A Message To All The Inflationists

[punter]

I see Ambrose Evans Pritchard is calling for debt monetisation in the telegraph:
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/9819701/Central-bankers-should-be-brought-to-heel-by-elected-parliaments.html

Mervyn King says a little inflation aint so bad:

http://www.telegraph.co.uk/finance/economics/9819372/Sir-Mervyn-King-says-abandoning-inflation-target-would-be-irresponsible.html

[doahh]

Mervyn King says a little inflation aint so bad:

http://www.telegraph.co.uk/finance/economics/9819372/Sir-Mervyn-King-says-abandoning-inflation-target-would-be-irresponsible.html

Abandoning inflation targeting in Britain would be “irresponsible” and risk a return to the high inflation of the 1970s warned Sir Mervyn King, in what appeared to be a veiled criticism of his successor Mark Carney and the Chancellor.

Lets just wait until the velocity of that QE money picks up, then we will have inflation Mr King. As it is I think he has already abandoned the inflation target and his actions will either cause stagnation for decades or the return to 1970's that he claims to fear so much. What a knob.

The governor suggested an extension to the Bank’s £375bn quantitative easing programme was a strong possibility if conditions deemed a further dose necessary, but said there were reasons to believe “a gentle recovery” is underway.

Tr-la-la-la-la, stick my fingers in my ears, as I am Mr. Tuc-king. More printy-printy.

Edited January 23, 2013 by doahh

[easy2012]

I see Ambrose Evans Pritchard is calling for debt monetisation in the telegraph:

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/9819701/Central-bankers-should-be-brought-to-heel-by-elected-parliaments.html

Mervyn King says a little inflation aint so bad:

http://www.telegraph.co.uk/finance/economics/9819372/Sir-Mervyn-King-says-abandoning-inflation-target-would-be-irresponsible.html

I think he copies me. I having been asking this question for years on HPC and FT now.

If printing leads to prosperity then indeed world poverty will be wiped off in a stroke - it can't.

What it can do though, it to steal existing resources and move it to the hand of those who know how to game the monetary system.

[easy2012]

A piece of paper 'makes society richer' because it enables activity to take place which otherwise wouldn't.

It avoids the natural collapse of demand and default.

Perhaps at the beginning and for a short while. Once people know that their fruit of labours and savings are being nicked, they just produce not a lot more than what they need to exchange and then go out sledging on the snow. Or, they may go elsewhere where they are being mugged less.

Money are promises in standardised unit of favours extended today and the holder of the promise expect that to be repaid in something that is of use to him/her - no more pieces of papers.

It further skew the incentives where people trying to make money from money rather than making real stuffs/services. ( That is why our brightest head for GS rather than RR).

Edited January 23, 2013 by easy2012

[Bloo Loo]

A piece of paper 'makes society richer' because it enables activity to take place which otherwise wouldn't.

It avoids the natural collapse of demand and default.

The powers that be like it because it 'appears' at face value to 'work' whilst avoiding the need to tackle inequality. Indeed it exacerbates it by extending it and allowing the imbalances to become even bigger.

Why would velocity increase? I should imagine the money is spent but I should imagine velocity is constantly falling as more money continues to accumulate in fewer hands.

Devaluation is the key reason why people will need to spend more as prices rise and in a desire to shed fiat for assets. But in order to tackle inequality properly we cannot continue to ignore the role of assets and must use tax/price adjustments to effect.

the "piece of paper" is a receipt for the pledge of something valuable.

Printing devalues the pledge instantly as the person receiving the receipt has made no effort whatsoever to obtain its value.

Therefore, every single extra piece of paper issued devalues the rest.

[Sour Mash]

I see Ambrose Evans Pritchard is calling for debt monetisation in the telegraph:

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/9819701/Central-bankers-should-be-brought-to-heel-by-elected-parliaments.html

Mervyn King says a little inflation aint so bad:

http://www.telegraph.co.uk/finance/economics/9819372/Sir-Mervyn-King-says-abandoning-inflation-target-would-be-irresponsible.html

No problem - according to the 'deflation' camp there's absolutely no way that we can have inflation, deflation is a cert, so print as much as you like, guys!

[winkie]

They can print, let them do that....it will only find its way into the hands that will not use it correctly...it will be taken outside the country to invest elsewhere whilst it still is of value....it will make most at the bottom of the pile poorer, kill all savings and price out more people....our work will become worthless.

The poor and disadvantaged, the old and sick, will cut back drastically and find new ways to eat and live doing things their own way....society will break down, it will all eventually implode on itself.

[doahh]

A piece of paper 'makes society richer' because it enables activity to take place which otherwise wouldn't.

It avoids the natural collapse of demand and default.CWI

The powers that be like it because it 'appears' at face value to 'work' whilst avoiding the need to tackle inequality. Indeed it exacerbates it by extending it and allowing the imbalances to become even bigger.

Why would velocity increase? I should imagine the money is spent but I should imagine velocity is constantly falling as more money continues to accumulate in fewer hands.

