Originally posted by telerionEasy credit leads to an expansion of the money supply because of fractional reserve banking. This is usually led by a contraction of the money supply later because less new loans are created. Much of our money supply is dependent on debt to exist. When things run smoothly in the economy it works but when credit gets disrupted for some reason and it throws our money supply out of whack it causes real problems.
The problem no1 has (and I do too) is that you've picked 25% for no apparent good reason.
It's still not clear exactly what problem you are solving with 25% that 3% cannot solve. It's also not clear why 25% does the best job of solving that not-so-well-defined problem.
If you could very simply state the what the issue is, and then show why 3% is too low and 75% is too high and 25% is "just right" then things would be a lot clearer to me.
I think raising the rr would make the money supply less dependent on this process. I think it is better for the long term stability of the economy and it would almost eliminate the need for FDIC
I am simply in favor of more of our money supply being in permanent circulation. It would reduce the contraction of the money supply when credit is disrupted.
Isn't 3% reserve requirements about what banks would keep in reserves by choice if there were no rr at all? Do you think we should have no rr like Canada?
Originally posted by PalynkaDon't you have a web link?
The "theory" is the obvious fact that inflation is not determined by decree and so is never perfectly stable.
Run, Forrest, run!
You never give me anything. Then you pretend I am running from a fact you never show to be fact.
Run and claim the other is running. Odd tactic.
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Originally posted by Metal BrainRun, Forrest, run!
Don't you have a web link?
You never give me anything. Then you pretend I am running from a fact you never show to be fact.
Run and claim the other is running. Odd tactic.
Please explain how you would maintain inflation at exactly 0% without risking deflation. It's your claim, so prove it's possible.
Originally posted by PalynkaYou made the claim that 0% could not be sustained without sliding into deflation. It's your claim, so prove it is possible.
Run, Forrest, run!
Please explain how you would maintain inflation at exactly 0% without risking deflation. It's your claim, so prove it's possible.
Originally posted by PalynkaI never said there was no fluctuation. When the Gov says inflation is 3.4% do you say it is not always that?
Look at any inflation chart from any period in history from any country.
Not a single one of them is flat.
Your turn.
When is the last time it fluctuated to near 0%?
If you are saying the inflation rate fluctuates a lot I would like to see the data. Try to back up your claims with a link or something.
Originally posted by Metal BrainWhen is the last time it fluctuated to near 0%?
I never said there was no fluctuation. When the Gov says inflation is 3.4% do you say it is not always that?
When is the last time it fluctuated to near 0%?
If you are saying the inflation rate fluctuates a lot I would like to see the data. Try to back up your claims with a link or something.
Err...now?
http://in.reuters.com/article/marketsNewsUS/idINN1728111120090318
On a year-over-year basis, consumer prices were up 0.2 percent after being flat in January.
If you are saying the inflation rate fluctuates a lot I would like to see the data. Try to back up your claims with a link or something.
http://www.tutor2u.net/blog/files/cpi_june08_1.gif
Run, Forrest, run!
Which evident fact will you try to deny now?
Originally posted by murrowMmm... Are you sure you mean price stability?
There was relative price stability during the c19th, though
Average inflation over the entire century was close to zero, but that didn't preclude the existence of episodes of 15% inflation over a single year or -12% deflation.
Here are some historical estimates for the UK:
http://www.whatsthecost.com/historic.cpi.aspx
Originally posted by PalynkaAbsolutely. Massive fluctuation, but not the inexorable upward trend of the c20th.
Mmm... Are you sure you mean price stability?
Average inflation over the entire century was close to zero, but that didn't preclude the existence of episodes of 15% inflation over a single year or -12% deflation.
Here are some historical estimates for the UK:
http://www.whatsthecost.com/historic.cpi.aspx
Originally posted by Metal BrainHonestly, Pal, doesn't really need to give web links to everything. He's speaking from years of training in economics. A lot of websites are written by people with less knowledge of economics than Pal so unless he's citing data I don't see why a website should lend anymore credibility to his statements.
Don't you have a web link?
You never give me anything. Then you pretend I am running from a fact you never show to be fact.
Run and claim the other is running. Odd tactic.
Originally posted by murrowThe fluctuations are more problematic than a stable upward trend. Give me an economy with consistent 3% inflation to one with 0% average inflation but large volatility.
Absolutely. Massive fluctuation, but not the inexorable upward trend of the c20th.
In the first case, you can predict future inflation pretty well so nominal rates can adjust to mitigate some of the losses. Plus, I would just make sure to keep my holdings of cash and non-interest bearing assets to a minimum. In all I should be able to maintain the value of my wealth fairly well.
The second world, on the otherhand, has a lot of uncertainty. Should I hold cash (deflation) or shed it (inflation)? Is making an investment that ties up my money at a fixed rate good or bad? I may not have or not want to wait for a long time horizon to net everything out.