tag:blogger.com,1999:blog-1892824566694270102.post6532151146675135412..comments2024-01-27T00:46:34.345-08:00Comments on How Fiat Dies: How We Know High Inflation is ComingVincent Catehttp://www.blogger.com/profile/06502618776820144289noreply@blogger.comBlogger52125tag:blogger.com,1999:blog-1892824566694270102.post-72400372808495329812014-11-16T06:49:24.339-08:002014-11-16T06:49:24.339-08:00Yes, see Jan 4th comment below.Yes, see Jan 4th comment below.Vincent Catehttps://www.blogger.com/profile/06502618776820144289noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-53740361057168983322014-11-16T06:46:14.040-08:002014-11-16T06:46:14.040-08:00When consumers are going into hyperinflation what ...When consumers are going into hyperinflation what they pay for necessities goes up much more than their salaries. Life gets hard under hyperinflation. The way this is possible is they have to cut back on non-necessities. Some things that you might think of as necessities, like rent, are not really as you can move in with relatives. <br /><br />Nominal GDP does go up going into hyperinflation.<br /><br />As the velocity of base money goes up, then m2 will be going up. The reason it can spike up is that the velocity is not under the control of the central bank or government.<br /><br />Look at Japan. The prices for food and other imports are going up much faster than the consumer salaries. The shock seems to come from the exchange rate going down. Foreigners drive up the price of exports and imports are directly more expensive. This provides a price shock to the economy, not a demand shock.Vincent Catehttps://www.blogger.com/profile/06502618776820144289noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-28361191187038076142014-11-15T20:38:57.171-08:002014-11-15T20:38:57.171-08:00In order to get high inflation, you have to increa...In order to get high inflation, you have to increase *consumer* prices. In order to get higher consumer prices, you have to give consumers money to chase those prices. In order to increase wages, unemployment has to fall. For unemployment to fall, GDP will pretty much have to increase.<br /><br />You get to choose your definition of money supply and price level. But it's kinda important that you choose correct relevant pairs. M2 and M3 are still growing on the order of 5% a year, and those are the values that are going to have to spike in order to produce serious demand-shock inflation.Anonymoushttps://www.blogger.com/profile/11304146622068183941noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-62827059077962408992014-11-15T18:38:11.043-08:002014-11-15T18:38:11.043-08:00http://research.stlouisfed.org/publications/review...http://research.stlouisfed.org/publications/review/10/11/Anderson.pdf<br />would seem to be relevant...Anonymoushttps://www.blogger.com/profile/11304146622068183941noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-17766996467448490092014-11-15T18:07:41.466-08:002014-11-15T18:07:41.466-08:00I can find evidence that New Zealand had $3 billio...I can find evidence that New Zealand had $3 billion in M0 in 2004. I can't find evidence that New Zealand had $12.8 billion in M0 in 2006. So I too could use some help reading and understanding the R2 spreadsheet.Anonymoushttps://www.blogger.com/profile/11304146622068183941noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-2202824846539400362014-01-27T15:40:52.338-08:002014-01-27T15:40:52.338-08:00When banks loan out demand deposits they make it s...When banks loan out demand deposits they make it seem like there is more money since both the guy who now has the money and the person who has the demand deposit think they can spend the money. So you can theoretically get deflation if people are paying down loans faster than new loans are being made. But with governments all running huge deficits it is mostly theoretical. Sometimes there is a bit of deflation right before hyperinflation. Eventually the rate of printing new money overpowers any loan payoffs going on. Don't know if we will actually see prices go down.<br /><br />Yes, with rising inflation and rising interest rates I would expect to see stocks, bonds, and real estate go down, at least at first. The bond bubble should really pop.Vincent Catehttps://www.blogger.com/profile/06502618776820144289noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-11070184798052732932014-01-27T03:50:17.585-08:002014-01-27T03:50:17.585-08:00How do you explain the deflationary forces buildin...How do you explain the deflationary forces building in Europe and soon to be in Emerging markets as debt implodes. Does deflation not get exported to North America. What stops this process? Are we going to see deflation first? <br /><br />Also, rising interest rates with inflation will affect equities and end the asset inflation, will it not?TheRealWorldhttps://www.blogger.com/profile/18204987031010794945noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-33883190844635206852014-01-11T14:24:32.522-08:002014-01-11T14:24:32.522-08:00... though in fairness, on re-reading Rowe's p...... though in fairness, on re-reading Rowe's piece, I think he's saying that targeting inflation OR NGDP levels too low (close to 0) will force the CB to be large (and is thus the "socialist" option, Ha!).Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-11748394738385160002014-01-11T13:27:34.930-08:002014-01-11T13:27:34.930-08:00Vanessa A,
