Termyn8or
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Joined: 11/12/2005
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Now, this shows as responding to the OP, but it is not necessarily.
My assessment might differ from that of the "experts". Keynes was an "expert".
This is not an easy subject to be sure. We may discuss what the mention of an increase in the money supply does, and it is a valid point. But my assertion, which will sound flippant, is that the money supply is the only true cause of what is termed truly as "inflation"
Take any domestically produced commodity. Prices change, and not inveresly with the number of dollars in circulation. There are literally too many factors to include to come to a conclusion. Money, like stocks etc., any instrument of debt, which they all are no matter what anyone says, are worth what people think they are worth. So what is it that influences this ?
Supply versus demand is a huge factor even when the money supply is factored in. It dwarfs money supply by at least an order of magnitude in comparison. This is mainly because the money supply is controlled, ad hoc to keep currency value as well as "inflatuion" relatively stable. Think of what would happen if the fed absolutely refused to increase the money supply. Well there is a thing called population growth, and under such a circumstance, there would be "deflation". But would there really ? Look at the currencies of the world in compare. Countries have lopped zeros off at the end to simply make money managable.
In an isolationist economy, things are alot easier to figure out. But we are not there. For example between WW1 and WW2 Germany experienced such a devaluation of their currency that it was unmanagable. Production didn't stop or slow much, currency was not removed from circultion. It was foreign expenditures due to war reparations mainly. Note that Hitler didn't cause it, but he certainly took advantage of it.
So just for example, let's say the US is self sufficient and there is no trade whatsoever internationally. Let's assume the money supply and the population remains constant. No exchange rates, nothing of the sort. Remember this is an example, a hypothetical situation. It is clear that the value of the currency would be much more predictable if not more stable.
So then what is the main indicator, or setpoint ? Years ago when property values were on a slow but steady increase I assumed that land would be a good indicator, but later I realized that this does not tell the whole story. Even without improvements like sewers and city services it is not entirely true. Granted, improvements have a substantial impact on the "value" of land, but even with every other value in stasis, things happen. Two factors that come to mind are climate and discovery.
So I will concede that it is impossible to completely isolate any given factor, but I think it is important to give each factor the proper weight. This is, of course, where it gets tricky. Sticking with the land now, and allowing other factors, other important factors come into the mix. The ever expanding population is one, and improvement is another. Now let's bring in the money supply.
This is where the problem started for real estate. With an ample supply of money, via credit actually, property rose in price. This is in part due to consumerism, the innate desire of the huiman animal to have a better nest. The properties sold. That fueled even more price increases which is the essence of the "bubble". These properties did not have major improvments, in fact they depreciated because almost everything does. And people will buy, because they want. This is the consumerism factor. They had to have the ivory tower, not thinking of the total cost. All they cared about was the monthly payment, and this is a folly of the nth degree. The last aquisition of property in which I was personally involved, cost about 35% of our level of qualification. That is why I am not renting now.
The property nearly quadrupled in "value" during the growth of the bubble, and now that the bubble has burst it is only worth twice the original dollar amount. But has it's value really changed ? The improvements were already extant. Not much has changed but for some remodeling. The square footage and location have not changed significantly, and that is partly due to my actions. Neighborhood protection keeps this from becoming a slum, and the lack of blatant improvements have kept the taxes down.
Compare this to North Royalton, Ohio. Neighboring Strongsville enjoyed brisk home sales, while the North Royaltonese are stuck with their ivory towers. The reason ? Property taxes. Very few people in this state will buy in North Royalton because of the tax rate. There is another factor.
With any equation, to solve you simplify and then SMAD. In this case simplification is a complex process. An axiom for sure, but one has to start somewhere. The problem with any equation is how to properly assign the weight to each variable, and to do so these variable must be isolated. Even the appointment of a new school superintendent or the election of a new sherriff can have an effect.
Outside factors, such as a shopping mall or highway can have a profound effect, and those factors are not controllable locally. Why ? It's the nature of the game, the decision of location for a shopping mall is not totally in local hands usually. The federal highway system is even less influencable by the locals. The level of impact then depends on geography for the most part. The closer you get, the further you can fall.
And this is only dealing with real estate. Just this one factor of the bigger equation is not easily analysed today. If the "inflation" index could be calculated precisely it would give the cray a migraine. Then that's only if it is programmed properly.
