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Guest The Relaxation Suite

Inflation's Moral Hazard

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Guest The Relaxation Suite
What a great article. Good find!

Thanks, I thought so. You get some good stuff on there some times.

Edited by D-503

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http://www.city-journal.org/2009/19_3_otbie-inflation.html

"It all suggested a giant pyramid scheme."

People talk about the imminent inflation, but the truth is we've already had it for decades.

My browser is not letting me read the article but have to say the stateent about is very much how I see it.

Any inflation we get will not be good inflation. If we get the high inflation many are predicting we won't get the 70's an 80's wage inflation which is what makes any potential future inflation bad. Currancy debasement will do nothing to help with servicing the debt. We need a benign period like the Japanse lost decades to allow the debt to work itself out, although there is evidence this has not even been achieved for them yet with a bout of their own sub prime about to explode after the Governments efforts to support their collasping housing market in the erlier stages comes back to haunt them.

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Guest The Relaxation Suite
My browser is not letting me read the article but have to say the stateent about is very much how I see it.

Any inflation we get will not be good inflation. If we get the high inflation many are predicting we won't get the 70's an 80's wage inflation which is what makes any potential future inflation bad. Currancy debasement will do nothing to help with servicing the debt. We need a benign period like the Japanse lost decades to allow the debt to work itself out, although there is evidence this has not even been achieved for them yet with a bout of their own sub prime about to explode after the Governments efforts to support their collasping housing market in the erlier stages comes back to haunt them.

It's too long to copy and paste, but the google cache thing worked. He basically makes the point that inflation was stable and minimal for centuries until the 20th century, particularly the late 20th when things got well out of hand. He makes the point that the ensuing destruction of private wealth is immoral.

Edited by D-503

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It's too long to copy and paste, but the google cache thing worked. He basically makes the point that inflation was stable and minimal for centuries until the 20th century, particularly the late 20th when things got well out of hand. He makes the point that the ensuing destruction of private wealth is immoral.

Read it and it was a very good read.

As we all know at this juncture the $64,000 ($64 Trillion in today money :rolleyes: ) question is who do we look to for experience that will be relative to our futures, to his Dad's Dad or the Author.

Despite peoples insistence in knowing what the future holds I believe the jury is still very much out.

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My browser is not letting me read the article but have to say the stateent about is very much how I see it.

Any inflation we get will not be good inflation. If we get the high inflation many are predicting we won't get the 70's an 80's wage inflation which is what makes any potential future inflation bad. Currancy debasement will do nothing to help with servicing the debt. We need a benign period like the Japanse lost decades to allow the debt to work itself out, although there is evidence this has not even been achieved for them yet with a bout of their own sub prime about to explode after the Governments efforts to support their collasping housing market in the erlier stages comes back to haunt them.

what a bunch of ignorant claptrap. wage inflation, what the hell are you talking about? inflation is inflation, currency loses value (prices go up) wages are just prices.

Edited by Where is my pen?

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what a bunch of ignorant claptrap. wage inflation, what the hell are you talking about? inflation is inflation, currency loses value (prices go up) wages are just prices.

I am only interested in prices, they are what affect me. If you want to worry youself about the piddly amount of QE we have seen in face of the massive collapsing debt bubble then that is your prerogative.

I am much more comfortable observing than making claims I can see the future. I have studied the inflationist argument and it is a very powerful one (I even own gold and have traded it) but I have also studied the deflationists argument which is also pretty compelling. It is the first time someone has accused me of being ignorant on this site and having read several of your recent post I think the label could be more appropriately applied to yourself.

Edited by Confounded

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It is the first time someone has accused me of being ignorant on this site and having read several of your recent post I think the label could be more appropriately applied to yourself.

I wouldn't take it personally. There have been a couple of new posters that seem hell bent on antagonizing others.... some kind of tag team maybe? Who knows where they're from....

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What a great article! Above all else, we need to return to sound money and reason.

Regarding inflation - if it is based on credit, there will be a day when the matching deflation again tries to return the credit to the ether it came from. Unless, that is, we abandon the gilts market altogether. We would then have a new form of monetary system, with QE forever growing, with all borrowing coming from the BoE (ie. thin air), and fuelling inflation, rather than government borrowing. (EDIT: to meet the government's inflation target - for right or wrong)

The former will lead to a depression, but the latter could lead to monetary reform, if the governments (and importantly, the people) have the strength of will and foresight to make changes for the better. Once the blinkers are off and the dual causes of monetary inflation are laid bare (government borrowing + fractional reserve banking), there could be a time of reappraisal. What is money and who should have the power to create it?

EDIT: typo

Edited by Traktion

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I wouldn't take it personally. There have been a couple of new posters that seem hell bent on antagonizing others.... some kind of tag team maybe? Who knows where they're from....

Not realy offended just felt after a string of his posts turning up on threads I would rise to the bait.

I understand being a fence sitter does not endear you to anyone but I am comfortable to be here atm. I am set up for deflation which is currently the most powerful force but I am not proud and will switch to the inflationary camp if necessary.

