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Old 4th January 2013, 12:27 PM   #81
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Originally Posted by kevsta View Post
er, hello? I dont believe your inflation figures.

as you can see, priced in the only currency that doesn't permanently devalue consistently over time, oil still costs about the same as it has for the last 40 years or so.


the Magic Money Tree theory is woo.
Inflation is not measured relative to gold, it is measured relative to what people actually buy.
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Old 4th January 2013, 02:51 PM   #82
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Originally Posted by lomiller View Post
You are not plotting inflation against either spending or money supply so I don’t see how your grapic supports this claim.
It shows directly that net spending doesn't directly lead to inflation; the second graph shows this relative to the money supply.

Originally Posted by lomiller View Post
Again you do not show money supply in the graphic so I don’t see how you can say it supports this claim.
Yes it does show money supply; it is represented by (Debt Outstanding Domestic Nonfinancial Sectors - Total Domestic Nonfinancial Sectors); here's another graph with M2 added in (which still shows the disconnect between money supply and inflation):


Here it is also vs MZM:


And against M1:


You can mess around with the graphs on their site here, to check other measures of the money supply too; take your pick, as none of them fit the "money supply inflation = price inflation" claim:
http://research.stlouisfed.org/datatools.html

Originally Posted by lomiller View Post
All you show here is that the price of energy is correlated with prices in general. Since prices in general are moved by the same forces this is not surprising. (IOW correlation doesn’t equal causation).
Ya but the price of energy is most highly determined by availability of energy sources, such as oil, thus that graph shows a high correlation between availability of energy sources and general price inflation; it's a far better fit than comparisons to the money supply.

Originally Posted by lomiller View Post
The reason energy prices are excluded from core inflation isn’t because they are not correlated with other prices but because they are more volatile and subject to other influence.
True indeed.

Originally Posted by lomiller View Post
Spending and deficit spending are different things. Deficit spending is expected to raise GDP and inflation but the impact on each depends on where in the business cycle you are. It can be inflationary when times are good, but when times are good deficits decrease natural. Simple techniques may not detect this signal, because monetary policy dominates.
Well ya, that "when times are good" part is key of course, and you definitely don't want to keep net-spending then as it is a real inflation risk; in bad economic times though, that's when it's not as inflationary (and is especially the time when deficits should be left to decrease naturally, rather than directly cut).

Originally Posted by lomiller View Post
Once again, you don’t show government spending so your conclusion doesn’t follow from your graphic.
That does though, it shows governments use of national debt for spending; the point the graph makes, is that trying to extinguish the debt by running a 'surplus', is heavily correlated with leading to economic recessions.

Here's pretty much the same graph again, but with a less-ambiguous variable:
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Old 4th January 2013, 03:05 PM   #83
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Originally Posted by The_Animus View Post
Originally Posted by Shambler
You did not explain this at all, actually; to give an example:
If I startup a bank tomorrow, and government printed $100 trillion and credited it to my bank (given free, without any corresponding debt or national debt), and I did not spend that money on anything, just left it there sitting on my bank ledger, there would be no price or asset inflation.

If that is true, then the money supply does not cause price or asset price inflation, and it is how money is spent that determines whether or not inflation happens.

If you disagree, I would be very interested to hear an explanation, of how that $100 trillion sitting there doing nothing, would cause any kind of inflation.
Interesting discussion, but why use am example that will never happen? What good does showing something that will never happen will not cause inflation? It would be better to give examples of spending that printed money not causing inflation since your claim is that inflation depends on how it's spent.
Well, I give that example more as a thought exercise in how money creation isn't automatically inflationary

Some examples of real non-inflationary spending of created money, would be:
1: Buying surplus resources (or from industry where supply can easily scale up to meet/exceed demand); this does not inflate the price of the goods, because they are surplus

2: Paying down of private debt; the main source of inflation from this, would be increased dispensable income for the debtor (since they are putting less money into repaying their debt). This allows a very large amount of money to be spent, with a much smaller inflationary cost than the overall sum of money spent.

3: Hiring surplus labour (unemployed people); the primary inflationary potential from this, is through dispensable income through wages, but this is controllable with fiscal-policy/taxes.


So, it is all about how the money is spent that determines the potential for inflation; the act of creating money, in and of itself, does not automatically lead to inflation, and there are ample ways of spending money with minimal inflationary impact.
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Old 4th January 2013, 03:12 PM   #84
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Originally Posted by Shambler View Post
Inflation is not measured relative to gold, it is measured relative to what people actually buy.
that, right there says it all really. how many ways is that one sentence wrong?

1. not according to that 11 year period in the table it is not. not unless nobody buys food, energy, fuel, cotton, oil based products, things from mines, well you know, that thing called real life that doesn't show up anywhere in the BLS figures (or MMT in general.)

2. Gold reflects the inflation lies told by authorities, when real inflation is higher than interest rates, gold takes off upwards. when the published real interest rates go negative, it really goes up. funny that.

3. inflation is not measured, it is all an academic farce.

4. interestingly, people in the US, people in India , China , and central banks worldwide are buying gold, lots of it. have you been paying attention?

That aside, of course I understand that gold is just a commodity, and not money or a currency, however I really would like to know what your thoughts on these few questions are please?

1. why do Central banks not store other more useful, less barbarous commodities in their vaults as currency reserves?

2. why are all the completely unimportant and meaningless central bank gold transactions matters of national security and of the highest secrecy, whilst much else, (not all, obviously) is regularly audited and visible?

3. what if the global marketplace disagrees with your perception of gold and it's role in things?

your one line tells me immediately you couldn't possibly contemplate the actual reality, like many on here.

on the inflation side of things, the table also kindof implies that inflation (BLS) is:

a) not so dependent on oil price, if +320% crude and +155% gasoline in a decade only causes a BLS cumulative inflation figure of 29% over a decade?

b) an utter joke, when compared to cost of living increases, from the real inflation in commodities, stocks and financial bubbles all over the place.

c) 158% over the same period if we counted it the way those primitives Reagan etc did.

im curious why nobody has taken the new "improvements" to statistics collection and analysis and retroactively applied them to all previous crises, as we'd find out the great depression wasn't so bad after all, it was actually green shoots and a jobless recovery they experienced instead.

and the 70's well that was all a misunderstanding, yes, I see, of course, There is no evidence of inflation

Originally Posted by shambler
You can mess around with the graphs on their site here, to check other measures of the money supply too; take your pick, as none of them fit the "money supply inflation = price inflation" claim:
http://research.stlouisfed.org/datatools.html
are you serious? are you really saying "the Fed's models say what they want them to say, so it must be true" ?

although as I understand it this model was stubbornly saying something they didnt agree with http://newyorkfed.org/research/staff_reports/sr574.pdf

Quote:
Carlstrom et al. show that the Smets and Wouters model would predict an explosive inflation and output if the short-term interest rate were pegged at the ZLB (Zero Lower Bound) between eight and nine quarters. This is an unsettling fi nding given that the current horizon of forward guidance by the FOMC is of at least eight quarters.
methinks some people have way too much faith in the Fed and their mumbo jumbo models and woo based "theories".
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Old 4th January 2013, 04:01 PM   #85
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Originally Posted by kevsta View Post
thats implicit in the inverse relationship to 10 year yield shown in the table as -67% is it not?
I wouldn't say it's implicit just from the change in the yield, but we know that yields typically fall as bond prices rise (unless the coupons go up). We need a bond price chart along with volume analysis to appreciate the depth and breadth of monetary debasement in the trillions.

But the inflation apologists will of course just retreat by claiming that bond prices don't matter, and aren't evidence of anything.
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Old 4th January 2013, 05:12 PM   #86
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Originally Posted by Shambler View Post
You can't make up new definitions for words like that, least of all when it is in direct contradiction with the real definition. Counterfeiting is the illegal printing of fiat money, and the central bank is the one place money can be legally printed.

Semantic redefinitions of words like that, are one of the primary ways disinformation is spread within economics, and it is a barrier to discussion, because it means people are reading posts with separate interpretations of words themselves.

Your entire counterfeiting definition as well, is implicitly assuming price inflation = money supply inflation (since it's saying spending power is stolen), and since this is a point that I've shown is false, it is not just inaccurate but it is a barrier to debate; in order to be able to discuss anything, we need to stick to a common dictionary definition of words.
I am going to try and consolidate what you wrote and respond to the important points, so that it doesn't appear to be tit-for-tat.

The reason I use and will continue to use the word counterfeiting, when describing the actions of central bank policy, is because the theft of purchasing power that occurs is vastly more important than the idea of whether or not the money or credit is "authentic", or "legally produced". A simple analogy may help you to understand:

Central banking is to counterfeiting what taxation is to theft

Namely, it is a form of counterfeiting, much like taxation is a form of theft. I am aware that you, and all other collectivists will immediately protest the idea that taxation is theft, and while it technically isn't, it shares a lot in common with it. Certainly the idea that just because one discounts anarchy as a valid form of government, doesn't justify the idea that punitive rates of taxation, graft, and government waste are anything other than theft. Just because I'm not an anarchist, doesn't mean I consent to a 100%, 50%, or even 25% marginal tax rate, nor do I consent to my money being perpetually and infinitely debased. It's all a matter of scope and degree.

The inflation tax is particularly insidious because most people (including yourself, as I will demonstrate) are unaware of how it works. Keyes and Lenin were certainly right as they described how to overturn the existing basis of society by debauching the currency.

