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

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mnottertail -> RE: Why do Prices Keep Rising? (12/31/2011 2:27:21 PM)


quote:

ORIGINAL: wittynamehere

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).

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.



The root cause of fuel prices is speculation, laying waste to the rest of your monograph.

Take for instance, the fact that we now know, that if you were to pump the worlds daily supply of oil out of the Bakken Find and its vast area to the north in Alberta, and only using that area, 24/7/365 you would not run out of oil until somewhere after 3060....

The rest I will leave as an exercise to the reader...connect the dots.



Musicmystery -> RE: Why do Prices Keep Rising? (12/31/2011 2:47:57 PM)


quote:

ORIGINAL: wittynamehere

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).

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.


If that were true, price levels of other goods would be rising as well. They aren't. Housing prices, for example, are in the basement.

Second, if increasing the money supply were the only factor, we'd have had proportional increases since 2009 when the bailouts started. We didn't. In fact, inflation hasn't gotten out of the threes, even at its highest since then.

And finally, there are multiple reasons for rising fuel prices. Perhaps you've seen the news over the past decade.



Musicmystery -> RE: Why do Prices Keep Rising? (12/31/2011 2:52:58 PM)

quote:

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.


The only accurate part here is "simple."

Of course supply can increase if demand increases (as can quantity supplied). No way am I taking on more work than I already have. But if demand increases so much that you'll pay be $10,000 to work this weekend, I'm there. That increase in demand is then met by an increase in quantity supplied. That, however, is not inflation--it's an increase in price of a single good, not an increase in aggregate prices.

Nor need that mandate an increase in money supply, as an increase in velocity would accomplish the same thing (if you want to isolate single variables, and you're clearly itching to do that). Let's assume a very small economy of just you and me, which has a money supply of $100. I have the $100 and spend it to buy $100 of flowers from you. You in turn spend $100 to buy books from me. We have created $200 of our "gross domestic product" from a money supply of just $100. If we do that transaction every month, we would have $2400 of "GDP" from our $100 monetary base.

If the only point of this babble is to make the point that modest inflation is generally accepted in a growing, healthy economy, agreed. Nowhere is that questioned.

[image]http://www.history-society.com/im/5.JPG[/image]

demand vs. quantity demanded:
http://www.oocities.org/economissed/qd_vs_d.htm

supply vs. quantity supplied:
http://www.oocities.org/economissed/qs_vs_s.htm



DomKen -> RE: Why do Prices Keep Rising? (12/31/2011 3:47:40 PM)


quote:

ORIGINAL: Musicmystery
If the only point of this babble is to make the point that modest inflation is generally accepted in a growing, healthy economy, agreed. Nowhere is that questioned.

You still haven't watched the video that started this thread then.

It posits that inflation is always negative as the very first point in the video.

As to the rest I'm not gtting paid to teach remedial econ.



Real0ne -> RE: Why do Prices Keep Rising? (12/31/2011 6:03:27 PM)





Investopedia - What is Monetary Inflation?



Ron Paul vs Ben Bernanke - Monetary Inflation - 11.08.07




LookieNoNookie -> RE: Why do Prices Keep Rising? (12/31/2011 7:28:30 PM)

Here's the basic answer:

Have you asked for a raise in the last 2+ years?

That's inflation.

(I know....I don't know how I do it either).



Musicmystery -> RE: Why do Prices Keep Rising? (1/1/2012 9:56:28 AM)


quote:

ORIGINAL: DomKen


quote:

ORIGINAL: Musicmystery
If the only point of this babble is to make the point that modest inflation is generally accepted in a growing, healthy economy, agreed. Nowhere is that questioned.

You still haven't watched the video that started this thread then.

It posits that inflation is always negative as the very first point in the video.

As to the rest I'm not gtting paid to teach remedial econ.

[8|]

Good thing too.



kinkbound -> RE: Why do Prices Keep Rising? (1/1/2012 2:27:14 PM)

quote:

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.


