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United States43195 Posts
On April 29 2019 07:39 BerserkSword wrote:Show nested quote +On April 29 2019 07:05 Nouar wrote:On April 29 2019 05:50 BerserkSword wrote:On April 28 2019 21:00 Biff The Understudy wrote:
I don’t think you understand at all the interview you quoted because it’s a lesson on why inflation is good:
Suppose you want to buy a really good book about economics (for example). And the book costs 100 dollars. You are VERY tight with your money, not because you are stingy but because spoiler alert, you are a metaphor for a big company. Anyway. There is an inflation rate of 2% that means next year the book will be 102 dollars. Your most rational behaviour is to not delay and buy it immediately.
Suppose that there is a deflation of 2%. Now the book will be 98 dollars. No way you buy it now; it’s much better to put your cash under your pillow and wait for a year or two. Hell you make a profit by not investing.
Now, here is the thing: there is strictly no downside to a small dose of inflation. As long as it’s not a runaway phenomenon, it just incentivize people to spend their money and invest and punishes sleeping money, which is great.
And that’s what the interview says: inflation is great for investment, deflation for savings. And in a capitalist economy you really don’t want people to save, you want them to invest and buy shit. On the contrary, I understand exactly what it said. You just don't understand the implications Inflation is great for borrowing. I've already written paragraphs on this matter and included the method governments and banks use to enrich themselves at the expense of people down the ladder. This is how big banks make a killing selling US government debt that is handed out like candy (at the expense of general population) and public companies pump their stocks (since federal funds rate is so slow it's almost like they are borrowing money for free). And, since like we both agree (at least I think we do), inflation rewards borrowers, it creates a debt system that keeps the "consumers" enslaved for decades. The idea that there is zero downside to inflation is delusional. It is in direct conflict with one of the fundamental concepts of economics - EVERYTHING has a price. So basically, while inflation is great for people higher on the socio-economic ladder, it sucks the poorer someone is. Keynesians like yourself either don't understand or choose to ignore the situation poorer people are in. Life 101 is that you DO need to keep some cash under your pillow (in the bank) as an emergency fund. In the real world the working and middle classes are paid in USD. Not everything is an "investment" and for the low and middle class, investments are not a concern when they barely make ends meet. You are right and wrong. It is also good for regular people that have to borrow to buy a home, a car, or whatever else, instead of always renting as you complain. The main issue is when wages do not keep up with inflation, and that should have been your main focus, instead of inflation itself if you want to target regular people and the middle class slowly disappearing. With deflation, people can't afford their mortgages and get thrown out. With (controlled) inflation, money put in banks or under a mattress loses value over time (works best with rich people, no impact on paycheck to paycheck workers), and it is an incentive to invest that money into something useful for the economy, growing it. It also allows the government to lower the value of its debt, if only they were not stupid enough to use that as an incentive to grow it even more... Your life 101 is why in Europe, there is a guarantee on bank and savings account at 100,000€/person. Deregulation and increased power to corporations against workers (as the Supreme Court showed two days ago, getting a wonderful dissent from RBG) is why wages are not going up accordingly (basically current republican policies as I see them). Only extreme worker shortage, like there is currently, is getting the wages to catch up a little. And this is also a very fine line to thread for the economy, as it hinders its growth as companies can't find people. Of course, too much power to workers is also not good, it's always a matter of balance. Wages and money kept sitting in banks/under the mattress are irrelevant to what I am talking about. Wage control is another form on keynesianism which, together with the inflation, only fucks over poor people. Also, no doubt that the current debt system won't work if there is no inflation....that's the whole reason inflation exists - it's to create a borrowing friendly environment aka the debt slave system. Is that what we really want though? a system that has been, over the last several decades of keynesian monetary expansionist policy, leaving a continually increasing percentage of society unable to even dream of owning a home? Also, you say that inflation keeps rich people from hording fiat and that's a "good thing" as if most or rich people's net worth is composed of fiat money. The fact of the matter is that rich people keep so much of their wealth in non-fiat assets, whether it's property, equities, stores of value, capital, etc. This is how inflation helps rich people because the inflationary policies like QE artificially pump things like the stock market and make actual non-fiat assets more valuable (compared to basic unit of fiat) in comparison to the decreasing value of the cash money Inflation literally helps the rich I dont understand how you are all claiming that "controlled" inflation has no impact on paycheck to paycheck type working and middle class individuals. It is an entirely baseless claim that is in direct odds with the essence of inflation detailed in basic economics. Inflation hits hardest those who are at the bottom of the ladder and latest to see the new circulation, and it hits hardest those who deal the most with fiat money compared to other assets.... Show nested quote +On April 29 2019 07:29 KwarK wrote:On April 29 2019 05:59 BerserkSword wrote:On April 28 2019 22:52 KwarK wrote:On April 28 2019 15:25 BerserkSword wrote:On April 28 2019 11:16 Sermokala wrote:
I think Berzerk sword is confusing basic monetary policy intending to continue inflation at a steady rate as a grand conpiracy thats somehow a ponzi scam where no one gets scamed and everyone benifits. I am not On April 28 2019 11:53 KwarK wrote:On April 28 2019 07:33 BerserkSword wrote:On April 28 2019 07:00 KwarK wrote:I think you're missing the point. I know what a Ponzi scheme is, it's a scheme where you steal from each subsequent round of "investors" to return the investment to the previous round. What I don't understand is why you're describing monetary policy as a Ponzi scheme. Let's put it in relatively simple terms. The way a Ponzi scheme works is that Mr Ponzi offers Adam the opportunity to double his money with a high yield investment if Adam gives Ponzi the money. Adam gives Ponzi the money. Ponzi gives Adam regular account statements showing an increasing balance and Adam is so happy he tells Bob and Charlie about it too and they buy in. When Adam asks for his money back Ponzi can't give him the real investment returns because the investment never existed and so Ponzi steals money from Bob and Charlie's investments to give to Adam. Then when they want their returns he takes money from the next wave of investors (David, Ed, Fred, and George), and so forth. It continues much like a pyramid scheme until the number of new investors joining is insufficient to pay those leaving at which point Ponzi simply takes all the money and flees to a non extradition haven. Could you explain why monetary policy is a Ponzi scheme in terms of which entity plays the part of Ponzi, Adam, Bob, and Charlie, what exactly the high yield investment they're offered is, what mechanism is used to transfer the money from Bob and Charlie to Adam and Ponzi, and what Ponzi's exit strategy is, ideally including the safe haven? I'm guessing you didnt understand my explanation then lol Mr. Ponzi = U.S government circle as i described above The high yield investment Adam - Zach is offered is investment in the U.S. Dollar. Adam - Zach are told they should invest their labor/skills/capital into USD. The mechanism of transfer is getting people to invest in the USD (exchange it for skills/capital/etc) and then decreasing the ability of the dollar to exchange for goods/services. keep in mind i am talking about the transfer of wealth/capital to Mr. Ponzi, not raw fiat money. It continues until the Yaneck's and Zach's are virtually no longer able to be paid for their dollars (ie, the dollars they hold cannot buy anything). The exit strategy is amassing a bunch of food and shelter and other excesses (remember these are the things Yaneck and Zack want to trade their USD for but really cant) and live like kings for when the economy collapses. The safe haven is the military compound surrounded by slums and starvation. See zimbabwe, venezuela, or so. Or maybe some other country. I dont know the detailed plans of the world's elite obviously it's more nuanced than that and I am not saying the U.S is going to replicate zimbabwe (at least anytime soon) but that is the concept. the essence of this whole thign is a ponzi scheme But individuals aren't investing in USD, the vast majority of US families can't lay their hands on $400. They've got clothes, cars, houses, food, land, many even have stocks and shares, but they don't generally have large amounts of liquid cash. It wouldn't make sense for them to have cash either, cash is a medium of exchange to avoid bartering. Wealth is still kept in noncash assets, cash simply lets you sell your noncash asset to person A for tokens and then give those tokens to person B for his noncash asset because person B didn't want the asset you would have bartered. If cash becomes worthless people will be fine. The average American doesn't have hundreds of thousands of dollars under his mattress, he has physical possession of a house and a car, a loan on both of those denominated in dollars which is now essentially settled, student loan debt which is also now settled, and some credit cards. If he's lucky he also has some investments which, while valued in dollars, are ownership stakes in tangible things which will have preserved their value. Dollars are lubrication, a way of making tangible assets exchangeable, it's not the value itself. If the dollars go we'll find something else, the physical paper is a negligible portion of overall wealth. Hell, I'm doing pretty well for myself but I generally have negative dollars on hand at any given time. If assets kept their value but currency ceased to be worth anything my net worth would rise because my liabilities are dollars but my assets are value generating. Every time someone gets paid in USD, he/she is investing in USD. Last time I checked Americans are paid in USD. You ignored when I said the situation in America is more nuanced and slow moving than a zimbabwe or venazuela type situation where pepole are wheelbarrowing around cash to by bread. Youre ignoring the factor of time and sequence that i described before. The basic principle is that people early in the sequence get enriched while the people at the end get impoverished. This happens in all degrees of inflation, just to a different extent depending on inflation rate. The people at the bottom of the socio-economic pyramid - the people who do not have access to non-depreciating assets and who live paycheck to paycheck with maybe a small cash sum in their bank account continually get fucked over. As this goes on the people who are affected spreads to higher up the economic ladder. Decades ago a high school grad had a solid chance of working 40 hrs a week in a factory and trading his labor for USD capable of getting his family a house as well as resources to live. The middle class used to NEVER worry about things like health insurance. Decades are going by and now we have the most college educated generation stuck renting most of the time and a health insurance crisis that is even affecting the middle class. On April 28 2019 12:52 KwarK wrote:On April 28 2019 12:02 GreenHorizons wrote:On April 28 2019 11:53 KwarK wrote:On April 28 2019 07:33 BerserkSword wrote:On April 28 2019 07:00 KwarK wrote:
[quote]
I think you're missing the point. I know what a Ponzi scheme is, it's a scheme where you steal from each subsequent round of "investors" to return the investment to the previous round.
What I don't understand is why you're describing monetary policy as a Ponzi scheme.
Let's put it in relatively simple terms.
The way a Ponzi scheme works is that Mr Ponzi offers Adam the opportunity to double his money with a high yield investment if Adam gives Ponzi the money. Adam gives Ponzi the money. Ponzi gives Adam regular account statements showing an increasing balance and Adam is so happy he tells Bob and Charlie about it too and they buy in. When Adam asks for his money back Ponzi can't give him the real investment returns because the investment never existed and so Ponzi steals money from Bob and Charlie's investments to give to Adam. Then when they want their returns he takes money from the next wave of investors (David, Ed, Fred, and George), and so forth. It continues much like a pyramid scheme until the number of new investors joining is insufficient to pay those leaving at which point Ponzi simply takes all the money and flees to a non extradition haven.
