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The Fed And Mr. Krugman: The Price Of Nuts
Submitted by Doug French via Mises Canada,
The pine nuts I like to sprinkle on my salads have become so precious the price jumped from an already outrageous $5.99 per 4 ounce container to $6.99 this past week. One person who is happy about this is the New York Times’ Paul Krugman, for instead of being like Europe, that is “clearly in the grip of a deflationary vortex,” America only teeters on the edge of a general price plunge. “And there but for the grace of Bernanke go we,” writes the voice of Grey Lady economics wisdom.
Google “grocery prices last 12 months” and it’s post after post beginning with “Consumer prices rise” or “Rising food prices bite.” However, Krugman claims there is something called a “deflation caucus” keeping the Fed from doing even more than quadrupling its balance sheet. Monetary policy is partisan politics and the right wingers “demand tight money even in a depressed, low-inflation economy?”
Krugman then uses a word coined by Stephen Colbert, truthiness, meaning something that sounds true that isn’t to describe “The Fed is printing money, printing money leads to inflation, and inflation is always a bad thing.” He writes that this “is a triply untrue statement, but it feels true to a lot of people.”
The Nobel winner evidently hasn’t asked anyone from Zimbabwe, or Argentina, or any of the other 20 countries that have experienced hyperinflation in the last 25 years how their country’s inflation policy worked out for them. Krugman hasn’t noticed the Fed has expanded its balance sheet from less than $900 billion before the crisis of 2008 to the current $4.5 trillion (money printing).
His argument is really that prices haven’t gone anywhere, contrary to what Austrian economists might have predicted. Sure, John Williams reports that using 1990-based CPI calculations, price inflation is running at almost 6%, and calculating it the way the government did in 1980, price inflation is 10%. But Krugman would still wonder, “Where’s the hyperinflation already?”
It turns out the central bank can print money but it can’t print velocity. The PhDs over at the St. Louis Fed say prices aren’t going anywhere because consumers are hoarding money.
Since the government strips gas and food out of their inflation calculations, prices are increasing at less than the Fed’s 2% target. There’s good reason to believe that’s nonsense, but let’s say that’s right for the sake of argument.
So where’s the money? Banks have close to $2.8 trillion in reserves parked at the Fed, and households are sitting on $2.15 trillion in savings, nearly a 50 percent increase over the past five years.
“So why did the monetary base increase not cause a proportionate increase in either the general price level or (gross domestic product)?” economist Yi Wen and associate Maria A. Arias asked in the St. Louis Fed paper. “The answer lies in the private sector’s dramatic increase in their willingness to hoard money instead of spend it. Such an unprecedented increase in money demand has slowed down the velocity of money.”
According to Yi and Arias during the first half of this year, “the velocity of the monetary base was at 4.4, its slowest pace on record.” Prior to the Great Recession base money turned over 17.2 times.
So the Fed’s been injecting more and more money and it simply has gone nowhere. No GDP growth, no price inflation. The two Fed researchers think people are hoarding because they are generally gloomy after the financial crisis and low, low interest rates provide no incentive to buy interest-bearing assets.
By all accounts the Fed has gone where no central bank has gone before, but according to the Times columnists, not far enough. However, note to Mr. Krugman, the two Fed researchers have this conclusion:
In this regard, the unconventional monetary policy has reinforced the recession by stimulating the private sector’s money demand through pursuing an excessively low interest rate policy (i.e., the zero-interest rate policy).
So it’s not the Fed responding to right wing deflation nuts that’s keeping growth and price increases (the government can see and measure) from happening, it’s Joe and Jane Lunchbucket being, dare we say, prudent.
What’s been left out of this discussion is the primary money creation engine–commercial banks. Up until now they’ve been kow-towing to regulators and licking their real estate loan wounds.
No more. “Lending Appears Back for Good in FDIC’s 2Q Data” reports American Banker.
Three-quarters of all institutions reported higher loan balances in the 2nd quarter with almost all major loan categories participating. “The growth is more pronounced at community banks, where balances over the past year have increased 7.6% versus 4.9% for the industry as a whole,” reports AB.
FDIC Chairman Martin Gruenberg said the industry that once was “preparing balance sheets, strengthening capital and liquidity and recovering from the aftermath of the crisis and ensuing recession, … [is] moving into a period of higher growth for the economy” with “increasing credit demand and greater opportunity for the industry.”
That’s not all. The commercial banks’ un-taxed competitors, credit unions, increased their lending 9.8% in the second quarter. The Wall Street Journal reported, “New-auto loans jumped 17% to $77.7 billion in the second quarter, and used-auto loans rose 12% to $135.3 billion, the credit-union regulator reported. Net business loan balances increased 12% to $48.8 billion.”
Mr. Krugman shouldn’t declare defeat to the deflationists just yet. Bankers are learning to say ‘yes’ again, and that means velocity and price increases.
We’ll see how much pine nuts will cost then.
* * *
As none other than Ken Rogoff recently opined...
Today, high inflation seems so remote that many analysts treat it as little more than a theoretical curiosity.
They are wrong to do so. No matter how much central banks may wish to present the level of inflation as a mere technocratic decision, it is ultimately a social choice. And some of the very pressures that helped to contain inflation for the past two decades have been retreating.
...