Quote:

I agree with the last sentence there, which is why I support the economic arguments I put forward in this thread, which would change that:
Private banks could be replaced with a single public bank, where the government is directly in charge of loans/deposits, and governments would not depend upon private investors to fund the budget (and would not be in the position to provide those investors interest payments as part of the deal, as that method of funding would be obsolete).

You're again asserting through your inaccurate definition of 'counterfeiting', that money supply inflation = price inflation, which is false, and which I have debunked at length.

Seigniorage (synonymous with money printing, but without corresponding debt) is not a tax, it does not cause price inflation; it is down to government to decide how it would spend that printed money, and it is how that is spent that determines whether or not inflation happens.

You need to engage with my arguments describing how money supply inflation does not directly cause price inflation, because your arguments seem to be heavily based on that premise, that I have already dealt with and debunked.
You have debunked nothing, all you have done is redefine "price inflation" such that financial asset prices are not included, and then claimed that the price increases of such assets due to money debasement are not important, and therefore not worthy of being measured, or considered when discussing price inflation. Not only is that an astounding lie, but it also ignores the blatant manipulation required to claim with a straight face that there has been negligible inflation even given your narrow definition, as evidenced by kevsta's chart and table in this thread.

If you want to concede this, then we can talk about why financial assets matter greatly, and how they will necessarily affect future rates of inflation, no matter how narrow the definition.

Quote:

Asset price inflation is usually caused by excess credit in the economy, i.e. banks lending out far too much money to people, leading to a rise in house price since more people can get bigger mortgages.

Just like with general price inflation, an increase in the money supply does not automatically lead to asset price inflation, it depends on how that money is spent.
The above is quite true, but not very relevant when you consider that the central bank is primarily in the business of manipulating bond prices upward.

Quote:

I agree that banks and others in finance, undeservedly earn income through interest payments which depend upon an expanding money supply, but that injustice is due to the structure of the financial/banking system, it is not due to money creation itself.

The impression I've been getting from some of your arguments, is that it seems you might think that increasing the money supply automatically leads to inflation (i.e. automatically leads to price inflation and thus a loss in the buying power of peoples savings); maybe I'm mistaken and this isn't what you've been saying, but it's, as you say, an important distinction.


These are exactly the kinds of argument which makes me think you are equating money supply inflation with price inflation; to steal consumer purchasing power through money creation, money supply inflation must cause price inflation, which I've shown is not the case.
Here we have a series of big misunderstandings on your part. I will attempt to make this as clear as possible.

First of all, as I explained above, asset prices are important, in fact, crucial. Since monetary policy makes houses, stocks, and bonds more dear, it prices the poor and middle class out of these assets, just as surely as it deprives the poor of milk when it results in the price of milk going up. By doing this, it serves to increase wealth condensation which vastly widens the gap between rich and poor, and paves the way for collectivists like you to claim that the "private sector" has failed, and we need to yield to more government control. In fact, central bank subsidies of the investor class are the problem, and I say this candidly speaking even as a successful investor.

Second, you show complete ignorance of the productivity norm. Productivity results in an increased supply of goods and services which compete with existing goods and services, driving prices downward. Given a static money supply, consumers will enjoy the fruits of increased productivity by obtaining more wealth for less money. Therefore, if the central bank maintains even an inflation target of 0%, it continues to steal purchasing power from the saver!. This doesn't come in the form of higher prices, instead it comes in the form of an opportunity cost which, absent the pilfering (legal counterfeiting), would have resulted in lower prices for everyone. This is how non-producing actors in the economy steal virtually undetected.

Quote:

The current level of unemployment shows private industry is incapable of solving the problem of achieving continuous full employment; this means that only government can step-in to do this, when private industry fails to, because only government can create the money needed to do that.
This is a political argument which, of course, I vehemently disagree with, but it's out of the scope of what I want to focus on. I would say that it is government, not private industry, which has failed.

Quote:

Well, I actually agree with debt repudiation there, and I don't advocate the current system (my views in this thread, advocate very significant changes); I think also, that private banks should be made redundant by government offering a single public bank (there's no reason interest on debts should go into private hands, for one).
I don't think the debts of legitimate savers should be repudiated, only the counterfeit debts of the largest private banks who use the Federal Reserve to their immense gain. I assume we have the technology to make this distinction.

Your solution of socializing the entire banking industry, a notable part of the communist manifesto, is a non-starter.

Quote:


You did not explain this at all, actually; to give an example:
If I startup a bank tomorrow, and government printed $100 trillion and credited it to my bank (given free, without any corresponding debt or national debt), and I did not spend that money on anything, just left it there sitting on my bank ledger, there would be no price or asset inflation.

If that is true, then the money supply does not cause price or asset price inflation, and it is how money is spent that determines whether or not inflation happens.

If you disagree, I would be very interested to hear an explanation, of how that $100 trillion sitting there doing nothing, would cause any kind of inflation.
According to your specific example, I do not disagree (except that the valuation of your bank would skyrocket). However, your hypothetical bears little resemblance to anything in reality.
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Old 4th January 2013, 06:25 PM   #87
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Originally Posted by Shambler View Post
No, I said it depends on what they spend it on, and if they spend it; companies in the current economy, aren't in a rush to expand production, when the demand isn't there to meet the increase in productive capacity.

I also gave the specific example of pumping money into the construction industry, on infrastructure projects, where the chain of expenditure is going to largely stay with surplus (construction) industry capacity.
These companies still have to pay their employees for the extra work and their suppliers for the raw materials, even if the labor and materials were surplus to the existing needs of the nation. That money ends up back in the economy.

And as for profit, large companies aren't in the habit of leaving large amounts of money lying around in a vault. They do one of three things with it, spend, invest or distribute.

If they spend it on advertising, expansion or infrastructure, the money ends back in the economy.

If they invest it, in order to earn interest or capital gains, the money ends back in the economy.

If they distribute it in the form of employee raises/bonuses, dividends, share-buybacks or early repayment of debt, the money ends back in the economy.

All the money ends up floating around the economy in the end, contributing to inflation.
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Old 4th January 2013, 06:26 PM   #88
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Originally Posted by Shambler View Post
I agree with the last sentence there, which is why I support the economic arguments I put forward in this thread, which would change that:
Private banks could be replaced with a single public bank, where the government is directly in charge of loans/deposits, and governments would not depend upon private investors to fund the budget (and would not be in the position to provide those investors interest payments as part of the deal, as that method of funding would be obsolete).
NOW the truth comes out. You are not advocating Modern Money theory at all. You are arguing for the complete abolishment of private banking altogether. It's no wonder that you are not interested in arguments about credit/deposit expansion. That couldn't happen if all you had was a single government owned national bank. So all your graphs are a complete smokescreen.

Your arguments about the government spending money in non-inflationary ways wouldn't work if people could still vote for politicians that engaged in pork barreling so the electoral system would have to be reformed as well (maybe abolish elections while we are at it).

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Old 5th January 2013, 09:59 AM   #89
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Originally Posted by kevsta View Post
...
Gold, along with commodities that significantly underpin economies (like energy and essential raw materials), are invested in as a store of value for when economic trouble is present or approaching; gold is not a measure of inflation.

Gold has no underpinning in the economy like oil does, so it is in no way connected to general inflation in the economy; oil however, has a very obvious connection throughout the economy, so when unregulated markets allow the use of oil as a vehicle for speculation, it gets used as a store of value which pushes up prices, and that causes inflation in the wider economy, through supply-shock inflation, as it's a resource economies actually need in order to function (hence why oil markets should be properly regulated, so oil is not used as a vehicle for speculation or as a place for troubled money to be spent).

The only unique thing about gold, is that it's traditionally a universally-agreed-upon store of value, which is what makes people invest in it; so its value is almost entirely psychological (since it has no real productive use matching its value).


It will also become completely worthless (compared to present values) in the future, once enough countries realize that mining gold and adding it to an enormous world stockpile that serves no useful purpose, is an unbelievably wasteful use of resources/productivity.
It will likely then, be replaced with an international electronic currency with a severely restricted money supply, which provides precisely the same role but without wasting any resources.


With regards to other arguments in your post: A lot of it seems to be based on gold-bug/anti-government conspiracy theories and myths (such as unbacked claims about fed data and inflation measurements themselves), the kind that can be read on ZeroHedge all the time (among other unreliable sources); I tend not to engage in discussions with arguments like that.
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Old 5th January 2013, 10:26 AM   #90
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Originally Posted by Tippit View Post
I am going to try and consolidate what you wrote and respond to the important points, so that it doesn't appear to be tit-for-tat.

The reason I use and will continue to use the word counterfeiting, when describing the actions of central bank policy, is because the theft of purchasing power that occurs is vastly more important than the idea of whether or not the money or credit is "authentic", or "legally produced". A simple analogy may help you to understand:

Central banking is to counterfeiting what taxation is to theft

Namely, it is a form of counterfeiting, much like taxation is a form of theft. I am aware that you, and all other collectivists will immediately protest the idea that taxation is theft, and while it technically isn't, it shares a lot in common with it. Certainly the idea that just because one discounts anarchy as a valid form of government, doesn't justify the idea that punitive rates of taxation, graft, and government waste are anything other than theft. Just because I'm not an anarchist, doesn't mean I consent to a 100%, 50%, or even 25% marginal tax rate, nor do I consent to my money being perpetually and infinitely debased. It's all a matter of scope and degree.