Could you explain why monetary policy is a Ponzi scheme in terms of which entity plays the part of Ponzi, Adam, Bob, and Charlie, what exactly the high yield investment they're offered is, what mechanism is used to transfer the money from Bob and Charlie to Adam and Ponzi, and what Ponzi's exit strategy is, ideally including the safe haven? I'm guessing you didnt understand my explanation then lol Mr. Ponzi = U.S government circle as i described above The high yield investment Adam - Zach is offered is investment in the U.S. Dollar. Adam - Zach are told they should invest their labor/skills/capital into USD. The mechanism of transfer is getting people to invest in the USD (exchange it for skills/capital/etc) and then decreasing the ability of the dollar to exchange for goods/services. keep in mind i am talking about the transfer of wealth/capital to Mr. Ponzi, not raw fiat money. It continues until the Yaneck's and Zach's are virtually no longer able to be paid for their dollars (ie, the dollars they hold cannot buy anything). The exit strategy is amassing a bunch of food and shelter and other excesses (remember these are the things Yaneck and Zack want to trade their USD for but really cant) and live like kings for when the economy collapses. The safe haven is the military compound surrounded by slums and starvation. See zimbabwe, venezuela, or so. Or maybe some other country. I dont know the detailed plans of the world's elite obviously it's more nuanced than that and I am not saying the U.S is going to replicate zimbabwe (at least anytime soon) but that is the concept. the essence of this whole thign is a ponzi scheme But individuals aren't investing in USD, the vast majority of US families can't lay their hands on $400. They've got clothes, cars, houses, food, land, many even have stocks and shares, but they don't generally have large amounts of liquid cash. It wouldn't make sense for them to have cash either, cash is a medium of exchange to avoid bartering. Wealth is still kept in noncash assets, cash simply lets you sell your noncash asset to person A for tokens and then give those tokens to person B for his noncash asset because person B didn't want the asset you would have bartered. If cash becomes worthless people will be fine. The average American doesn't have hundreds of thousands of dollars under his mattress, he has physical possession of a house and a car, a loan on both of those denominated in dollars which is now essentially settled, student loan debt which is also now settled, and some credit cards. If he's lucky he also has some investments which, while valued in dollars, are ownership stakes in tangible things which will have preserved their value. Dollars are lubrication, a way of making tangible assets exchangeable, it's not the value itself. If the dollars go we'll find something else, the physical paper is a negligible portion of overall wealth. Hell, I'm doing pretty well for myself but I generally have negative dollars on hand at any given time. If assets kept their value but currency ceased to be worth anything my net worth would rise because my liabilities are dollars but my assets are value generating. Indeed the value is "stored" in private ownership and the expansion of the concept of personal property into the commons. Then the paper (and digital records) that document it and the forces which enforce those concepts. From my perspective anyway. That's to say your ownership is only as valuable as your ability to secure it against those who would claim ownership themselves, so the value of your property isn't really yours so much as it is allowed you by the system which assures you it is. The manifestation of this (because it may be confusing) would be Japanese Americans in the 40's. They had property that held value until the system (people) decided they didn't. The property I think we agree had value, but their ownership of that value is less obvious (granted there were some formal reparations). The point is that inflation only impacts cash and cash flows. If the purchasing power of cash goes down I don't give a shit because I don't have any cash and my fixed cash outflows (mortgage payments) are greater than my fixed cash inflows (possibly my rate of pay but that's not really fixed, it increases with cost of living). The idea that inflation is stealing wealth from the general population makes no sense. It's also not a Ponzi scheme, for what it's worth. Dude. It's good to hear that you are doing alright, but we are not talking about you, specifically.... And I explained in two ways (defining quantitative easing and your Mr Ponzi Adam, Bob, Charlie scenario) how inflation transfers wealth from the bottom to the top. As long as the general population gets paid in USD, inflation takes wealth from them. I’ll try to explain it a different way. Consider a car. In a period of inflation does it go slower? Is the mpg worse? Or is the utility provided by the car exactly the same? Because if it’s the same then the car can always be traded for whatever amount of currency represents that value, whether it’s ten thousand dollars or a million dollars, the value represented by each unit of currency does not impact the value of the car. Now consider the car note. The bank wants 48 equal monthly payments of $300. In a period of inflation are those $300 payments easier to get or harder? Inflation hurts people holding large amounts of cash and large amounts of fixed rate cash flows. Conversely it helps people who have assets and fixed rate debt payments. Yes I know lol Now tell me how any of this applies to a working class or middle class person working 60 hrs a week, living paycheck to paycheck, and drowning in debt. Inflation is great for people like you and me. I literally owe my great life to inflation (Obama's QE). I quit my career as a physician, and went balls deep in property, the stock market, and bitcoin because that's what the feds policy rewards the most......NOT slaving away at an extremely high stress, high responsiblity, profession, one that is being bogged down by more and more red tape, and having no life. Now I make money from the comfort of my home and do whatever i want. But how does my or your success help lower and middle classl people who are struggling in the U.S? Inflation is great if you're drowning in debt and living paycheck to paycheck. Paycheck to paycheck means 0 cash on hand. Debt means your future cash outflows exceed your future cash inflows. If cash becomes less precious and you have negative cash that means your debt has, in real terms, gone down. I explain, in pretty simple terms, how inflation is a good thing to people with no cash and lots of debt to which you respond "yes, I know, but how does any of that help people with no cash and lots of debt". This is economics 101. If you have cash and the value of cash goes down then you lose. If you have negative cash and the value of cash goes down then you win. The working American has negative cash. "paycheck to paycheck means 0 cash on hand" you do realize that when these people receive paychecks, they have cash on hand....that cash must be used to survive though. working/middle class literally spend 40 hrs or more per week working to obtain cash. They then use that cash to live. inflation is good for me and you who have most of net worth in something that is NOT cash, that increases in value at a higher rate than cash
1) Paycheck to paycheck means their paycheck is fully consumed by expenses with no leftover cash at the end of the month. If your definition of paycheck to paycheck includes leftover cash reserves you're not understanding the words. And if they have no leftover cash then they have nothing to be impacted by inflation.
2) No, real rate of return is net of inflation. The higher inflation, the lower real rate of return. If I have a bond that pays 4% annual interest and inflation increases from 2% to 3% then in real terms my rate of return has halved. (4-2=2, 4-3=1, 1 is half of 2)
3) Debt can be considered a negative rate investment. Therefore the inverse of 2 applies for the exact same reason. If the nominal interest on your debt is 4% but the rate of inflation increases from 2% to 3% then in real terms your interest cost has halved. (4-2=2, 4-3=1, 1 is half of 2)
You need to get back out your textbook. Everything you're saying is the opposite of true.
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On April 29 2019 07:49 KwarK wrote:Show nested quote +On April 29 2019 07:39 BerserkSword wrote:On April 29 2019 07:05 Nouar wrote:On April 29 2019 05:50 BerserkSword wrote:On April 28 2019 21:00 Biff The Understudy wrote:
I don’t think you understand at all the interview you quoted because it’s a lesson on why inflation is good:
Suppose you want to buy a really good book about economics (for example). And the book costs 100 dollars. You are VERY tight with your money, not because you are stingy but because spoiler alert, you are a metaphor for a big company. Anyway. There is an inflation rate of 2% that means next year the book will be 102 dollars. Your most rational behaviour is to not delay and buy it immediately.
Suppose that there is a deflation of 2%. Now the book will be 98 dollars. No way you buy it now; it’s much better to put your cash under your pillow and wait for a year or two. Hell you make a profit by not investing.
Now, here is the thing: there is strictly no downside to a small dose of inflation. As long as it’s not a runaway phenomenon, it just incentivize people to spend their money and invest and punishes sleeping money, which is great.
And that’s what the interview says: inflation is great for investment, deflation for savings. And in a capitalist economy you really don’t want people to save, you want them to invest and buy shit. On the contrary, I understand exactly what it said. You just don't understand the implications Inflation is great for borrowing. I've already written paragraphs on this matter and included the method governments and banks use to enrich themselves at the expense of people down the ladder. This is how big banks make a killing selling US government debt that is handed out like candy (at the expense of general population) and public companies pump their stocks (since federal funds rate is so slow it's almost like they are borrowing money for free). And, since like we both agree (at least I think we do), inflation rewards borrowers, it creates a debt system that keeps the "consumers" enslaved for decades. The idea that there is zero downside to inflation is delusional. It is in direct conflict with one of the fundamental concepts of economics - EVERYTHING has a price. So basically, while inflation is great for people higher on the socio-economic ladder, it sucks the poorer someone is. Keynesians like yourself either don't understand or choose to ignore the situation poorer people are in. Life 101 is that you DO need to keep some cash under your pillow (in the bank) as an emergency fund. In the real world the working and middle classes are paid in USD. Not everything is an "investment" and for the low and middle class, investments are not a concern when they barely make ends meet. You are right and wrong. It is also good for regular people that have to borrow to buy a home, a car, or whatever else, instead of always renting as you complain. The main issue is when wages do not keep up with inflation, and that should have been your main focus, instead of inflation itself if you want to target regular people and the middle class slowly disappearing. With deflation, people can't afford their mortgages and get thrown out. With (controlled) inflation, money put in banks or under a mattress loses value over time (works best with rich people, no impact on paycheck to paycheck workers), and it is an incentive to invest that money into something useful for the economy, growing it. It also allows the government to lower the value of its debt, if only they were not stupid enough to use that as an incentive to grow it even more... Your life 101 is why in Europe, there is a guarantee on bank and savings account at 100,000€/person. Deregulation and increased power to corporations against workers (as the Supreme Court showed two days ago, getting a wonderful dissent from RBG) is why wages are not going up accordingly (basically current republican policies as I see them). Only extreme worker shortage, like there is currently, is getting the wages to catch up a little. And this is also a very fine line to thread for the economy, as it hinders its growth as companies can't find people. Of course, too much power to workers is also not good, it's always a matter of balance. Wages and money kept sitting in banks/under the mattress are irrelevant to what I am talking about. Wage control is another form on keynesianism which, together with the inflation, only fucks over poor people. Also, no doubt that the current debt system won't work if there is no inflation....that's the whole reason inflation exists - it's to create a borrowing friendly environment aka the debt slave system. Is that what we really want though? a system that has been, over the last several decades of keynesian monetary expansionist policy, leaving a continually increasing percentage of society unable to even dream of owning a home? Also, you say that inflation keeps rich people from hording fiat and that's a "good thing" as if most or rich people's net worth is composed of fiat money. The fact of the matter is that rich people keep so much of their wealth in non-fiat assets, whether it's property, equities, stores of value, capital, etc. This is how inflation helps rich people because the inflationary policies like QE artificially pump things like the stock market and make actual non-fiat assets more valuable (compared to basic unit of fiat) in comparison to the decreasing value of the cash money Inflation literally helps the rich I dont understand how you are all claiming that "controlled" inflation has no impact on paycheck to paycheck type working and middle class individuals. It is an entirely baseless claim that is in direct odds with the essence of inflation detailed in basic economics. Inflation hits hardest those who are at the bottom of the ladder and latest to see the new circulation, and it hits hardest those who deal the most with fiat money compared to other assets.... On April 29 2019 07:29 KwarK wrote:On April 29 2019 05:59 BerserkSword wrote:On April 28 2019 22:52 KwarK wrote:On April 28 2019 15:25 BerserkSword wrote:On April 28 2019 11:16 Sermokala wrote:
I think Berzerk sword is confusing basic monetary policy intending to continue inflation at a steady rate as a grand conpiracy thats somehow a ponzi scam where no one gets scamed and everyone benifits. I am not On April 28 2019 11:53 KwarK wrote:On April 28 2019 07:33 BerserkSword wrote:On April 28 2019 07:00 KwarK wrote:I think you're missing the point. I know what a Ponzi scheme is, it's a scheme where you steal from each subsequent round of "investors" to return the investment to the previous round. What I don't understand is why you're describing monetary policy as a Ponzi scheme. Let's put it in relatively simple terms. The way a Ponzi scheme works is that Mr Ponzi offers Adam the opportunity to double his money with a high yield investment if Adam gives Ponzi the money. Adam gives Ponzi the money. Ponzi gives Adam regular account statements showing an increasing balance and Adam is so happy he tells Bob and Charlie about it too and they buy in. When Adam asks for his money back Ponzi can't give him the real investment returns because the investment never existed and so Ponzi steals money from Bob and Charlie's investments to give to Adam. Then when they want their returns he takes money from the next wave of investors (David, Ed, Fred, and George), and so forth. It continues much like a pyramid scheme until the number of new investors joining is insufficient to pay those leaving at which point Ponzi simply takes all the money and flees to a non extradition haven. Could you explain why monetary policy is a Ponzi scheme in terms of which entity plays the part of Ponzi, Adam, Bob, and Charlie, what exactly the high yield investment they're offered is, what mechanism is used to transfer the money from Bob and Charlie to Adam and Ponzi, and what Ponzi's exit strategy is, ideally including the safe haven? I'm guessing you didnt understand my explanation then lol Mr. Ponzi = U.S government circle as i described above The high yield investment Adam - Zach is offered is investment in the U.S. Dollar. Adam - Zach are told they should invest their labor/skills/capital into USD. The mechanism of transfer is getting people to invest in the USD (exchange it for skills/capital/etc) and then decreasing the ability of the dollar to exchange for goods/services. keep in mind i am talking about the transfer of wealth/capital to Mr. Ponzi, not raw fiat money. It continues until the Yaneck's and Zach's are virtually no longer able to be paid for their dollars (ie, the dollars they hold cannot buy anything). The exit strategy is amassing a bunch of food and shelter and other excesses (remember these are the things Yaneck and Zack want to trade their USD for but really cant) and live like kings for when the economy collapses. The safe haven is the military compound surrounded by slums and starvation. See zimbabwe, venezuela, or so. Or maybe some other country. I dont know the detailed plans of the world's elite obviously it's more nuanced than that and I am not saying the U.S is going to replicate zimbabwe (at least anytime soon) but that is the concept. the essence of this whole thign is a ponzi scheme But individuals aren't investing in USD, the vast majority of US families can't lay their hands on $400. They've got clothes, cars, houses, food, land, many even have stocks and shares, but they don't generally have large amounts of liquid cash. It wouldn't make sense for them to have cash either, cash is a medium of exchange to avoid bartering. Wealth is still kept in noncash assets, cash simply lets you sell your noncash asset to person A for tokens and then give those tokens to person B for his noncash asset because person B didn't want the asset you would have bartered. If cash becomes worthless people will be fine. The average American doesn't have hundreds of thousands of dollars under his mattress, he has physical possession of a house and a car, a loan on both of those denominated in dollars which is now essentially settled, student loan debt which is also now settled, and some credit cards. If he's lucky he also has some investments which, while valued in dollars, are ownership stakes in tangible things which will have preserved their value. Dollars are lubrication, a way of making tangible assets exchangeable, it's not the value itself. If the dollars go we'll find something else, the physical paper is a negligible portion of overall wealth. Hell, I'm doing pretty well for myself but I generally have negative dollars on hand at any given time. If assets kept their value but currency ceased to be worth anything my net worth would rise because my liabilities are dollars but my assets are value generating. Every time someone gets paid in USD, he/she is investing in USD. Last time I checked Americans are paid in USD. You ignored when I said the situation in America is more nuanced and slow moving than a zimbabwe or venazuela type situation where pepole are wheelbarrowing around cash to by bread. Youre ignoring the factor of time and sequence that i described before. The basic principle is that people early in the sequence get enriched while the people at the end get impoverished. This happens in all degrees of inflation, just to a different extent depending on inflation rate. The people at the bottom of the socio-economic pyramid - the people who do not have access to non-depreciating assets and who live paycheck to paycheck with maybe a small cash sum in their bank account continually get fucked over. As this goes on the people who are affected spreads to higher up the economic ladder. Decades ago a high school grad had a solid chance of working 40 hrs a week in a factory and trading his labor for USD capable of getting his family a house as well as resources to live. The middle class used to NEVER worry about things like health insurance. Decades are going by and now we have the most college educated generation stuck renting most of the time and a health insurance crisis that is even affecting the middle class. On April 28 2019 12:52 KwarK wrote:On April 28 2019 12:02 GreenHorizons wrote:On April 28 2019 11:53 KwarK wrote:On April 28 2019 07:33 BerserkSword wrote:
[quote]
I'm guessing you didnt understand my explanation then lol
Mr. Ponzi = U.S government circle as i described above
The high yield investment Adam - Zach is offered is investment in the U.S. Dollar. Adam - Zach are told they should invest their labor/skills/capital into USD.
