the_austrian Posted February 3, 2009 Share Posted February 3, 2009 Thye don't buy less, they buy exactly the same.There is more stuff relative to it though, that's why it's a boom! Check the last decade - what went up apart from the stuff that credit was issued to pay for? Nowt. Wages the same, food prices static etc etc Only in our magic credit HPI wonderland did prices alter and that's because someone was telling porkie pies and causing malinvesting! Wages and food have been static because efficiencies due to advancing technology and globalisation have allowed them to fall in price at a similar rate to monetary expansion. Quote Link to comment Share on other sites More sharing options...
Injin Posted February 3, 2009 Share Posted February 3, 2009 Wages and food have been static because efficiencies due to advancing technology and globalisation have allowed them to fall in price at a similar rate to monetary expansion. You mean stuff that the credit expansion has been making possible and won't exist without? Quote Link to comment Share on other sites More sharing options...
the_austrian Posted February 3, 2009 Share Posted February 3, 2009 You mean stuff that the credit expansion has been making possible and won't exist without? It's a credit bubble not a housing bubble. Quote Link to comment Share on other sites More sharing options...
garybug Posted February 3, 2009 Share Posted February 3, 2009 Printy printy... "Use of the Scheme has been considerable, totalling £185 billion of Treasury Bills" http://www.bankofengland.co.uk/publication...ws/2009/006.htm Quote Link to comment Share on other sites More sharing options...
the_austrian Posted February 3, 2009 Share Posted February 3, 2009 You mean stuff that the credit expansion has been making possible and won't exist without? Or do you mean that improvements in technology and globalisation require monetary expansion? Assuming the State is still in place, why can't they happen in a fixed money-supply economy? Does your hyperinflationary scenario rely on State failure? In the short to medium term and if the State remains... would replacing credit with cash be inflationary (meaning prices not narrow money supply)? To be inflationary, by this definition, would have to mean that credit is less highly valued than cash (before it is replaced). At what point would the public decide not to value credit? If they lose faith in credit before it is replaced then deflation will happen before inflation so overall prices will be stable. Quote Link to comment Share on other sites More sharing options...
rich66 Posted February 3, 2009 Share Posted February 3, 2009 FT article here: http://v2.ftalphaville.ft.com/blog/2009/02...-created-equal/ This means that while the US is still master of its own destiny, in the UK, QE is insufficient to fix the problem. Quote Link to comment Share on other sites More sharing options...
TheEmperorHasNoClothes Posted February 3, 2009 Share Posted February 3, 2009 Can someone explain what it means for the layman?- Interest rates on any kind of debt? - value of the pound sterling? - price of goods (imported/locally produced)? Thanks very much. This perhaps: http://news.bbc.co.uk/1/hi/world/africa/7865259.stm Quote Link to comment Share on other sites More sharing options...
deeplyblue Posted February 3, 2009 Share Posted February 3, 2009 (edited) I'd expect hyper-inflation by the end of summer at the very latest, but most likely well before then. Hyper-inflation = "inflation exceeding 50% a month." So, a house for sale at 200K this month will cost at least 500K by September? (allowing for a gradual increase before getting to somewhere short of 50%) db Edited February 3, 2009 by deeplyblue Quote Link to comment Share on other sites More sharing options...
InternationalRockSuperstar Posted February 3, 2009 Share Posted February 3, 2009 Hyper-inflation = ""inflation exceeding 50% a month."" So, a house for sale at 200K this month will cost at least 500K by September? (allowing for a gradual increase before getting to somewhere short of 50%)db if GBP halves in value over a specified time, a house will double in GBP price over that period if the house's value is unchanged. Incase you haven't noticed, house are falling dramatically in value. general rule: price of asset in a given currency unit = value of asset / value of currency unit Quote Link to comment Share on other sites More sharing options...
the_austrian Posted February 3, 2009 Share Posted February 3, 2009 (edited) if GBP halves in value over a specified time, a house will double in GBP price over that period if the house's value is unchanged. Incase you haven't noticed, house are falling dramatically in value.general rule: price of asset in a given currency unit = value of asset / value of currency unit If a bail-out of the banking system doesn't lead to State failure, would prices be higher or lower after a bail-out than immediately before? Edit: To improve Grammatical tense Edited February 3, 2009 by the_austrian Quote Link to comment Share on other sites More sharing options...