The inflation tax is particularly insidious because most people (including yourself, as I will demonstrate) are unaware of how it works. Keyes and Lenin were certainly right as they described how to overturn the existing basis of society by debauching the currency.
Well that inaccurate use of the word 'counterfeiting' makes it literally impossible to have a rational discussion, because when I say "increases in the money supply do not lead to price inflation", you say "the money supply is increased by counterfeiting", when your definition of 'counterfeiting' inherently includes the claim that "increasing the money supply leads to price inflation".

It is a straight-forward circular argument, which you are trying to hide with a semantic redefinition of the word 'counterfeiting'.

All of your arguments replying to my claim that "money supply inflation does not automatically cause price inflation", depend upon that circular argument, so it is a transparently dishonest method of argument you are using there.

Originally Posted by Tippit View Post
You have debunked nothing, all you have done is redefine "price inflation" such that financial asset prices are not included, and then claimed that the price increases of such assets due to money debasement are not important, and therefore not worthy of being measured, or considered when discussing price inflation. Not only is that an astounding lie, but it also ignores the blatant manipulation required to claim with a straight face that there has been negligible inflation even given your narrow definition, as evidenced by kevsta's chart and table in this thread.

If you want to concede this, then we can talk about why financial assets matter greatly, and how they will necessarily affect future rates of inflation, no matter how narrow the definition.
Here you use "money debasement", i.e. the same circular argument again, as it presupposes that inflation will happen, and that the currency will be debased.

Try to explain precisely, how financial asset inflation will occur, without using exactly the same circular argument as before, except replacing 'price inflation' with 'financial asset inflation'; it will come out effectively as this:
"financial asset inflation will occur because money creation is counterfeiting, and counterfeiting creates financial asset inflation".

Originally Posted by Tippit View Post
Originally Posted by Shambler
Asset price inflation is usually caused by excess credit in the economy, i.e. banks lending out far too much money to people, leading to a rise in house price since more people can get bigger mortgages.

Just like with general price inflation, an increase in the money supply does not automatically lead to asset price inflation, it depends on how that money is spent.
The above is quite true, but not very relevant when you consider that the central bank is primarily in the business of manipulating bond prices upward.
You don't attempt to explain here, how increasing the money supply (through money creation alone, not through debt issuance), will cause the central bank to loosen lending policies; you have not explained that crucial link you claim, to financial asset inflation.

Originally Posted by Tippit View Post
Here we have a series of big misunderstandings on your part. I will attempt to make this as clear as possible.

First of all, as I explained above, asset prices are important, in fact, crucial. Since monetary policy makes houses, stocks, and bonds more dear, it prices the poor and middle class out of these assets, just as surely as it deprives the poor of milk when it results in the price of milk going up. By doing this, it serves to increase wealth condensation which vastly widens the gap between rich and poor, and paves the way for collectivists like you to claim that the "private sector" has failed, and we need to yield to more government control. In fact, central bank subsidies of the investor class are the problem, and I say this candidly speaking even as a successful investor.

Second, you show complete ignorance of the productivity norm. Productivity results in an increased supply of goods and services which compete with existing goods and services, driving prices downward. Given a static money supply, consumers will enjoy the fruits of increased productivity by obtaining more wealth for less money. Therefore, if the central bank maintains even an inflation target of 0%, it continues to steal purchasing power from the saver!. This doesn't come in the form of higher prices, instead it comes in the form of an opportunity cost which, absent the pilfering (legal counterfeiting), would have resulted in lower prices for everyone. This is how non-producing actors in the economy steal virtually undetected.
Again, using the same circular argument, and assuming the initial point several times (that money supply inflation will cause either financial asset or price inflation, without explanation).

Frankly, this is a load of waffle you are using to obfuscate and try to cover up your use of that same circular argument again and again, in every argument you put forward.


You need to back up your claim that increasing the money supply will lead either to financial asset inflation, or price inflation; if you do that solely with circular arguments, then you are being deliberately dishonest and deceptive.
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Old 5th January 2013, 10:47 AM   #91
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Originally Posted by Brian-M View Post
These companies still have to pay their employees for the extra work and their suppliers for the raw materials, even if the labor and materials were surplus to the existing needs of the nation. That money ends up back in the economy.

And as for profit, large companies aren't in the habit of leaving large amounts of money lying around in a vault. They do one of three things with it, spend, invest or distribute.

If they spend it on advertising, expansion or infrastructure, the money ends back in the economy.

If they invest it, in order to earn interest or capital gains, the money ends back in the economy.

If they distribute it in the form of employee raises/bonuses, dividends, share-buybacks or early repayment of debt, the money ends back in the economy.

All the money ends up floating around the economy in the end, contributing to inflation.
All that's true yes, but it's a matter of when and where the money gets back into the economy.
The inflationary effect of money that goes back into the economy through worker wages, is manageable with taxation; so long as the chain of raw resources bought, is in excess supply, there won't be inflation from that (so the main potential for inflation will be from wages).

Some amount of spent money will always end up in savings, either corporate savings or the savings of employees, not all of it will be spent immediately; you want to try and guide as much money as possible towards providing the most potential for increased production though (which construction is good for right now).
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Old 5th January 2013, 10:49 AM   #92
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Originally Posted by Shambler View Post
Gold, along with commodities that significantly underpin economies (like energy and essential raw materials), are invested in as a store of value for when economic trouble is present or approaching; gold is not a measure of inflation.

Gold has no underpinning in the economy like oil does, so it is in no way connected to general inflation in the economy; oil however, has a very obvious connection throughout the economy, so when unregulated markets allow the use of oil as a vehicle for speculation, it gets used as a store of value which pushes up prices, and that causes inflation in the wider economy, through supply-shock inflation, as it's a resource economies actually need in order to function (hence why oil markets should be properly regulated, so oil is not used as a vehicle for speculation or as a place for troubled money to be spent).

The only unique thing about gold, is that it's traditionally a universally-agreed-upon store of value, which is what makes people invest in it; so its value is almost entirely psychological (since it has no real productive use matching its value).


It will also become completely worthless (compared to present values) in the future, once enough countries realize that mining gold and adding it to an enormous world stockpile that serves no useful purpose, is an unbelievably wasteful use of resources/productivity.
It will likely then, be replaced with an international electronic currency with a severely restricted money supply, which provides precisely the same role but without wasting any resources.


With regards to other arguments in your post: A lot of it seems to be based on gold-bug/anti-government conspiracy theories and myths (such as unbacked claims about fed data and inflation measurements themselves), the kind that can be read on ZeroHedge all the time (among other unreliable sources); I tend not to engage in discussions with arguments like that.
group question dodge noted. but thank you for your opinions anyway, pretty much as I thought. I disagree with you on most of it, and think the global markets will too, but only time will tell I suppose.

if you would like to be more specific about which claims are unbacked and/or conspiracy theories I'm happy to present what I consider the evidence?

lets start with "about Fed data and inflation measurements themselves" - numbers compiled from the Bureau of Economic Analysis website, up to 15% of GDP historically is "imputation" and hence made up, ie potentially imaginary.



Quote:
IMPUTATIONS

Of all the inflation distorted items in the category of "Uni-Directional Inflation" in my chart above, the one that few understand, and even fewer publicly discuss, is the concept of "Imputations". Imputations are fundamentals about dollars that do not exist and dollars that do not even change hands. They are in some instances a replacement measurement of “notional value”.
these people are predicting 1, 2, 3% "growth" when they made up, up to 15% of it anyway. Does this really sound reasonable to you?

this is the kind of woo that pervasively underpins modern economics and their models, and why we are witnessing it's ultimate failure, real time.

How much do you know about the Fed's economic modelling programs anyway, do you know their names ?

http://online.wsj.com/article/SB1000...828299832.html


Originally Posted by Zerohedge quoting Hilsenrath
As the WSJ's Jon Hilsenrath explains "they are computer-modeling programs the central bank uses to make predictions about how various policies and events will play out across the economy....The Fed's main economic model, launched in 1995, is called FRB/US, pronounced "Ferbus." It uses hundreds of different mathematical equations to describe how the economy works. "

Brilliant. And as Hilsenrath himself adds further on,

Quote:
"The models are deeply flawed. They failed to foresee the financial crisis in 2008 and have tended to overestimate the strength of the economy for several years."
Hilsenrath then goes on to pose a very rhetorical question:

Quote:
"Could they fail the Fed again?"
The answer is painfully obvious to anyone who has been on the receiving end of the Fed's endless attempts to blow a credit bubble always and forever. And just in case it is not obvious, let's just remind everyone that "subprime is contained."

From Hilsenrath: WSJ

Quote:
When the Federal Reserve said in December that it would keep short-term interest rates near zero until the unemployment rate falls to 6.5%, it was backed by a team of geeks who get little attention outside the central bank but a lot of attention inside.

The geeks have names such as Ferbus, Edo and Sigma. They are computer-modeling programs the central bank uses to make predictions about how various policies and events will play out across the economy.

In December, the Fed wanted to telegraph how long it would keep interest rates low. To do that it used forecasting models to map out different scenarios. Looking to the models for guidance, Fed officials decided to announce they would keep interest rates near zero until the unemployment rate drops to 6.5%. The models told them such a commitment would help nudge unemployment lower—it was 7.7% in November—and wouldn't risk a big burst of inflation.

Of course, no model or human can perfectly predict the future. But the Fed models have a more specific problem. Despite all their complexity and sophistication, they have long been plagued by gaps in how they read and project the economy. One of the biggest is that they have ignored the nuances of the financial system—one of the primary channels through which Fed policy works.