The mechanism of transfer is getting people to invest in the USD (exchange it for skills/capital/etc) and then decreasing the ability of the dollar to exchange for goods/services. keep in mind i am talking about the transfer of wealth/capital to Mr. Ponzi, not raw fiat money.
It continues until the Yaneck's and Zach's are virtually no longer able to be paid for their dollars (ie, the dollars they hold cannot buy anything). The exit strategy is amassing a bunch of food and shelter and other excesses (remember these are the things Yaneck and Zack want to trade their USD for but really cant) and live like kings for when the economy collapses. The safe haven is the military compound surrounded by slums and starvation. See zimbabwe, venezuela, or so. Or maybe some other country. I dont know the detailed plans of the world's elite
obviously it's more nuanced than that and I am not saying the U.S is going to replicate zimbabwe (at least anytime soon) but that is the concept.
the essence of this whole thign is a ponzi scheme
But individuals aren't investing in USD, the vast majority of US families can't lay their hands on $400. They've got clothes, cars, houses, food, land, many even have stocks and shares, but they don't generally have large amounts of liquid cash. It wouldn't make sense for them to have cash either, cash is a medium of exchange to avoid bartering. Wealth is still kept in noncash assets, cash simply lets you sell your noncash asset to person A for tokens and then give those tokens to person B for his noncash asset because person B didn't want the asset you would have bartered. If cash becomes worthless people will be fine. The average American doesn't have hundreds of thousands of dollars under his mattress, he has physical possession of a house and a car, a loan on both of those denominated in dollars which is now essentially settled, student loan debt which is also now settled, and some credit cards. If he's lucky he also has some investments which, while valued in dollars, are ownership stakes in tangible things which will have preserved their value. Dollars are lubrication, a way of making tangible assets exchangeable, it's not the value itself. If the dollars go we'll find something else, the physical paper is a negligible portion of overall wealth. Hell, I'm doing pretty well for myself but I generally have negative dollars on hand at any given time. If assets kept their value but currency ceased to be worth anything my net worth would rise because my liabilities are dollars but my assets are value generating. Indeed the value is "stored" in private ownership and the expansion of the concept of personal property into the commons. Then the paper (and digital records) that document it and the forces which enforce those concepts. From my perspective anyway. That's to say your ownership is only as valuable as your ability to secure it against those who would claim ownership themselves, so the value of your property isn't really yours so much as it is allowed you by the system which assures you it is. The manifestation of this (because it may be confusing) would be Japanese Americans in the 40's. They had property that held value until the system (people) decided they didn't. The property I think we agree had value, but their ownership of that value is less obvious (granted there were some formal reparations). The point is that inflation only impacts cash and cash flows. If the purchasing power of cash goes down I don't give a shit because I don't have any cash and my fixed cash outflows (mortgage payments) are greater than my fixed cash inflows (possibly my rate of pay but that's not really fixed, it increases with cost of living). The idea that inflation is stealing wealth from the general population makes no sense. It's also not a Ponzi scheme, for what it's worth. Dude. It's good to hear that you are doing alright, but we are not talking about you, specifically.... And I explained in two ways (defining quantitative easing and your Mr Ponzi Adam, Bob, Charlie scenario) how inflation transfers wealth from the bottom to the top. As long as the general population gets paid in USD, inflation takes wealth from them. I’ll try to explain it a different way. Consider a car. In a period of inflation does it go slower? Is the mpg worse? Or is the utility provided by the car exactly the same? Because if it’s the same then the car can always be traded for whatever amount of currency represents that value, whether it’s ten thousand dollars or a million dollars, the value represented by each unit of currency does not impact the value of the car. Now consider the car note. The bank wants 48 equal monthly payments of $300. In a period of inflation are those $300 payments easier to get or harder? Inflation hurts people holding large amounts of cash and large amounts of fixed rate cash flows. Conversely it helps people who have assets and fixed rate debt payments. Yes I know lol Now tell me how any of this applies to a working class or middle class person working 60 hrs a week, living paycheck to paycheck, and drowning in debt. Inflation is great for people like you and me. I literally owe my great life to inflation (Obama's QE). I quit my career as a physician, and went balls deep in property, the stock market, and bitcoin because that's what the feds policy rewards the most......NOT slaving away at an extremely high stress, high responsiblity, profession, one that is being bogged down by more and more red tape, and having no life. Now I make money from the comfort of my home and do whatever i want. But how does my or your success help lower and middle classl people who are struggling in the U.S? Inflation is great if you're drowning in debt and living paycheck to paycheck. Paycheck to paycheck means 0 cash on hand. Debt means your future cash outflows exceed your future cash inflows. If cash becomes less precious and you have negative cash that means your debt has, in real terms, gone down. I explain, in pretty simple terms, how inflation is a good thing to people with no cash and lots of debt to which you respond "yes, I know, but how does any of that help people with no cash and lots of debt". This is economics 101. If you have cash and the value of cash goes down then you lose. If you have negative cash and the value of cash goes down then you win. The working American has negative cash. "paycheck to paycheck means 0 cash on hand" you do realize that when these people receive paychecks, they have cash on hand....that cash must be used to survive though. working/middle class literally spend 40 hrs or more per week working to obtain cash. They then use that cash to live. inflation is good for me and you who have most of net worth in something that is NOT cash, that increases in value at a higher rate than cash 1) Paycheck to paycheck means their paycheck is fully consumed by expenses with no leftover cash at the end of the month. If your definition of paycheck to paycheck includes leftover cash reserves you're not understanding the words. And if they have no leftover cash then they have nothing to be impacted by inflation. 2) No, real rate of return is net of inflation. The higher inflation, the lower real rate of return. If I have a bond that pays 4% annual interest and inflation increases from 2% to 3% then in real terms my rate of return has halved. 3) Debt can be considered a negative rate investment. Therefore the inverse of 2 applies for the exact same reason. If the nominal interest on your debt is 4% but the rate of inflation increases from 2% to 3% then in real terms your interest cost has halved. You need to get back out your textbook. Everything you're saying is the opposite of true.
Can I use this argument to support the idea that poor people in Zimbabwe that were living paycheck to paycheck and in debt were helped by the inflation?
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United States43195 Posts
On April 29 2019 07:51 GreenHorizons wrote:Show nested quote +On April 29 2019 07:49 KwarK wrote:On April 29 2019 07:39 BerserkSword wrote:On April 29 2019 07:05 Nouar wrote:On April 29 2019 05:50 BerserkSword wrote:On April 28 2019 21:00 Biff The Understudy wrote:
I don’t think you understand at all the interview you quoted because it’s a lesson on why inflation is good:
Suppose you want to buy a really good book about economics (for example). And the book costs 100 dollars. You are VERY tight with your money, not because you are stingy but because spoiler alert, you are a metaphor for a big company. Anyway. There is an inflation rate of 2% that means next year the book will be 102 dollars. Your most rational behaviour is to not delay and buy it immediately.
Suppose that there is a deflation of 2%. Now the book will be 98 dollars. No way you buy it now; it’s much better to put your cash under your pillow and wait for a year or two. Hell you make a profit by not investing.
Now, here is the thing: there is strictly no downside to a small dose of inflation. As long as it’s not a runaway phenomenon, it just incentivize people to spend their money and invest and punishes sleeping money, which is great.
And that’s what the interview says: inflation is great for investment, deflation for savings. And in a capitalist economy you really don’t want people to save, you want them to invest and buy shit. On the contrary, I understand exactly what it said. You just don't understand the implications Inflation is great for borrowing. I've already written paragraphs on this matter and included the method governments and banks use to enrich themselves at the expense of people down the ladder. This is how big banks make a killing selling US government debt that is handed out like candy (at the expense of general population) and public companies pump their stocks (since federal funds rate is so slow it's almost like they are borrowing money for free). And, since like we both agree (at least I think we do), inflation rewards borrowers, it creates a debt system that keeps the "consumers" enslaved for decades. The idea that there is zero downside to inflation is delusional. It is in direct conflict with one of the fundamental concepts of economics - EVERYTHING has a price. So basically, while inflation is great for people higher on the socio-economic ladder, it sucks the poorer someone is. Keynesians like yourself either don't understand or choose to ignore the situation poorer people are in. Life 101 is that you DO need to keep some cash under your pillow (in the bank) as an emergency fund. In the real world the working and middle classes are paid in USD. Not everything is an "investment" and for the low and middle class, investments are not a concern when they barely make ends meet. You are right and wrong. It is also good for regular people that have to borrow to buy a home, a car, or whatever else, instead of always renting as you complain. The main issue is when wages do not keep up with inflation, and that should have been your main focus, instead of inflation itself if you want to target regular people and the middle class slowly disappearing. With deflation, people can't afford their mortgages and get thrown out. With (controlled) inflation, money put in banks or under a mattress loses value over time (works best with rich people, no impact on paycheck to paycheck workers), and it is an incentive to invest that money into something useful for the economy, growing it. It also allows the government to lower the value of its debt, if only they were not stupid enough to use that as an incentive to grow it even more... Your life 101 is why in Europe, there is a guarantee on bank and savings account at 100,000€/person. Deregulation and increased power to corporations against workers (as the Supreme Court showed two days ago, getting a wonderful dissent from RBG) is why wages are not going up accordingly (basically current republican policies as I see them). Only extreme worker shortage, like there is currently, is getting the wages to catch up a little. And this is also a very fine line to thread for the economy, as it hinders its growth as companies can't find people. Of course, too much power to workers is also not good, it's always a matter of balance. Wages and money kept sitting in banks/under the mattress are irrelevant to what I am talking about. Wage control is another form on keynesianism which, together with the inflation, only fucks over poor people. Also, no doubt that the current debt system won't work if there is no inflation....that's the whole reason inflation exists - it's to create a borrowing friendly environment aka the debt slave system. Is that what we really want though? a system that has been, over the last several decades of keynesian monetary expansionist policy, leaving a continually increasing percentage of society unable to even dream of owning a home? Also, you say that inflation keeps rich people from hording fiat and that's a "good thing" as if most or rich people's net worth is composed of fiat money. The fact of the matter is that rich people keep so much of their wealth in non-fiat assets, whether it's property, equities, stores of value, capital, etc. This is how inflation helps rich people because the inflationary policies like QE artificially pump things like the stock market and make actual non-fiat assets more valuable (compared to basic unit of fiat) in comparison to the decreasing value of the cash money Inflation literally helps the rich I dont understand how you are all claiming that "controlled" inflation has no impact on paycheck to paycheck type working and middle class individuals. It is an entirely baseless claim that is in direct odds with the essence of inflation detailed in basic economics. Inflation hits hardest those who are at the bottom of the ladder and latest to see the new circulation, and it hits hardest those who deal the most with fiat money compared to other assets.... On April 29 2019 07:29 KwarK wrote:On April 29 2019 05:59 BerserkSword wrote:On April 28 2019 22:52 KwarK wrote:On April 28 2019 15:25 BerserkSword wrote:On April 28 2019 11:16 Sermokala wrote:
I think Berzerk sword is confusing basic monetary policy intending to continue inflation at a steady rate as a grand conpiracy thats somehow a ponzi scam where no one gets scamed and everyone benifits. I am not On April 28 2019 11:53 KwarK wrote:On April 28 2019 07:33 BerserkSword wrote:On April 28 2019 07:00 KwarK wrote:
[quote]
I think you're missing the point. I know what a Ponzi scheme is, it's a scheme where you steal from each subsequent round of "investors" to return the investment to the previous round.