InternationalRockSuperstar Posted February 3, 2009 Share Posted February 3, 2009 If a bail-out of the banking system doesn't lead to State failure, would prices be higher or lower than they were immediately prior to the bail-out? well I don't confuse inflation with price rises but; the value of fiat would fall so prices in general would rise (unless the value of the goods in question fell faster than the value of fiat - see equation in previous post). Quote Link to comment Share on other sites More sharing options...
the_austrian Posted February 3, 2009 Share Posted February 3, 2009 well I don't confuse inflation with price rises but;the value of fiat would fall so prices in general would rise (unless the value of the goods in question fell faster than the value of fiat - see equation in previous post). Leaving aside the value of general goods, if we consider money in isolation (from other assets) why would a bail-out affect the price of money? Quote Link to comment Share on other sites More sharing options...
Injin Posted February 3, 2009 Share Posted February 3, 2009 Or do you mean that improvements in technology and globalisation require monetary expansion? Assuming the State is still in place, why can't they happen in a fixed money-supply economy? I mean there haven't been any improvements, just malincestment. Why malinvestment? because when peopel got credit pounds the vauled them as the same as current pounds. When house prices went up so much people didn't think "ooh, the value of the pound is falling because there are more of them, I'd better agitate for pay rises and expect the cost of everything else to go up over time" did they? No...they thought "weeee I'm RICH!!" and that's because credit trades on the value of existing money. Does your hyperinflationary scenario rely on State failure? It relies upon those in the government realising the game is up and then using the last burst of energy in the state to loot the public purse. it's a fair bet - it's happened every other time in history that the state has been bankrupt and has had nop way out. In the short to medium term and if the State remains... would replacing credit with cash be inflationary (meaning prices not narrow money supply)? To be inflationary, by this definition, would have to mean that credit is less highly valued than cash (before it is replaced). At what point would the public decide not to value credit? If they lose faith in credit before it is replaced then deflation will happen before inflation so overall prices will be stable. They won't get the option - the banks will be closed and the insiders will go on a last ditch spending spree before getting out. Quote Link to comment Share on other sites More sharing options...
Injin Posted February 3, 2009 Share Posted February 3, 2009 Leaving aside the value of general goods, if we consider money in isolation (from other assets) why would a bail-out affect the price of money? Because it actually increases the money supply. Lying about how much money you have doesn't and credit = lies. Quote Link to comment Share on other sites More sharing options...
deeplyblue Posted February 3, 2009 Share Posted February 3, 2009 if GBP halves in value over a specified time, a house will double in GBP price over that period if the house's value is unchanged. Incase you haven't noticed, house are falling dramatically in value.general rule: price of asset in a given currency unit = value of asset / value of currency unit What I had noticed is that houses (houses on the market, at any rate) are falling dramatically in price. That price is always quoted in GBP. For other assets you may be able to establish their value in another currency - how much would that widget cost if you took it to the US or to Euro-land? You can't do that for most houses. For a few London properties it may be sensible to try and establish how much you could get for it in other currencies. For a 3-bed semi in Newcastle, its "value" in Euros, Dollars or Chinese Yuan is probably zilch. So for most houses their "value" is the same as what you can get for them in GBP if you put them on the market. How else are you establishing their value? db Quote Link to comment Share on other sites More sharing options...
Injin Posted February 3, 2009 Share Posted February 3, 2009 (edited) What I had noticed is that houses (houses on the market, at any rate) are falling dramatically in price. That price is always quoted in GBP. For other assets you may be able to establish their value in another currency - how much would that widget cost if you took it to the US or to Euro-land? You can't do that for most houses. For a few London properties it may be sensible to try and establish how much you could get for it in other currencies. For a 3-bed semi in Newcastle, its "value" in Euros, Dollars or Chinese Yuan is probably zilch. So for most houses their "value" is the same as what you can get for them in GBP if you put them on the market. How else are you establishing their value?db Right now the economy is shedding jobs olike a mother******er, as employers try to battle the inflation with cuts in workforce and efficiency drives. Once they run out of room doing that, prices will go north on a stardrive. it's also hyperinflationary if we halve the number of economic participants, but nominal prices remain the same! Edited February 3, 2009 by Injin Quote Link to comment Share on other sites More sharing options...