The models have formulas that predict how many pennies an investor will spend for every $1 increase in his stock-market portfolio or how much less banks might lend if interest rates go up half a percentage point. But they haven't predicted the vulnerability of banks to a financial panic or how that vulnerability affects the broader economy.

Fed officials are well aware of this flaw. Chairman Ben Bernanke himself documented the importance of financial-system fragility in his days as an academic. Central-bank staffers are now undertaking a wide-ranging effort to update and improve the models to better account for financial crises. But it is a decadelong project that is far from complete.
notice they even have their tame press mouthpiece (Hilsenrath) preparing the way for failure with excuses about their models never being very accurate all along.

"modern" economics is outdated alright, its had a 40 year trial period and is an abject failure, give it up, there is no magic money tree.
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Old 5th January 2013, 10:55 AM   #93
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Originally Posted by psionl0 View Post
NOW the truth comes out. You are not advocating Modern Money theory at all. You are arguing for the complete abolishment of private banking altogether. It's no wonder that you are not interested in arguments about credit/deposit expansion. That couldn't happen if all you had was a single government owned national bank. So all your graphs are a complete smokescreen.

Your arguments about the government spending money in non-inflationary ways wouldn't work if people could still vote for politicians that engaged in pork barreling so the electoral system would have to be reformed as well (maybe abolish elections while we are at it).
Heh, I favour a single public bank alright, though it comes second to MMT (since it pretty much depends upon MMT's redefining of basic economics); the basic MMT policies themselves, don't depend upon a public bank, they can be applied in the current private banking system.

I'm not really interested in discussing credit/deposit expansion in private banks, because it's not really relevant to the discussion; my public bank example, just gives a pretty nice way to illustrate exactly how they can be made irrelevant.


Maybe I will discuss it more later though, and get into the theoretical problems of fractional reserve and such, but the discussion has been moving a bit fast so easier to put it aside for now.

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Old 5th January 2013, 11:09 AM   #94
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Originally Posted by kevsta View Post
if you would like to be more specific about which claims are unbacked and/or conspiracy theories I'm happy to present what I consider the evidence?
Well, pretty much all of the claims are unbacked, as you're saying gold is the "one true guide" for inflation; you also say the authorities lie about inflation with no backing argument, you say inflation measurements themselves are an academic farce (backed with an article that appears to use the "money supply increase = price inflation" argument, that I've debunked), you say lots of people are buying gold (no disagreement there) but imply that means somehow gold is a measure of inflation, you say central banks have reserves of gold (again, no disagreement there) but again fail to explain how that means it is a measure of inflation, you say central banks put high security on gold transfers and again no explanation of how that relates to inflation.


Another argument I missed in your first post: You say "are you really saying 'the Fed's models say what they want them to say, so it must be true'", in response to a graph I provide from the fed research site, but the fed did not put out that graph I just used their graphing tool.

If the implication is that the fed deliberately manipulates the data in the graphs I've provided, you've certainly provided no argument to back that up.

Either way, it's a major conspiracy theory, to claim fed manipulation like that.


All of that, leads me to not take you posts very seriously.
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Old 5th January 2013, 01:33 PM   #95
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Originally Posted by Shambler View Post
Well that inaccurate use of the word 'counterfeiting' makes it literally impossible to have a rational discussion, because when I say "increases in the money supply do not lead to price inflation", you say "the money supply is increased by counterfeiting", when your definition of 'counterfeiting' inherently includes the claim that "increasing the money supply leads to price inflation".

It is a straight-forward circular argument, which you are trying to hide with a semantic redefinition of the word 'counterfeiting'.

All of your arguments replying to my claim that "money supply inflation does not automatically cause price inflation", depend upon that circular argument, so it is a transparently dishonest method of argument you are using there.
There is no circular argument, there is only you failing to understand the argument made.

The argument, is that money creation (legal or otherwise) creates illegitimate demand for either financial assets, or consumer goods and services. I define illegitimate demand as demand which was not obtained from savings. If you don't produce anything, you don't deserve to consume anything. This may or may not result in "price inflation" depending on a) the supply of financial assets, and the supply of goods and services, and b) the metric you use for "price inflation".

So the only claim that I am making, is that money (or credit) creation results in either theft or taxation, depending upon how you want to look at it. It's really quite simple.

Quote:

Here you use "money debasement", i.e. the same circular argument again, as it presupposes that inflation will happen, and that the currency will be debased.
It doesn't matter whether price inflation happens given money creation, because theft or taxation happens. The price level depends not only on the supply and demand of money, but on the supply and demand of the goods denominated in money. If society produces more, and that excess production is claimed by non-producers using phony demand, the price level may well not even budge, and yet you have a transfer of wealth regardless, which can be expressed as an opportunity cost.

You obviously do not grasp the concept of the productivity norm. I suggest reading my previous post more carefully, or using google.

Quote:

Try to explain precisely, how financial asset inflation will occur, without using exactly the same circular argument as before, except replacing 'price inflation' with 'financial asset inflation'; it will come out effectively as this:
"financial asset inflation will occur because money creation is counterfeiting, and counterfeiting creates financial asset inflation".
If the supply of financial assets is increased, thereby diluting the underlying asset for which the financial asset is a derivative, there may well be no financial asset inflation. New demand is met with new supply. There is, however, a transfer of wealth. The beneficiary of the new money receives title to a newly created asset, and benefits from both the dilution of the underlying, and from the dilution of the money supply.

An example of this is the US government bond market, for which not only has the supply of bonds been massively increased (this represents the US taxpayer being diluted), but it has been matched by even larger increases in the money supply, resulting in sky high bond prices, and yield compression.

This isn't hard to understand.

Quote:

You don't attempt to explain here, how increasing the money supply (through money creation alone, not through debt issuance), will cause the central bank to loosen lending policies; you have not explained that crucial link you claim, to financial asset inflation.
If the Fed engages in a repurchase transaction (repo), it is in fact increasing the money supply and "loosening its lending policy". The link to financial asset inflation is obvious - the Fed's phony demand results in a new bid for a pre-existing asset, which, assuming the supply remains constant, necessitates higher asset prices. If the supply does increase and prices don't budge, this only means that previous bondholders (and savers in general) get diluted.

To the extent that the Fed does this with the delegated right to create fiat money for severely overvalued assets that banks want to get rid of, the correct term is bailout, subsidy, graft, theft, fraud, whatever you want to call it.

Quote:

Again, using the same circular argument, and assuming the initial point several times (that money supply inflation will cause either financial asset or price inflation, without explanation).

Frankly, this is a load of waffle you are using to obfuscate and try to cover up your use of that same circular argument again and again, in every argument you put forward.


You need to back up your claim that increasing the money supply will lead either to financial asset inflation, or price inflation; if you do that solely with circular arguments, then you are being deliberately dishonest and deceptive.
It may or may not lead to price inflation, asset or otherwise, but it always leads to theft of purchasing power, which is all that matters.
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Old 5th January 2013, 02:20 PM   #96
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Originally Posted by Tippit View Post
There is no circular argument, there is only you failing to understand the argument made.

The argument, is that money creation (legal or otherwise) creates illegitimate demand for either financial assets, or consumer goods and services. I define illegitimate demand as demand which was not obtained from savings. If you don't produce anything, you don't deserve to consume anything. This may or may not result in "price inflation" depending on a) the supply of financial assets, and the supply of goods and services, and b) the metric you use for "price inflation".

So the only claim that I am making, is that money (or credit) creation results in either theft or taxation, depending upon how you want to look at it. It's really quite simple.
Again you have made the precise same circular argument, and are trying to obfuscate it (very poorly as well); you are saying money creation creates theft/taxation, i.e. you are asserting that it creates inflation and steals from savings (since that's your definition of theft/taxation; it is 'theft/taxation' because it is inflationary), and you are saying that in order to support your argument that money creation leads to price inflation.

This is the same circular argument.

Originally Posted by Tippit View Post
It doesn't matter whether price inflation happens given money creation, because theft or taxation happens. The price level depends not only on the supply and demand of money, but on the supply and demand of the goods denominated in money. If society produces more, and that excess production is claimed by non-producers using phony demand, the price level may well not even budge, and yet you have a transfer of wealth regardless, which can be expressed as an opportunity cost.

You obviously do not grasp the concept of the productivity norm. I suggest reading my previous post more carefully, or using google.
And again, theft/taxation being defined as stealing savings through inflation....you're using that to support the argument that money creation causes price inflation, i.e. again a circular argument.

The rest is, again, just waffle trying to obfuscate your initial circular argument.

Originally Posted by Tippit View Post
Originally Posted by Shambler
Try to explain precisely, how financial asset inflation will occur, without using exactly the same circular argument as before, except replacing 'price inflation' with 'financial asset inflation'; it will come out effectively as this:
"financial asset inflation will occur because money creation is counterfeiting, and counterfeiting creates financial asset inflation".
If the supply of financial assets is increased, thereby diluting the underlying asset for which the financial asset is a derivative, there may well be no financial asset inflation. New demand is met with new supply. There is, however, a transfer of wealth. The beneficiary of the new money receives title to a newly created asset, and benefits from both the dilution of the underlying, and from the dilution of the money supply.

An example of this is the US government bond market, for which not only has the supply of bonds been massively increased (this represents the US taxpayer being diluted), but it has been matched by even larger increases in the money supply, resulting in sky high bond prices, and yield compression.

This isn't hard to understand.
No explanation here, of how financial asset demand is supposed to increase in the first place, so the entire premise that you're basing your argument on here has no backing, and you try to cover that up by expanding on your point at length.