What I don't understand is why you're describing monetary policy as a Ponzi scheme.
Let's put it in relatively simple terms.
The way a Ponzi scheme works is that Mr Ponzi offers Adam the opportunity to double his money with a high yield investment if Adam gives Ponzi the money. Adam gives Ponzi the money. Ponzi gives Adam regular account statements showing an increasing balance and Adam is so happy he tells Bob and Charlie about it too and they buy in. When Adam asks for his money back Ponzi can't give him the real investment returns because the investment never existed and so Ponzi steals money from Bob and Charlie's investments to give to Adam. Then when they want their returns he takes money from the next wave of investors (David, Ed, Fred, and George), and so forth. It continues much like a pyramid scheme until the number of new investors joining is insufficient to pay those leaving at which point Ponzi simply takes all the money and flees to a non extradition haven.
Could you explain why monetary policy is a Ponzi scheme in terms of which entity plays the part of Ponzi, Adam, Bob, and Charlie, what exactly the high yield investment they're offered is, what mechanism is used to transfer the money from Bob and Charlie to Adam and Ponzi, and what Ponzi's exit strategy is, ideally including the safe haven? I'm guessing you didnt understand my explanation then lol Mr. Ponzi = U.S government circle as i described above The high yield investment Adam - Zach is offered is investment in the U.S. Dollar. Adam - Zach are told they should invest their labor/skills/capital into USD. The mechanism of transfer is getting people to invest in the USD (exchange it for skills/capital/etc) and then decreasing the ability of the dollar to exchange for goods/services. keep in mind i am talking about the transfer of wealth/capital to Mr. Ponzi, not raw fiat money. It continues until the Yaneck's and Zach's are virtually no longer able to be paid for their dollars (ie, the dollars they hold cannot buy anything). The exit strategy is amassing a bunch of food and shelter and other excesses (remember these are the things Yaneck and Zack want to trade their USD for but really cant) and live like kings for when the economy collapses. The safe haven is the military compound surrounded by slums and starvation. See zimbabwe, venezuela, or so. Or maybe some other country. I dont know the detailed plans of the world's elite obviously it's more nuanced than that and I am not saying the U.S is going to replicate zimbabwe (at least anytime soon) but that is the concept. the essence of this whole thign is a ponzi scheme But individuals aren't investing in USD, the vast majority of US families can't lay their hands on $400. They've got clothes, cars, houses, food, land, many even have stocks and shares, but they don't generally have large amounts of liquid cash. It wouldn't make sense for them to have cash either, cash is a medium of exchange to avoid bartering. Wealth is still kept in noncash assets, cash simply lets you sell your noncash asset to person A for tokens and then give those tokens to person B for his noncash asset because person B didn't want the asset you would have bartered. If cash becomes worthless people will be fine. The average American doesn't have hundreds of thousands of dollars under his mattress, he has physical possession of a house and a car, a loan on both of those denominated in dollars which is now essentially settled, student loan debt which is also now settled, and some credit cards. If he's lucky he also has some investments which, while valued in dollars, are ownership stakes in tangible things which will have preserved their value. Dollars are lubrication, a way of making tangible assets exchangeable, it's not the value itself. If the dollars go we'll find something else, the physical paper is a negligible portion of overall wealth. Hell, I'm doing pretty well for myself but I generally have negative dollars on hand at any given time. If assets kept their value but currency ceased to be worth anything my net worth would rise because my liabilities are dollars but my assets are value generating. Every time someone gets paid in USD, he/she is investing in USD. Last time I checked Americans are paid in USD. You ignored when I said the situation in America is more nuanced and slow moving than a zimbabwe or venazuela type situation where pepole are wheelbarrowing around cash to by bread. Youre ignoring the factor of time and sequence that i described before. The basic principle is that people early in the sequence get enriched while the people at the end get impoverished. This happens in all degrees of inflation, just to a different extent depending on inflation rate. The people at the bottom of the socio-economic pyramid - the people who do not have access to non-depreciating assets and who live paycheck to paycheck with maybe a small cash sum in their bank account continually get fucked over. As this goes on the people who are affected spreads to higher up the economic ladder. Decades ago a high school grad had a solid chance of working 40 hrs a week in a factory and trading his labor for USD capable of getting his family a house as well as resources to live. The middle class used to NEVER worry about things like health insurance. Decades are going by and now we have the most college educated generation stuck renting most of the time and a health insurance crisis that is even affecting the middle class. On April 28 2019 12:52 KwarK wrote:On April 28 2019 12:02 GreenHorizons wrote:On April 28 2019 11:53 KwarK wrote:
[quote]
But individuals aren't investing in USD, the vast majority of US families can't lay their hands on $400. They've got clothes, cars, houses, food, land, many even have stocks and shares, but they don't generally have large amounts of liquid cash. It wouldn't make sense for them to have cash either, cash is a medium of exchange to avoid bartering. Wealth is still kept in noncash assets, cash simply lets you sell your noncash asset to person A for tokens and then give those tokens to person B for his noncash asset because person B didn't want the asset you would have bartered.
If cash becomes worthless people will be fine. The average American doesn't have hundreds of thousands of dollars under his mattress, he has physical possession of a house and a car, a loan on both of those denominated in dollars which is now essentially settled, student loan debt which is also now settled, and some credit cards. If he's lucky he also has some investments which, while valued in dollars, are ownership stakes in tangible things which will have preserved their value.
Dollars are lubrication, a way of making tangible assets exchangeable, it's not the value itself. If the dollars go we'll find something else, the physical paper is a negligible portion of overall wealth. Hell, I'm doing pretty well for myself but I generally have negative dollars on hand at any given time. If assets kept their value but currency ceased to be worth anything my net worth would rise because my liabilities are dollars but my assets are value generating. Indeed the value is "stored" in private ownership and the expansion of the concept of personal property into the commons. Then the paper (and digital records) that document it and the forces which enforce those concepts. From my perspective anyway. That's to say your ownership is only as valuable as your ability to secure it against those who would claim ownership themselves, so the value of your property isn't really yours so much as it is allowed you by the system which assures you it is. The manifestation of this (because it may be confusing) would be Japanese Americans in the 40's. They had property that held value until the system (people) decided they didn't. The property I think we agree had value, but their ownership of that value is less obvious (granted there were some formal reparations). The point is that inflation only impacts cash and cash flows. If the purchasing power of cash goes down I don't give a shit because I don't have any cash and my fixed cash outflows (mortgage payments) are greater than my fixed cash inflows (possibly my rate of pay but that's not really fixed, it increases with cost of living). The idea that inflation is stealing wealth from the general population makes no sense. It's also not a Ponzi scheme, for what it's worth. Dude. It's good to hear that you are doing alright, but we are not talking about you, specifically.... And I explained in two ways (defining quantitative easing and your Mr Ponzi Adam, Bob, Charlie scenario) how inflation transfers wealth from the bottom to the top. As long as the general population gets paid in USD, inflation takes wealth from them. I’ll try to explain it a different way. Consider a car. In a period of inflation does it go slower? Is the mpg worse? Or is the utility provided by the car exactly the same? Because if it’s the same then the car can always be traded for whatever amount of currency represents that value, whether it’s ten thousand dollars or a million dollars, the value represented by each unit of currency does not impact the value of the car. Now consider the car note. The bank wants 48 equal monthly payments of $300. In a period of inflation are those $300 payments easier to get or harder? Inflation hurts people holding large amounts of cash and large amounts of fixed rate cash flows. Conversely it helps people who have assets and fixed rate debt payments. Yes I know lol Now tell me how any of this applies to a working class or middle class person working 60 hrs a week, living paycheck to paycheck, and drowning in debt. Inflation is great for people like you and me. I literally owe my great life to inflation (Obama's QE). I quit my career as a physician, and went balls deep in property, the stock market, and bitcoin because that's what the feds policy rewards the most......NOT slaving away at an extremely high stress, high responsiblity, profession, one that is being bogged down by more and more red tape, and having no life. Now I make money from the comfort of my home and do whatever i want. But how does my or your success help lower and middle classl people who are struggling in the U.S? Inflation is great if you're drowning in debt and living paycheck to paycheck. Paycheck to paycheck means 0 cash on hand. Debt means your future cash outflows exceed your future cash inflows. If cash becomes less precious and you have negative cash that means your debt has, in real terms, gone down. I explain, in pretty simple terms, how inflation is a good thing to people with no cash and lots of debt to which you respond "yes, I know, but how does any of that help people with no cash and lots of debt". This is economics 101. If you have cash and the value of cash goes down then you lose. If you have negative cash and the value of cash goes down then you win. The working American has negative cash. "paycheck to paycheck means 0 cash on hand" you do realize that when these people receive paychecks, they have cash on hand....that cash must be used to survive though. working/middle class literally spend 40 hrs or more per week working to obtain cash. They then use that cash to live. inflation is good for me and you who have most of net worth in something that is NOT cash, that increases in value at a higher rate than cash 1) Paycheck to paycheck means their paycheck is fully consumed by expenses with no leftover cash at the end of the month. If your definition of paycheck to paycheck includes leftover cash reserves you're not understanding the words. And if they have no leftover cash then they have nothing to be impacted by inflation. 2) No, real rate of return is net of inflation. The higher inflation, the lower real rate of return. If I have a bond that pays 4% annual interest and inflation increases from 2% to 3% then in real terms my rate of return has halved. 3) Debt can be considered a negative rate investment. Therefore the inverse of 2 applies for the exact same reason. If the nominal interest on your debt is 4% but the rate of inflation increases from 2% to 3% then in real terms your interest cost has halved. You need to get back out your textbook. Everything you're saying is the opposite of true. Can I use this argument to support the idea that poor people in Zimbabwe that were living paycheck to paycheck and in debt were helped by the inflation?
Why do you think they inflated their currency? They do it to devalue their debt denominated in their currency. The problem is hyperinflation has a bunch of other really shitty problems. But hopefully you can understand that Zimbabwe's debt, denominated in Zimbabwe dollars, got a whole lot easier to pay back when they printed all that currency. And therefore you can understand why an individual's car payment might also be easier to pay off if the currency used was devalued.
Zimbabwe is completely irrelevant to the case of 2% inflation in America. But if you want to bring it up then I hope you can follow why it makes debts easier to pay off.
If you were to ever take the CFP exam this kind of stuff would come up a lot with foreign currency hedges and so forth. It's not debatable stuff, it's just math. You work out your net cash position (cash + cash inflows (rate adjusted) - cash outflows (rate adjusted)) and then you look at relative inflation/interest. If your net cash position is positive and the cash devalues that's bad. If your net cash position is negative and the cash devalues that's good.