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Not realy offended just felt after a string of his posts turning up on threads I would rise to the bait.

I understand being a fence sitter does not endear you to anyone but I am comfortable to be here atm. I am set up for deflation which is currently the most powerful force but I am not proud and will switch to the inflationary camp if necessary.

I am a fence sitter too; so much depends on the continued actions of the government, that it is impossible to be sure which way they will go. I suspect the government may be more interested in inflation than deflation, but very high inflation is sure to lose them the grey vote. IMO, much depends on whether you believe the government can be trusted to do things in our interest or whether you think those with deep pockets will influence the decision instead.

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I am a fence sitter too; so much depends on the continued actions of the government, that it is impossible to be sure which way they will go. I suspect the government may be more interested in inflation than deflation, but very high inflation is sure to lose them the grey vote. IMO, much depends on whether you believe the government can be trusted to do things in our interest or whether you think those with deep pockets will influence the decision instead.

Lots and lots of variables, and IMHO while in the eye of the storm this is a very dangerous point in the crash to hold firm beliefs one way or the other. I am willing to pay for hindsight which in the case of high inflation means missing out on the opening phase of it.

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I understand being a fence sitter does not endear you to anyone but I am comfortable to be here atm.

On the other hand "pigeon-holing" yourself is never a good idea. It can lead people to support things they don't really believe just because it fits the box.

I know (as I'm sure we all do) people who have grown up "labour" or "tory" and will support anything they do..... simply because they have told themselves that's what they are.... if you get my drift..... I haven't had enough coffee.

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Reading this blog I FIRMLY STATE I AM IN THE INFLATION CAMP possibly hyperinflation

I too have read arguments for deflation and are very good and solid and yes we have had a good spell of it

I too have read very good arguments for inflation or hyperinflation WE ARE NOW IN THE INFLATION STAGE

House prices up over 5 months meaning double didgit yoy inflation

Oil up triple didgits from its low a real driver of inflation

Think taxes up petrol yesterday bear taxes up VAT going up soon means prices up is inflation

Why am I certain we are in an inflation phaze not the facts above these are just the start of this policy WE WILL DO WHATEVER IT TAKES from the powers that be not the words but the historical action done and continuing

Dont be suprised when the inflation suprisingly is higher than expected when reported which will be lower than real price rises

The hype over deflation was true before government started doing whater ever it takes now it takes deflation hype to keep interest rated manipulated low to stoke inflation deflation hype helps this manipulation as does global QE currency manipulation to devalue and stoke inflation and get that wrong then hyperinflation will happen within days the key is interest rates and currency value at the moment inflation is winning

I cant predict the future but I will be prepared for all outcomes this being cash for deflation stocks for inflation and gold for hyperinflation and allocate your portfolio percentage wise as to the odds of all three the best way is spend it now I am good investing

I assume I will get some flack for not sitting on the sidelines but I will enjoy watching comments

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I am only interested in prices, they are what affect me. If you want to worry youself about the piddly amount of QE we have seen in face of the massive collapsing debt bubble then that is your prerogative.

This is the interesting thing about discussions about QE and inflation... It's hard to describe, but if you allow me some poetic licence, I'd say that the discussions - and the positions people take seem to be rather one-dimensional. We talk about wage inflation or asset price inflation; we talk about inflation or deflation - etc. I think we're conditioned to do this by a culture that assumes everything of importance can be modelled using a suitable metric.

In practice, I think the reality is very much more complicated. Sticking with 'dimensionality', we need to consider specifics if we want to forecast scientifically - and this means we must take into account the interleaving of significant events - and, hence, time-scales. We also need to consider that there are many significantly different interacting systems - for example, the bond and equity markets; bond and commodity markets; commodity and equity markets - etc. etc. The complexity of our monetary system means that it is extremely difficult to estimate the value of money - and, hence, there can be no unassailable arguments about what our future holds - we are definitely interacting with a chaotic system. We can likely predict what central banks will do, and have a fair stab at what legislation will emerge from government. What we can't do is reliably estimate human irrationality - though we can be sure that only irrational behaviour is significant.

The consequences of QE are not only difficult to predict a-priori (as a forecast) but they are also difficult to analyse a posteori (after the event...) because there is no control experiment. I share your belief that while the nominal sums involved with QE are huge, their impact is far smaller than the nominal amounts in news headlines suggest. I think QE has an inflationary effect - though this is debatable - since, it can be argued, that the system was in equilibrium at the time of the crisis - which makes it difficult, if not impossible, to predict the systemic effects of any intervention. Perhaps QE itself diminishes confidence and will prove deflationary. Not only can't we predict, but we will likely never know if QE significantly effected the systemic outcome. However, I am interested to note that QE definitely does have temporal effects - it delays some events and accelerates others - and I think these direct implications can be anticipated. It is my opinion that these short-term influences on when events transpire deserve the most attention.

Edited by A.steve

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