Originally Posted by Tippit View Post
Originally Posted by Shambler
You don't attempt to explain here, how increasing the money supply (through money creation alone, not through debt issuance), will cause the central bank to loosen lending policies; you have not explained that crucial link you claim, to financial asset inflation.
If the Fed engages in a repurchase transaction (repo), it is in fact increasing the money supply and "loosening its lending policy". The link to financial asset inflation is obvious - the Fed's phony demand results in a new bid for a pre-existing asset, which, assuming the supply remains constant, necessitates higher asset prices. If the supply does increase and prices don't budge, this only means that previous bondholders (and savers in general) get diluted.

To the extent that the Fed does this with the delegated right to create fiat money for severely overvalued assets that banks want to get rid of, the correct term is bailout, subsidy, graft, theft, fraud, whatever you want to call it.
You are talking about increasing private bank reserves, which is quite plainly not what I was talking about, as I am discussing an increase in the base money supply, specifically for government spending.

You are being deliberately misleading here, trying to use jargon and general obfuscation, to try and hide the fallacious parts of your arguments.


I'm reporting your post as I'm quite certain you are trying to derail and muddy the discussion here.

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Old 5th January 2013, 06:40 PM   #97
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Originally Posted by Shambler View Post
You are talking about increasing private bank reserves, which is quite plainly not what I was talking about, as I am discussing an increase in the base money supply, specifically for government spending.
Where do you think new base money ends up - hidden under mattresses? It gets deposited into banks!

Do you know what happens to bank reserves when base money is deposited?

Originally Posted by Shambler View Post
I'm reporting your post as I'm quite certain you are trying to derail and muddy the discussion here.
By that measure, your entire thread is a derail.
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Old 5th January 2013, 08:25 PM   #98
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Originally Posted by psionl0 View Post
Where do you think new base money ends up - hidden under mattresses? It gets deposited into banks!

Do you know what happens to bank reserves when base money is deposited?

By that measure, your entire thread is a derail.
We're talking about money creation, your talking about the actual spending of created money; when money is created with government spending in mind, it sits in the governments capital account, it does not go to the private banks.

When the money is spent, then immediately portions of it are being hoovered back up through taxes, and that expenditure fuels production before a reduced portion of it ends up deposited in any banks.

By the time the money is reaching any bank, taxes (which are adjustable and can be used to soak up large portions of the money) and debt downpayments are already heavily cutting down the amounts of money sitting in bank deposits in the end.


Consider also, private banks being replaced with a public bank, and the validity of the entire 'financial assets inflation' argument (due to deposits and bank reserves) disappears, without even having to get into the functioning of the current private banking system.

Since a public bank replaces the entire fractional reserve banking system (including reserves) with a simple bookkeeping ledger listing amounts deposited, the deposits are not used to issue loans; the public bank would simply issue loans through money creation, with standard credit controls to limit risk and inflation.


So this configuration of the financial system, completely removes any opportunity for people to hide false "money supply increase = price inflation" claims, through the deceitful use of deliberately obfuscated jargon-filled arguments involving the private banking system.
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Old 5th January 2013, 09:33 PM   #99
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Originally Posted by Shambler View Post
Consider also, private banks being replaced with a public bank, and the validity of the entire 'financial assets inflation' argument (due to deposits and bank reserves) disappears, without even having to get into the functioning of the current private banking system.

Since a public bank replaces the entire fractional reserve banking system (including reserves) with a simple bookkeeping ledger listing amounts deposited, the deposits are not used to issue loans; the public bank would simply issue loans through money creation, with standard credit controls to limit risk and inflation.
Terrific! So when Joe the builder wants to borrow money to fulfill some building contracts, instead of a banker saying, "let's look at your credit rating" he gets a bureaucrat saying, "Nah! We have planned a different use for this money. Your customers can whistle 'Dixie'!".

The idea that bureaucrats with cinchy jobs can make better spending/investment decisions than individuals who have to stake their livelihoods on the decisions they make has been proven false time and time again throughout history.


Originally Posted by Shambler View Post
So this configuration of the financial system, completely removes any opportunity for people to hide false "money supply increase = price inflation" claims, through the deceitful use of deliberately obfuscated jargon-filled arguments involving the private banking system.
All you are doing is focusing on the jargon itself rather than the ideas that are being represented.

This is not a new debate. !Kaggen raised the issue of MMT last year in THIS THREAD. You should look at the thread to see how a proper debate should be conducted. !Kaggen asked questions, considered all responses seriously and quoted sources for all of her opinions. (In the end I don't think she was convinced by the responses to her OP but the debate was still fruitful).

In contrast, you simply repeat your own POV (without references) and dismiss all objections to it as "ain't so".
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Old 6th January 2013, 01:13 AM   #100
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Originally Posted by Shambler View Post
Well, pretty much all of the claims are unbacked, as you're saying gold is the "one true guide" for inflation;
no, I did not say "the one true" anything, however it is well documented that gold responds positively to negative real interest rates, whatever figures governments put out.

pretty much everything in that table shows actual inflation, from 100-300% average over the last decade. I therefore find it interesting, that calculated the way it was the last time we were in a (major) crisis, the alternative figure comes out at 158% over that 11 year period, or 8.5% per annum cumulative?

and the new "improved" figure is 30%. which would appear to be closer to actual reality to you?

Originally Posted by Shambler View Post
Well you also say the authorities lie about inflation with no backing argument, you say inflation measurements themselves are an academic farce (backed with an article that appears to use the "money supply increase = price inflation" argument, that I've debunked),
I'll be honest, I was only skimming your writing because the idea of you debunking that "inflation is always and everywhere a monetary phenomenon" and is actually due to rising oil prices, rather than oil prices being a symptom of inflation is a bit far fetched, even for MMT.

I could maybe seriously contemplate it if everything else didn't consistently roughly double every decade or so as well, but it does, while credit expansion is in full flow.

7% for 10 years = doubled.

or perhaps we ought to rename this "prices doubling" phenomena to something else, to fit in better around our new improved correct and definitely better inflation figures instead and MMT?

...make a new equation or model or something.

So I believe I have backed my arguments, but I sense that there is no hope here and you want to talk about abstract theories not reality, so I will not derail your thread any more.

Originally Posted by Shambler View Post
you say lots of people are buying gold (no disagreement there) but imply that means somehow gold is a measure of inflation,
no, you said

Quote:
"inflation is not measured against gold, it is measured against things people actually buy"
I am saying,

- no, its not, it clearly doesn't measure anything on the table, that people buy all the time

- it is not "measured" at all, it is conjured and massaged

- plus as your sentence also implies that people are not "actually buying gold", I pointed out that is incorrect too, just as a final "wrong"

all in all, one very incorrect sentence.

Originally Posted by Shambler View Post
you say central banks have reserves of gold (again, no disagreement there) but again fail to explain how that means it is a measure of inflation, you say central banks put high security on gold transfers and again no explanation of how that relates to inflation.
no, again you misunderstand the meaning of my questions, I was not implying the secrecy was anything to do with inflation, just trying to get you to reconsider your (IMO deeply flawed) understanding of gold's real (and increasing) role in modern finance.

why are CBs globally stocking up do you think? - I wanted to hear your thoughts on why central banks keep only gold out of all the available commodities as their currency reserves, and why all leasing, sales and transfers are top secret and matters of national security?

the Basel 3 agreement also now looks to be reclassifying it as a Tier 1 asset, ie as "safe as cash or AAA sovereign bonds" (lol) this year, which is also significant news.

Originally Posted by Shambler View Post
Another argument I missed in your first post: You say "are you really saying 'the Fed's models say what they want them to say, so it must be true'", in response to a graph I provide from the fed research site, but the fed did not put out that graph I just used their graphing tool.

If the implication is that the fed deliberately manipulates the data in the graphs I've provided, you've certainly provided no argument to back that up.

Either way, it's a major conspiracy theory, to claim fed manipulation like that.
do you not understand that the Fed's whole raison d'etre is to manipulate the markets via interest rates and mutterings about what they might do henceforth? they have models that "predict" what to tell people to get them to act in the way the central planners want.

so the implication is not a conspiracy theory, its a mumbo jumbo incompetence theory. the implication is that this:

http://www.federalreserve.gov/pubs/f.../199642pap.pdf

is a load of old woo, we have a bunch of witchdoctors steering a holed ship in unchartered terroritory guided by a collection of ancient ridiculous mathematic scriptures, it doesn't exactly fill me full of confidence for the future.

Originally Posted by Shambler View Post
All of that, leads me to not take you posts very seriously.
well, as we do see eye to eye here, I'll leave you to your abstract theorizing, have fun.
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Old 6th January 2013, 07:47 AM   #101
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Originally Posted by psionl0 View Post
Terrific! So when Joe the builder wants to borrow money to fulfill some building contracts, instead of a banker saying, "let's look at your credit rating" he gets a bureaucrat saying, "Nah! We have planned a different use for this money. Your customers can whistle 'Dixie'!".

The idea that bureaucrats with cinchy jobs can make better spending/investment decisions than individuals who have to stake their livelihoods on the decisions they make has been proven false time and time again throughout history.
This entire thread is about governments ability to create money, and you are speaking about a public bank, as if the government would have a limited supply of money, and would just say "Nah! We have planned a different use for this money.".

There also could still be investment banks, as a public bank just gets rid of the fractional reserve system; any other banks that want to setup (investment banks or otherwise) would need to be full reserve, and will be competing directly with a government bank capable of money creation.