Sumner calls himself a "practical...Vanessa A,<br /><br />Sumner calls himself a "practical libertarian" and he doesn't care about inflation at all. He thinks the fact that world central banks and governments currently ARE concerned with inflation is a colossal problem. He thinks that CBs should forget about inflation and start explicitly targeting NGDP levels (the practice knows as NGDPLT). He points out that once CBs started targeting inflation back in the late 70s and early 80s in the developed world (Fed, BoC, BoJ etc) that inflation has ceased to be a problem in those countries, except that it sometimes gets too low (and that's only because those CB's lose their nerve to maintain the target during recessions).<br /><br />He argues that NGDPLT is more "conducive to macro stability" than I.T. (see my Sumner quote in the comment below), so inflation should be completely dropped as a CB target.<br /><br />And he's far from the only (self proclaimed) libertarian in this camp: e.g. Lars Christensen, Marcus Nunes, David Beckworth and Bill Woolsey are some other libertarian economists that share this view. Glasner and Rowe may or may not be libertarians, but they too share it.<br /><br />Regarding inflation, I believe most economists (left, right, center and libertarian) mean growth of price level by that. All the economists in the above list will answer your questions on their blogs, so I encourage you to check with them. In fact try other non-libertarian, non-Market Monetarist economists: Noah Smith, Stephen Williamson, John Cochrane, Brad DeLong.... I'll bet you'll have trouble finding an opinion too far from Sumner's on this. Unless you ask an Austrian I guess. Ha! I don't follow them, so I don't know.<br /><br />Defining "inflation" as growth in the base money supply is the trick that Peter Schiff uses to explain away his failed hyperinflation predictions over the past 5 years. Kudlow challenged him on these failed predictions to which he essentially responded "But my definition of inflation doesn't have anything to do with price levels: it is only about the quantity of base money, so my predictions were all correct!!" The incredulous Kudlow then mocked him "So for five years you've been giving dire warnings that if the Fed creates more base money, then there'll soon be more base money??? Lol!" To which Schiff essentially said "Yes." (I'm paraphrasing). :D<br /><br />I'm guessing you're not a Schiff fan (because I'm sensing you're a Mish fan instead?) and probably not a hyperinflationist (otherwise, why would you be here arguing against Vincent's hyperinflation warnings?), but your definition of inflation seems to overlap with that of Schiff's which seems to me to be tailor made to help Schiff save face during TV interviews.Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-89224596143638559992014-01-11T12:10:28.209-08:002014-01-11T12:10:28.209-08:00Most conservatives have no clue about the economy....Most conservatives have no clue about the economy. The libertarians are the ones that will really destroy the socialists - ask them what rate of inflation they want.<br /><br />Well, I will answer that one for you. Inflation is not necessarily an increase in prices. But, higher prices are a symptom of inflation. Inflation is simply an increase in the amount of money and credit. Any amount of money supply + credit would do - but that does not mean prices will not increase. Prices can in fact increase due to many factors outside of the money supply, like weather, diseases, natural disasters, etc..<br /><br />Socialists are those that are all in for handouts, and all out for producing those things they want to hand out. Let's see, everyone should line up to get free food, education, homes, clothing - and nobody lines up to produce them. Does that make sense to you? I don't think so.Dhttps://www.blogger.com/profile/16839998764015490922noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-86948401704078887902014-01-11T10:58:36.040-08:002014-01-11T10:58:36.040-08:00Vincent, I also thought you might like this one fr...Vincent, I also thought you might like this one from Scott Sumner, at least the last bit where he brings up the gold standard:<br /><br />"It’s really, really hard to cheat on level targeting. That’s why central banks don’t do it, it gives them very little discretion and they know it. And that’s exactly why I like it. It’s really effective, for better or worse. The gold standard was sort of like that, but with a target (gold prices) that was much less conducive to macro stability than NGDP."