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A View on Inflation & Keynesian Talking Points
As the world spins helplessly into insolvency, central banks are becoming more and more active in helping to "solve" the crisis (although some would argue it's odd to have those who helped create it be counted on to help solve it). As this is taking place, the Keynesians (MMT'ers) and Austrians are renewing their rivalry, and are once again going after each other for their thoughts on the situation (note: it really doesn't matter what the Austrians believe, as the Keynesians are currently in charge of the decision making).
Volumes can and have been written on these two schools of economic thought - what I'd like to focus on is inflation.
Austrians are always sounding the alarm on inflation, and the Keynesians always laugh and point to the monthly CPI figures the BLS publishes. They say that it's in the 2%-3% range, everything is fine. And besides, the velocity of money is down significantly, so the Austrians need to be quiet and take their "crazy" somewhere else.
That's one way to look at it. I would argue that inflation is all around us, we just choose not to look.
Some context: Say you were buying apples at your local store. What if you thought that there were only a dozen apples in the store you were in, with no chance of more apples being delivered. You'd place a higher value on each apple right? Now what if you knew there was a truck load of apples being delivered shortly - you'd place a little less value on each apple, knowing that the supply of apples will be increasing shortly.
This is the same way Austrians view the value of money. They believe that individuals value money based on both quantity, and QUALITY. If the Federal Reserve can just print money and increase the money supply, creating more dollars to chase a similar amount of goods, why would you value each dollar the same as you would before the money supply was increased? And in regards to velocity of money, the velocity of money does not create inflation, it is a symptom of inflation. Think about it, if you knew there were more and more dollars chasing the same amount of goods around, you'd begin to draw on your account & borrow to purchase goods now instead of in the future, thus increasing the velocity of money. But the inflation was already there when the money supply increased arbitrarily.
Inflation is all around us. I don't need to get into things like WTI or Brent, you feel the effects of those each time you get gas. What I'd like to point out are things like healthcare, energy as a whole, housing prices, and student loans. Do you not see the inflation in those areas? -- As an aside, I recommend reading this piece ZH published on student loans.
Here's the case I lay out for those reading to make up their own minds. The Federal Reserve prints money, "buying" treasuries & increasing the money supply, thus devaluing the dollar. The Government then subsidizes all of the aforementioned areas, which means more dollars are available to purchase those goods & services. And this is how the game is played (also, banks net income swells as a result).
A. M2 (Money Supply) skyrockets (Fed printing)

B. An Example of Government Subsidies in Student Loans

C. Here's Your Inflation (that nobody can seem to find)

D. All with a declining velocity of money

E. The USD is losing value at a rapid pace (but who wants the paper tied to something of value, that's crazy) -- Also, you can look at DXY, but you'd only be looking at how the U.S. is doing devaluing their currency vs. the rest of the currencies in the race to the bottom.

And may I present to you the only reason money is printed - so everyone can consume all those iPads and sweet big screen tv's:

Eventually the game will be up folks, and I strongly recommend you learn to live below your means before you're forced to. The ponzi will fail, and the economy will reset - the only question is when.
In the spirit of the Zero Hedge Mob
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The price of everything BUT housing must increase to "hide" housing's fall. Say hello to $20 big macs. Unfortunately, wages will not be coming along for the ride, so plan the eventual collapse....
It's consistantly amazing that these stupid fuckers couldn't figure out the inflation has to come from the bottom up, or inflating doesn't "fix" your debt problem.
Unless of course, their aim was to print enough money to just buy everything in sight...
We'll see how that works out. You can only buy so much security before you run into the problem of your hired gun looking over at you and saying: "Hey - Fat, florid, puffy, old white man... How much money do you have, anyway...?".
"Bottom up" inflation is NOT what the Fed wants, as that is the only inflation that will upset the apple cart. That truly is like printing money and handing it out to the unwashed. And once wages rise, you can bet your ass the Bernank will raise rates. Top down inflation keeps the big boyz assets nicely propped up even though it screws the little guy with inflation that is "hedonically adjusted" out of existence. Just one more reason why the wealth gap in this country grows by the second. And on purpose.
REMEBER: there is no inflation unless there is wage inflation. Officially, that is....
Endless printing for the bankers and permanent recession for the public is what they want. They want to print money and have it retain value. But the author here is correct. High velocity is not inflation. Nor is velocity the problem the Fed thinks it is. There is velocity of exchange in an economy. This is not inflation. Then there is the velocity of exchanging your money in a panic for anything but paper dollars. The Fed thinks that by suppression of velocity in economic exchange now, they can stop the panic to get completely out of dollars when it comes. They are two different animals and barely even related. By keeping money out of the economy and economic exchange now, they are reducing the ability to pay taxes and debt. This will bring on the collapse of the debt system that backs our paper currency and lead to complete abandonment of the Dollar in the bad kind of velocity.
That the Soviet Union would fail was obvious to many economists as early as the 1930's. But anyone waiting for the collapse to come, got old and grey (and probably died) still waiting for things to fall apart.
Moral of the story: "Can-kicking" can go on for longer than you can possibly imagine. Things can get progressively worse to the point that people are starving, life becomes a struggle, and government has absolute authority over every facet of life -- and there will still be no revolution -- only fear and poverty.
The belief in an imminent "end game" can prevent people from taking precautions, and often provides a false sense of hope. That "end game" might be something that your grand-kids will celebrate without you.
Plan accordingly.
You've also got to hope complacency doesn't set in on huge swaths of the population at the acceptance of "The Rapture". Belief in Armageddon of one sort or another exists underlying nearly all cultures and religions. Hey, maybe they're right.
The USA entered its full-on soviet phase in 2001. Given that the Soviet Union lasted 75 or so years, I'll see you in 2076. The tri-centennial. No, I won't. I'll be downsized into an urn.