Originally Posted by psionl0 View Post
All you are doing is focusing on the jargon itself rather than the ideas that are being represented.
I've explained in detail, how the jargon is used to try and obfuscate a deliberately dishonest argument; if you say you understood the arguments, and that they weren't obfuscated, perhaps you can put them in your own words? (I understood the arguments well myself, and could easily see the obfuscation)

It seems rather, that the arguments were deliberately filled with garbage/jargon, exactly so posters could accuse anyone who disagrees of not understanding, and then refusing to explain further; itself a (yet another) dishonest method of argument, which in this case falls down precisely because I understood the argument so well, I was able to point out the obfuscation/deception in it.

Originally Posted by psionl0 View Post
This is not a new debate. !Kaggen raised the issue of MMT last year in THIS THREAD. You should look at the thread to see how a proper debate should be conducted. !Kaggen asked questions, considered all responses seriously and quoted sources for all of her opinions. (In the end I don't think she was convinced by the responses to her OP but the debate was still fruitful).

In contrast, you simply repeat your own POV (without references) and dismiss all objections to it as "ain't so".
I've actually provided ample references; also, quote exactly where I have dismissed objections with something like "it ain't so".

What I take exception to here are dishonest arguments; if posters start using anti-intellectual forms of argument, that they know are false, then they have no interest in real discussion, just in shutting down discussion and trying to denigrate an opposing argument.

Being a forum dedicated to skeptical thought and critical thinking, people engaging in intellectual dishonesty aught to be used to receiving particularly short thrift.


Also, a lot of the responses to !Kaggen in her thread there, relied more on bashing the theory and at times being really condescending to !Kaggen herself, rather than honestly engaging in discussion.
That's not a proper debate, in fact that's a pretty poor showing from posters on a forum dedicated to critical thought.

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Old 6th January 2013, 08:29 AM   #102
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Originally Posted by Shambler View Post
This entire thread is about governments ability to create money, and you are speaking about a public bank, as if the government would have a limited supply of money, and would just say "Nah! We have planned a different use for this money.".
Did you forget your original position?
Originally Posted by Shambler View Post
I never said money creation could not be inflationary either; I explicitly said spending through money creation, is restricted by inflation.

Originally Posted by Shambler View Post
There also could still be investment banks, as a public bank just gets rid of the fractional reserve system; any other banks that want to setup (investment banks or otherwise) would need to be full reserve, and will be competing directly with a government bank capable of money creation.
Oops! you forgot to mention that bit as well.

I can't be bothered with the rest.
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Old 6th January 2013, 09:58 AM   #103
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Originally Posted by psionl0 View Post
Did you forget your original position?
So wait, you support fractional reserve private banks extending credit through money creation, even when that creates undesired inflation? (I don't support public banks doing that)

Private banks can still exist without fractional reserve, even with a public money-creation-backed bank, they just have to be full reserve; so the criticism that credit issuance will be unjustifiably held back by government bureaucracy doesn't hold.

If you were interested in honest discourse, you'd ask questions about aspects you don't understand, rather than engaging in snippy rhetorical responses, based on false assumptions.
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Old 6th January 2013, 11:53 AM   #104
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Old 6th January 2013, 02:22 PM   #105
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I'm wondering exactly how a full-reserve bank would function. They wouldn't be allowed to lend out money deposited in accounts where you can withdraw your money at any time. They'd only be able to lend out money from fixed-term deposits.

They'd have to rely entirely on account-keeping and transaction fees in order to maintain regular accounts, and wouldn't pay interest on them....

.... wait a sec. Are we sure that banks haven't spent the last couple of decades secretly gearing up to switch to full-reserve?
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Old 6th January 2013, 05:27 PM   #106
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Heh, ya you're right now I've thought that through more; I've read up on MMT at length, but not as much on combining it with a public money-creation-backed bank.

The configuration the system would likely take, is a complete separation of deposit and investment banks in the private sector, with a money-creation-backed public bank which takes deposits and gives out loans; private deposit banks would be full reserve (thus there would probably be none, as they couldn't compete with the public bank), and there would be private investment banks, that just basically act as agents for investing peoples money.

The investment banks would also be competing with the public bank (which would provide money-creation-backed loans), but would still provide a useful role for those seeking higher-risk higher-reward places to put their money.
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Old 6th January 2013, 07:54 PM   #107
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Originally Posted by Brian-M View Post
I'm wondering exactly how a full-reserve bank would function. They wouldn't be allowed to lend out money deposited in accounts where you can withdraw your money at any time. They'd only be able to lend out money from fixed-term deposits.

They'd have to rely entirely on account-keeping and transaction fees in order to maintain regular accounts, and wouldn't pay interest on them....

.... wait a sec. Are we sure that banks haven't spent the last couple of decades secretly gearing up to switch to full-reserve?
You have pretty much outlined how banking would work under the Positive Money proposals that I referred to in post #53. As their SUBMISSION shows, we could switch to full reserve banking by having the central bank create enough money to fully back all demand deposits and not allowing banks to lend that money out (which prevents inflation).

Some of the advantages include:
  • There would be no need to nationalize banking
  • There would be no need for taxpayers to guarantee demand deposits
  • Banks that made bad investment decisions could be allowed to fail
  • Debts could be paid down without shrinking the money supply
  • Massive speculative bubbles would be much more difficult to occur since banks could not create credits at will
Under this environment, MMT theories could actually be put into practice although with the politicians' penchant for deficit budgets, we might not have an opportunity to do so.

One thing that PositiveMoney.org doesn't tackle is the mountain of private debt that is threatening economies world wide. Interestingly enough, the IMF has put out a working paper titled, THE CHICAGO PLAN REVISITED which includes full reserve banking and debt forgiveness.

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Old 7th January 2013, 03:24 PM   #108
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I'd like to start by apologizing if my comments here have already been addressed, i haven't read through the whole thread.
Originally Posted by Shambler View Post
This topic is going to highly offend conventional thinking about economics, so I'd request patience and openmindedness from people responding (since this place highly promotes skepticism and critical thinking, I'm hoping for a high-level of argument)


Almost all economic theory today is based on gold-standard-era thinking, when it comes to money itself; theory has not been properly rewritten to reflect the properties of fiat money, and this (in my view) is perhaps the single most significant problem with economics and politics today, due to how it cripples informed political discussion over economic issues (and in turn, leads to enormous suffering and even deaths).
I don't understand this claim. Gold standard-era thinking and fiat money thinking are really one and the same. The gold standard is simply a currency peg, something that exists today, and I believe economists have a pretty comprehensive grasp on (at least theoretically) on that matter. Fiat vs. Non fiat is not a meaningful comparison in my mind. All currency is fiat.

Quote:
The effects of fiat money on economics/politics are very wide ranging, so instead of providing a whole litany of examples of what it changes, I'll pick this one thing to start off with, and provide arguments to back it up:
Government can create and spend as much money as it likes, with the only limit being inflation.
By limit you mean consequence? I'd disagree. Price stability is important. Generally, Inflation is the primary consequence of expansionary monetary policy.

Quote:
This seems a simple enough statement, but let me build upon it with some other statements, and show what kind of policies that opens up (the below all builds up to a description of the Job Guarantee policy):
1: Money creation, on its own, does not cause inflation (i.e. inflation of the money supply is not the same as price inflation), it is how that money is spent, that determines whether or not there is inflation. *
If you mean base money, then i agree. It is not necessarily true, as we are witnessing currently, that an increasing in base money leads to increased inflation. The issue of "how the money is spent," is complicated. I'd appreciate it if you could elaborate on what you mean by "how the money is spent." I have an idea of what you'd mean, but i prefer to hear your explanation first.

Quote:
2: Inflation in the price of a good, is typically caused when the supply of that good, cannot meet the demand for that good (or when the increase in supply, can't keep pace with the increase in demand). This means money spent buying something with a lot of excess supply, is non-inflationary.
Well right off the bat you are making a HUGE error. The statement "inflation in the price of a good" is completely meaningless, as inflation is almost always defined as the general increase in the price of goods in an economy. To talk about price increases of a particular good is one thing, but it is not inflation. Money spent buying goods with excess supply can increase prices. "Excess supply" would lead to lower prices, so any additional spending on that good which consumes the "excess" may not increase the price from it's last price, but it is increased relative to a decrease that would have occurred absent the increase in consumption.

Quote:
3: If government spends printed money combining surplus labour (unemployed people) with surplus industry/resources (e.g. the construction industry, which has a lot of idle resources in many countries), that does not have to be inflationary (but which may still cause some amount of inflation, due to worker wages).
Same as above.

Quote:
4: Fiscal policy (e.g. taxes) is a set of tools which is used to manage inflation; tightening fiscal policy (i.e. increased taxes), can be used to fight against inflation, including that from worker wages.
Not true. Increased taxes do not reduce inflation. In fact they can lead to higher wages. Taxed income is spent, so you aren't removing money from the economy by taxing income.

Quote:
5: The Job Guarantee policy is government using created money to temporarily employ surplus labour, put to work on surplus resources, combined with fiscal policy; the surplus labour put to work with surplus resources is non-inflationary, and the potential inflation from worker wages can be counteracted with fiscal policy (increased taxes). As the private sector recovers, workers are moved out of the job guarantee program into the private sector.
It sounds like you're talking about expansionary monetary policy as it's been practiced in recessions for decades. Except for the taxation part, i think you've got that all wrong.


Quote:
So, building on that simple initial statement, the above shows how easy it is to expand that, into policies that allow the elimination of unemployment; this is a powerful redefining of basic macroeconomics, which can reshape political and economic discourse.
Aside from the claims you've made that don't make sense w.r.t taxation, this is pretty much textbook economics.

