle and lower class consumers who can't avoid high increases in fuel and food over the past decade.

while I agree with a lot of what you said in as much as where the pain is, the root problem is still the same.

that M keeps getting higher and the fed has not forced it back into equilibrium. That is to say forced to the no-inflation line.

On the contrary they continually force it farther away from the no inflation line causing more inflation which drives prices higher.

The dollar now worth about .0117 give or take from its original value of a dollar.

V only serves to add time into the equation. It has nothing to do what so ever with total "M".

It is total M that is the demon here and how fast is moves at instant is irrelevant to the fact that inflation keeps going up, hence value keeps going down, hence prices keep going up.

It does not matter if you light a fire with a match, cigarette lighter, flint and steel, or a freaking nuke, the end result is you have fire, the end result is we have ever increasing inflation due to an ever increasing M! (in the final analysis)

Hence no matter how you like to play with numbers or describe which one needs to be changed it is that monetary inflation that is robbing this country blind.

< Message edited by Real0ne -- 12/31/2011 11:53:19 AM >

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RE: Why do Prices Keep Rising? - 12/31/2011 11:46:38 AM

DomKen

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quote:

ORIGINAL: Musicmystery

quote:

Changing quantity demanded/supplied is a direct shift in supply and demand.

No, it's not. One is a movement along an existing curve. The other is changing the position of that curve.

?

Movement along the curve is all that is possible. You cannot shift the curve if it is an accurate model of supply and demand. That is the whole point of the term. Increase/decrease supply or demand and you simply move the price up or down along the curve. To change the curve you'd need to change the underlying basis for the curve (for instance food becomes unnecessary or diamonds become essential for survival).

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RE: Why do Prices Keep Rising? - 12/31/2011 11:46:46 AM

Termyn8or

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Forget it RealO. I almost posted this earlier but dumped it.

It's not so much people being wrong because they're ignorant, it is something totally different - point of view. For example I have said more than once that there is no such thing as inflation. Either something goes up in value or it does not. If the object's value has not been enhanced and it's price rises, it is the value of the money that has changed, not the object.

We've actually been through all this some time ago. The discussion got into the time people used rocks for money and all that shit as well as why eventually there had to be "special" rocks to keep people from just gathering them up to get rich for nothing. I believe back then the example was seashells but who cares.

The reason I dumped that other post was because the concept is difficult to articulate. The best way I can do it in short is to say that one looks at the situation like a dentist and the other like a proctologist. Or another way of putting it is that we both see the same baseball game but one of us is sitting behind first base and other behind third.

Inflation is a term used by those with the store boughten education. They will always say others are wrong, and ironically while they are wrong in saying that, they are not wrong about other things. Actually what they say is not the opposite, it is just expressed inversely in a way.

In my short intercourse with DK using the example of ten people, which was not my limitation, it is shown that money supply must increase with increasing population, I do not dispute that. However if that eleventh person pulls his weight then the added currency of whatever type does not cause inflation because of the value added to the gross output of the community. If the money supply did not increase, it would apparently or relatively increase in value. This is actually a "devaluation" of the true wealth which is what is to be purchased. In such a case those who saved up over the years would have a distinct advantage which could be called intrinsic interest in a way.

But where the school taughten fall down is that they think it has something to do with population. This is a socialistic view in a way. What needs to happen really is for the money supply to grow proportionally to the wealth created by the members of the society in question. It has nothing to do with population, it has to do with goods and services produced.

This of course is only a dream of a perfect world. Also, the tenets of the system I have drawn here actually do make the use of gold as a standard counterproductive. Money really only does have to be a ledger entry, but that only works when everyone is honest. Fat chance.

No matter what anyone says about the people who run the royal scam etc., which is true, it is also true that the production of goods and services has not kept up with population growth. Due to the way things are, we can't even seem to waste less to be able to feed the world. However I am now of the opinion that we should not feed the world. Free food should come with strong contraceptives, look at what has happened in parts of Africa. Ever see the old Star Trek - The Trouble With Tribbles ? (I know another damn scifi reference, but it fits).

So if the same percentage of the people work as did when the population was ½ what it is today, there are two choices. there is either twice the money supply or the money is worth twice as much. One or the other. And the problem with the gold standard is that there is no way to assure that twice as much mined and refined gold would exist with the doubling of population, or the ouput. The gold standard was just meant to keep people honest.

It didn't work all that well anyway.

ETA : a constant money supply would work out well except for one thing. Instead of raises people would have to take pay cuts periodically. Everyhing should keep going down in "price" of course but just try to get workers to swallow that ! "Well it's been a year so now everybody makes a dime less per hour". No way that would work.

T^T

< Message edited by Termyn8or -- 12/31/2011 11:53:30 AM >

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RE: Why do Prices Keep Rising? - 12/31/2011 12:47:14 PM

Musicmystery

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quote:

ORIGINAL: DomKen

quote:

ORIGINAL: Musicmystery

quote:

Changing quantity demanded/supplied is a direct shift in supply and demand.

No, it's not. One is a movement along an existing curve. The other is changing the position of that curve.