What Berserk is arguing is that if your net cash position is negative and cash devalues then that's bad. That doesn't follow because the cash you have to repay would now take fewer hours of labour or fewer assets sold to repay. Obviously it's bad to have a negative net cash position because you're broke. That's a real problem, people with negative cash have problems related to having negative cash. But they don't have inflation problems, on the contrary, they have inflation solutions.
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On April 29 2019 07:49 KwarK wrote:Show nested quote +On April 29 2019 07:39 BerserkSword wrote:On April 29 2019 07:05 Nouar wrote:On April 29 2019 05:50 BerserkSword wrote:On April 28 2019 21:00 Biff The Understudy wrote:
I don’t think you understand at all the interview you quoted because it’s a lesson on why inflation is good:
Suppose you want to buy a really good book about economics (for example). And the book costs 100 dollars. You are VERY tight with your money, not because you are stingy but because spoiler alert, you are a metaphor for a big company. Anyway. There is an inflation rate of 2% that means next year the book will be 102 dollars. Your most rational behaviour is to not delay and buy it immediately.
Suppose that there is a deflation of 2%. Now the book will be 98 dollars. No way you buy it now; it’s much better to put your cash under your pillow and wait for a year or two. Hell you make a profit by not investing.
Now, here is the thing: there is strictly no downside to a small dose of inflation. As long as it’s not a runaway phenomenon, it just incentivize people to spend their money and invest and punishes sleeping money, which is great.
And that’s what the interview says: inflation is great for investment, deflation for savings. And in a capitalist economy you really don’t want people to save, you want them to invest and buy shit. On the contrary, I understand exactly what it said. You just don't understand the implications Inflation is great for borrowing. I've already written paragraphs on this matter and included the method governments and banks use to enrich themselves at the expense of people down the ladder. This is how big banks make a killing selling US government debt that is handed out like candy (at the expense of general population) and public companies pump their stocks (since federal funds rate is so slow it's almost like they are borrowing money for free). And, since like we both agree (at least I think we do), inflation rewards borrowers, it creates a debt system that keeps the "consumers" enslaved for decades. The idea that there is zero downside to inflation is delusional. It is in direct conflict with one of the fundamental concepts of economics - EVERYTHING has a price. So basically, while inflation is great for people higher on the socio-economic ladder, it sucks the poorer someone is. Keynesians like yourself either don't understand or choose to ignore the situation poorer people are in. Life 101 is that you DO need to keep some cash under your pillow (in the bank) as an emergency fund. In the real world the working and middle classes are paid in USD. Not everything is an "investment" and for the low and middle class, investments are not a concern when they barely make ends meet. You are right and wrong. It is also good for regular people that have to borrow to buy a home, a car, or whatever else, instead of always renting as you complain. The main issue is when wages do not keep up with inflation, and that should have been your main focus, instead of inflation itself if you want to target regular people and the middle class slowly disappearing. With deflation, people can't afford their mortgages and get thrown out. With (controlled) inflation, money put in banks or under a mattress loses value over time (works best with rich people, no impact on paycheck to paycheck workers), and it is an incentive to invest that money into something useful for the economy, growing it. It also allows the government to lower the value of its debt, if only they were not stupid enough to use that as an incentive to grow it even more... Your life 101 is why in Europe, there is a guarantee on bank and savings account at 100,000€/person. Deregulation and increased power to corporations against workers (as the Supreme Court showed two days ago, getting a wonderful dissent from RBG) is why wages are not going up accordingly (basically current republican policies as I see them). Only extreme worker shortage, like there is currently, is getting the wages to catch up a little. And this is also a very fine line to thread for the economy, as it hinders its growth as companies can't find people. Of course, too much power to workers is also not good, it's always a matter of balance. Wages and money kept sitting in banks/under the mattress are irrelevant to what I am talking about. Wage control is another form on keynesianism which, together with the inflation, only fucks over poor people. Also, no doubt that the current debt system won't work if there is no inflation....that's the whole reason inflation exists - it's to create a borrowing friendly environment aka the debt slave system. Is that what we really want though? a system that has been, over the last several decades of keynesian monetary expansionist policy, leaving a continually increasing percentage of society unable to even dream of owning a home? Also, you say that inflation keeps rich people from hording fiat and that's a "good thing" as if most or rich people's net worth is composed of fiat money. The fact of the matter is that rich people keep so much of their wealth in non-fiat assets, whether it's property, equities, stores of value, capital, etc. This is how inflation helps rich people because the inflationary policies like QE artificially pump things like the stock market and make actual non-fiat assets more valuable (compared to basic unit of fiat) in comparison to the decreasing value of the cash money Inflation literally helps the rich I dont understand how you are all claiming that "controlled" inflation has no impact on paycheck to paycheck type working and middle class individuals. It is an entirely baseless claim that is in direct odds with the essence of inflation detailed in basic economics. Inflation hits hardest those who are at the bottom of the ladder and latest to see the new circulation, and it hits hardest those who deal the most with fiat money compared to other assets.... On April 29 2019 07:29 KwarK wrote:On April 29 2019 05:59 BerserkSword wrote:On April 28 2019 22:52 KwarK wrote:On April 28 2019 15:25 BerserkSword wrote:On April 28 2019 11:16 Sermokala wrote:
I think Berzerk sword is confusing basic monetary policy intending to continue inflation at a steady rate as a grand conpiracy thats somehow a ponzi scam where no one gets scamed and everyone benifits. I am not On April 28 2019 11:53 KwarK wrote:On April 28 2019 07:33 BerserkSword wrote:On April 28 2019 07:00 KwarK wrote:I think you're missing the point. I know what a Ponzi scheme is, it's a scheme where you steal from each subsequent round of "investors" to return the investment to the previous round. What I don't understand is why you're describing monetary policy as a Ponzi scheme. Let's put it in relatively simple terms. The way a Ponzi scheme works is that Mr Ponzi offers Adam the opportunity to double his money with a high yield investment if Adam gives Ponzi the money. Adam gives Ponzi the money. Ponzi gives Adam regular account statements showing an increasing balance and Adam is so happy he tells Bob and Charlie about it too and they buy in. When Adam asks for his money back Ponzi can't give him the real investment returns because the investment never existed and so Ponzi steals money from Bob and Charlie's investments to give to Adam. Then when they want their returns he takes money from the next wave of investors (David, Ed, Fred, and George), and so forth. It continues much like a pyramid scheme until the number of new investors joining is insufficient to pay those leaving at which point Ponzi simply takes all the money and flees to a non extradition haven. Could you explain why monetary policy is a Ponzi scheme in terms of which entity plays the part of Ponzi, Adam, Bob, and Charlie, what exactly the high yield investment they're offered is, what mechanism is used to transfer the money from Bob and Charlie to Adam and Ponzi, and what Ponzi's exit strategy is, ideally including the safe haven? I'm guessing you didnt understand my explanation then lol Mr. Ponzi = U.S government circle as i described above The high yield investment Adam - Zach is offered is investment in the U.S. Dollar. Adam - Zach are told they should invest their labor/skills/capital into USD. The mechanism of transfer is getting people to invest in the USD (exchange it for skills/capital/etc) and then decreasing the ability of the dollar to exchange for goods/services. keep in mind i am talking about the transfer of wealth/capital to Mr. Ponzi, not raw fiat money. It continues until the Yaneck's and Zach's are virtually no longer able to be paid for their dollars (ie, the dollars they hold cannot buy anything). The exit strategy is amassing a bunch of food and shelter and other excesses (remember these are the things Yaneck and Zack want to trade their USD for but really cant) and live like kings for when the economy collapses. The safe haven is the military compound surrounded by slums and starvation. See zimbabwe, venezuela, or so. Or maybe some other country. I dont know the detailed plans of the world's elite obviously it's more nuanced than that and I am not saying the U.S is going to replicate zimbabwe (at least anytime soon) but that is the concept. the essence of this whole thign is a ponzi scheme But individuals aren't investing in USD, the vast majority of US families can't lay their hands on $400. They've got clothes, cars, houses, food, land, many even have stocks and shares, but they don't generally have large amounts of liquid cash. It wouldn't make sense for them to have cash either, cash is a medium of exchange to avoid bartering. Wealth is still kept in noncash assets, cash simply lets you sell your noncash asset to person A for tokens and then give those tokens to person B for his noncash asset because person B didn't want the asset you would have bartered. If cash becomes worthless people will be fine. The average American doesn't have hundreds of thousands of dollars under his mattress, he has physical possession of a house and a car, a loan on both of those denominated in dollars which is now essentially settled, student loan debt which is also now settled, and some credit cards. If he's lucky he also has some investments which, while valued in dollars, are ownership stakes in tangible things which will have preserved their value. Dollars are lubrication, a way of making tangible assets exchangeable, it's not the value itself. If the dollars go we'll find something else, the physical paper is a negligible portion of overall wealth. Hell, I'm doing pretty well for myself but I generally have negative dollars on hand at any given time. If assets kept their value but currency ceased to be worth anything my net worth would rise because my liabilities are dollars but my assets are value generating. Every time someone gets paid in USD, he/she is investing in USD. Last time I checked Americans are paid in USD. You ignored when I said the situation in America is more nuanced and slow moving than a zimbabwe or venazuela type situation where pepole are wheelbarrowing around cash to by bread. Youre ignoring the factor of time and sequence that i described before. The basic principle is that people early in the sequence get enriched while the people at the end get impoverished. This happens in all degrees of inflation, just to a different extent depending on inflation rate. The people at the bottom of the socio-economic pyramid - the people who do not have access to non-depreciating assets and who live paycheck to paycheck with maybe a small cash sum in their bank account continually get fucked over. As this goes on the people who are affected spreads to higher up the economic ladder. Decades ago a high school grad had a solid chance of working 40 hrs a week in a factory and trading his labor for USD capable of getting his family a house as well as resources to live. The middle class used to NEVER worry about things like health insurance. Decades are going by and now we have the most college educated generation stuck renting most of the time and a health insurance crisis that is even affecting the middle class. On April 28 2019 12:52 KwarK wrote:On April 28 2019 12:02 GreenHorizons wrote:On April 28 2019 11:53 KwarK wrote:On April 28 2019 07:33 BerserkSword wrote:
[quote]
I'm guessing you didnt understand my explanation then lol
Mr. Ponzi = U.S government circle as i described above
The high yield investment Adam - Zach is offered is investment in the U.S. Dollar. Adam - Zach are told they should invest their labor/skills/capital into USD.
The mechanism of transfer is getting people to invest in the USD (exchange it for skills/capital/etc) and then decreasing the ability of the dollar to exchange for goods/services. keep in mind i am talking about the transfer of wealth/capital to Mr. Ponzi, not raw fiat money.