Modern central banking has worked wonders to bring down inflation. Ultimately, however, a central bank’s anti-inflation policies can work only within the context of a macroeconomic and political framework that is consistent with price stability. Inflation may be dormant, but it is certainly not dead.
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Same thing here in India. I prefer cashews but they have become a once-a-month indulgence. It's become cost efficient to grow a few cashew trees.
Doesn't the mess in Japan totally disprove Krugman's neo-Keynsian BS? The only explanation I have read for why Japan's QE has failed (Declining GDP) is because Japan has structural problems. So in this scenario the US doesn't have structural problems and MOAR QE will do the rick nicely. That, of course, explains why Labour force participation continues to decline and GDP growth remains at such low levels 6 years into "The recovery"?
Keynesian Klunker = Krudman...
The Fed And Mr. Krugman: ........... Nuts
I'm not sure that there'd be any great mourning if the Krugster were to come to the same demise as Wilford Brimley and choke to death on a mouthful of pine nuts.
Wilford Brimley is still alive. I'll bet your thinking of Kirk Douglas...
If you live in the North-East, sit down before looking at your electricity bill...
http://www.planbeconomics.com/2014/09/if-things-werent-bad-enough-reside...
Fuck youse guys and your cheap electricity!
http://www.dleg.state.mi.us/mpsc/electric/download/rates1.pdf
RESIDENTIAL kWh 250
UPPER PENINSULA POWER 25.16
I don't care if Krugman is lying or just simply an useful idiot. I just want him beat until he became comatose, which nobody will notice because he is already a brain-dead.
Historically Epic Fail. Krugman will be preserved by his acolytes but after that, a historic oddity and remarkable example of the current financial epoch's ignorance and hubris.
Why just Japan? Ask Krugman if any big government program evr succeeded at doing anything useful?
True, no disagreement with that SOZ. However Japan is a better illustration of how QE doesn't work as it has been the first totally OTT neo-Keynsian playground where Debt/GDP post QE is now at 250%+, the economy is shrinking, inflation is way up and real net incomes are down. Yet according to Krugman, the only reason QE is not working in The US is because The Fed has not QE's enough. Like Japan did. To explain away the failure in Japan, the excuse is that Japan has Structural problems, implying that The US doesn't and that similar levels of QE in The US would have seen everything turn around. You can't argue with clowns until it all collapses. And even then, tehy will dream up new excuses. My other point was that, if The US does NOT have structural problems of its own, why is it that the emplyment rate continues to decline and GDP growth is anemic SIX YEARS into "The recovery"? And Krugman would answer "Not enough QE". You can't win with these clowns.
Deflation is not an inherently bad thing unless you're a debt holder (ie: gubberment). The issue is the crap that often accompanies deflation is very economically destructive. That is to say, economic systems collapse and cause deflation, but these guys are acting as though deflation causes economic collapse to bolster the position of big government and keep the gravy train going.
All the while savers are getting ruined for being prudent with their money. If you want to stare madness in the face, you need not look much further than the modern policy makers. The sorts of people who, upon realizing they cannot afford their mortgages, are willing to burn down their own house and then blame the neighbor to keep their reputation untarnished. When either way they would be without shelter eventually, but in the process of chosing the former option, end up hurting other people, and causing wholesale collateral damage.
In a world of rational economic and monetary policy deflation would be the norm. Why? Because we produce ever more stuff with ever less effort and energy, i.e., efficiency and productivity improves. I guy with a bulldozer can do more work in a day that 500 guys with shovels. He can even do things that were formerly impossible.
So, inflation at its core is more money chasing the same or fewer goods. Deflation is simply the opposite, the same or lesser amounts of money chasing more goods, If productivity rises at roughly 1-3% per year as I believe is the historical norm, then prices should drop over time...all other things being equal. In a sense, deflation is good as it is a measure of productivity gains and sound monetary policy.
What you say, Broseph is the emotional correlation everyone makes. Government collapses the economy and deflation is often the symptom. It is not the cause, however and government policy makers get this backwards.
Well, that makes two of us that understand real economics and inflation vs. deflation. Not very many people understand what the real definition of inflation is (increase in the money supply).
It's so backwards. I don't think people will ever understand that deflation is good.
freedom: your theory doesn't work because you don't factor in energy scarcity.
A bulldozer is not efficient if it costs more energy to run it, than the food that energizes 500 guys with shovels.
No doubt, but since food production is also heavily energy dependent these days in developed countries.. Which costs more?
Oh what a twisted web the energy costs of maintaining the economic system weaves.
"Deflation is not an inherently bad thing unless you're a debt holder (ie: gubberment)."
The first mistake is continuing to speak of one thing as if it is another. The base misidentification of what we are dealing with is a huge part of the problem. definitive language has to be agreed upon before rational discussions and negotiations can be enjoined -and this has not yet happened.
There is debt and then there is something else which is most often called debt; something which shares many of the characteristics of debt but which is not.
DEBT is designed to be paid down -most ofter over a fixed period.
What Governments and many corporations have created/accrued and which is often called debt -IS NOT DEBT.
It isn't designed to be paid back. These are actually types of perpetual regulatory indulgences, generational wealth transfer scemes and/or rentier streams.
NO ONE I have ever spoken to actually believes the the U.S. Federal Debt is ever going to be paid back!
