Obama

[Scott SoCal]

Originally Posted by Cobblestones

Inflation fear is a canard. The amount of money is deflating due to the unwinding of massively leveraged positions. Without printing money (or T bonds), we would have a dreaded deflation at hand. You could actually print quite a bit more with very little impact on inflation pressure. Don't confuse rising gold prices with inflation. Gold is just another bubble which will eventually pop**. And don't confuse a weak dollar with inflation. All of those are different things.

**I hope you're not one of those Ron Paul, gold standard fanatics. Because that's so wrong on all counts. I've debated a couple of them once and it was excruciating. Not an experience I'd like to repeat.

Tell that to the Chinese. There are many economists and lay persons (me) that disagree with this position. I don't know what Ron Paul's position on gold is (don't care either). Historically gold prices run up for one reason and the speculation of gold will become rational when inflation fears subside (and not before).

[Cobblestones]

Originally Posted by Scott SoCal

Tell that to the Chinese. There are many economists and lay persons (me) that disagree with this position. I don't know what Ron Paul's position on gold is (don't care either). Historically gold prices run up for one reason and the speculation of gold will become rational when inflation fears subside (and not before).

You're right that lots of lay people disagree with my position, but economists? Not so much. I give you Nobel prize winning, and very outspoken Paul Krugman.

Gold is a commodity as any other. The current high is likely to a large degree a speculative bubble which could pop any time. As you correctly write yourself, it's likely based on inflation fear more than anything else.

Here is a chart with inflation data. It supports my view that once the highly leveraged positions began to unwind due to the financial crisis (summer 2008) it destroyed so much money that we entered a time of deflation. The best way to counteract deflation and recession is to increase the stimulus by factor 2 or 3 and thereby jump start the economy and job creation as well.

It's in the raw data. I don't know why most of the lay people (and sorry to say most politicians belong to that class) cannot see it.

[Scott SoCal]

Originally Posted by Cobblestones

You're right that lots of lay people disagree with my position, but economists? Not so much. I give you Nobel prize winning, and very outspoken Paul Krugman.

Gold is a commodity as any other. The current high is likely to a large degree a speculative bubble which could pop any time. As you correctly write yourself, it's likely based on inflation fear more than anything else.

Here is a chart with inflation data. It supports my view that once the highly leveraged positions began to unwind due to the financial crisis (summer 2008) it destroyed so much money that we entered a time of deflation. The best way to counteract deflation and recession is to increase the stimulus by factor 2 or 3 and thereby jump start the economy and job creation as well.

It's in the raw data. I don't know why most of the lay people (and sorry to say most politicians belong to that class) cannot see it.

Not sure how to respond. I'll start by taking your Paul Krugman and raise you a Milton Friedman just to even the Nobel Prize equasion.

What you mention above is Keynesian and who knows, maybe is correct. I just don't think so. And neither does Peter Schiff (I know, so what?) or William Niskanen, who wrote this recently;

http://www.cato.org/pubs/handbook/hb111/hb111-36.pdf

and Willem H. Buiter, who whote this piece;

http://blogs.ft.com/maverecon/2009/0...ulus/#more-395

"As regards the required massive transfer of resources from the public to the private sector in the US, it has long been recognised by those who look at long-term prospects for taxes and public spending in the US, that a combined permanent increase in the tax share/reduction in the share of public spending in GDP of around ten percentage points would be required to fund existing Medicare and Medicaid commitments (and to a lesser extent Social Security commitments). In the past decade the US has legislated for its citizens (though Medicare, Medicaid and Social Security retirement) a West European-style welfare state. Obama’s proposals for universal health care will complete this process. The US has done so with a general government public expenditure share in GDP that is about 10 percentage points below the West European average (in the mid-thirties for the US, in the mid-forties in for Western Europe. Evolving demographics and entitlement will drive US welfare state expenditure towards the West-European levels, in the absence of political decisions in the US to limit coverage and entitlements.
This resource shift from the private to the public sector would only manifest itself gradually however, and no doubt, there will be changes in (whittling down of) these commitments before their full impact is felt.
The US Federal government has taken on massive additional contingent liabilities through its bail out/underwriting of the US financial system (and possibly other bits of the US economic system that are too politically connected to fail). Together will the foreseeable increase in actual Federal government liabilities because of vastly increased future Federal deficits, this implies the need for a future private to public sector resource transfer that is most unlikely to be politically feasible without recourse to inflation. The only alternative is default on the Federal debt. There is little doubt, in my view, that the Federal authorities will choose the inflation and currency depreciation route over the default route."