<br /><br />http://www.themoneyillusion.com/?p=25823Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-11714213852968547162014-01-11T10:54:27.960-08:002014-01-11T10:54:27.960-08:00Vincent, I thought you might like this one from Ni...Vincent, I thought you might like this one from Nick Rowe:<br /><br />http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/01/monetary-policy-fiscal-policy-the-target-and-the-size-of-the-central-bank.html<br /><br />Here's a good quote:<br /><br />"As we lower the inflation target (or NGDP level growth target), the demand for the central bank's currency would increase, the average size of the central bank would increase, relative to GDP, and so would the absolute size of those fluctuations in size."<br /><br />Scott Sumner contributes as well in the comments:<br /><br />"This is a point I am also trying to make. And the implication is that the actual "zero lower bound" is not zero rates, it's when you reach "zero eligible assets left to buy."<br /><br />Regarding the "extreme socialists," I like to sometimes tease conservatives who want really low inflation by pointing out that that they are advocating socialism."<br /><br />So if you want 0% inflation, you must be an extreme socialist. :DTom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-36711086911856099352014-01-11T09:01:26.552-08:002014-01-11T09:01:26.552-08:00Back at you...
http://sucesofinanciero.blogspot.c...Back at you...<br /><br />http://sucesofinanciero.blogspot.com/2014/01/response-to-vince-cate-at-how-fiat-dies.htmlDhttps://www.blogger.com/profile/16839998764015490922noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-89821705126077331892014-01-11T06:34:15.925-08:002014-01-11T06:34:15.925-08:00I have replied on that blog. I have replied on that blog. Vincent Catehttps://www.blogger.com/profile/06502618776820144289noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-65632001003453924222014-01-10T19:46:00.671-08:002014-01-10T19:46:00.671-08:00My rebuttal to Vince's comments... Don't e...My rebuttal to Vince's comments... Don't expect any inflation at all. Expect low growth for a while.<br /><br />http://sucesofinanciero.blogspot.com/2014/01/response-to-vince-cate-at-how-fiat-dies.html<br /><br />SucesoFinancierohttp://sucesofinanciero.blogspot.com/2014/01/response-to-vince-cate-at-how-fiat-dies.htmlnoreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-18320601675991003252014-01-10T12:57:52.325-08:002014-01-10T12:57:52.325-08:0038 year cycle ~= pi*12 does this look familiar? :...38 year cycle ~= pi*12 does this look familiar? :-)<br /><br />Still, no hyperinflation in the US, unless it goes into complete isolation (think iron curtain) from the world, lose its technological/industrial status #1, lose its demographic advantage, lose it's tremendous energy advantage, etc, etc. With all the head winds and drawbacks, the US will be the last man standing :-) :-)<br /><br />Joe 6-packAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-29682821843985366002014-01-08T15:20:35.630-08:002014-01-08T15:20:35.630-08:00deflation theories: sure you have them! Just run y...deflation theories: sure you have them! Just run your inflation ones in reverse! :DTom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-63165889996804260262014-01-07T16:57:50.094-08:002014-01-07T16:57:50.094-08:00This is the wrong blog for deflation theories. :-...This is the wrong blog for deflation theories. :-) In fiat currencies without any tie to gold the most deflation seems to be Japan, which was not really that much. Inflation and hyperinflation are huge changes in the value of money. Deflation of 1% seems to mostly be an excuse to print more money. I am amazed at how many people are worried about deflation when historically the odds of inflation are so much higher, in pure fiat money. In my hyperinflation FAQ I have a graph showing how deflation and inflation were similar probability things under gold, but since 1971 the odds are just not the same.Vincent Catehttps://www.blogger.com/profile/06502618776820144289noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-42827411034976324782014-01-07T16:10:52.858-08:002014-01-07T16:10:52.858-08:00Hey Vincent, do you have any theories on deflation...Hey Vincent, do you have any theories on deflation? Lars thinks the EuroZone is headed that way:<br /><br />http://marketmonetarist.com/2014/01/07/one-step-close-to-euro-zone-deflation/Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-28604875105529388172014-01-06T15:03:46.537-08:002014-01-06T15:03:46.537-08:00The first round of the contest has been paid as ag...The first round of the contest has been paid as agreed above. I sent $50 to JP, $50 to Mark, and $20 to Tom. <br /><br />A second round of the contest with updated rules is now on for another $100.Vincent Catehttps://www.blogger.com/profile/06502618776820144289noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-61896019206648299922014-01-05T16:43:51.246-08:002014-01-05T16:43:51.246-08:00Vincent, JP and Mark... just now reading this. Mar...Vincent, JP and Mark... just now reading this. Mark I'm glad you tracked this down. I figured you would. I didn't give any names in my "cryptic" comment because I didn't want to bias you either way. :D<br /><br />And I posted this contest in three places thinking you'd probably see it in one... but JP beat you to it. He was quick! (Of course I posted it directly to his blog).