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View Diary: Financial Repression: ZIRP and Zero Retirement (14 comments)

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  •  Great post even if I disagree with some of it (0+ / 0-)

    Inflation is caused by too much demand chasing too much supply. Increasing the amount of money can spur demand and cause inflation, but by itself increasing money doesn't cause inflation. With capital utilization still low we still don't have a real danger of hyper-inflation. We need a higher rate of inflation to create something our politics won't force banks to do, write down the inflated asset prices of many investments. Asset prices should be based on the amount of income they generate, with workers wages in a 15 year depression the "purchasing class" doesn't have the income to buy from the "supplier class". Higher inflation is a cruel and crude way of causing this. Some of the fear depends on if you think the Fed has the ability to drain excess capital out of the system. They claim to have a number of innovative ways of doing so.

    -1.63/ -1.49 "Speaking truth to power" (with snark of course)!

    by dopper0189 on Sun Oct 14, 2012 at 10:57:24 AM PDT

    •  The causes of inflation (4+ / 0-)

      It's amazing how many people have the wrong idea of what causes inflation. For instance:

       Currently, the quantity theory of money is widely accepted as an accurate model of inflation in the long run. Consequently, there is now broad agreement among economists that in the long run, the inflation rate is essentially dependent on the growth rate of money supply relative to the growth of the economy. However, in the short and medium term inflation may be affected by supply and demand pressures in the economy, and influenced by the relative elasticity of wages, prices and interest rates
       Your idea of inflation is only partly right and only in the short-term.
         We are in the days of QE-to-infinity and unprecedented, global central bank intervention. So the antiquated ideas of inflation that you've written need to be retired.

      ¡Cállate o despertarás la izquierda! - protest sign in Spain

      by gjohnsit on Sun Oct 14, 2012 at 12:05:41 PM PDT

      [ Parent ]

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