It continues until the Yaneck's and Zach's are virtually no longer able to be paid for their dollars (ie, the dollars they hold cannot buy anything). The exit strategy is amassing a bunch of food and shelter and other excesses (remember these are the things Yaneck and Zack want to trade their USD for but really cant) and live like kings for when the economy collapses. The safe haven is the military compound surrounded by slums and starvation. See zimbabwe, venezuela, or so. Or maybe some other country. I dont know the detailed plans of the world's elite
obviously it's more nuanced than that and I am not saying the U.S is going to replicate zimbabwe (at least anytime soon) but that is the concept.
the essence of this whole thign is a ponzi scheme
But individuals aren't investing in USD, the vast majority of US families can't lay their hands on $400. They've got clothes, cars, houses, food, land, many even have stocks and shares, but they don't generally have large amounts of liquid cash. It wouldn't make sense for them to have cash either, cash is a medium of exchange to avoid bartering. Wealth is still kept in noncash assets, cash simply lets you sell your noncash asset to person A for tokens and then give those tokens to person B for his noncash asset because person B didn't want the asset you would have bartered. If cash becomes worthless people will be fine. The average American doesn't have hundreds of thousands of dollars under his mattress, he has physical possession of a house and a car, a loan on both of those denominated in dollars which is now essentially settled, student loan debt which is also now settled, and some credit cards. If he's lucky he also has some investments which, while valued in dollars, are ownership stakes in tangible things which will have preserved their value. Dollars are lubrication, a way of making tangible assets exchangeable, it's not the value itself. If the dollars go we'll find something else, the physical paper is a negligible portion of overall wealth. Hell, I'm doing pretty well for myself but I generally have negative dollars on hand at any given time. If assets kept their value but currency ceased to be worth anything my net worth would rise because my liabilities are dollars but my assets are value generating. Indeed the value is "stored" in private ownership and the expansion of the concept of personal property into the commons. Then the paper (and digital records) that document it and the forces which enforce those concepts. From my perspective anyway. That's to say your ownership is only as valuable as your ability to secure it against those who would claim ownership themselves, so the value of your property isn't really yours so much as it is allowed you by the system which assures you it is. The manifestation of this (because it may be confusing) would be Japanese Americans in the 40's. They had property that held value until the system (people) decided they didn't. The property I think we agree had value, but their ownership of that value is less obvious (granted there were some formal reparations). The point is that inflation only impacts cash and cash flows. If the purchasing power of cash goes down I don't give a shit because I don't have any cash and my fixed cash outflows (mortgage payments) are greater than my fixed cash inflows (possibly my rate of pay but that's not really fixed, it increases with cost of living). The idea that inflation is stealing wealth from the general population makes no sense. It's also not a Ponzi scheme, for what it's worth. Dude. It's good to hear that you are doing alright, but we are not talking about you, specifically.... And I explained in two ways (defining quantitative easing and your Mr Ponzi Adam, Bob, Charlie scenario) how inflation transfers wealth from the bottom to the top. As long as the general population gets paid in USD, inflation takes wealth from them. I’ll try to explain it a different way. Consider a car. In a period of inflation does it go slower? Is the mpg worse? Or is the utility provided by the car exactly the same? Because if it’s the same then the car can always be traded for whatever amount of currency represents that value, whether it’s ten thousand dollars or a million dollars, the value represented by each unit of currency does not impact the value of the car. Now consider the car note. The bank wants 48 equal monthly payments of $300. In a period of inflation are those $300 payments easier to get or harder? Inflation hurts people holding large amounts of cash and large amounts of fixed rate cash flows. Conversely it helps people who have assets and fixed rate debt payments. Yes I know lol Now tell me how any of this applies to a working class or middle class person working 60 hrs a week, living paycheck to paycheck, and drowning in debt. Inflation is great for people like you and me. I literally owe my great life to inflation (Obama's QE). I quit my career as a physician, and went balls deep in property, the stock market, and bitcoin because that's what the feds policy rewards the most......NOT slaving away at an extremely high stress, high responsiblity, profession, one that is being bogged down by more and more red tape, and having no life. Now I make money from the comfort of my home and do whatever i want. But how does my or your success help lower and middle classl people who are struggling in the U.S? Inflation is great if you're drowning in debt and living paycheck to paycheck. Paycheck to paycheck means 0 cash on hand. Debt means your future cash outflows exceed your future cash inflows. If cash becomes less precious and you have negative cash that means your debt has, in real terms, gone down. I explain, in pretty simple terms, how inflation is a good thing to people with no cash and lots of debt to which you respond "yes, I know, but how does any of that help people with no cash and lots of debt". This is economics 101. If you have cash and the value of cash goes down then you lose. If you have negative cash and the value of cash goes down then you win. The working American has negative cash. "paycheck to paycheck means 0 cash on hand" you do realize that when these people receive paychecks, they have cash on hand....that cash must be used to survive though. working/middle class literally spend 40 hrs or more per week working to obtain cash. They then use that cash to live. inflation is good for me and you who have most of net worth in something that is NOT cash, that increases in value at a higher rate than cash 1) Paycheck to paycheck means their paycheck is fully consumed by expenses with no leftover cash at the end of the month. If your definition of paycheck to paycheck includes leftover cash reserves you're not understanding the words. And if they have no leftover cash then they have nothing to be impacted by inflation. 2) No, real rate of return is net of inflation. The higher inflation, the lower real rate of return. If I have a bond that pays 4% annual interest and inflation increases from 2% to 3% then in real terms my rate of return has halved. 3) Debt can be considered a negative rate investment. Therefore the inverse of 2 applies for the exact same reason. If the nominal interest on your debt is 4% but the rate of inflation increases from 2% to 3% then in real terms your interest cost has halved. You need to get back out your textbook. Everything you're saying is the opposite of true.
1) Leftover cash reserves or not, they are still dealing primarily with cash. This is why working AND middle class (who may or may not be pay check to paycheck, but are still barely managing to stay afloat) are getting bent over. Even if they have no cash balance at the end of the month, they still had to use cash to support themselves.
The bottom line is that those who cannot afford to diversify their net worth, such as people who are living pay check to pay check, get screwed over to some extent by inflation.
2) your rate of return is still better than the poor guy who has no bond and only gets paid in cash and whose net value of investments (infestment in the USD) is going down. Why do you think the bond yield would be high enough for you to profit anyway? Bond yields are determined by expected inflation - the higher the expected inflation, the higher the bond yields are.
And youre ignoring the elephant in the room which is the stock market, probably the biggest target of QE. QE artificially pumps (distorts) the stock market like crazy. That's why the stock market soared under Obama, and that's why Trump lambasts the Fed when they engage in even a small modicum of monetary tightening - Trump wants the stock market to look good during his regime.
3) I never denied that inflation is good for borrowing....i literally said that inflation rewards taking on debt several times already lol. I don't see how this is relevant to this whole discussion.
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On April 29 2019 07:55 KwarK wrote:Show nested quote +On April 29 2019 07:51 GreenHorizons wrote:On April 29 2019 07:49 KwarK wrote:On April 29 2019 07:39 BerserkSword wrote:On April 29 2019 07:05 Nouar wrote:On April 29 2019 05:50 BerserkSword wrote:On April 28 2019 21:00 Biff The Understudy wrote:
I don’t think you understand at all the interview you quoted because it’s a lesson on why inflation is good:
Suppose you want to buy a really good book about economics (for example). And the book costs 100 dollars. You are VERY tight with your money, not because you are stingy but because spoiler alert, you are a metaphor for a big company. Anyway. There is an inflation rate of 2% that means next year the book will be 102 dollars. Your most rational behaviour is to not delay and buy it immediately.
Suppose that there is a deflation of 2%. Now the book will be 98 dollars. No way you buy it now; it’s much better to put your cash under your pillow and wait for a year or two. Hell you make a profit by not investing.
Now, here is the thing: there is strictly no downside to a small dose of inflation. As long as it’s not a runaway phenomenon, it just incentivize people to spend their money and invest and punishes sleeping money, which is great.
And that’s what the interview says: inflation is great for investment, deflation for savings. And in a capitalist economy you really don’t want people to save, you want them to invest and buy shit. On the contrary, I understand exactly what it said. You just don't understand the implications Inflation is great for borrowing. I've already written paragraphs on this matter and included the method governments and banks use to enrich themselves at the expense of people down the ladder. This is how big banks make a killing selling US government debt that is handed out like candy (at the expense of general population) and public companies pump their stocks (since federal funds rate is so slow it's almost like they are borrowing money for free). And, since like we both agree (at least I think we do), inflation rewards borrowers, it creates a debt system that keeps the "consumers" enslaved for decades. The idea that there is zero downside to inflation is delusional. It is in direct conflict with one of the fundamental concepts of economics - EVERYTHING has a price. So basically, while inflation is great for people higher on the socio-economic ladder, it sucks the poorer someone is. Keynesians like yourself either don't understand or choose to ignore the situation poorer people are in. Life 101 is that you DO need to keep some cash under your pillow (in the bank) as an emergency fund. In the real world the working and middle classes are paid in USD. Not everything is an "investment" and for the low and middle class, investments are not a concern when they barely make ends meet. You are right and wrong. It is also good for regular people that have to borrow to buy a home, a car, or whatever else, instead of always renting as you complain. The main issue is when wages do not keep up with inflation, and that should have been your main focus, instead of inflation itself if you want to target regular people and the middle class slowly disappearing. With deflation, people can't afford their mortgages and get thrown out. With (controlled) inflation, money put in banks or under a mattress loses value over time (works best with rich people, no impact on paycheck to paycheck workers), and it is an incentive to invest that money into something useful for the economy, growing it. It also allows the government to lower the value of its debt, if only they were not stupid enough to use that as an incentive to grow it even more... Your life 101 is why in Europe, there is a guarantee on bank and savings account at 100,000€/person. Deregulation and increased power to corporations against workers (as the Supreme Court showed two days ago, getting a wonderful dissent from RBG) is why wages are not going up accordingly (basically current republican policies as I see them). Only extreme worker shortage, like there is currently, is getting the wages to catch up a little. And this is also a very fine line to thread for the economy, as it hinders its growth as companies can't find people. Of course, too much power to workers is also not good, it's always a matter of balance. Wages and money kept sitting in banks/under the mattress are irrelevant to what I am talking about. Wage control is another form on keynesianism which, together with the inflation, only fucks over poor people. Also, no doubt that the current debt system won't work if there is no inflation....that's the whole reason inflation exists - it's to create a borrowing friendly environment aka the debt slave system. Is that what we really want though? a system that has been, over the last several decades of keynesian monetary expansionist policy, leaving a continually increasing percentage of society unable to even dream of owning a home? Also, you say that inflation keeps rich people from hording fiat and that's a "good thing" as if most or rich people's net worth is composed of fiat money. The fact of the matter is that rich people keep so much of their wealth in non-fiat assets, whether it's property, equities, stores of value, capital, etc. This is how inflation helps rich people because the inflationary policies like QE artificially pump things like the stock market and make actual non-fiat assets more valuable (compared to basic unit of fiat) in comparison to the decreasing value of the cash money Inflation literally helps the rich I dont understand how you are all claiming that "controlled" inflation has no impact on paycheck to paycheck type working and middle class individuals. It is an entirely baseless claim that is in direct odds with the essence of inflation detailed in basic economics. Inflation hits hardest those who are at the bottom of the ladder and latest to see the new circulation, and it hits hardest those who deal the most with fiat money compared to other assets.... On April 29 2019 07:29 KwarK wrote:On April 29 2019 05:59 BerserkSword wrote:On April 28 2019 22:52 KwarK wrote:On April 28 2019 15:25 BerserkSword wrote:On April 28 2019 11:16 Sermokala wrote:
I think Berzerk sword is confusing basic monetary policy intending to continue inflation at a steady rate as a grand conpiracy thats somehow a ponzi scam where no one gets scamed and everyone benifits. I am not On April 28 2019 11:53 KwarK wrote:On April 28 2019 07:33 BerserkSword wrote:
[quote]
I'm guessing you didnt understand my explanation then lol
Mr. Ponzi = U.S government circle as i described above
The high yield investment Adam - Zach is offered is investment in the U.S. Dollar. Adam - Zach are told they should invest their labor/skills/capital into USD.
The mechanism of transfer is getting people to invest in the USD (exchange it for skills/capital/etc) and then decreasing the ability of the dollar to exchange for goods/services. keep in mind i am talking about the transfer of wealth/capital to Mr. Ponzi, not raw fiat money.
It continues until the Yaneck's and Zach's are virtually no longer able to be paid for their dollars (ie, the dollars they hold cannot buy anything). The exit strategy is amassing a bunch of food and shelter and other excesses (remember these are the things Yaneck and Zack want to trade their USD for but really cant) and live like kings for when the economy collapses. The safe haven is the military compound surrounded by slums and starvation. See zimbabwe, venezuela, or so. Or maybe some other country. I dont know the detailed plans of the world's elite
obviously it's more nuanced than that and I am not saying the U.S is going to replicate zimbabwe (at least anytime soon) but that is the concept.
the essence of this whole thign is a ponzi scheme
But individuals aren't investing in USD, the vast majority of US families can't lay their hands on $400. They've got clothes, cars, houses, food, land, many even have stocks and shares, but they don't generally have large amounts of liquid cash. It wouldn't make sense for them to have cash either, cash is a medium of exchange to avoid bartering. Wealth is still kept in noncash assets, cash simply lets you sell your noncash asset to person A for tokens and then give those tokens to person B for his noncash asset because person B didn't want the asset you would have bartered. If cash becomes worthless people will be fine. The average American doesn't have hundreds of thousands of dollars under his mattress, he has physical possession of a house and a car, a loan on both of those denominated in dollars which is now essentially settled, student loan debt which is also now settled, and some credit cards. If he's lucky he also has some investments which, while valued in dollars, are ownership stakes in tangible things which will have preserved their value. Dollars are lubrication, a way of making tangible assets exchangeable, it's not the value itself. If the dollars go we'll find something else, the physical paper is a negligible portion of overall wealth. Hell, I'm doing pretty well for myself but I generally have negative dollars on hand at any given time. If assets kept their value but currency ceased to be worth anything my net worth would rise because my liabilities are dollars but my assets are value generating. Every time someone gets paid in USD, he/she is investing in USD. Last time I checked Americans are paid in USD. You ignored when I said the situation in America is more nuanced and slow moving than a zimbabwe or venazuela type situation where pepole are wheelbarrowing around cash to by bread. Youre ignoring the factor of time and sequence that i described before. The basic principle is that people early in the sequence get enriched while the people at the end get impoverished. This happens in all degrees of inflation, just to a different extent depending on inflation rate. The people at the bottom of the socio-economic pyramid - the people who do not have access to non-depreciating assets and who live paycheck to paycheck with maybe a small cash sum in their bank account continually get fucked over. As this goes on the people who are affected spreads to higher up the economic ladder. Decades ago a high school grad had a solid chance of working 40 hrs a week in a factory and trading his labor for USD capable of getting his family a house as well as resources to live. The middle class used to NEVER worry about things like health insurance. Decades are going by and now we have the most college educated generation stuck renting most of the time and a health insurance crisis that is even affecting the middle class. On April 28 2019 12:52 KwarK wrote:On April 28 2019 12:02 GreenHorizons wrote:
[quote]
Indeed the value is "stored" in private ownership and the expansion of the concept of personal property into the commons. Then the paper (and digital records) that document it and the forces which enforce those concepts. From my perspective anyway.