Does ANYONE here at ZH actually believe that the $17T or whatever is actually going to be PAID BACK AND SATISFIED?
-Well: then whatever it is IT ISN'T DEBT & WHAT IT REALLY IS REQUIRES IDENTIFICATION before any discussion of it can bereasonably undertaken.
Same here with the cashews. Feeling major pain and loss at cutting back to once a month or less. Even Wallyworld's generic halves and pieces are shooting up....twice this year alone.
Nuts to Krugman.
Fuck you, Krugman!
Hey Krugman, is that a sock in your tights or are you just glad to see inflation.
That overloaded pair of swim trunks reminds me of the Potato in FRONT joke.
That is so disgusting.
Is that punk Paul Krugman moniker still posting to Zerohedge?
THAT'S NOT A SOCK, THATS A THREE PACK - NO, TWO THREE PACKS - NO, SIX THREE PACKS OF WALMART HAYNES BRIEFS!
You're all wrong. That's three pair of spare panty hose...
Another interesting question is how much farther can inflation externalities go before people get fed up with having to hold their cigarettes vertical to keep the mostly sawdust tobacco mix from spilling out. Quality and quantity have been degraded so much over the past decade that we are close to the tipping point when it comes to xxxconsumersxxx customers willingness to tolerate piss poor quality. About three years ago, I had to fire Walmart because they are stocking total crap!!!!
Post post edit: Hey Durden: The striekthrough option does not work in the posting editor!!!
Bust a hickory nut....good luck
Where I live, prices are generally increasing across the board. This deflationary talk is disconnected from reality,
The changes made to CPI since the 70's are deliberately designed to MINIMIZE reported inflation
You're seeing deflation on the things you really DON'T NEED while prices on the things you DO NEED are going up. So you can get a cheaper toaster but the bread that goes in it costs more. Most people care lot more about the cost of bread than they do about the toaster.
My current toaster doesnt work properly anymore. It lasted 3 yrs. My previous toaster lasted 12 yrs. That isn't incorporated in any inflation measure that I've seen.
Manufacturers can barely calculate the replacement costs of their own products. Government doens't even have a profit motive. "Staring madness in the face".
Planned obsolescence or more often piss poor quality are included in the subcategory, "inflation externalities" see above. Sadly, this significant category is usually left out of mainsteram discussions. We just need to remain steadfast in our determination to serve justice when this powder keg we are sitting on blows up in our collective faces.
"You're seeing deflation on the things you really DON'T NEED while prices on the things you DO NEED are going up."
I disagree that this is deflation. It is more likely just a reflection of genuine demand/supply characteristics within the real economy. People, having had their purchasing power eroded, are simply not buying crap they don't need. That's not deflation, that is a lack of genuine demand for crap, ie: "Sorry honey, we won't be buying that extra kitchen cabinet this year."
I agree with the rest though.
Edit: It takes a while for inflation to transmit into the cash economy, but I would wager that without the price inflation that stuff would be even LOWER in sell value than you see now.
True. Inflation is an increase in the money supply. All else being equal, that leads to an increase in prices, but people call price increases inflation. That's wrong, but they do it.
You have to identify where the money supply is increasing. Housing? Yep, we all saw that play out with mortgages. House prices went up.
Food stamps? Yes, they spend like money. So food prices are going up.
Electronics? Most of that was on credit cards, which have been cut off. So naturally, demand is down and prices are down. That IS deflation. Decrease the money supply (whether it's less credit or loss of a job), then the demand decreases, then prices decrease.
That's how it works.
Most of us have enough ,or more likely than not, too much crap. And it lasts longer. Fridge, flat screen, washer, dryer, etc. cars are better and last longer also. Cars are and always have been the biggest " I gotta have it " scam.
My idiot wife traded in a paid for 06 Jeep Grand Cherokee, four new tires and up to date maintenance. A perfectly good vehicle for a private in the FSA. Dimwit traded it in at50% of its street value, + $5000.00 cash, plus a $490 a month payment for who knows how long. And twists and contorts to make excuses why she had to have a new car. Had to. Needed it. Fucking moron.
I live with a perfect example of what is wrong with this country. And I for one, am at the end of the rope. I don't wish to see the stupid twit suffer ( too much). But she has kicked this mule almost to end of the pasture. He is about to kick back, and knock her dumbass over the fence.
Rant off. Send bill.
@ cynicalskeptic:
good way to put it - lotta truth in your comment
Biflationary nut cracker will crack the nuts of both inflationistas and their deflationary foes. Because a little of each will continue to corrode and degrade the economy. High cost of living, doing business and working will live side by side with slumping real incomes, net margins and general demand. Costs will rise without velocity of money going up.
I'm in the antidisinbidestagflation camp....
These compelling histories are kept away from being seen by the people.
The Public Be Suckered
http://patrick.net/forum/?p=1223928
Why?
Inflation deniers...man, oh man, don't they shop for food or do they eat their own feces? Sorry to be so crude.
They really don't eat their feces. They just pick out the carrots, nuts and corn for recycling into second serving Mooch school lunch programmes.
Ban,
Overall we are in deflation. The total money supply is decreasing (poof) all over. That is the one and only definition of deflation.
As for food prices increasing? Food stamps. That makes the money supply (for food) increase, which increases demand, which makes prices go up. That is the definition for inflation.
You are extrapolating food prices going up with the entire economy. You need to analyze it properly.