the_austrian Posted February 3, 2009 Share Posted February 3, 2009 I mean there haven't been any improvements, just malincestment.Why malinvestment? because when peopel got credit pounds the vauled them as the same as current pounds. When house prices went up so much people didn't think "ooh, the value of the pound is falling because there are more of them, I'd better agitate for pay rises and expect the cost of everything else to go up over time" did they? No...they thought "weeee I'm RICH!!" and that's because credit trades on the value of existing money. I would argue that people did agitate for pay rises and such only they found it difficult because of technology and globalisation... It relies upon those in the government realising the game is up and then using the last burst of energy in the state to loot the public purse. it's a fair bet - it's happened every other time in history that the state has been bankrupt and has hadnop way out. Sure, they'll do what they can, I'm just trying to establish that a bail-out is not inherently inclined to increase prices because credit is currently valued equivalently to cash. They won't get the option - the banks will be closed and the insiders will go on a last ditch spending spree before getting out. OK but if the insiders don't go on that spending spree a default of the banking system would lead to rapidly declining prices, don't you think? Because it actually increases the money supply.Lying about how much money you have doesn't and credit = lies. It doesn't increase the supply of money because credit is money... Are you saying that the price of money is unaffected by the quantity of credit in the system? Quote Link to comment Share on other sites More sharing options...
Injin Posted February 3, 2009 Share Posted February 3, 2009 I would argue that people did agitate for pay rises and such only they found it difficult because of technology and globalisation... Where were the strikes? The pickets? We have them at the moment......fact is most people who saw wages versus housing go out of whack either felt wealthy because of HPI or were only to happy to jump on board the HPI bandwgon because of gains to be realised in the future (priced in todays pounds!) Very few looked at it and saw it for what it was - check this site. Sure, they'll do what they can, I'm just trying to establish that a bail-out is not inherently inclined to increase prices because credit is currently valued equivalently to cash. It will actually increase the money supply, which will lead to price rises other things being equal. OK but if the insiders don't go on that spending spree a default of the banking system would lead to rapidly declining prices, don't you think? Maybe but then you have to ask measured in what? It won't be fiat money if the banks collapse. The choice is pretty simple - let the banking system collapse and take the pain or hyperinflate, profit personally and then the banking system will collpase. As the statists at the top are evil, amoral sociopaths who only do it to steal, they'll obviously hyperinflate. It doesn't increase the supply of money because credit is money... Are you saying that the price of money is unaffected by the quantity of credit in the system? Already did so a few times and proved it by pointing out that the recipients of said money assumed they were wealthy, they didn't assume there was more money about and therefore poorer. Credit is noit money - it is access to the current value of money for multiple people per unit. It trades on the value of the existing money supply. Quote Link to comment Share on other sites More sharing options...
InternationalRockSuperstar Posted February 3, 2009 Share Posted February 3, 2009 Leaving aside the value of general goods, if we consider money in isolation (from other assets) why would a bail-out affect the price of money? because you are increasing the supply of money, while doing nothing to increase its demand. HMG spending < HMG revenue --> GBP gains value HMG spending > HMG revenue --> GBP loses value HMG spending >> HMG revenue --> GBP plummets in value Quote Link to comment Share on other sites More sharing options...
Winston Wolf Posted February 3, 2009 Share Posted February 3, 2009 Right now the economy is shedding jobs olike a mother******er, as employers try to battle the inflation with cuts in workforce and efficiency drives. Once they run out of room doing that, prices will go north on a stardrive. it's also hyperinflationary if we halve the number of economic participants, but nominal prices remain the same! Jobs are being shed big time but not I beleive in the most part due to them battling inflation. They are shedding jobs simply becuase they have been geared up to serve a market of X size and now it is Y size and they are simply downsizing. When they run out of room some will go to the wall, making whatever market they are in significantly less competitive. This along with import rises will produce inflation. No doubt inflation (price inflation is all i care about) is coming, it is here in some areas already. Some areas have been masked by retailer fire sales, clearing inventories to free up cash blah blah but they will have to rebuy a smaller amount of stock and pay more for it, this will be passed on to you and me. The timing im thinking is in around 3 months it is going to start to show. We are going to get? have got? price inflation, wage stagnation and asset deflation there is no way of avoiding it now. This is just a rebalancing of the world exercise it cannot ever be stopped unless slavery is reintroduced. I dont see the state failing as such but hopefully it will change big time but for that we need a leader.... in case anyone hasnt noticed we do not have any candidates. Eek. Quote Link to comment Share on other sites More sharing options...
