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Thread: CNBC: "Why Printing Trillions of Dollars May Not Cause Inflation"

  1. #1

    Thumbs down CNBC: "Why Printing Trillions of Dollars May Not Cause Inflation"

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  3. #2
    One thing the video gets right. Monetary policy is driven by expectations. If people expect inflation they will spend now and it will be a self fulfilling prophecy. The Fed could create inflation by just credibly saying they will do WHATEVER it takes to get 2% inflation.

    That is perfectly congruent with the Milton Friedman view that inflation is forever and always a monetary phenomenon. Milton Friedman said when interest rates are ultra low you can print a lot of money and inflation won't follow a strict quantity theory of money. Amazing how ignorant all of these economists are of what Friedman actually believed.

    <ost of the proceeds will end up in commercial banks, adding to their reserves and enabling them to expand their liabilities by loans and open market purchases. But whether they do so or not, the money supply will increase.

    There is no limit to the extent to which the Bank of Japan can increase the money supply if it wishes to do so.
    https://www.hoover.org/research/reviving-japan

  4. #3
    They say it's a new, complex system of banking, so the old rules don't apply anymore. Ok. Sure. Maybe gravity will disappear too. Sounds like the old "end of history" quote the neocons loved.

    And as usual, no mention of the cost of labor playing a role.

    Monetary inflation never flows straight to across the board price inflation. It's not a pipe. It's a complex terrain, like snow falling on a mountain top. It may stay frozen at the top for a while. There will be lakes and damns before it reaches the ocean.

    Where is all of this money going? The same place it has been going since Obama was doing it. Right to the top 1%. It's going straight into the stock market. But enough of it is filtering down to result in uncomfortable price inflation for the masses. Increases food and housing prices, for example.
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  5. #4
    Not only is today's money printing much larger in scale than anything we've ever seen, it's more directed toward the masses.

    The last decade was all about hot money causing asset price inflation; this decade, we're going to see consumer price inflation.
    "Democracy is the theory that the common people know what they want, and deserve to get it good and hard."

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  6. #5
    Quote Originally Posted by r3volution 3.0 View Post
    Not only is today's money printing much larger in scale than anything we've ever seen, it's more directed toward the masses.

    The last decade was all about hot money causing asset price inflation; this decade, we're going to see consumer price inflation.
    I think it's a fool's game when people try to micro analyze why printing will or will not eventually cause consumer prices to rise. There's too many variables. I just look at the basic math. The general price level HAS to rise when you print money in proportion to the amount that was printed. It's an inescapable fact. It may take time and there are other factors but printing money causes prices to rise more than they otherwise would've, period.

  7. #6
    Quote Originally Posted by Madison320 View Post
    I think it's a fool's game when people try to micro analyze why printing will or will not eventually cause consumer prices to rise. There's too many variables. I just look at the basic math. The general price level HAS to rise when you print money in proportion to the amount that was printed. It's an inescapable fact. It may take time and there are other factors but printing money causes prices to rise more than they otherwise would've, period.
    It is important how the money's spent, though.

    If it never leaves Wall Street, it won't cause as much price inflation, in the ordinary sense (i.e. consumer goods/services), as you'd think.

    That's pretty much what happened last time; this time is already quite different.

    E.G. Take a look at the data on the Fed balance sheet versus outstanding corporate securities and loans.

    Last time, the former rose even as the latter fell.

    This time, they both surged.

    The money's getting "out there" in a way it wasn't a decade ago.
    "Democracy is the theory that the common people know what they want, and deserve to get it good and hard."

    -H. L. Mencken

  8. #7
    Quote Originally Posted by Krugminator2 View Post
    One thing the video gets right. Monetary policy is driven by expectations. If people expect inflation they will spend now and it will be a self fulfilling prophecy. The Fed could create inflation by just credibly saying they will do WHATEVER it takes to get 2% inflation.

    That is perfectly congruent with the Milton Friedman view that inflation is forever and always a monetary phenomenon. Milton Friedman said when interest rates are ultra low you can print a lot of money and inflation won't follow a strict quantity theory of money. Amazing how ignorant all of these economists are of what Friedman actually believed.

    https://www.hoover.org/research/reviving-japan
    Any increase in the money supply (i.e. the real, effective money supply, e.g. excluding amounts parked impotently in excess reserves at the Fed) will cause some prices to rise, at least relative what they otherwise would have been, regardless of expectations. Likewise, there can't be a lasting price inflation based on expectations alone; i.e. you can't "draw demand forward" forever (cash balances run out eventually, absent an increase in the money supply).

    This isn't to say that inflation expectations are irrelevant, they certainly can have an important short-term effect, and they're a good signal for investors, but it seems to me that the focus on psychology is part and parcel of the myth that central banks have been trying and failing to create inflation (which in turn is an expression of the mythical deflation monster). The reality is that the central banks aren't trying to create inflation, at least not consumer price inflation. They're trying to finance states and politically connected businesses; that is why they exist. The very last thing they want is consumer price inflation. The ideal situation for the central banks would be to print infinite amounts of money with no consequences. But, since they aren't retarded, they know that this is impossible. When the central banks start talking about accepting or encouraging higher consumer price inflation, that's them rationalizing the undesirable (from their perspective) consequences of pursuing their true mandate. And, yes, I know that the models they use may suggest that higher inflation is positively good for the economy, but those aren't just wrong, they're "superstructure," as Marx would say; the real decision-makers, IMO, who may not even be at the central banks (they may be legislators in important sub-committees, for instance) aren't following the models, they're following the political imperative to keep the vote-buying schemes financed.
    Last edited by r3volution 3.0; 08-05-2020 at 06:14 PM.
    "Democracy is the theory that the common people know what they want, and deserve to get it good and hard."

    -H. L. Mencken

  9. #8
    Quote Originally Posted by r3volution 3.0 View Post
    If it never leaves Wall Street, it won't cause as much price inflation, in the ordinary sense (i.e. consumer goods/services), as you'd think.
    I think this is impossible, given enough time.

    That being said I agree that's one reason why we didn't get much of a rise in the cpi.



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  11. #9
    Quote Originally Posted by Brian4Liberty View Post
    They say it's a new, complex system of banking, so the old rules don't apply anymore. Ok. Sure. Maybe gravity will disappear too. Sounds like the old "end of history" quote the neocons loved.

    And as usual, no mention of the cost of labor playing a role.

    Monetary inflation never flows straight to across the board price inflation. It's not a pipe. It's a complex terrain, like snow falling on a mountain top. It may stay frozen at the top for a while. There will be lakes and damns before it reaches the ocean.

    Where is all of this money going? The same place it has been going since Obama was doing it. Right to the top 1%. It's going straight into the stock market. But enough of it is filtering down to result in uncomfortable price inflation for the masses. Increases food and housing prices, for example.
    Looking at the price of gold and silver, it seems others are seeing it that way too.

  12. #10
    Quote Originally Posted by Madison320 View Post
    I think this is impossible, given enough time.

    That being said I agree that's one reason why we didn't get much of a rise in the cpi.
    The underlined is true; ultimately that money gets spent (because no one buys securities for fun, with no intention of every selling them).

    But, for the last decade, there's not been much selling; it's mostly been STAWK chimps chasing larger returns.

    So, I suppose the way to think about it is this; not only will the coming stagflation encompass the late printing, but also the last printing.

    Hello $9 gas.

    IOW, inflation will be totally irrelevant until it becomes important and then totally out of control,
    "Democracy is the theory that the common people know what they want, and deserve to get it good and hard."

    -H. L. Mencken



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