"According to Yi and Arias during the first half of this year, “the velocity of the monetary base was at 4.4, its slowest pace on record.” Prior to the Great Recession base money turned over 17.2 times."
Simple math. If you've increased the amount of money in circulation by a factor of four or five but the economic activity has not grown, then overall velocity of the money in circulation HAS TO DROP correspondingly
Ok then figure out a way to make it move faster.
@ Tom Green Swedish:
deposit it in my account - I'll show you how fast I can move it...
[into PM's and maybe if any left over - a night-on-the-town]
QE. Directly to the people. 85 billion a month, 330 million population. Send it out direct. About $250 a month. That should do it.
"Simple math. If you've increased the amount of money in circulation by a factor of four or five but the economic activity has not grown, then overall velocity of the money in circulation HAS TO DROP correspondingly"
If you have increased the money in circulation and no one is circulating it, how has the money in circulation increased?
Inflation is a good thing, especially for people with debts, i.e. the majority of the population (student debt, anyone?), because it will effectively decrease the value of the amount of these debts over time. Deflation is a fantasy, because available capital is not based on an absolute amount of say gold or silver anymore as it was in the 30s. Hence, if capital supply runs out, central banks can just print more bills.
"Inflation is a good thing, especially for people with debts,......"
Congratulations! You have just made the top ten list for the stupidest comment ever on ZH. Inflation is good? Please tell that to my folks are their friends who were living just fine a few years ago but now sweat bullets whenever they go to the market. What an idiotic remark.
Indeed, inflation is not so good for people with capital or savings, they will need to spend more on goods. However on a large scale, knowing capital is going to lose its value by inflation will incentivize banks and companies to spend it, rather than hoard it, which should boost the economy. Since the global economy is stuck in a credit/debt hole, central banks are aiming for mild inflation (not Zimbabwian hyperinflation, which was never my point) around 1.8-1.9% p/a instead of 0.3% currently.
Inflation is not a good thing except for the banks and those of the monied few. There is no reason other than the population growing that inflation is good. The only reason the propaganda repeats this line ad infinitum is because they want to maintain their vig on the excess money creation over the 6% paid to the FED. The interest needs to come from somewhere mother fuckers!! So an ever increasing money supply is required. Stop that and the whole edifice crumbles. Price stability works in a non-debt based money stystem.
Dear Student of the "Krugman School of Tardenomics."
Please study what seniorage is, and consider the types of incentives that the policy you described encourages. We are currently sleepwalking towards a society of debt serfdom.
PS: Debt can be written off you know. It doesn't have to be inflated away.
Funny comment.
But seriously, does anyone expect the Rothschild banksters to allow their farm animals, the American sheeple, to repudiate their debts via inflation?!
No way! They will, have, created an SDR mechanism whereby they will force debtors to pay them in the currency/fiat of their, the banksters', choice.
And yes the contract says "dollars," but that will lead to the sheeple becoming more familiar with what an Ashkenazi owned government and court system really means.
"Many ask where the Nazis came from. Few ask where the anti-Semitism that helped propel them into power came from."
So the level of the S&P, at all time highs in spite of flat revenues...that does not count as 'inflation?'
The very act of money creation, in excess of real GDP expansion, guarantees higher prices somewhere in the economy.
What surprises me is how folks don't see gold as being cheap. I guess it is years of separation of gold from the day to day American reality that has just made them forget that gold is still the basis of the monetary system.
This last 43 years of irredeemable currency has hidden this fact.
Still, the central banks of the world know what's what. The ECB sit quietly on 10,800 tons in their system. Small countries add to their hoard and even the USA, the country with the most to lose should the world turn again, en masse, to gold as THE store of value has not seen fit to openly dump it's 8100 tons.
When I consider these facts the only reason I can see is that people just don't put in the effort to connect dots. I believe dot connecting will prove to be the very best hobby of all time.
"....and even the USA, the country with the most to lose should the world turn again, en masse, to gold as THE store of value has not seen fit to openly dump it's 8100 tons."
That's because they privately dumped the 8,100 tons of Gold.
There is absoulutely no reason what-so-ever for me to "believe' there is 8,100 tons of Gold sitting somewhere with USA stamped on it. However I suspect there is a whole lot of OPG (Other People's Gold) sitting out there with the USA stamped on it.
Maybe that is why Germany was told to get lost when it asked for its Gold back.
According to historical standards gold and silver are in a gigantic bubble. Ever look at a chart buddy? The stuff is abou 3 times as high as its historical mean and is dropping like the bubble it was. But you're probably right by the gold dip. How is gold the basis of the money system? I do not own one single piece of gold.
Now if you want a current bubble look at oil. Since 1999 without stopping. When does it stop? When we run out or China takes a dump. I am betting the latter happens first.
"I do not own one single piece of gold."
It seems you should be the leader of the world. You are apparently smarter than all of the sovereign nations hoarding and stockpiling that stupid metal.
Gold is a hedge against inflation.
Inflation is an increase in the money supply.
An increase in the money supply makes demand go up.
An increase in demand makes prices go up.
An increase in prices is what people call the value of the dollar going down.
Now,
You can't inflate the money supply any higher once interest rates are near zero.
Without outright printing, that is. (Which they didn't do and won't do.)
That starts the deflation clock.