And this;

http://fintrend.com/ftf/MIP.asp

CURRENT INFLATION FORECAST

"It looks like Annual deflation has turned the corner. It reached a low of -2.10% in July and was at -1.48% last month. It has dropped to -1.29% for September. If you look at the chart "turning the corner" looks exactly like what happened as the red "actual inflation" line made a 90 degree turn and began heading upwards.
It will take a few more months for the deflationary effects to work out of the system. But beginning November and December we should see inflation beginning to rear its ugly head once again.
At this point the MIP is projecting that a year from now we could once more be at 5% inflation just as we were a year ago.
But once the effects of the "stimulus" package kick in we will probably see massive inflation (perhaps even hyperinflation). Generally, it takes about 2 years for monetary stimulus to result in inflation, so we could begin seeing massive inflation just beyond the MIP's window."


There is rational reason for concern not only about possible inflation spikes but also the stability of the dollar on a go-forward basis. Some very bright people are turning to gold for predictible reasons.

BTW, gold set a new high again today for the very reasons (and more) listed above.

http://www.ft.com/cms/s/0/0eaa4a80-c...44feabdc0.html

[fatandfast]

CBS.com 60 minutes, Andy Rooney on health care. Obama points from an old white guy. If you live outside the US, watch and listen, it's pretty close to gospel.

[Cobblestones]

Your first link mentions inflation 7 times. Most of the times to discuss a newly proposed monetary policy. The one time they discuss inflation in itself, they get it completely wrong:

More important, it is much
less clear what will be the effects of the sharp reduction of interest rates
since July 2007, the several measures to avoid a collapse of the mortgage
market, and the substantial increase in inflation. The rapid increase in
consumer and producer prices in summer 2008 should have been ample
warning to the Fed not to be diverted from its primary mission.

As you know from the graph I provided, inflation turned to deflation around that time.

About your next link, I would like to comment on the bolded part (where it mentions inflation). I don't know why the author sees inflation as the only (or most likely) means of transfer of resources from private to public. Not since the 1970s this has been true for any of the Western European countries which are held up here as a model. We know that such a transfer (if necessary at all) is most effectively achieved via tax increases, which will have the least impact on the economy. Anyway, inflation discussed in this article is NOT seen as a consequence of the stimulus, it is discussed as a means to cover liabilities in the future (liabilities due to the bank bailout, NOT the stimulus, and potential future liabilities due to Medicare, Medicaid, Social Security, and possibly the new Health Insurance bill). As I said above, these things could be handled by tax increases. Willfully increasing inflation to address this would be a stupid thing to do, and I don't think anyone really considers it. In essence it's a straw man argument.

Your third link is a forecast. It forecasts inflation around 4% with an uncertainty of less than 1% already in December 2009. I seriously doubt that. But let's wait and see. It won't take long. I looked up their predictions/reality comparisons, and they have nothing more recent than 2006? I'm sorry, but these are very different times from 2006. I would really like to see how they did 2008 AND 2009 because if you didn't do well then, your models are not likely well adjusted for the present conditions. I'm not impressed.

Your final link is gold again. It has nothing to do with inflation. Yes, some commodities increase, some decrease. Gold is at the moment in a huge speculative bubble. If that's your standard, than everything looks expensive. Fortunately, the price of gold is practically irrelevant when calculating inflation.

Anyway, inflation fear is a canard. We could spend 2-3 times the stimulus money without much inflation pressure, thereby jump starting the economy and reducing unemployment. I don't know why the public, after happily spending much more money on two useless wars and useless tax reductions for the rich is now suddenly in fear of inflation. The war spending and tax decreases came on top of enormous credit expansion and inflation was up to 5-6%. Now, we have a huge reduction in credit, tax reduction for the rich are running out (hopefully) and maybe (although I'm not holding my breath), war expenditures could finally ramp down. There'd be nothing wrong with another stimulus. The only thing which does really drive inflation is the bank bailout, which I hated, but unfortunately, Wall Street is too well connected with both the Dems and the Repubs.