?

Movement along the curve is all that is possible. You cannot shift the curve if it is an accurate model of supply and demand. That is the whole point of the term. Increase/decrease supply or demand and you simply move the price up or down along the curve. To change the curve you'd need to change the underlying basis for the curve (for instance food becomes unnecessary or diamonds become essential for survival).

Wow. Open any first year economics text. You'll see graphs and graphs of shifting curves.

What you describe above are changes in quantity demanded/supplied.

Demand and Supply are always snapshots of a moment. At this time, here are the quantities people are willing and able to supply/demand at various prices. It's a schedule, a table of quantities at different prices. It's how the curve is plotted.

But times/conditions/circumstances change. When they do, the old schedule is modified to meet the new conditions, what quantities at various prices people are willing/able to supply/demand at this new time. Those changes are shifts in supply/demand.

Your extreme posit is silly. Supply and demand change continually. You are thinking of the diamond/water paradox (which addresses marginal utility, not supply/demand per se), but that's not at all the point here. This is simply, basic, supply and demand, chapter 1.

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RE: Why do Prices Keep Rising? - 12/31/2011 12:50:00 PM

Musicmystery

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I have said more than once that there is no such thing as inflation. Either something goes up in value or it does not. If the object's value has not been enhanced and it's price rises, it is the value of the money that has changed, not the object.

However, inflation *IS* the value of the money. It lowers purchasing power. The object is, obviously, unchanged. The amount of money needed to purchase it has changed--inflation, a function of money, not objects.

quote:

where the school taughten fall down is that they think it has something to do with population

Has nothing to do with population per se. It has to do with liquidity in the economy, but that's not necessarily a function of population.

< Message edited by Musicmystery -- 12/31/2011 12:52:19 PM >

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RE: Why do Prices Keep Rising? - 12/31/2011 12:50:04 PM

mnottertail

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Jesus, they have words to describe this. but you are a total innumerate.

let me fill in the (you understood in the equation) MV = PQ.

M * V = P * Q

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RE: Why do Prices Keep Rising? - 12/31/2011 1:01:52 PM

wittynamehere

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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).

You're pointing to a symptom and thinking it's a cause. Rising fuel prices are an example of price inflation. But the root cause of price inflation is monetary inflation - an increase in the total amount of currency in circulation and related pools. The policies of the Federal Reserve are largely responsible for monetary inflation. It's well worth a look if you haven't done some honest research using non-mainstream sources.

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RE: Why do Prices Keep Rising? - 12/31/2011 1:31:25 PM

DomKen

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quote:

ORIGINAL: Musicmystery

quote:

we had deflation in 2009

Because of a sharp drop in Velocity.

The title of this thread, Ken, is why prices keep rising. It's because fuel prices are keeping transport/agriculture costs high. Not a drop in M3 (which increased throughout, just more slowly), not minor deflation two years ago, both of which should otherwise *lower* prices.

You claime we hadn't had deflation after the huge drop in M3 in late 2008. I just showed that we had.

Prices keep rising because if they don't the economy would be in bad shape. As I've already shown inflation is a necessary aspect of a healthy economy.

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RE: Why do Prices Keep Rising? - 12/31/2011 1:45:38 PM

DomKen

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quote:

ORIGINAL: Musicmystery

quote:

ORIGINAL: DomKen

quote:

ORIGINAL: Musicmystery

quote:

Changing quantity demanded/supplied is a direct shift in supply and demand.

No, it's not. One is a movement along an existing curve. The other is changing the position of that curve.

?

Movement along the curve is all that is possible. You cannot shift the curve if it is an accurate model of supply and demand. That is the whole point of the term. Increase/decrease supply or demand and you simply move the price up or down along the curve. To change the curve you'd need to change the underlying basis for the curve (for instance food becomes unnecessary or diamonds become essential for survival).

Wow. Open any first year economics text. You'll see graphs and graphs of shifting curves.

What you describe above are changes in quantity demanded/supplied.

Demand and Supply are always snapshots of a moment. At this time, here are the quantities people are willing and able to supply/demand at various prices. It's a schedule, a table of quantities at different prices. It's how the curve is plotted.

But times/conditions/circumstances change. When they do, the old schedule is modified to meet the new conditions, what quantities at various prices people are willing/able to supply/demand at this new time. Those changes are shifts in supply/demand.

Your extreme posit is silly. Supply and demand change continually. You are thinking of the diamond/water paradox (which addresses marginal utility, not supply/demand per se), but that's not at all the point here. This is simply, basic, supply and demand, chapter 1.

You really didn't understand macroeconomics if you didn't understand those graphs.

In simplest terms a supply/demand graph is 2 lines. One represents increasing supply as price rises while the other represents declining demand as the price rises. the interection of those 2 lines represents the price if no outside factors constrain supply or demand. Of course there are always outside forces so the graph is simply a visual representation of a basic part of economics. For instance in my simple example above the size of the economy is tightly constrained so there is no way to increase supply if demand increases. However the simple model does demonstrate that price inflation is part of an expanding money supply which is essential to an economy that is growing.

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