Gold is not a hedge against deflation.
(I'm not telling anyone what to do. I love gold, but I sold at the top when it was time. Following what nations are doing is not a good strategy. Good luck, and I mean that.)
"You can't inflate the money supply any higher once interest rates are near zero.
Without outright printing, that is. (Which they didn't do and won't do.)"
BULLSHIT.
In a debt based fiat currency system the currency is effectively increased every time money is loaned into existence within the commercial banking system. When the FED generated excess reserves against defaulted useless mortgages and commercial trash to the tune of nearly $4T it damned well 'printed' 'money'.
Central Banks are NOT supposed to just be able to go and buy up real assets -however valuable or impaired- simply because the bureaucrats running the CB feel like it. Monetary systems are supposed to allocate real goods and services based on productivity and retained earnings, not on speculation and best access to the bank managers.
Excess reserves are deposits -deposits with interest accrual. The FED has either printed credit/money or it is paying interest on phantom 'deposits' and is actually mearly skimming the U.S. Treasury of it's seiniorage vig -or BOTH.
You CANNOT have it both ways: either credit is money and the FED balance sheet whows creation of triollions of dollars against defaulted collateral -NAKED Print- or credit is NOT money and Congress and The FED is running a far more insidious and despicable scam with the U.S. Treasury Complex.
I will ask again:
ARE TREASURIES DEBT?
WHO ACTUALLY BELIEVES THAT THE FEDERAL DEBT WILL BE PAID OFF AT SOME POINT?
IF IT IS NOT MEANT TO BE PAID OFF IS IT REALLY DEBT OR IS IT COMETHING ELSE THAT HAS NOT BEEN PROPERLY IDENTIFIED?
I said increase in the money supply, not just currency. Credit spends like money, so an increase in credit = an increase in the money supply. No printing required. The past 40 years was the hyperinflation everyone is still waiting for.
We're in major deflation now. That money that was conjured out of nowhere is going back from whence it came faster than the Fed can QE (or whatever else you want to call it). It's disappearing faster than the next wave of borrowers can borrow.
Poof.
Gold will not be money again for centuries. Maybe even millennia. It is too scarce. Even during Bretton-Woods, gold was not money. It was a tether for money.
Could a tether like that be reinstated? Yes. Probably. I don't know if it will though. Purely electronic currency seems like the next movement (and no, I'm not talking about Bitcoin). I mean a state-sanctioned electronic currency. It will give states and banks enormous power over the citizenry. However, it might actually lead to wholesale unrest and black markets.
Gold/Silver is a commodity and has its own unique properties. I would not rule out gold and silver, but their performance still is dependent on global events.
Edit: Interestingly, I also agree that inflation likely found its way into the financial markets. Which suggests to me that stocks have still got some way to go. Gold/Silver probably have some way to drop (unfortunate, but true.)
What we have seen is stock markets driven by a lack of restraint in lending. Corporate stock buybacks on margin, which as ZH has pointed out has allowed companies with weak balance sheets to outperform their competitors with strong balance sheets. The next phase will be those companies with strong balance sheets effectively becoming the "only game in town" in phase 2 of the market rally. This might be driven by the fact that every other country in the developed world is going to hell right on schedule.
stock market also goes up because of people saving for retirement. Peeps with 401ks find it enormously easier to index their money than to buy RE or phyz. Helps keep price inflation down by taking some money out of the market and takes stocks to the moon.
The perfect storm.
Anyone with a sufficiently literate comprehension of well established and abundantly documented historical data realizes that this system is unsustainable. The collapse will come in such an immediate shock that we shall be stunned as from a blow from nowhere.
But then at some point they will concoct an explanation; something between the official 'story' and what the citizens collectively agree to accept as 'normal'.
Eventually all compromises with truth will whither, die, and provoke awful (at the time for those caught in their flow) consequences.
We exist within the framework of a profoundly consequential period of time. In the midst of post globalization?
Maybe. We can hope so. Clearly (to some) an epic series of events unfolds around us as the system we were born into evolves and alters around us.
Seems to me that they are losing? I mean, obviously they do seem to have the upper hand but if we only look around, the opposition to excessive 'government' is feral and vibrant.
Another tightwad lawyer type along with the rest of the board. The sentiment and themes of this entire posting board is the same thing. Cry about the fed, invest in prescious metals and spew negative sentiment. The whole spirit of America was to take risks that is the American dream not a chicken in every pot shit. It's called free will. You want a cherrios and a blankie?
You will become much more disillusioned before you learn that true Capitalist will not be slaves. Gird up.
Take risk? Why bother? Nominal rates are 0%, real rates are negative. Do you understand the concept of time value of money??
Yes I understand it totally well. And for centuries now $1 dollar invested turns into thousands over the course of the years. It's just how it works. The market always goes up. You sound like another lawyer Obama
Yes, this explains exactly why no government or monetary system has managed to avoid collapse. "The market always goes up." What a crock of shit. I don't know what rock you crawled out from under, but you need to go find a nice liberal fascist forum to spew your BS!!! ZH will eat you alive.
Freedom is all the posters on this board seek.
That includes the freedom to earn their income in an honest fashion, clear of the chicaneries of the state/mega-corporations.
That's it.
I remember as a young college student when Burker King (the American one), opened in our college town, you could get Whoppers for 99 cents.
