Originally posted by @wolfgang59Shares? Seems like you are talking about stocks. I thought you were talking about bank savings rates. You need to be specific about what you are talking about.
What do you mean by just above 0%.
The incentive to save is surely a function of the difference between interest rates (or expected return on equities) and inflation isn't it? And not just inflation.
If I'm expecting 10% growth on my shares I don't mind inflation at 5% do I?
Savings account? CD? Stock shares? What?
Originally posted by @metal-brainWe were talking about inflation.
Shares? Seems like you are talking about stocks. I thought you were talking about bank savings rates. You need to be specific about what you are talking about.
Savings account? CD? Stock shares? What?
If you don't know what I mean by shares are you could google it!
Originally posted by @wolfgang59I did. Nobody knows what you mean. Shares imply stocks and you are just being evasive because you don't want to admit you have no idea what you are talking about.
We were talking about inflation.
If you don't know what I mean by shares are you could google it!
I already pointed our stocks are asset value and immune from inflation. The underclass cannot afford to buy stock shares. You are defending class warfare.
Originally posted by @metal-brainShares is the common term in UK for what US calls Stocks.
I did. Nobody knows what you mean. Shares imply stocks and you are just being evasive because you don't want to admit you have no idea what you are talking about.
I already pointed our stocks are asset value and immune from inflation. The underclass cannot afford to buy stock shares. You are defending class warfare.
I do know what I am talking about.
Share price is not immune to inflation.
Anyone with money to invest can buy shares.
I'm not defending class warfare.
Now - stop frothing at the mouth and get a grip!
Why are you arguing with me?
Originally posted by @wajomaIt will take a long time before banks offer anything close to 10% on term deposits.
Are there any banks paying 10%, sounds like a lot, don't forget to subtract the tax.
This debate is interesting because to some extent pretty much everyone's point of view is valid, given appropriate context. If you prefer a gold backed economy, where the primary focus is avoiding the erosion of wealth, as long as the system is transparent and never more currency is printed than the gold that backs it, then fine. Except history is full of examples of how treasuries circumvent that basic rule. Back in Rome they devalued their coins by literally making it out of cheaper metal. So yes I agree with you that if you double the money supply prices will tend to rise to reflect that new level of capital, but you need to ask the question how?
If wages are rising and more money is being spent in the economy prices tend to rise because more money usually leads to sellers markets in expensive things like houses and land. But wages may not go up and instead of rewarding labour directly with increased wages, credit may remain easier to obtain at lower rates encouraging more people to finance a whole range of goods, that their steady employment suggests they can afford.
The thing I have an issue with is when people ascribe the Fed with magical powers, when they are clearly always playing catch-up, to not only what has been, but with squaring off all the current trend lines and projections with the previous sets of trend lines and projections and the policy settings and rate targets that were put into place. The thought that the Fed could just set the rates near zero and that's where they would sit forever and a day forgets the dynamic nature of a large economy and how much of economic activity is based on "feelings". One thing Trump never lied about was how much his brand was worth. He said it depends on how he feels about it, but he is right to a large extent. If other countries look at your numbers and think the underlying looks good, they will continue to trade and you can run the settings you want. But when markets around you get skittish and confidence disappears then being too close to zero only requires someone to breathe out too rapidly to send your economy spiralling into deflation, where you pay the bank to hold your money.
This will make me sound a shill I know, but the Fed and the Fractional Reserve Banking system has generated a lot of wealth for Americans and allowed for untold mobility and freedom for people to move and change their lot in life and become entrepreneurs and take on risk and succeed in ways and numbers that simply were not possible when every dollar was backed by gold. A gold backed economy is a very restricted one. You can't get a loan for love or money and see how that helps your business grow!
Just a point on the OP, what low unemployment can be indicative of is underinvestment. One can grow output by employing more people rather than making structural improvements. The difficulty is that this leaves one with an inefficient economy and a strong workforce able to resist the job losses implied by productivity improvements. So production increases past the point of market saturation and the companies with the worst cash situations go bust. Worse this increases the risks of investing, so either there is a wave of nationalisations and economic stagnancy like in the sixties and seventies, or bankruptcies start to occur, people lose their jobs and the economy nosedives. I think this is the kind of scenario the FED has in mind. The thing is that it is not full employment that causes recessions per se but a failure to invest in productivity improvements in combination with market saturation - there are only so many self-propelling pencils one needs. The neoliberal solution is mass unemployment, with the blame placed firmly on the unemployed for not having the jobs the economy can't provide. The alternative is a four day week. The catch in both cases is that one isn't paid as much and so affording things like housing becomes a problem.