So do we give up ? I say no, I say we insulate, as well as possible, those factors over which we have no control. First of all, anyone who doesn't believe that we are headed for a crash [in currency value internationally] is, in my opinion, whistling in the dark. How long this can be forestalled is not easily estimable because it depends on influences over which we have no control.
And why is such an external effect so profound ? The answer is simple really, because we import so much of our basic needs. Sure we have exports, but they are not basic necessities for the most part. They are not mass market. If you dispute this, reference for example how many US made parts are incoroprated into foreign cars built exclusively for foreign markets. Bosch and Hitachi simply are not here. Of course there are esoteric performance products made here, but they mainly go to the domestic market. Have you recently bought a a TV, toaster, refrigerator, vehicle, clothing, or anything else that was totally domestically produced ?
I am not talking about Boeings or bombs, I am talking about basic things which we consider necessities. Cars made in the US frequently have fuel injectors by Bosch. Do you think German cars made exclusively made for the German market have any parts made in the US ? Do the Japanese and Chines buy US built TV sets ? Actually Anama was one of the last holdouts, they tried. They really tried to stay domestic, and I think are commendable for that, but market forces drove most of their production out. What were the factors ? Regulations and labor cost.
So now we can fix all these negative factors in the equation in one fell swoop. How many times have you heard US economists say that the "devaluation" of the USD would be good for the economy ? More than once I bet over the years. The stated reason was that it would make imports less attractive pricewise, and have the opposite effect on exports. Basically that idea is sound, if we have mass market exports. Name one.
Now of course there is another choice. It's been said by people who have an oversimplistic understanding of the factors, but that does not inherently make it untrue. What are our mass market exports ? Well wheat and grains come to mind. Those "infantiles" stated right out "Well if a barrel of oil costs that much, a bushel of wheat costs this much".
Of course that is over simplistic, but the basis is not. We let our grain rot in silos and they can burn their oil in their lakes and streams. Oops, they have no lakes and streams, they can't even grow a cactus. Who is on top now ? Burn your oil and starve to death, go right ahead. Less of you for us to bomb. That would save a few bucks as well.
Why is the yuan pegged to the dollar (or was) ? Becuse it was in China's best interest to do so at the time. We can't stop them from doing it, though our "leaders" have tried. Things may have changed, maybe that's not how it is now, but it was and it had a profound effect on our economy. The effect remains with us. Why ?
Because our "leaders" are actually spineless traitors. They have been for quite some time. I like some of the things Nixon did, but opening the door to Chinese trade is not one of them. All of these things have an effect, and with the unpredictablity involved we are painted into a corner, vulnerable, and at the mercy of foreign influence. So what would be the proper response to this, which I consider an untenable situation ?
Simple. Take the good with the bad. In a fight [and the money game is a fight] if you are down on the ground, and use one hand to start strangling your opponent rather than guarding yourself you might win. You might get hit, but if you stay on the defensive, afraid to get hit, you will lose. Same precept, different science.
If we dealt form a positon of relative strength concerning the economy like we do in military force, things would be much different. But our "leaders" are hopelessly addicted to money. Any lobbyists money is good.
Though it is not the most major issue, take the case of AIPAC. We send that country billions every year. Perhaps it is for their gas bill, but we have no control over whether they use it for the electric bill, a beanie baby, or crack cocaine. Once it is in their hands, we have nothing to say about it. Note this money is never paid back nor expected to be. Pure and simple charity. What do they do with "their" money ? Fold some of it back to buy our politicians to keep the gravy train moving. Wouldn't you ?
There is alot more to it. Foreign aid is not the biggest piece of our pie, but everything goes that way. The government used our money to break ma bell, now look what has happened. The monpoly has grown bigger and stronger. They used our money to regulate food and drugs, they regualte alright, whoever has the most money takes the prize. The prize of influence.
The only way to relly fix this mess is with a severe collapse. It would mute most of the negative influences right away. We would suffer yes, but how ? By learning to work for ourselves again instead of "earning" money out of thin air, from borrowing to meet our basic needs ?
I want to hear some argument on this. I want to know, FROM PEOPLE WHO HAVE KIDS, how this is a good thing to continue the status quo. I want to understand the mentality that I can't grasp, the sense of entitlement so many share, and just how good things are.
T
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RE: And Now For My Next Magic Trick… NO Inflation! A... - 
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