That's to say your ownership is only as valuable as your ability to secure it against those who would claim ownership themselves, so the value of your property isn't really yours so much as it is allowed you by the system which assures you it is.
The manifestation of this (because it may be confusing) would be Japanese Americans in the 40's. They had property that held value until the system (people) decided they didn't. The property I think we agree had value, but their ownership of that value is less obvious (granted there were some formal reparations). The point is that inflation only impacts cash and cash flows. If the purchasing power of cash goes down I don't give a shit because I don't have any cash and my fixed cash outflows (mortgage payments) are greater than my fixed cash inflows (possibly my rate of pay but that's not really fixed, it increases with cost of living). The idea that inflation is stealing wealth from the general population makes no sense. It's also not a Ponzi scheme, for what it's worth. Dude. It's good to hear that you are doing alright, but we are not talking about you, specifically.... And I explained in two ways (defining quantitative easing and your Mr Ponzi Adam, Bob, Charlie scenario) how inflation transfers wealth from the bottom to the top. As long as the general population gets paid in USD, inflation takes wealth from them. I’ll try to explain it a different way. Consider a car. In a period of inflation does it go slower? Is the mpg worse? Or is the utility provided by the car exactly the same? Because if it’s the same then the car can always be traded for whatever amount of currency represents that value, whether it’s ten thousand dollars or a million dollars, the value represented by each unit of currency does not impact the value of the car. Now consider the car note. The bank wants 48 equal monthly payments of $300. In a period of inflation are those $300 payments easier to get or harder? Inflation hurts people holding large amounts of cash and large amounts of fixed rate cash flows. Conversely it helps people who have assets and fixed rate debt payments. Yes I know lol Now tell me how any of this applies to a working class or middle class person working 60 hrs a week, living paycheck to paycheck, and drowning in debt. Inflation is great for people like you and me. I literally owe my great life to inflation (Obama's QE). I quit my career as a physician, and went balls deep in property, the stock market, and bitcoin because that's what the feds policy rewards the most......NOT slaving away at an extremely high stress, high responsiblity, profession, one that is being bogged down by more and more red tape, and having no life. Now I make money from the comfort of my home and do whatever i want. But how does my or your success help lower and middle classl people who are struggling in the U.S? Inflation is great if you're drowning in debt and living paycheck to paycheck. Paycheck to paycheck means 0 cash on hand. Debt means your future cash outflows exceed your future cash inflows. If cash becomes less precious and you have negative cash that means your debt has, in real terms, gone down. I explain, in pretty simple terms, how inflation is a good thing to people with no cash and lots of debt to which you respond "yes, I know, but how does any of that help people with no cash and lots of debt". This is economics 101. If you have cash and the value of cash goes down then you lose. If you have negative cash and the value of cash goes down then you win. The working American has negative cash. "paycheck to paycheck means 0 cash on hand" you do realize that when these people receive paychecks, they have cash on hand....that cash must be used to survive though. working/middle class literally spend 40 hrs or more per week working to obtain cash. They then use that cash to live. inflation is good for me and you who have most of net worth in something that is NOT cash, that increases in value at a higher rate than cash 1) Paycheck to paycheck means their paycheck is fully consumed by expenses with no leftover cash at the end of the month. If your definition of paycheck to paycheck includes leftover cash reserves you're not understanding the words. And if they have no leftover cash then they have nothing to be impacted by inflation. 2) No, real rate of return is net of inflation. The higher inflation, the lower real rate of return. If I have a bond that pays 4% annual interest and inflation increases from 2% to 3% then in real terms my rate of return has halved. 3) Debt can be considered a negative rate investment. Therefore the inverse of 2 applies for the exact same reason. If the nominal interest on your debt is 4% but the rate of inflation increases from 2% to 3% then in real terms your interest cost has halved. You need to get back out your textbook. Everything you're saying is the opposite of true. Can I use this argument to support the idea that poor people in Zimbabwe that were living paycheck to paycheck and in debt were helped by the inflation? Why do you think they inflated their currency? They do it to devalue their debt denominated in their currency. The problem is hyperinflation has a bunch of other really shitty problems. But hopefully you can understand that Zimbabwe's debt, denominated in Zimbabwe dollars, got a whole lot easier to pay back when they printed all that currency. And therefore you can understand why an individual's car payment might also be easier to pay off if the currency used was devalued. Zimbabwe is completely irrelevant to the case of 2% inflation in America. But if you want to bring it up then I hope you can follow why it makes debts easier to pay off. If you were to ever take the CFP exam this kind of stuff would come up a lot with foreign currency hedges and so forth. It's not debatable stuff, it's just math. You work out your net cash position (cash + cash inflows (rate adjusted) - cash outflows (rate adjusted)) and then you look at relative inflation/interest. If your net cash position is positive and the cash devalues that's bad. If your net cash position is negative and the cash devalues that's good.
Does it though? If your wages don't keep up with the devaluation of the currency? That's to say if you owe for a payday loan, and are perpetually on payday loans (that are cashing checks worth less when they get there than when they were written), does your credit card debt (which is nominally fixed at it's legal cap after penalty rates) actually get easier to pay or more debt easier/better to have?
Or do you effectively have inflation being used to mask a massive transfer of wealth through real monetary inflation that dwarfs the nominal and policy rate?
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United States43195 Posts
On April 29 2019 08:04 BerserkSword wrote:Show nested quote +On April 29 2019 07:49 KwarK wrote:On April 29 2019 07:39 BerserkSword wrote:On April 29 2019 07:05 Nouar wrote:On April 29 2019 05:50 BerserkSword wrote:On April 28 2019 21:00 Biff The Understudy wrote:
I don’t think you understand at all the interview you quoted because it’s a lesson on why inflation is good:
Suppose you want to buy a really good book about economics (for example). And the book costs 100 dollars. You are VERY tight with your money, not because you are stingy but because spoiler alert, you are a metaphor for a big company. Anyway. There is an inflation rate of 2% that means next year the book will be 102 dollars. Your most rational behaviour is to not delay and buy it immediately.
Suppose that there is a deflation of 2%. Now the book will be 98 dollars. No way you buy it now; it’s much better to put your cash under your pillow and wait for a year or two. Hell you make a profit by not investing.
Now, here is the thing: there is strictly no downside to a small dose of inflation. As long as it’s not a runaway phenomenon, it just incentivize people to spend their money and invest and punishes sleeping money, which is great.
And that’s what the interview says: inflation is great for investment, deflation for savings. And in a capitalist economy you really don’t want people to save, you want them to invest and buy shit. On the contrary, I understand exactly what it said. You just don't understand the implications Inflation is great for borrowing. I've already written paragraphs on this matter and included the method governments and banks use to enrich themselves at the expense of people down the ladder. This is how big banks make a killing selling US government debt that is handed out like candy (at the expense of general population) and public companies pump their stocks (since federal funds rate is so slow it's almost like they are borrowing money for free). And, since like we both agree (at least I think we do), inflation rewards borrowers, it creates a debt system that keeps the "consumers" enslaved for decades. The idea that there is zero downside to inflation is delusional. It is in direct conflict with one of the fundamental concepts of economics - EVERYTHING has a price. So basically, while inflation is great for people higher on the socio-economic ladder, it sucks the poorer someone is. Keynesians like yourself either don't understand or choose to ignore the situation poorer people are in. Life 101 is that you DO need to keep some cash under your pillow (in the bank) as an emergency fund. In the real world the working and middle classes are paid in USD. Not everything is an "investment" and for the low and middle class, investments are not a concern when they barely make ends meet. You are right and wrong. It is also good for regular people that have to borrow to buy a home, a car, or whatever else, instead of always renting as you complain. The main issue is when wages do not keep up with inflation, and that should have been your main focus, instead of inflation itself if you want to target regular people and the middle class slowly disappearing. With deflation, people can't afford their mortgages and get thrown out. With (controlled) inflation, money put in banks or under a mattress loses value over time (works best with rich people, no impact on paycheck to paycheck workers), and it is an incentive to invest that money into something useful for the economy, growing it. It also allows the government to lower the value of its debt, if only they were not stupid enough to use that as an incentive to grow it even more... Your life 101 is why in Europe, there is a guarantee on bank and savings account at 100,000€/person. Deregulation and increased power to corporations against workers (as the Supreme Court showed two days ago, getting a wonderful dissent from RBG) is why wages are not going up accordingly (basically current republican policies as I see them). Only extreme worker shortage, like there is currently, is getting the wages to catch up a little. And this is also a very fine line to thread for the economy, as it hinders its growth as companies can't find people. Of course, too much power to workers is also not good, it's always a matter of balance. Wages and money kept sitting in banks/under the mattress are irrelevant to what I am talking about. Wage control is another form on keynesianism which, together with the inflation, only fucks over poor people. Also, no doubt that the current debt system won't work if there is no inflation....that's the whole reason inflation exists - it's to create a borrowing friendly environment aka the debt slave system. Is that what we really want though? a system that has been, over the last several decades of keynesian monetary expansionist policy, leaving a continually increasing percentage of society unable to even dream of owning a home? Also, you say that inflation keeps rich people from hording fiat and that's a "good thing" as if most or rich people's net worth is composed of fiat money. The fact of the matter is that rich people keep so much of their wealth in non-fiat assets, whether it's property, equities, stores of value, capital, etc. This is how inflation helps rich people because the inflationary policies like QE artificially pump things like the stock market and make actual non-fiat assets more valuable (compared to basic unit of fiat) in comparison to the decreasing value of the cash money Inflation literally helps the rich I dont understand how you are all claiming that "controlled" inflation has no impact on paycheck to paycheck type working and middle class individuals. It is an entirely baseless claim that is in direct odds with the essence of inflation detailed in basic economics. Inflation hits hardest those who are at the bottom of the ladder and latest to see the new circulation, and it hits hardest those who deal the most with fiat money compared to other assets.... On April 29 2019 07:29 KwarK wrote:On April 29 2019 05:59 BerserkSword wrote:On April 28 2019 22:52 KwarK wrote:On April 28 2019 15:25 BerserkSword wrote:On April 28 2019 11:16 Sermokala wrote:
I think Berzerk sword is confusing basic monetary policy intending to continue inflation at a steady rate as a grand conpiracy thats somehow a ponzi scam where no one gets scamed and everyone benifits. I am not On April 28 2019 11:53 KwarK wrote:On April 28 2019 07:33 BerserkSword wrote:On April 28 2019 07:00 KwarK wrote:
[quote]
I think you're missing the point. I know what a Ponzi scheme is, it's a scheme where you steal from each subsequent round of "investors" to return the investment to the previous round.
What I don't understand is why you're describing monetary policy as a Ponzi scheme.
Let's put it in relatively simple terms.