If the money supply did not shrink as you claim, then this guy is full of shit. (specifically watch from about 1:45 to about 4:45):

http://www.youtube.com/watch?feature=player_detailpage&v=tbfOKK1M6-Y



Musicmystery -> RE: Why do Prices Keep Rising? (1/2/2012 9:58:05 AM)

In fact, he's discussing the increase in the money supply, except the M3 hard-on by people trying to attain office, sell gold, or sell books (which is what he's doing).

He also assumes increasing M1 causes a decrease in M3...all of a sudden, despite the concurrence previously.

So it's not the factor. He's right--there's a "crisis." But that crisis is Velocity falling like a stone.

M3 is M2 plus plus large-denomination ($100,000 or more) time deposits, balances in institutional money funds, repurchase liabilities issued by depository institutions, and Eurodollars held by U.S. residents at foreign branches of U.S. banks and at all banks in the United Kingdom and Canada. Since 2006, M3 is no longer tracked by the Fed, and that has got conspiracy theorists working overtime. However, there are still estimates produced by various private institutions...which have their own individual methods and individual agendas.

M2 is money (M1) and "close substitutes" for money. Economists use M2 when looking to quantify the amount of money in circulation and trying to explain different economic monetary conditions. M2 is a key economic indicator used to forecast inflation--which is the Fed's job, along with appropriate liquidity.

Now, if instead you're interested in what the Big Boys are doing with their money...OK, look at M3. But this is outside the mandate of the Fed.

Would YOU leave millions in low interest bearing accounts in a climate where money lending has slowed dramatically? Clearly, people have opted for other options. And likely for investments traditionally far more rewarding than gold, which is useful primarily as a hedge (and occasionally speculation).

Money especially has been going into commodities futures.



Real0ne -> RE: Why do Prices Keep Rising? (1/2/2012 6:09:51 PM)

like the people who are trying to sell the economy?  [8|]

Investopedia - What is Monetary Inflation?

so where is your formula that shows value with regard to money supply?

your velocity only points to which part of the symptom needs the bandaid to get things moving but has nothing to do with value with respect to the money supply.





Real0ne -> RE: Why do Prices Keep Rising? (1/2/2012 6:57:03 PM)

quote:

ORIGINAL: kinkbound

quote:

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.


If the money supply did not shrink as you claim, then this guy is full of shit. (specifically watch from about 1:45 to about 4:45):

http://www.youtube.com/watch?feature=player_detailpage&v=tbfOKK1M6-Y



the OP refers to this:

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


which follows this:

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


but he insists on directing his comments to this:

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

which does not show how we are getting creamed where we are still getting hit with deflation the very thing the fed was sold to us to prevent but now instead of that deflation putting us even with the board

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

making the pain worthwhile and restoring the value to the money, after the deflationary period it is still in the inflation zone and continues to devalue the money throwing all pain and sacrifice we make out the window, only to create a minor correct while the money continues on course to total devaluation and worthlessness!



and you are right note the dip in the black line.  It shrunk as he and you said.

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



SilverBoat -> RE: Why do Prices Keep Rising? (1/2/2012 7:36:56 PM)

Hrmm ...

... Maybe somebody should note the date, but I agree with much of what both DomKen and RealOne posted, and I'd take issue with the video-prof's definition of "inflation" ...

DK & RO (and Mn and others too) posted some very valid points: as the number of persons, goods, services, etc in the total economy increases, if the total money supply (as measured by issuance, velocity, etc) remains static, in general each of those persons, goods, services, etc would be forced by their relative demands and supplies to transact at lower fractions of the total.