Try getting a 99 cent Whopper now. They are nowwhere to be found.
The 2 lb shredded hashbrown bag is still 2 bucks, but it's now 1 lb 10 oz.
I highly doubt the CPI people actually keep track of package size, which is why we don't see the number. They use a "basket of goods", but they don't weigh what's in the basket.
Fucking pathetic liars and bought and paid for whores.
Don't worry about inflation. Authorities are offering analytic solutions to fix it. So, all good /wink:
"This paper studies optimal monetary policy from the timeless perspective in a general model of state-dependent pricing. Firms are modeled as monopolistic competitors subject to idiosyncratic menu cost shocks. We find that, under certain conditions, a policy of zero inflation is optimal both in the long run and in response to aggregate shocks. Key to this finding is an “envelope” property: at zero inflation, a marginal increase in the rate of inflation has no effect on firms’ profits and hence on their probability of repricing. We offer an analytic solution that does not require local approximation or efficiency of the steady state. Under more general conditions, we show numerically that the optimal commitment policy remains very close to strict inflation targeting."
http://www.ijcb.org/journal/ijcb14q3a2.pdf
Pretty funny - and quickly scrolling through this fabulous piece of mathematical masterbation, this sentance stood out:
"At this point, we assume away government spending, G t = 0, such that Y t = C t ."
Regardless of whether this assumtion should be made at all, goes to infinity, or to zed - I heard the sound of a Ferrari opened wide on a straight away suddenly being thrown in reverse.
Not even ACME's "PhD thesis recovery kit" can fix this mess.
"At this point, we assume away government spending"
When the math finally starts to conclude that Government itself is the problem, the part of the economy that unbalances it due to a lack of functioning consumer feedback mechanisms; then it will be time to hoist the black flags.
Inflation is here, oh I'll tell you, My cost per puss has almost quadrupled over the past 12 months. .... Might be time for replacement of quality for quantity. Deflation!
Inflation is here, oh I'll tell you, My cost per puss has almost quadrupled over the past 12 months. .... Might be time for replacement of quality for quantity. Deflation!
"Inflation may be dormant, but it is certainly not dead."
Wait until the unexpected deflation shows up. They will say they never saw it coming.
Krugman then uses a word coined by Stephen Colbert, truthiness, meaning something that sounds true that isn’t to describe “The Fed is printing money, printing money leads to inflation, and inflation is always a bad thing.” He writes that this “is a triply untrue statement, but it feels true to a lot of people.”
KrugmaN is chock full of truthiness, exponentially so. I don't so much as believe a word he says.
From ZH article on 2014/08/26: Recent economic theory and practice has been "one which has borrowed so extensively from the future to fund the present that there is no future left".
That is a big part of the answer to the "question" this article presents. Scumbag liars like Krugman refuse to admit the scam they and their predator-cronies have been running. They pretend not to understand why people DEEP, DEEP, DEEP in debt can't spend like people without debt.
These scumbag liars refuse to acknowledge the obvious, namely "all those people they convinced to get deep, deep, deep in debt the past few decades NOW have to take much of their income and send it back to the banksters and thus NOT have much money to spend into the real economy".
This understanding is reality 101. Only a COMPLETE moron or LIAR could possible ignore this simple, obvious, unavoidable fact.
And that's not all! These same scumbag liars support and implement endless scams to jerk up the prices of homes, which makes mortgage and rent payments suck up increasingly large portions of every paycheck of everyone who has purchased or rented since the early 1990s. And guess what? The only money people have to spend on "the economy" is what remains after making their inflated mortgage, rent, auto and education debt payments.
All these factors (and more) kill demand due to paucity of "spending money" once the banksters are fed. Oink, oink, oink... and the banksters still aren't happy. PIGS.
This is also the reason these sleazebags eventually must turn to government to continue spending, because no actual spending constraints apply to government... until the currency in question is widely rejected as a form of payment (which is the primary cause of hyperinflation).
honestann: "Scumbag liars like Krugman..."
Krugman is not a liar, nor is he a scumbag.
Krugman honestly believes in his thoeries. I think he is wrong, you think he is wrong, he probably is wrong but to call him a 'scumbag' and 'liar' denigrates the discussion, steals credibilty from your argument as well as making your prose seem tawdry.
Maybe you should comment on Ann Landers if you find things here so offensive.
Krugman knows full well he is a liar, a scumbag and a predator who spews propaganda to justify whatever the oligarchy wants to do. While you may not be able to comprehend human beings who are that corrupt, they are actually quite numerous in world capitals.
"These scumbag liars refuse to acknowledge the obvious, namely "all those people they convinced to get deep, deep, deep in debt the past few decades NOW have to take much of their income and send it back to the banksters and thus NOT have much money to spend into the real economy"."
There is a difference between debt and debt serfdom.
There is a difference between a bailout and a liquidation.
There is a differnce between debt that is designed to be paid back and Debt Camaflauged Perpetual Income Streams based upon instruments of enslavement emitted and traded as if and described as debt.
Debt can and will be defaulted. Debt camaflauged perpetual income streams are not defaulted no matter the broad economic consequence of perpetuation.
People who are provided too much debt correct the lenders by defaulting. The system clears.
People who are enslaved by Government sponsored schemes whereby the citizenry are securitized and sold as Debt Camaflauged Perpetual Income Streams are precluded from correcting the Government by defaulting.