Quote:
Currently, conservative gold-standard-based economic discourse dominates, and this is hindering progressive goals in politics/economics, because the entire debate is always framed in conservative views.
I really don't think this is true at all. Monetary theory understands, or at least attempts to explain free floating exchange rates. It does so reasonably successfully.

Quote:
This redefining of economic theory though, to fit fiat money (based on Chartalism and Modern Monetary Theory), has the potential to re-empower progressive goals/views in politics/economics, so I view it as extremely important that it gets wider publicity and acceptance; however, thus far these views seem to be getting only limited traction, as they are not well known at the moment.


* Neither does it cause devaluation, which would also have to be explained in inflationary terms. In general, claims that money creation = inflation, depend upon the Quantity Theory of Money, which is empirically false/debunked.
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Old 7th January 2013, 03:50 PM   #109
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Originally Posted by Shambler View Post
Again you have made the precise same circular argument, and are trying to obfuscate it (very poorly as well); you are saying money creation creates theft/taxation, i.e. you are asserting that it creates inflation and steals from savings (since that's your definition of theft/taxation; it is 'theft/taxation' because it is inflationary), and you are saying that in order to support your argument that money creation leads to price inflation.

This is the same circular argument.
There is no circular argument. You created this strawmen to knock down so that you can avoid responding directly to what I've written in my above posts.

Quote:

And again, theft/taxation being defined as stealing savings through inflation....you're using that to support the argument that money creation causes price inflation, i.e. again a circular argument.

The rest is, again, just waffle trying to obfuscate your initial circular argument.
No. Once again, I said that money creation is theft if it is counterfeiting, and a tax if it is seigniorage. This is irrespective of the price level by any measure, because the price level is affected both by the supply of money and the supply of goods/services.

For example, assume that Apple, either by technological innovation or by suppressing wages at Foxconn, manages to produce a surplus of IPads for the same cost. If I print six $100 bills on my laser printer and acquire an IPad, I have taken a scarce IPad off of the market, which otherwise would have served to lower the real price of IPads for everyone else, or raise profits for Apple, depending. I have essentially either stolen from Apple shareholders, savers in general, or both, depending upon how you look at it. The consequences of the theft may not show up as price inflation, because the productivity gain covered it up, but it is, nevertheless, theft. My gain came at the expense of these two parties, even though the price may not have budged.

This logic holds true whether the counterfeiting is illegal, or legal (seigniorage).

Quote:

No explanation here, of how financial asset demand is supposed to increase in the first place, so the entire premise that you're basing your argument on here has no backing, and you try to cover that up by expanding on your point at length.
The presumption is that monetary expansion winds up as a bid for something, whether it is financial assets, or real goods and services. If it's financial assets, then while your price of bread and milk may not go up immediately, you have become proportionally less wealthy than the owner of the financial assets. The true impact on your standard of living won't be felt unless and until the financial asset holder realizes his or her gains, and decides to use them to consume real goods and services.

Quote:

You are talking about increasing private bank reserves, which is quite plainly not what I was talking about, as I am discussing an increase in the base money supply, specifically for government spending.
Increasing the monetary base necessarily increases private bank reserves, due to the money multiplier effect. This is an artifact of fractional reserve banking. As the government spends the money, it winds up as bank reserves in member banks, which allows those banks to increase their loans subject to the reserve requirement ratio. This is basic monetary policy.

Quote:

You are being deliberately misleading here, trying to use jargon and general obfuscation, to try and hide the fallacious parts of your arguments.

I'm reporting your post as I'm quite certain you are trying to derail and muddy the discussion here.
I'm neither trying to be misleading, nor trying to derail your thread. I'm commenting specifically on the moral and intellectual bankruptcy of your ideas, as well as that of the status quo.
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Old 7th January 2013, 04:14 PM   #110
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Originally Posted by Telecast View Post
I don't understand this claim. Gold standard-era thinking and fiat money thinking are really one and the same. The gold standard is simply a currency peg, something that exists today, and I believe economists have a pretty comprehensive grasp on (at least theoretically) on that matter. Fiat vs. Non fiat is not a meaningful comparison in my mind. All currency is fiat.
Welcome to the discussion. I have to disagree with you right off the bat, unfortunately. There are essentially three different types of money. Fiat, fiduciary, and commodity. Fiat money represents no promise to pay anything, it is a decree of payment. Fiduciary money (ie: a gold "standard") represents a promise to pay in a valuable commodity. Commodity money of course, represents actual payment in a commodity.

A gold coin with a denominal value above the actual cost of the gold and the minting of the coin, is partially fiat. To the extent that a commodity money like gold is naturally scarce, there is a hard limit on how much it can be debased. You can't print gold. On the other hand, you can print or create electronic representations of promises to pay in gold.

The key distinction between fiat and commodity money is the ability to reproduce the former infinitely, and this is not just an important distinction, but a crucial one.

Quote:

By limit you mean consequence? I'd disagree. Price stability is important. Generally, Inflation is the primary consequence of expansionary monetary policy.
Price stability is less important than you might think, especially given productivity gains. When society sees productivity gains, prices should fall to reflect them.

Quote:

Well right off the bat you are making a HUGE error. The statement "inflation in the price of a good" is completely meaningless, as inflation is almost always defined as the general increase in the price of goods in an economy. To talk about price increases of a particular good is one thing, but it is not inflation. Money spent buying goods with excess supply can increase prices. "Excess supply" would lead to lower prices, so any additional spending on that good which consumes the "excess" may not increase the price from it's last price, but it is increased relative to a decrease that would have occurred absent the increase in consumption.
Ding ding ding! We have a winner. You've just explained the productivity norm, succinctly.

Quote:

It sounds like you're talking about expansionary monetary policy as it's been practiced in recessions for decades. Except for the taxation part, i think you've got that all wrong.
I think part of the problem he has is that the policy hasn't resulted in any money for the jobless, only money for wars and corporate welfare/bailouts. He would rather that we use it as welfare for the jobless, I would rather abolish expansionary monetary policy altogether, eliminate the graft and corruption of banks, and establish a level playing field.
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Old 7th January 2013, 10:03 PM   #111
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Originally Posted by Telecast View Post
I'd like to start by apologizing if my comments here have already been addressed, i haven't read through the whole thread.
No worries; the discussion has moved pretty fast, and it's gotten concentrated on a few key points.

Originally Posted by Telecast View Post
I don't understand this claim. Gold standard-era thinking and fiat money thinking are really one and the same. The gold standard is simply a currency peg, something that exists today, and I believe economists have a pretty comprehensive grasp on (at least theoretically) on that matter. Fiat vs. Non fiat is not a meaningful comparison in my mind. All currency is fiat.
Well, the restrictions a gold standard puts on the money supply, and the ways it restricts government spending even when it can be non-inflationary, means it significantly cripples governments ability to manage the economy.

Originally Posted by Telecast View Post
Originally Posted by Shambler
The effects of fiat money on economics/politics are very wide ranging, so instead of providing a whole litany of examples of what it changes, I'll pick this one thing to start off with, and provide arguments to back it up:
Government can create and spend as much money as it likes, with the only limit being inflation.
By limit you mean consequence? I'd disagree. Price stability is important. Generally, Inflation is the primary consequence of expansionary monetary policy.
No, I meant limit (with the limit being an overall target rate of inflation) I agree that price stability is important as well.

While money creation generally is inflationary in an economy at fully productive capacity and full employment, a lot of relatively non-inflationary ways of spending money are opened up, during an economic downturn, when productivity and employment are both below-potential.

Originally Posted by Telecast View Post
If you mean base money, then i agree. It is not necessarily true, as we are witnessing currently, that an increasing in base money leads to increased inflation. The issue of "how the money is spent," is complicated. I'd appreciate it if you could elaborate on what you mean by "how the money is spent." I have an idea of what you'd mean, but i prefer to hear your explanation first.
Well, a lot of that is expanded upon in the bits you quote below, where I put together the general policies of the Job Guarantee, but in general there are some things government can spend money on that will be highly inflationary (like buying up a particularly large amount of oil for instance), and other things which are far less inflationary (spending on labour, put to work on projects of productive value, like general infrastructure).

Some kinds of inflation are also better than others:
Inflation as a result of worker wages, due to achieving full employment, is a net social benefit.
Inflation as a result of buying goods required for vital infrastructure is also a net social benefit.
Inflation today, on projects for achieving economic stability in the future, e.g. on power infrastructure, to avoid future inflation by the coming energy crisis are a net benefit both socially and economically.

It's all about allocating spending in as non-inflationary a manner as practical, avoiding going over a general targeted inflation rate, and prioritizing full employment and social wellbeing.


Originally Posted by Telecast View Post
Well right off the bat you are making a HUGE error. The statement "inflation in the price of a good" is completely meaningless, as inflation is almost always defined as the general increase in the price of goods in an economy. To talk about price increases of a particular good is one thing, but it is not inflation. Money spent buying goods with excess supply can increase prices. "Excess supply" would lead to lower prices, so any additional spending on that good which consumes the "excess" may not increase the price from it's last price, but it is increased relative to a decrease that would have occurred absent the increase in consumption.
Well, to talk about inflation generally, you also need to talk about inflation in the price of individual goods, in order to show how that will contribute to general inflation (which is measured based on a basket of goods, with different measurements based on different 'baskets' of goods); this is particularly true when talking about government spending, and arguing whether it will or will not be inflationary, since you need to talk about what/where spending will be directed.