[Scott SoCal]

Originally Posted by Cobblestones

Your first link mentions inflation 7 times. Most of the times to discuss a newly proposed monetary policy. The one time they discuss inflation in itself, they get it completely wrong:



As you know from the graph I provided, inflation turned to deflation around that time.

About your next link, I would like to comment on the bolded part (where it mentions inflation). I don't know why the author sees inflation as the only (or most likely) means of transfer of resources from private to public. Not since the 1970s this has been true for any of the Western European countries which are held up here as a model. We know that such a transfer (if necessary at all) is most effectively achieved via tax increases, which will have the least impact on the economy. Anyway, inflation discussed in this article is NOT seen as a consequence of the stimulus, it is discussed as a means to cover liabilities in the future (liabilities due to the bank bailout, NOT the stimulus, and potential future liabilities due to Medicare, Medicaid, Social Security, and possibly the new Health Insurance bill). As I said above, these things could be handled by tax increases. Willfully increasing inflation to address this would be a stupid thing to do, and I don't think anyone really considers it. In essence it's a straw man argument.

Your third link is a forecast. It forecasts inflation around 4% with an uncertainty of less than 1% already in December 2009. I seriously doubt that. But let's wait and see. It won't take long. I looked up their predictions/reality comparisons, and they have nothing more recent than 2006? I'm sorry, but these are very different times from 2006. I would really like to see how they did 2008 AND 2009 because if you didn't do well then, your models are not likely well adjusted for the present conditions. I'm not impressed.

Your final link is gold again. It has nothing to do with inflation. Yes, some commodities increase, some decrease. Gold is at the moment in a huge speculative bubble. If that's your standard, than everything looks expensive. Fortunately, the price of gold is practically irrelevant when calculating inflation.

Anyway, inflation fear is a canard. We could spend 2-3 times the stimulus money without much inflation pressure, thereby jump starting the economy and reducing unemployment. I don't know why the public, after happily spending much more money on two useless wars and useless tax reductions for the rich is now suddenly in fear of inflation. The war spending and tax decreases came on top of enormous credit expansion and inflation was up to 5-6%. Now, we have a huge reduction in credit, tax reduction for the rich are running out (hopefully) and maybe (although I'm not holding my breath), war expenditures could finally ramp down. There'd be nothing wrong with another stimulus. The only thing which does really drive inflation is the bank bailout, which I hated, but unfortunately, Wall Street is too well connected with both the Dems and the Repubs.

Cobbles, I love you man but you are probably wrong on the inflation scenario, very wrong on spending another 2 trillion in "stimulus" with no effect on inflation (gotta pay the borrowed money back or declare war on our creditors) and completely wrong on this "tax reduction for the rich". I posted the actual tax revenue numbers from the IRS somewhere (i think in this thread). The "rich" pay a shitload more in taxes than the non-rich as measured by percentage of income and real dollars. Any tax cut or increase will effect "the rich" simply because they pay the vast majority of the taxes. Please don't quote Warren Buffet's comments on how his secretary pays more taxes than he does because if that is true he should be ashamed of himself and if it's not true then he should be ashamed of himeself. Either way a very poor example and certainly not typical.

I reckon we will not agree on this but I appreciate the joust without name calling. Encouraging, I'd say.

[scribe]

Well. The courageous health bill has passed the House and is on the move to the Senate.

It does not surprise me (but most certainly disgusts me) that conservatives who would spend billions of dollars bombing other countries, are crying about the expense of providing health care for Americans.

[Bala Verde]

Originally Posted by scribe

Well. The courageous health bill has passed the House and is on the move to the Senate.

It does not surprise me (but most certainly disgusts me) that conservatives who would spend billions of dollars bombing other countries, are crying about the expense of providing health care for Americans.

National security obviously trumps the health of the people that make up the nation!

[scribe]

Yes! Especially when your cohorts in defense contracting are funding your campaigns and lining your pockets!!

The horror that the peasants would want their tax dollars to work towards their personal well being.

[richwagmn]

Originally Posted by scribe

Yes! Especially when your cohorts in defense contracting are funding your campaigns and lining your pockets!!

The horror that the peasants would want their tax dollars to work towards their personal well being.

Remains to be seen what it looks like when the senate gets through with it. I'm not hopeful.