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View Full Version : Inflation and Debt. Why the fed is powerless




CzargwaR
11-15-2011, 10:42 PM
http://www.nationalaffairs.com/publications/detail/inflation-and-debt

Travlyr
11-15-2011, 10:57 PM
Here is more BS from the Chicago School,

THE IMPOTENT CENTRAL BANK

The Fed is noticeably absent from this terrifying scenario. We have come to think that central banks control inflation. In fact, the Fed's ability to control inflation is limited — and the bank would be especially impotent in the event of fiscal or "run on the dollar" inflation.
True ^^^ IF, and ONLY IF, inflation is redefined. Inflation is the increase in the money supply = "Quantitative Easing." <--- Already done and likely to accelerate.


John H. Cochrane is the AQR Capital Management Distinguished Service Professor of Finance at the University of Chicago Booth School of Business, a research associate of the National Bureau of Economic Research, and an adjunct scholar at the Cato Institute.


John D. Rockefeller, gave $80 million to the University of Chicago under William Rainey Harper, turning a small Baptist college into a world-class institution by 1900.


And Milton Friedman (July 31, 1912 – November 16, 2006) was an American economist, statistician, academic, and author who taught at the University of Chicago for more than three decades.

Zippyjuan
11-15-2011, 11:57 PM
Not really a re- definition of the word. You had no troubles figuring which sort of inflation they were talking about. Rising prices is the most common usage for the term.

From Investopedia:


Inflation

What Does Inflation Mean?
The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.


Read more: http://www.investopedia.com/terms/i/inflation.asp#ixzz1dqR0APez

Dictionary.com:


in·fla·tion
   [in-fley-shuhn] Show IPA

noun
1.
Economics . a persistent, substantial rise in the general level of prices related to an increase in the volume of money and resulting in the loss of value of currency ( opposed to deflation).

2.
the act of inflating.

3.
the state of being inflated.
http://dictionary.reference.com/browse/inflation


World English Dictionary



inflation (ɪnˈfleɪʃən) — n
1. the act of inflating or state of being inflated

2. economics Compare deflation a progressive increase in the general level of prices brought about by an expansion in demand or the money supply ( demand-pull inflation ) or by autonomous increases in costs ( cost-push inflation )

3. informal the rate of increase of prices



Word Origin & History

inflation

mid-14c., from L. inflationem (nom. inflatio), noun of action from inflare "blow into, puff up," from in- "into" + flare "to blow" (see blow (v.1)). Monetary sense of "enlargement of prices" (originally by an increase in the amount of money in circulation) first recorded 1838 in Amer.Eng

I kinda liked this one:

Medical Dictionary

inflation in·fla·tion (ĭn-flā'shən)
n.

Distention with a fluid or gas.


The act of distending an organ or body part with a fluid or gas.

Steven Douglas
11-16-2011, 02:57 AM
I like thinking about things like this, because I am always looking for better ways to illustrate economic concepts in ways that would slam home instantly and register clearly with lay people in a way that is also technically accurate.

It's semantically interesting because of the metaphor involved. The currency supply is literally being diluted - like water used to refill a half empty whiskey bottle, but sold for the same amount (for a time, until people get wise). If our currency was an exotic gas (i.e., Ethylene=Gold), and the money supply was a balloon half-filled with that gas, filling it the rest of the way with an inert gas like N2, or just air (fiat currency), it would conflate the two gases in a way that literally inflates the entire freshly diluted money supply. A doubling of the quantity, but a halving of the value.

Inflation as a metaphor works equally well for the effects. If, instead of price tags with numbers, all prices were indicated by tiny balloons inflated to various sizes, inflating the currency would cause a corresponding inflation of all price tag balloons as a delayed response.

The author of the article conflated cause and effect as if they were one in the same, the way I think most people do, the reason for which seems clear enough. The act of inflating the currency happens unseen, while the effects of inflation are always felt afterward, seen as rising (inflating) prices. So the cause is referred to in terms of the effect.

Conflation of cause and effect is an interested reflection of what actually occurs with the fiat currency money supply, which is literally a conflation of two similar but characteristically different items (existing money and newly created money), which are mixed together and referred to as if they were identical, until the real differences are between them are indistinguishable.

What happens to any other commodity that increases in supply is pure inflation, because you are increasing the supply (and thus reducing the scarcity) of identical items. If a counterfeit of any of these items is introduced (pirated software, fake watches, fake gold) these items conflate that supply.


EDIT: What I find insidious comes from this line:

"After all, inflation declined during the financial crisis and subsequent recession, and remains low by post-war standards."

Any time the government or anyone else refers to a baseline of activity as a "zero" reference point, to obfuscate and obscure what is actually happening with the raw numbers. For example, 2-5% inflation might be considered "normal" (acceptable, gonna happen regardless), so we call that zero, any deviation from which is referenced in terms of inflation, or even "deflation".

That is how heroin addicts feel the effects of heroin once addicted. There really is a baseline, as a certain quantity of heroin must be taken in perpetually just to feel normal, any amount below which feels terrible, or above which produces an actual high. And that baseline, the amount needed just to feel normal, always increases.

Seraphim
11-16-2011, 06:59 AM
The Fed is powerless to create (or even help) a healthy economy over the long term. The Fed DOES have the power to siphon wealth away from the people (the people forced to use their currency product, who's wage is denominated in this product).