Also, when I talk about excess supply, I don't just mean extra goods lying around, I also mean extra productive potential; that is, industries ability to scale up production to meet an increased demand for a good, and to be able to scale-up faster than the increase in demand.

That does not lead to a significant inflation in prices, unless demand increases too fast, or resources needed for production become scarce.

Originally Posted by Telecast View Post
Not true. Increased taxes do not reduce inflation. In fact they can lead to higher wages. Taxed income is spent, so you aren't removing money from the economy by taxing income.
If you removed all taxes tomorrow though, and kept government spending at the same level, you would see inflation happen.

Originally Posted by Telecast View Post
It sounds like you're talking about expansionary monetary policy as it's been practiced in recessions for decades. Except for the taxation part, i think you've got that all wrong.
I don't think governments in many places have provided a Job Guarantee type policy though? It basically makes government an 'employer of last resort', maintaining full employment at all times.

Originally Posted by Telecast View Post
Aside from the claims you've made that don't make sense w.r.t taxation, this is pretty much textbook economics.
...
I really don't think this is true at all. Monetary theory understands, or at least attempts to explain free floating exchange rates. It does so reasonably successfully.
I'm glad that enough of it, despite an issue here and there, seems sensible enough, but unfortunately a lot of textbook economics teaches theory that is largely (but not wholly) incompatible with the policies I lay out.
For instance, the main policy I lay out, the Job Guarantee, would all but end unemployment; yet current economic orthodoxy is allowing a significant level of unemployment to exist, causing significant social and economic harm.

Here is one of the best wide-ranging descriptions I've read, of the problems with current economic theory and teaching (very long mind, but a good read):
http://neweconomicperspectives.org/2...ff-part-4.html
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Old 7th January 2013, 10:27 PM   #112
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Originally Posted by Tippit View Post
There is no circular argument. You created this strawmen to knock down so that you can avoid responding directly to what I've written in my above posts.
I've explained in detail in my posts here and here exactly how you are deliberately using a circular argument, and are deliberately trying to obfuscate your posts/arguments, in order to muddy debate; that's completely intellectually dishonest.

You entire post is, again, dependent on the exact same circular argument; in response to the general line of discussion we are on, "How is money creation inflationary?" you say:
"money creation = counterfeiting = inflation" and
"money creation through seigniorage = taxation i.e. inflation".

Completely transparent circular argument, that you are trying to cover over with obfuscation, by using ridiculous semantic redefinitions of counterfeiting and taxation, which pretty much amounts to 'inflation'.


You then also, try to go off on another line of argument about "financial asset inflation", i.e. deposits in private banks, despite that with the policy framework I put forward, there would be one public bank with deposits going straight back to government, and no fractional reserve system, thus nullifying your line of argument here.
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Old 8th January 2013, 02:12 AM   #113
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Originally Posted by Tippit
Increasing the monetary base necessarily increases private bank reserves, due to the money multiplier effect. This is an artifact of fractional reserve banking. As the government spends the money, it winds up as bank reserves in member banks, which allows those banks to increase their loans subject to the reserve requirement ratio. This is basic monetary policy.
We should be wary of the standard money multiplier description; it may not work in the way the textbooks explain. More reserves may not mean more lending. In fact, lending might not have all that much to do with levels of reserves. Indeed, this Fed-paper leads one to question the validity of the formal notion. Money, Reserves, and the Transmission of Monetary Policy: Does the Money Multiplier Exist?

Originally Posted by Carpenter & Demiralp
For perspective, M2 averaged about $7¼ trillion in 2007. In contrast, reservable deposits were about $600 billion, or about 8 percent of M2. Moreover, bank loans for 2007 were about $6¼ trillion. This simple comparison suggests that reservable deposits are in no way sufficient to fund bank lending. Indeed, if we consider the fact that reserve balances held at the Federal Reserve were about $15 billion and required reserves were about $43 billion, the tight link drawn in the textbook transmission mechanism from reserves to money and bank lending seems all the more tenuous. Figure 2 plots required reserves with M2 (both panels), and there is no relationship.

[... conclusion ...]

Changes in reserves are unrelated to changes in lending, and open market operations do not have a direct impact on lending. We conclude that the textbook treatment of money in the transmission mechanism can be rejected. Specifically, our results indicate that bank loan supply does not respond to changes in monetary policy through a bank lending channel, no matter how we group the banks.
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Old 8th January 2013, 03:23 AM   #114
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Originally Posted by Shambler View Post
. . . with the policy framework I put forward, there would be one public bank with deposits going straight back to government, and no fractional reserve system, . . .
Can you explain why you think a single government operated national bank would be superior to a full reserve banking proposal as put forward by Positive Money?

Full reserve banking could be implemented at no cost to the taxpayer whereas your idea would require the government to either buy out bank shareholders or confiscate their assets.
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Old 8th January 2013, 03:47 AM   #115
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Originally Posted by Shambler View Post
I've explained in detail in my posts here and here exactly how you are deliberately using a circular argument, and are deliberately trying to obfuscate your posts/arguments, in order to muddy debate; that's completely intellectually dishonest.

You entire post is, again, dependent on the exact same circular argument; in response to the general line of discussion we are on, "How is money creation inflationary?" you say:
"money creation = counterfeiting = inflation" and
"money creation through seigniorage = taxation i.e. inflation".
Unfortunately, you are the only dishonest one here. You keep referring to a circular argument that does not exist, while failing to respond substantively to my comments about why the productivity norm and financial assets can disguise the transfer of wealth that occurs given seigniorage, and that may not necessarily show up immediately in the general price level.

I can't say that I blame you, because as a welfare statist whose objective it is to transfer as much wealth to the state as possible, it doesnt serve your interest to discuss the real consequences of monetary policy, lest people recognize the agenda.
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Old 8th January 2013, 04:16 AM   #116
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Originally Posted by Shambler View Post
Well, the restrictions a gold standard puts on the money supply, and the ways it restricts government spending even when it can be non-inflationary, means it significantly cripples governments ability to manage the economy.
This is a feature, not a bug. Gold is "holy water" to the vampire of deficit spending. I don't see anywhere in the US Constitution where the government has the right to "manage" the economy.

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If you removed all taxes tomorrow though, and kept government spending at the same level, you would see inflation happen.
This would only be true if the government created enough money to offset the lost tax revenue, first. It can't spend money it doesn't have. In such a scenario, the overall burden of government wouldn't change, it would merely be shifted, regressively. Yes, prices would rise, but this would be offset by taxpayers with more income to spend.

This is merely the substitution of all conventional taxes, with more of the seigniorage (counterfeiting) tax. If instead, you abolished the central bank, fiat money, and the fractional reserve system, and replaced it with higher capital gains rates, the burden would be shifted again, progressively. Poor people tend to have more cash, proportionally, and few capital assets.
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Old 8th January 2013, 04:23 AM   #117
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Originally Posted by lupus_in_fabula View Post
We should be wary of the standard money multiplier description; it may not work in the way the textbooks explain. More reserves may not mean more lending. In fact, lending might not have all that much to do with levels of reserves. Indeed, this Fed-paper leads one to question the validity of the formal notion. Money, Reserves, and the Transmission of Monetary Policy: Does the Money Multiplier Exist?
I think you and the paper have a good point, but it's worth pointing out that lending to the public is merely replaced with lending to the Fed. It's for this reason that some have suggested that the Fed either reduce, or stop paying interest on balances held with it, as this would spur more public lending.

See: Interest on Required Balances and Excess Balances
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Old 8th January 2013, 04:24 AM   #118
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Originally Posted by Shambler View Post
Gold has no underpinning in the economy
Explain.
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Old 8th January 2013, 08:39 AM   #119
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Originally Posted by Tippit View Post
I think you and the paper have a good point, but it's worth pointing out that lending to the public is merely replaced with lending to the Fed. It's for this reason that some have suggested that the Fed either reduce, or stop paying interest on balances held with it, as this would spur more public lending.

See: Interest on Required Balances and Excess Balances
Well, it was the Fed’s lending and liquidity facilities that created the excess reserves in the first place.

So while bank lending to the public has decreased, I would however not say they are lending them to the Fed instead. They are holding excess reserves at the Fed, without sufficient incentive to put them elsewhere. Banks’ lending decisions would not have altered the level of excess reserves for the whole banking system anyhow. But sure, more lending to the private businesses and households would probably have been needed for better economic recovery (although private sector debt is probably at unhealthy levels already so there is also a longer-term structural dilemma at play).

Fed staff report: Why Are Banks Holding So Many Excess Reserves?
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Old 8th January 2013, 02:18 PM   #120
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Originally Posted by lupus_in_fabula View Post
We should be wary of the standard money multiplier description; it may not work in the way the textbooks explain. More reserves may not mean more lending. In fact, lending might not have all that much to do with levels of reserves. Indeed, this Fed-paper leads one to question the validity of the formal notion. Money, Reserves, and the Transmission of Monetary Policy: Does the Money Multiplier Exist?
Indeed, the money multiplier is basically a myth; in the fractional reserve banking system, loans actually come before both reserves and the money supply itself as well; banks extend loans first, then go to the interbank market to fix up reserves later, causing the money supply to adjust if necessary (which has to be granted just as a practical matter, since if a bank overextends loans, government going back and attempting to cancel them would just be a mess).

To keep my argument simple though, I've substituted fractional reserve banking with a single public bank, which gets rid of having to go into detail about this whole mess, while still maintaining the core policies I put forward.
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