Devaluation is the key reason why people will need to spend more as prices rise and in a desire to shed fiat for assets. But in order to tackle inequality properly we cannot continue to ignore the role of assets and must use tax/price adjustments to effect.

My understanding is that the banks are using QE to shore up their balance sheets (the money is not spent). As they hold on to the money it is not being spent and velocity drops. However, if they manage to recover then they will begin to loan that money out in order to make a profit. As they begin to loan out that money the velocity increases and so will prices. The only solution is to remove the QE from the money supply as a recovery takes hold.

[Bloo Loo]

My understanding is that the banks are using QE to shore up their balance sheets (the money is not spent). As they hold on to the money it is not being spent and velocity drops. However, if they manage to recover then they will begin to loan that money out in order to make a profit. As they begin to loan out that money the velocity increases and so will prices. The only solution is to remove the QE from the money supply as a recovery takes hold.

course they spent it....it went to the Government.

[Dorkins]

A piece of paper 'makes society richer' because it enables activity to take place which otherwise wouldn't.

It avoids the natural collapse of demand and default.

This is typical Keynesian government-centric overaggregation.

Human beings will always engage in some sort of activity whether or not you give them more pieces of paper. Maybe they will decide to keep using their old laptop for another year instead of buying a new one. Maybe they will find work closer to home or move closer to work instead of spending a lot of money on commuting. Human beings will do what they always do, which is to try to make the best choices for themselves given the options available. The government might not like these choices because they happen independently of the government and don't contribute to GDP, but who wants to live in a society where the government always gets to decide which activities we must perform?

[winkie]

This is typical Keynesian government-centric overaggregation.

Human beings will always engage in some sort of activity whether or not you give them more pieces of paper. Maybe they will decide to keep using their old laptop for another year instead of buying a new one. Maybe they will find work closer to home or move closer to work instead of spending a lot of money on commuting. Human beings will do what they always do, which is to try to make the best choices for themselves given the options available. The government might not like these choices because they happen independently of the government and don't contribute to GDP, but who wants to live in a society where the government always gets to decide which activities we must perform?

I like that....to go against the flow as opposed to going with the expected flow.

[zugzwang]

course they spent it....it went to the Government.

Every penny. It's all there on the BoE's massively expanded balance sheet. The banks get to do some short-term speculating with the QE cash but only on condition that they buy the same quantity of gilts from the DMO that they sell to the Asset Purchase Facility.

http://www.bankofengland.co.uk/markets/Pages/balancesheet/default.aspx

[Game_Over]

A piece of paper 'makes society richer' because it enables activity to take place which otherwise wouldn't.

It avoids the natural collapse of demand and default.

The powers that be like it because it 'appears' at face value to 'work' whilst avoiding the need to tackle inequality. Indeed it exacerbates it by extending it and allowing the imbalances to become even bigger.

Why would velocity increase? I should imagine the money is spent but I should imagine velocity is constantly falling as more money continues to accumulate in fewer hands.

Devaluation is the key reason why people will need to spend more as prices rise and in a desire to shed fiat for assets. But in order to tackle inequality properly we cannot continue to ignore the role of assets and must use tax/price adjustments to effect.

Oh dear......

[Game_Over]

I get the feeling that many reading my post fail to understand its meaning.

I'm setting out why 'they' think it works with certain false evidence to back their views up.

Try and read a bit more intelligently guys.

I clearly point out they merely paper over the cracks rather than tackling the root causes - such as an inflationary bias exacerbating inequality and thereby end demand via the differential rates of asset price inflation versus price (and wage) inflation.

Perhaps you should have been a bit clearer in your statement of the obvious

then everyone else wouldn't have misunderstood what you were getting at.

Edited January 23, 2013 by Game_Over

[Game_Over]

I would have thought that putting 'makes people richer' for instance in inverted commas or using 'they' is a pretty clear signal that I myself do not hold that view. Hey ho. A bit too quick to jump to your prejudices and assumptions methinks.

Hilarious!

The Oh Dear was for the reaction you got

when many people misunderstood your post

after you constantly rip me for 'stating the obvious'

[Game_Over]

A piece of paper 'makes society richer' because it enables activity to take place which otherwise wouldn't.

It avoids the natural collapse of demand and default.

The powers that be like it because it 'appears' at face value to 'work' whilst avoiding the need to tackle inequality. Indeed it exacerbates it by extending it and allowing the imbalances to become even bigger.

Why would velocity increase? I should imagine the money is spent but I should imagine velocity is constantly falling as more money continues to accumulate in fewer hands.

Devaluation is the key reason why people will need to spend more as prices rise and in a desire to shed fiat for assets. But in order to tackle inequality properly we cannot continue to ignore the role of assets and must use tax/price adjustments to effect.

Ok

You are suggesting that printing is a good thing because it forces people to spend which in turn stimulates the economy.

You have also recognised, however, that it leads to asset price inflation which favours the asset rich, so you feel that this unwelcome side effect should be tackled via taxation.

Your original assertion is standard Keynesian pump priming but you have recognized one potential problem and suggested a typically socialist solution.