The example of adding 1 new worker's output (and wages) to the existing 10's economy is a classic, and valid example. Presume, for the sake of example, that the 10 workers produced 100 different items, but due to invention started producing 101, all of equal demand. With only X amount of wages available, the price for everything else produced would drop 1% (actually 1.00110011%...) Those are valid perspectives, regardless of all the specious garbage bickered around them by legions of irate academic idjiots whose careers depend on out-cult-of-personalitying their peers. And yeah, the various analytics of accumulations, velocities, etc also have some validity, because the real economy and finance are much too complex and too rapidly varying to assess using the counts of workers, goods, etc. (And that's far too many etcs, but I'm just in that sort of mood, etc ... lol)

Anyway, the costs of generic things, such as foods, fuels, clothing, housing and so forth *have* been rising, even as measured as relative fractions of mean wages, because the fraction of 'wages' (which includes 'profits') that gets diverted into paper pyramids of speculative 'securities' contracts, resource controls, and other non-productive parasitic ventures has increased. For every $100 of tangible goods and services produced (in the industrialized nations), roughly $20 is extracted as 'profit' by the 'financial' entities who bought the stock, made the loans, gilded the CEOs, and roll that back into leveraged buyouts of each other, pump-n-dumping commodity futures, imploding bundled mortgage tranches, etc. That's why you, Mr. J.Q.Bottom90%, only have $80 to buy today what your daddy's generation had $95.

And if the abuse of that diversion wasn't bad enough (and so grotesquely profitable enough that it's been bribed into legal subsidy via 'gains-exemptions'), the banking managers who control large retirement funds are screwing the millions of small investors with leverage on the investors' own deposits. Those managers can borrow from the Fed, at 0.25%, charge you at least 3.25% for a mortgage, 25% for revolving credit, and play lunatic market games at 2500% (for a 4% cash reserve requirement) with your minimum-free-checking account balance.

... Inflation, at the work-a-day consumers' level of prices rising faster than wages definition, is occurring because so much of the money supply has been hijacked by political bribery into the 'financial' systems' extortion. (Remember "too big to fail"?)

... Changing that, I dunno, might not be possible. They've bought up control of all the major media systems too.






Musicmystery -> RE: Why do Prices Keep Rising? (1/2/2012 7:43:35 PM)

quote:

The example of adding 1 new worker's output (and wages) to the existing 10's economy is a classic, and valid example. Presume, for the sake of example, that the 10 workers produced 100 different items, but due to invention started producing 101, all of equal demand. With only X amount of wages available, the price for everything else produced would drop 1% (actually 1.00110011%...)


ONLY if we were in a fixed monetary system where the currency equaled the money supply. Since money is created (and destroyed) through fractional banking, the money we introduce loans, your model no longer works.

In this case, lending is tight. If it weren't, all this new money pumped into the economy would either push up the economy or the price level. It's not, because the new money, even at low rates, isn't being spent as it would have previously. Until that's resolved, this is where we're stuck.



Real0ne -> RE: Why do Prices Keep Rising? (1/3/2012 4:31:29 AM)

quote:

ORIGINAL: Musicmystery

quote:

The example of adding 1 new worker's output (and wages) to the existing 10's economy is a classic, and valid example. Presume, for the sake of example, that the 10 workers produced 100 different items, but due to invention started producing 101, all of equal demand. With only X amount of wages available, the price for everything else produced would drop 1% (actually 1.00110011%...)


ONLY if we were in a fixed monetary system where the currency equaled the money supply. Since money is created (and destroyed) through fractional banking, the money we introduce loans, your model no longer works.

In this case, lending is tight. If it weren't, all this new money pumped into the economy would either push up the economy or the price level. It's not, because the new money, even at low rates, isn't being spent as it would have previously. Until that's resolved, this is where we're stuck.



huh?

there is a difference between no longer works and is no longer used. 

What you described only shows no longer used.