uncle rogi Posted February 3, 2009 Share Posted February 3, 2009 OK but if the insiders don't go on that spending spree a default of the banking system would lead to rapidly declining prices, don't you think? every time this has been tried before the same arguements get trotted out and they always fail due to human nature, for example... 1. why use QE now ? goverment would say to provide liquidity to mantain lending at a certain level. answer= the "certain level" is a boom fueled level therefore the act of QE is inflation i.e. more money in the system than is justifed by economic need or true market forces etc (as in injins points about credit etc) this will be reflected in poor debt sales untill the apparant need for blatent QE comes along i.e. printing money to buy debt when that happens the cat is out of the bag. 2. who is judging the balance of QE and UK debt issuance etc answer= the same idiots as in point 1. the "problem" with hyperinflation is, there is never enough money(again as injin says NOT credit actual money).....these idiots will continue down this road....the market tide of cash keeps pulling out becasue the market can see the money just going to maintain mallinvestments from the boom years..... all the time they are printing they will say the printing is justified to save such and such part of the economy when in fact the creative destruction part of the bust is actually being prevented from running its course, and the idiots are causing more harm by trying to keep more of the old mallinvested boom system alive. Quote Link to comment Share on other sites More sharing options...
the_austrian Posted February 3, 2009 Share Posted February 3, 2009 Where were the strikes? The pickets?We have them at the moment......fact is most people who saw wages versus housing go out of whack either felt wealthy because of HPI or were only to happy to jump on board the HPI bandwgon because of gains to be realised in the future (priced in todays pounds!) Very few looked at it and saw it for what it was - check this site. If the money supply had remained constant would house prices and earnings (measured by Wages and Food) have maintained their historical relationship or would Wages and Food have fallen anyway (because of Globalisation etc.), regardless of credit creation? I'll skip the rest, for now, because much of what we are talking about would appear to hinge on our opinion of what has driven the fall in prices of consumables relative to house prices. Quote Link to comment Share on other sites More sharing options...
InternationalRockSuperstar Posted February 3, 2009 Share Posted February 3, 2009 If the money supply had remained constant... value is a funtion of supply and demand - your post says nothing of demand. Quote Link to comment Share on other sites More sharing options...
the_austrian Posted February 3, 2009 Share Posted February 3, 2009 because you are increasing the supply of money, while doing nothing to increase its demand.HMG spending < HMG revenue --> GBP gains value HMG spending > HMG revenue --> GBP loses value HMG spending >> HMG revenue --> GBP plummets in value I agree that... HMG spending < HMG revenue --> GBP gains value HMG spending > HMG revenue --> GBP loses value HMG spending >> HMG revenue --> GBP plummets in value ...although we might not agree on the reasons why this is true. Can you tell me why a bailout would affect HMG spending, if that is your suggestion? Quote Link to comment Share on other sites More sharing options...
Injin Posted February 3, 2009 Share Posted February 3, 2009 If the money supply had remained constant would house prices and earnings (measured by Wages and Food) have maintained their historical relationship or would Wages and Food have fallen anyway (because of Globalisation etc.), regardless of credit creation? Real incomes have fallen for the last 3 decades, apart from in the top 6% I'll skip the rest, for now, because much of what we are talking about would appear to hinge on our opinion of what has driven the fall in prices of consumables relative to house prices. There has been a housing bubble based on phantom value and phantom money. If they just let it crash house prices would return to the mean and all credit would vanish from the imagination (which is the only place it exists.) The value fo money would remain at it's current level but would be reallocated. If they add money to match the phantom amount people have thought was there, we get inflation and it's a bottomless pit, because the value it needs to make up is the value of itself before the addition. it must end in currency annihiliation. People think they are going to be getting £x at y value. andf have made commitments based on that. They were wrong. Instead of going bust, the government steps in and provides new £, which reduces the value of y by a %age. Which means they don't get properly paid, obviously. So the government can then either add more or give up and let it default. If they add more, then the value of y reduces again. So then they have to choose to either give up or do it again. Choices are default and let the system right itself or print up money endlessly. They've picked option 2 because it has personal benefits abnd the system is ******ed anyway. Quote Link to comment Share on other sites More sharing options...
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