The U.S. Federal 'Debt' is NOT designed to be paid off and is thus NOT debt.
Treasuries are PERPETUAL claims on Taxpayers.
'DEBT' TO BE REPAID IS NOT BEING SOLD: PEOPLE ARE.
IF Treasuries can neither be paid off or defaulted: then 'debt' is not being sold; People are being sold as revenue streams -as slaves.
The U.S. Treasury Complex = Oligarchy & serfdom.
WHAT MUST BE UNDERSTOOD IS THAT THERE ARE TOO MANY ASS-LICKERS IN THE USA WHO HAVE BOLIXED UP OUR ENTIRE COUNTRY AND YOU MAY AS WELL SAY THE ENTIRE WORLD, THE WHOLE BALL OF WAX AND SHEBANG! WHY? WHO VOTED FOR THE RICH A$$HOLES WHO ARE MAKING ALL OF OUR LIVES TOTALLY MISERABLE AND TURNING OUR SOCIETY INTO A GLOBAL PLANTATION? CERTAINLY NOT YOURS TRULY, AND IF I HAD ANY SAY I WOULD LINE THESE PATHETIC JERK OFF ARTISTS AGAINST THE WALL AND GUN THEM DOWN WITH AN AK47!!!
knucles, Wilford Brimley is not dead.
Yeah, and it was raisin nuts that he choked on!
Maybe he aint such a bad guy? Id take him out to a ball game or deep sea fishin. You know hang out and stuff. Kick stuff around and get to know the guy. Get in his head so to speak.
A tip from flyover country. Every year I save up enough money to go to the livestock auction at the county fair. This auction is sponsored by the local 4H clubs in the area.
This year was no different but the wife and I splurged and bought a steer, a lamb, and a hog. No growth hormones, no additives, and the meat is some of the best I've ever tasted. The steer tend to be grain and grass fed exclusively. My average costs work out to about $3 to $3.50 per pound for the beef after butchering locally.
You'll probably need a deep freeze or two, but it's worth it.
Now here is the kicker that everyone on ZH I hope can appreciate. Since the auction is for the 4H kids and the money goes to them, it's a charitable contribution! Write the amount off the Federal/State taxes. Keep the meat, throw a lot of barbecues, impress the friends while serving copious amounts of alcoholic beverages.
Not an omnivore? Re-donate the livestock, and double dip.
You forgot #FUIRS
Why someone hasn't climbed a clock tower and taken this piece of shit out is a mystery.
FUCK YOU KRUGMAN YOU CUNT!
Beetle: You are a rude, ignorant prick.
The only question of the dollar's end is whether it collapses and prices go supernova or first prices go supernova and the dollar collapses after.
An American, not US subject.
Goldlilocks for Predators. You prime the pump to get market asset inflation to support the derivatives that sit atop. Why should you care about inflation of necessities ? This inflation shall gladly be lied through the construct of "core inflation". This inflation should not exist in functioning markets given demand downturn, it exists because the distribution system of food and essentials is ripping. (Many developing countries have years of experience with this type of inflation foisted by their cronies and the outcome has been an undergound economy...a survival valve that US has no experience ).
Debt enslaves the preys. If they can be duped into even more debts for yield chasing, this is a bonus. There will be no shortage of the likes of Krugmann who are modern day enuchs.
All these economic theories are just belief systems not panaceas. They are taken off shelves to be re-packaged as paths to the traps of Predators.
There can be no general price stability when there is no price discovery. Price discovery has been muffled by high debt level and in turn is managed by the Predators.
Just need to see Predators and Death Systems for what they are !
I think in order to understand inflation in terms of the money supply, it isnecessary to understand that there is more than just a central bank policy that creates money. For years, banks have created money out of thin air through fractional reserve lending. This whole process is basically selling someone a piece of paper (debt) that an amount of money, usually on a payment plan of some sort. Markets have created money by selling people pieces of paper for money too -- and in many respects the paper is worth nothing, so it is really selling nothing for something.
It isn't necessarily a bad thing, but when many different people and institutions are selling nothing for something, it creates a lot of perceived wealth. the folks that do well under this type of scenario are the ones who monetize their paper -- short selling shares, for example -- and then take their money off the table, out of the system, and leave town, so to speak. The folks that packaged low- and non-performing mortgages into MBSs or CDOs did a great job of creating paper, ultimately sold by banks to the federal government for dollars, and then for USTs. The originators of the MBSs got their money and left town. Of course, the banks want their money too, so now they have to get the gummint to print money to make them whole. The gummint now owns a lot of residential property that they are trying to sell through homepath.com and the like. When the mortgage companies took their money, there was no inflation. When the feds print money to increase the money supply, there will be inflation if banks continue to lend in the same way (which they haven't). Since the velocity of money exists now only for necessity items like food, energy and housing, that will be the only place where inflation will occur for now.
The answer to the question of why such a low velocity of money in four words - "you didn't build that."
At the moment the death of the Dollar is only happening by a thousand cuts. The Pace is glacial. Has been for a long time (5 years, although some say since 1913, but I'm really talking about it in light of Lehmans,) but it is happening. That said the (much hoped for?) sudden collapse well, seems like we're having to wait for a black swan, say 6 sigma, event for that to happen? The cash hoarding that is going on suggests everyone knows the banks are bust, in effect it's "baked in."