[image]http://i123.photobucket.com/albums/o296/nine_one_one/fed%20reserve/Cumulative_Inflation_by_Decade_sm2.jpg[/image]

See this is cumulative inflation that lowers value and acts as a hidden tax and all the gubafia has to do to tax everyone is increase the money supply or allow it to be increased

there is another variable missing in your formula for the level of pricing and that is monetary inflation which would be a vertical offset to the standard formula you show that slides up and down that cumulative inflation chart that I posted a couple posts ago that you as usual NEVER comment on.  LOL

It is the result of your 3% per year model that has total economic failure and raping everyone but the most wealthy built right into it.



Real0ne -> RE: Why do Prices Keep Rising? (1/3/2012 5:31:57 AM)

as you can see from the above cumulative inflation chart that inflation and the devaluation of the dollar to ZERO is runaway and you have not provided a formula to correct it.

The minimum wage in 1970 was  $1.60 and now the minimum wage is $7.25.

Hows that wonderful monetary system workin?

quote:

In 2010, 72.9 million American workers age 16 and over were paid at hourly rates, representing 58.8 percent of all wage and salary workers.1 Among those paid by the hour, 1.8 million earned exactly the prevailing Federal minimum wage of $7.25 per hour. About 2.5 million had wages below the minimum.2 Together, these 4.4 million workers with wages at or below the Federal minimum made up 6.0 percent of all hourly-paid workers. Tables 1-10 present data on a wide array of demographic and socioeconomic characteristics for hourly-paid workers earning at or below the Federal minimum wage. The following are some highlights from the 2010 data.


The minimum wage in 1970 was $1.60. A new car cost $3,800 and a new house cost $23,400.00.

Minimum wage increased by 450% since 1970.

The average annual income in 1970 was $17,550.00.

Average income today is about 32,000 bucks, sounds like the creation of a banana republic to me!

So lets see if we can figger this out. 

Inflation increased by 2000% since 1970 and the average income increased by an insulting 100%.

How does your velocity account for that gap and constant loss of money of the people at large, the 99.5% to the gubafia banking cartel?

Now you were saying?   




mnottertail -> RE: Why do Prices Keep Rising? (1/3/2012 5:50:16 AM)

Nixon took us off the gold standard in 1971.  Your tinfoil charting does not agree with that date, therefore everything about them, and every argument using them,  is of no value, as usual.



Real0ne -> RE: Why do Prices Keep Rising? (1/3/2012 5:56:55 AM)

quote:

ORIGINAL: mnottertail

Nixon took us off the gold standard in 1971.  Your tinfoil charting does not agree with that date, therefore everything about them, and every argument using them,  is of no value, as usual.


I was not talking about your opinion.




mnottertail -> RE: Why do Prices Keep Rising? (1/3/2012 6:00:59 AM)

I dont give a good goddamn fuck what you are talking about.  Your data is meaningless bullshit, no cause and effect, therefore:

All premises that are forwarded based on the illustrations in these charts are junk, they are wholly flawed if not outright numbers picked out of the air.



Real0ne -> RE: Why do Prices Keep Rising? (1/3/2012 6:04:06 AM)

quote:

ORIGINAL: mnottertail

I dont give a good goddamn fuck what you are talking about.  Your data is meaningless bullshit, no cause and effect, therefore:

All premises that are forwarded based on the illustrations in these charts are junk, they are wholly flawed if not outright numbers picked out of the air.


so you do not know how to add and subtract huh?

you have a better source than the federal reserve statistics huh?






mnottertail -> RE: Why do Prices Keep Rising? (1/3/2012 6:10:56 AM)

those are not federal reserve statistics.

I know how to add and subtract, and I am aware of time flowing from past to present, not the other way around.

As Nixon signed the law that took us off the gold standard (thereby deflating money 100% (not in your chart)) he made the famous statement (which I have repeatedly quoted out here):

We're ALL Kenyesians now.  

(he also did some other real dirty shit, like remove the USPS from the federal budget, and created HMO crap, which led to some real devistating monetary issues that are a bulk of our money troubles today)

He was Mr BorrowandSpend paving the way for St. BorrowandSpend, old wrinklemeat.



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