Originally posted by @wolfgang59The underclass is too poor to own stocks. I have said that multiple times and you keep ignoring it like it doesn't matter. If you don't think it matters then you are an apologist for class warfare. Either that or you are too stupid to make the connection.
Shares is the common term in UK for what US calls Stocks.
I do know what I am talking about.
Share price is not immune to inflation.
Anyone with money to invest can buy shares.
I'm not defending class warfare.
Now - stop frothing at the mouth and get a grip!
Why are you arguing with me?
Originally posted by @deepthoughtThe 60s and 70s were periods of inflation. The FRS caused that inflation. Your whole unintelligible guess is based on the belief inflation is an accidental event and it is not.
Just a point on the OP, what low unemployment can be indicative of is underinvestment. One can grow output by employing more people rather than making structural improvements. The difficulty is that this leaves one with an inefficient economy and a strong workforce able to resist the job losses implied by productivity improvements. So production incr ...[text shortened]... oth cases is that one isn't paid as much and so affording things like housing becomes a problem.
Originally posted by @metal-brainI did not mention inflation in my post. What is more it was perfectly clear. I was talking about unemployment and not inflation. However, since that seems to be what you are interested in: The proximate cause of price inflation is people increasing the asking price of whatever they are selling. This is in response either to supply price increases, or because they believe that the market will accept it due to an increase in demand. All that central banks can do is tinker with base rates and set regulations.
The 60s and 70s were periods of inflation. The FRS caused that inflation. Your whole unintelligible guess is based on the belief inflation is an accidental event and it is not.
Originally posted by @metal-brainReally!
The underclass is too poor to own stocks. .
Any more pearls of wisdom?
You do realise I am only slightly to the right of shav don't you?
Originally posted by @metal-brainPoliticians not in power will tell you the government controls inflation.
The 60s and 70s were periods of inflation. The FRS caused that inflation. Your whole unintelligible guess is based on the belief inflation is an accidental event and it is not.
Politicians in power will tell you it is due to the world economy/war/oil prices/wind direction.
Originally posted by @wajomaNo, it isn't. Even monetarism view money as neutral in the long run.
Inflation is precisely an over supply of currency. And you know what else it is. It's a tax on everyone that holds a dollar. If for example there's a million dollars in an economy and the goobermint prints another million in an instant, everything would double in price, not instantly, prices would take time to adjust, but with no more wealth in the econom ...[text shortened]... h wages, wages react to a lot of things, one of them is inflation, or the devaluing of currency.
The (short run) effect on inflation in wages is up to discussion - especially stickyness. Wages and menu costs cannot be adjusted instantly to an increase in the money supply.
Originally posted by @metal-brainAs long as the interest rate are above the inflation there is incentive to save money - and depending on your risk tolerance even below.
Just above 0% would be best. There would be almost no devaluation so there would be incentive to save. That would be best for the economy. The money supply would still be increasing to keep up with growth, yet the near zero rate would not burden the poor.
Inflation discourages saving because it is a devaluation of the currency. Nobody wants to save c ...[text shortened]... need low inflation to escape abject poverty or higher wages. The FRS want them to have neither.
Inflation in itself only discourage savings outside bonds/banks.
I do not believe the FED wants to keep people poor. Why would that be? The poorest in most countries tend to spend all their money. This is either because of low wages and/or high consumption (compared to the disposable income). Low inflation helps this, which is one of the main reasons to keep inflation down. The FED (and the EU) wants exactly that.
Originally posted by @lundosIf one were to take a snap shot of an economy, there are X dollars in circ, and there is Y wealth, all looks hunky dory. A unit of currency buys a something of value tha tis measured as a unit of currency But it is the act/action of pumping currency in faster than what wealth is increasing which is inflation. Might be why you're struggling with the concept, rather than the snap shot try to look at things a bit more esoterically, look at things in movement.
No, it isn't. Even monetarism view money as neutral in the long run.
The (short run) effect on inflation in wages is up to discussion - especially stickyness. Wages and menu costs cannot be adjusted instantly to an increase in the money supply.
It is either increasing currency supply beyond wealth creation, or there's a catastrophic loss where the level of currency supply is static but something has caused wealth to decrease. That situation is rare, generally it's the gooberrmint and their bank buddies ripping everyone off nice and steadily so as not to cause alarm. Either way inflation is currency over supply. Money is the tool used to measure wealth, it represents wealth, it is not wealth in and of itself. Need to stretch your mind around that one too.