There are also geopolitical things going on all the time from Fukushima to Ebola to Ukraine, each time there's a convenient excuse available to blame for sudden modest/temporary market spikes. The thing is we've had a few atomic energy plant disasters and recovered from them, we've had war, disease and pestilence and recovered from them, these things are not black swan'ish enough.
The one thing I suspect people are perhaps not expecting is...for the bankers to pull the plug on their own party. The collapse will come from inside. (e.g perhaps Goldmans will try to fuck JPM over and they'll retaliate etc.)
Either that or, America will sloooowly turn into Detroit, so slowly the people will hardly notice.
Inflation-Deflation its the bankers game,Left right same old story they win because they pay us with nothing and earn interest off our energy as slaves.
The real reason that pine nuts, walnuts and pistachios, but NOT peanuts have risen is simple. The Chinese like them. The Chinese have received a lot of US$. Now those exported US$ are being used to compete with an inelastic nut supply.
I suspect this is just the beginning of an upward spiral that will affect: 1) Products the Chinese want; and 2) Products that inelastic.
Walnuts are inelastic. The use lots of water and take years to produce. Peanuts are elastic. A rapid rise could double next years crop. Pine nuts are extremely inelastic. Try using pecans when you make your Pesto.
Cashew prices have been increasingly ugly for years. I buy mine at Sams in the big can. I also hold onto reciepts from Sams for benchmarking. Cashew prices are up around 60% in the last 3 years. The Chinese are also increasingly fond of pecans due to someone substituting them for Walnuts a few years ago. Pecan prices are down from 2 years ago mainly due to increases in supply. English Walnuts have gone nutso in prices close to doubling and now higher than Pecan prices.... Function of demand but also the drought in California where they are the primary producers. Peanut prices have come down from two years ago when a drought in the SE jammed them higher. Peanut Butter is cheaper than two years ago if you shop the sales. I think this years crop should limit upside in prices unless said Chinese go big on importing it. Europe remains a small market for peanuts/butter.
We use copius amounts of nuts but can say we have cut back on Cashews and English walnuts due to prices. Peanuts Pecans and Almonds are substituted instead. We have a grove of 15 mature Pecans that have not been big producers last 3 years due to drought. Small crop again this year that I wiill compete aggressively with the squirrels for...Two English walnuts I planted 5 years ago had nuts on them this year for the first time....effing squirrels have already stole them. Almonds have been more of a struggle lost my best of three trees to the drought. Other two slow go. We have lived on these 11 acres for 24 years now and try and produce a reasonable share of our non protien needs. Can say its really more of a struggle than I expected. The weather robs you of yield due to lack of rain and the critters rob you at time of maturity. 10 years of trying to produce grapes this year yeilded a fantastic crop which we shared and I got so motivated by the huge clumps I was watching Utubes on propagating them from cuttings ready to expand next spring......went out the next morning and all the grapes were gone.....Wife had gone out the night before to shut down the pool and mentioned she had seen possums not far away..... Takes the motivation down a notch or two
Savings up 50%? Maybe for the top 10%ers, but certainly NOT the middle class, which is getting squeezed and raped forward + backwards in all possible and impossible orifices. The middle class is now just a shadow of what they once were. What TPTB are pulling of will end in a global humanitarian catastrophe that will test the social fabric of most societies on this plant. Coming to a theatre nearby SOON. Best to all. x
consumers are hoarding money: Just go into any McDonalds, Burger King,Shell, Mobile, or Wendy's and watch the people pay with cash. 5 years ago everyone paid with credit cards. No one is hording cash because the working poor have high levels of debt and are forced to use cash.
I contend the primary reason that inflation has not raised its ugly head or become a major economic issue is because we are pouring such a large percentage of wealth into intangible products or goods. If faith drops in these intangible "promises" and money suddenly flows into tangible goods seeking a safe haven inflation will soar. Like many of those who study the economy I worry about the massive debt being accumulated by governments and the rate that central banks have expanded the money supply.
The timetable on which economic events unfold is often quite uneven and this supports the possibility of an inflation scenario. A key issue being one of timing. If the price of gas jumps to $8 a gallon overnight do you buy gas and not make your car payment or stop driving the twenty miles to work? Answer, it could be months before your car is repossessed so you buy gas.
It is important to remember that debts can go unpaid and promises be left unfilled. If this happens where does it leave us? Chaos and major disruption would result from such a scenario. As we have seen from the economic crisis of 2008 and following many other unsettling developments legal actions can continue to drag on for years. More in the article below.
http://brucewilds.blogspot.com/2014/04/inflation-seed-of-economic-chaos...
What I don't understand - maybe someone can fill me in, seeriously -= why is it always individuals/househlds not spending enough that's bad for Krugman - not the large corporations sitting on cash or banks not lending it out.
Yes, I know we have a consumption-based economy, but this can't possible mean people should be spending all the time, for shit they don't need, unless you place no value at all in household savings.
It's almost as if Krugman's conceptualization of a "good" economy is how little cash savings people have and how in debt they are to banks. But surely a PhD in economics must understand that you can't have debt growing exponentially, and that the more in savings people have the better off each household is economically.
What's going on here - is Krugman's measure of the economy really so inventment bank-centric, really??