Two problems here, firstly the people you are forcing to spend their savings rely on the interest from their savings as an income

therefore the more you try and force them to spend via inflation, the more they will be forced to cut back on spending.

Secondly, we have reached the limit of what can be raised by taxation in this country so the more taxes are raised the lower overall revenue becomes.

So both measures, printing and increasing taxes are actually causing the opposite effect you are hoping for

and are resulting in STAGFLATION.

TPTB like QE because it does exactly what they want it to which is transfer wealth from us to them while eroding the liabilities of the state via inflation.

And they - Lib/Lab/Con don't give a toss about inequality

[Bloo Loo]

There you go again. I suggested no such thing. I'm explaining why 'they' think it is a good idea and why, in the short term, 'they' think it works.

I go on to state that an inflationary bias (not just money printing) favours asset holders over earners and cash savers leading ultimately to the root cause of falling demand, rising indebtedness and financial crises....inequality.

Kloset Keynesian Klan alert!

[Game_Over]

There you go again. I suggested no such thing. I'm explaining why 'they' think it is a good idea and why, in the short term, 'they' think it works.

I go on to state that an inflationary bias (not just money printing) favours asset holders over earners and cash savers leading ultimately to the root cause of falling demand, rising indebtedness and financial crises....inequality.

You said.

A piece of paper 'makes society richer' because it enables activity to take place which otherwise wouldn't.

It avoids the natural collapse of demand and default.

Did you not?

Well they have printed and demand has collapsed

so what is YOUR explanation, for this?

To be honest don't bother.

Everyone didn't 'misunderstand' your post because they are too thick to read it properly

they 'misunderstood' your post because, if you were intending the opening statement to be ironic

you failed.

Edited January 23, 2013 by Game_Over

[gf3]

You said.

A piece of paper 'makes society richer' because it enables activity to take place which otherwise wouldn't.

It avoids the natural collapse of demand and default.

Did you not?

Well they have printed and demand has collapsed

so what is YOUR explanation, for this?

The problem is obvious they simple haven't printed enough.

Maybe they should change the motif on the pound notes from "I promise to pay the bearer on demand" to " use it or lose it"

[Game_Over]

The problem is obvious they simple haven't printed enough.

Maybe they should change the motif on the pound notes from "I promise to pay the bearer on demand" to " use it or lose it"

Or they could add a few Zero's

Then we'd all be millionaires!

[Game_Over]

I find it very hard to engage with someone who seems to be deliberately misunderstanding my posts even when I make the effort to clarify what I originally stated. It is legitimate to criticise me for not initially writing clearly enough for you...but not subsequently.

If you really do wish to try and understand what I'm saying, I suggest going back and re-reading this thread slowly and carefully having wiped your prejudices from your mind about what views you think I hold.

You said

'I get the feeling that many reading my post fail to understand its meaning.

I'm setting out why 'they' think it works with certain false evidence to back their views up.

Try and read a bit more intelligently guys.'

So basically you think we are all too thick to understand what you meant

whereas most people here would have apologized and explained themselves more clearly.

And you are now clearly Trolling me.

[Game_Over]

Are you married? You are extremely annoying aren't you. Note to self - don't try and engage with game over. :-)

If you read all my posts you would know I am married.

And you had a chance to engage but decided to insult me instead.

However, as well as being extremely annoying I am also extremely reasonable

and tommorrow is another day

[Game_Over]

To be fair I make a deliberate policy of ignoring most of your posts because I know what you are like and how you can derail and trash any thread you are on.

Perhaps I should have said 'are you still married'? If so, your wife must be up for canonisation. :-)

Well if you know what I am like that is probably because I take great pains to explain my position clearly

And the way I apparently derail and trash threads is by challenging the left wing Groupthink that seems to be gradually dominating this site now we have a Conservative/Lib Dem government, although I notice the mods have now started putting some of the more overtly left wing political rant threads straight into off-topic.

At the end of the day, If you want a debate, then you have to be prepared to tolerate and engage with those who hold an opposing viewpoint.

Of course if you don't want a debate then I am a Troll.

[wonderpup]

If printing paper money can't make you richer- can claims based paper debt make you poorer?

Each is as abstract as the other.

So to be logical we must accept that both the printed money and the printed debt instruments are equally fiction and neither have any validity.

In which case there is no debt crisis. If paper cannot create wealth then neither can it create debt.

[Game_Over]

I find it interesting that you think that 'everyone' on hpc is a 'left wing jerk'. It is stuff like that makes me think you deliberately try and wreck what can be a very interesting and informative forum. I think of myself for instance as apolitical and have no time for any of the current shower. In fact I am very much a capitalist who rails against the fact that without an interest rate we no longer have 'capitalism' to help us. Listening to your ill informed views, I, along with nearly everyone else here is labelled a Marxist. I despise fraud and vested interests, particularly of those in power. And when I hear ignorant attack dog apologists for these people like you bent on destroying sensible discussion, I despair.

More ad hominem.

You basically just called everyone, myself included idiots because you didn't explain yourself coherently.

Now you are attacking me for pointing this out.