<br /><br />Congrats JP and Mark (and me, I guess)! Thanks for hosting this game Vincent... it was fun and educational though my contribution was minimal. I would consider giving my $20 to a good cause (like Mark's cat food supply) but given my own finances right now, I think I might need that for cat food myself pretty soon! (Currently my monthly outflow > monthly inflow, which really sucks!)<br /><br />So ... I looked up my old PayPal account which I haven't used for years, and it's still there! I don't think I ever received a payment via it though (and the funds have long since been drained to $0). So what is the "paypal address?" ... I'll send you an email w/ all the info, but if you need more, don't hesitate. Thanks again all!<br /><br />Especially you Vincent for running a "clean" game. :D<br /><br /><br /><br />Tom Brownhttp://www.google.comnoreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-52278506424473663552014-01-05T16:33:42.731-08:002014-01-05T16:33:42.731-08:00"Did Iceland expand by monetization or someth..."Did Iceland expand by monetization or something else?"<br /><br />Approximately 38.9% of the assets the CBI acquired between March 2005 and March 2010 were foreign. <br /><br />I'm sending you an email with my Paypal address.Mark A. Sadowskihttps://www.blogger.com/profile/08259309059705236763noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-50333193174793513572014-01-05T15:17:40.821-08:002014-01-05T15:17:40.821-08:00"JP, if you are happy with $50 then I propose..."JP, if you are happy with $50 then I propose I also give $50 to Mark and $20 to Tom."<br /><br />Sounds good!<br /><br />I'll try and find an example of a central bank expanding via domestic purchases of bonds, but no modern examples comes to mind at the moment.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-30631138303160795532014-01-05T14:40:42.227-08:002014-01-05T14:40:42.227-08:00JP, if you are happy with $50 then I propose I als...JP, if you are happy with $50 then I propose I also give $50 to Mark and $20 to Tom. I need to know what paypal address to send it to. If you don't want it public here you can email me at vincecate@gmail.com<br /><br />It seems New Zealand expanded by buying Foreign assets. I really want to find one that did it by monetization and so am doing the contest over with another $100 and the fixed up rules above.<br /><br />Mark, you should do a blog so we would know where to find you!<br /><br />Did Iceland expand by monetization or something else? I think it is the expansions that can not be unwound that are inflationary. Buying foreign currency can usually be unwound. Buying bonds from a government running huge deficits are not as easy to unwind. The problems are rising interest rates lower the value of the bonds, the government can't get cash if nobody is buying their bonds, and higher interest rates are bad for the economy.Vincent Catehttps://www.blogger.com/profile/06502618776820144289noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-59784340561145902872014-01-05T09:04:11.703-08:002014-01-05T09:04:11.703-08:00After researching the issue, I think New Zealand i...After researching the issue, I think New Zealand is the only easily verifiable example of this occuring (so far). There may be historical examples, or examples of developing nations, but then we get into quality of the data issues. <br /><br />Interestingly, by my count there are five very recent cases of quadrupling of the monetary base (monthly average) in five years or less which so far have not had (year on year) double digit inflation:<br /><br />1) Sweden - November 2009 <br />2) Iceland - March 2010<br />3) Switzerland - September 2011<br />4) UK - September 2012<br />5) US - August 2013<br /><br />Note that Iceland last had year on year double digit inflation in September 2009, so given the wording of the challenge ("...sometime during the 5 years after...") it will satisfy the requirements if five years passes without double digit inflation. Note also that the US only made the quadrupling of its base by the skin of its teeth, and only if one uses the unadjusted base (SBASENS). <br /><br />P.S. Do I actually get $20 for judging this? It will buy 6-weeks worth of catfood. (He's a large cat and if I only feed him dry food my life will not be worth living.)Mark A. Sadowskihttps://www.blogger.com/profile/08259309059705236763noreply@blogger.com