The way a Ponzi scheme works is that Mr Ponzi offers Adam the opportunity to double his money with a high yield investment if Adam gives Ponzi the money. Adam gives Ponzi the money. Ponzi gives Adam regular account statements showing an increasing balance and Adam is so happy he tells Bob and Charlie about it too and they buy in. When Adam asks for his money back Ponzi can't give him the real investment returns because the investment never existed and so Ponzi steals money from Bob and Charlie's investments to give to Adam. Then when they want their returns he takes money from the next wave of investors (David, Ed, Fred, and George), and so forth. It continues much like a pyramid scheme until the number of new investors joining is insufficient to pay those leaving at which point Ponzi simply takes all the money and flees to a non extradition haven.
Could you explain why monetary policy is a Ponzi scheme in terms of which entity plays the part of Ponzi, Adam, Bob, and Charlie, what exactly the high yield investment they're offered is, what mechanism is used to transfer the money from Bob and Charlie to Adam and Ponzi, and what Ponzi's exit strategy is, ideally including the safe haven? I'm guessing you didnt understand my explanation then lol Mr. Ponzi = U.S government circle as i described above The high yield investment Adam - Zach is offered is investment in the U.S. Dollar. Adam - Zach are told they should invest their labor/skills/capital into USD. The mechanism of transfer is getting people to invest in the USD (exchange it for skills/capital/etc) and then decreasing the ability of the dollar to exchange for goods/services. keep in mind i am talking about the transfer of wealth/capital to Mr. Ponzi, not raw fiat money. It continues until the Yaneck's and Zach's are virtually no longer able to be paid for their dollars (ie, the dollars they hold cannot buy anything). The exit strategy is amassing a bunch of food and shelter and other excesses (remember these are the things Yaneck and Zack want to trade their USD for but really cant) and live like kings for when the economy collapses. The safe haven is the military compound surrounded by slums and starvation. See zimbabwe, venezuela, or so. Or maybe some other country. I dont know the detailed plans of the world's elite obviously it's more nuanced than that and I am not saying the U.S is going to replicate zimbabwe (at least anytime soon) but that is the concept. the essence of this whole thign is a ponzi scheme But individuals aren't investing in USD, the vast majority of US families can't lay their hands on $400. They've got clothes, cars, houses, food, land, many even have stocks and shares, but they don't generally have large amounts of liquid cash. It wouldn't make sense for them to have cash either, cash is a medium of exchange to avoid bartering. Wealth is still kept in noncash assets, cash simply lets you sell your noncash asset to person A for tokens and then give those tokens to person B for his noncash asset because person B didn't want the asset you would have bartered. If cash becomes worthless people will be fine. The average American doesn't have hundreds of thousands of dollars under his mattress, he has physical possession of a house and a car, a loan on both of those denominated in dollars which is now essentially settled, student loan debt which is also now settled, and some credit cards. If he's lucky he also has some investments which, while valued in dollars, are ownership stakes in tangible things which will have preserved their value. Dollars are lubrication, a way of making tangible assets exchangeable, it's not the value itself. If the dollars go we'll find something else, the physical paper is a negligible portion of overall wealth. Hell, I'm doing pretty well for myself but I generally have negative dollars on hand at any given time. If assets kept their value but currency ceased to be worth anything my net worth would rise because my liabilities are dollars but my assets are value generating. Every time someone gets paid in USD, he/she is investing in USD. Last time I checked Americans are paid in USD. You ignored when I said the situation in America is more nuanced and slow moving than a zimbabwe or venazuela type situation where pepole are wheelbarrowing around cash to by bread. Youre ignoring the factor of time and sequence that i described before. The basic principle is that people early in the sequence get enriched while the people at the end get impoverished. This happens in all degrees of inflation, just to a different extent depending on inflation rate. The people at the bottom of the socio-economic pyramid - the people who do not have access to non-depreciating assets and who live paycheck to paycheck with maybe a small cash sum in their bank account continually get fucked over. As this goes on the people who are affected spreads to higher up the economic ladder. Decades ago a high school grad had a solid chance of working 40 hrs a week in a factory and trading his labor for USD capable of getting his family a house as well as resources to live. The middle class used to NEVER worry about things like health insurance. Decades are going by and now we have the most college educated generation stuck renting most of the time and a health insurance crisis that is even affecting the middle class. On April 28 2019 12:52 KwarK wrote:On April 28 2019 12:02 GreenHorizons wrote:On April 28 2019 11:53 KwarK wrote:
[quote]
But individuals aren't investing in USD, the vast majority of US families can't lay their hands on $400. They've got clothes, cars, houses, food, land, many even have stocks and shares, but they don't generally have large amounts of liquid cash. It wouldn't make sense for them to have cash either, cash is a medium of exchange to avoid bartering. Wealth is still kept in noncash assets, cash simply lets you sell your noncash asset to person A for tokens and then give those tokens to person B for his noncash asset because person B didn't want the asset you would have bartered.
If cash becomes worthless people will be fine. The average American doesn't have hundreds of thousands of dollars under his mattress, he has physical possession of a house and a car, a loan on both of those denominated in dollars which is now essentially settled, student loan debt which is also now settled, and some credit cards. If he's lucky he also has some investments which, while valued in dollars, are ownership stakes in tangible things which will have preserved their value.
Dollars are lubrication, a way of making tangible assets exchangeable, it's not the value itself. If the dollars go we'll find something else, the physical paper is a negligible portion of overall wealth. Hell, I'm doing pretty well for myself but I generally have negative dollars on hand at any given time. If assets kept their value but currency ceased to be worth anything my net worth would rise because my liabilities are dollars but my assets are value generating. Indeed the value is "stored" in private ownership and the expansion of the concept of personal property into the commons. Then the paper (and digital records) that document it and the forces which enforce those concepts. From my perspective anyway. That's to say your ownership is only as valuable as your ability to secure it against those who would claim ownership themselves, so the value of your property isn't really yours so much as it is allowed you by the system which assures you it is. The manifestation of this (because it may be confusing) would be Japanese Americans in the 40's. They had property that held value until the system (people) decided they didn't. The property I think we agree had value, but their ownership of that value is less obvious (granted there were some formal reparations). The point is that inflation only impacts cash and cash flows. If the purchasing power of cash goes down I don't give a shit because I don't have any cash and my fixed cash outflows (mortgage payments) are greater than my fixed cash inflows (possibly my rate of pay but that's not really fixed, it increases with cost of living). The idea that inflation is stealing wealth from the general population makes no sense. It's also not a Ponzi scheme, for what it's worth. Dude. It's good to hear that you are doing alright, but we are not talking about you, specifically.... And I explained in two ways (defining quantitative easing and your Mr Ponzi Adam, Bob, Charlie scenario) how inflation transfers wealth from the bottom to the top. As long as the general population gets paid in USD, inflation takes wealth from them. I’ll try to explain it a different way. Consider a car. In a period of inflation does it go slower? Is the mpg worse? Or is the utility provided by the car exactly the same? Because if it’s the same then the car can always be traded for whatever amount of currency represents that value, whether it’s ten thousand dollars or a million dollars, the value represented by each unit of currency does not impact the value of the car. Now consider the car note. The bank wants 48 equal monthly payments of $300. In a period of inflation are those $300 payments easier to get or harder? Inflation hurts people holding large amounts of cash and large amounts of fixed rate cash flows. Conversely it helps people who have assets and fixed rate debt payments. Yes I know lol Now tell me how any of this applies to a working class or middle class person working 60 hrs a week, living paycheck to paycheck, and drowning in debt. Inflation is great for people like you and me. I literally owe my great life to inflation (Obama's QE). I quit my career as a physician, and went balls deep in property, the stock market, and bitcoin because that's what the feds policy rewards the most......NOT slaving away at an extremely high stress, high responsiblity, profession, one that is being bogged down by more and more red tape, and having no life. Now I make money from the comfort of my home and do whatever i want. But how does my or your success help lower and middle classl people who are struggling in the U.S? Inflation is great if you're drowning in debt and living paycheck to paycheck. Paycheck to paycheck means 0 cash on hand. Debt means your future cash outflows exceed your future cash inflows. If cash becomes less precious and you have negative cash that means your debt has, in real terms, gone down. I explain, in pretty simple terms, how inflation is a good thing to people with no cash and lots of debt to which you respond "yes, I know, but how does any of that help people with no cash and lots of debt". This is economics 101. If you have cash and the value of cash goes down then you lose. If you have negative cash and the value of cash goes down then you win. The working American has negative cash. "paycheck to paycheck means 0 cash on hand" you do realize that when these people receive paychecks, they have cash on hand....that cash must be used to survive though. working/middle class literally spend 40 hrs or more per week working to obtain cash. They then use that cash to live. inflation is good for me and you who have most of net worth in something that is NOT cash, that increases in value at a higher rate than cash 1) Paycheck to paycheck means their paycheck is fully consumed by expenses with no leftover cash at the end of the month. If your definition of paycheck to paycheck includes leftover cash reserves you're not understanding the words. And if they have no leftover cash then they have nothing to be impacted by inflation. 2) No, real rate of return is net of inflation. The higher inflation, the lower real rate of return. If I have a bond that pays 4% annual interest and inflation increases from 2% to 3% then in real terms my rate of return has halved. 3) Debt can be considered a negative rate investment. Therefore the inverse of 2 applies for the exact same reason. If the nominal interest on your debt is 4% but the rate of inflation increases from 2% to 3% then in real terms your interest cost has halved. You need to get back out your textbook. Everything you're saying is the opposite of true. 1) Leftover cash reserves or not, they are still dealing primarily with cash. This is why working AND middle class (who may or may not be pay check to paycheck, but are still barely managing to stay afloat) are getting bent over. Even if they have no cash balance at the end of the month, they still had to use cash to support themselves. The bottom line is that those who cannot afford to diversify their net worth, such as people who are living pay check to pay check, get screwed over to some extent by inflation. 2) your rate of return is still better than the poor guy who has no bond and only gets paid in cash and whose net value of investments (infestment in the USD) is going down. Why do you think the bond yield would be high enough for you to profit anyway? Bond yields are determined by expected inflation - the higher the expected inflation, the higher the bond yields are. And youre ignoring the elephant in the room which is the stock market, probably the biggest target of QE. QE artificially pumps (distorts) the stock market like crazy. That's why the stock market soared under Obama, and that's why Trump lambasts the Fed when they engage in even a small modicum of monetary tightening - Trump wants the stock market to look good during his regime. 3) I never denied that inflation is good for borrowing....i literally said that inflation rewards taking on debt several times already lol. I don't see how this is relevant to this whole discussion.
1) Everyone is transacting in cash. I don't trade Apple stock for bread at Walmart.
2) Yes, having money is better than not having money for a bunch of reasons. But inflation is not one of those reasons. People who have no investments are screwed. But they're not screwed by inflation, they're helped by inflation, they're screwed by poverty.
3) People who have debt have negative future cash outflows. Their net cash position is negative. That means they're helped by inflation. The working poor, for example, with a car, phone, and house payment are having their interest rates reduced by inflation. Real interest = nominal interest - inflation. As inflation goes up real interest goes down. If you understand that people with a net negative cash position are helped by inflation and you understand that the working poor are living paycheck to paycheck and saddled with debt then I'm not sure where I'm losing you. Paycheck to paycheck + saddled with debt = net negative cash position = helped by inflation. Where did you get lost there?
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United States43195 Posts
On April 29 2019 08:05 GreenHorizons wrote:Show nested quote +On April 29 2019 07:55 KwarK wrote:On April 29 2019 07:51 GreenHorizons wrote:On April 29 2019 07:49 KwarK wrote:On April 29 2019 07:39 BerserkSword wrote:On April 29 2019 07:05 Nouar wrote:On April 29 2019 05:50 BerserkSword wrote:On April 28 2019 21:00 Biff The Understudy wrote:
I don’t think you understand at all the interview you quoted because it’s a lesson on why inflation is good:
Suppose you want to buy a really good book about economics (for example). And the book costs 100 dollars. You are VERY tight with your money, not because you are stingy but because spoiler alert, you are a metaphor for a big company. Anyway. There is an inflation rate of 2% that means next year the book will be 102 dollars. Your most rational behaviour is to not delay and buy it immediately.
Suppose that there is a deflation of 2%. Now the book will be 98 dollars. No way you buy it now; it’s much better to put your cash under your pillow and wait for a year or two. Hell you make a profit by not investing.
Now, here is the thing: there is strictly no downside to a small dose of inflation. As long as it’s not a runaway phenomenon, it just incentivize people to spend their money and invest and punishes sleeping money, which is great.
And that’s what the interview says: inflation is great for investment, deflation for savings. And in a capitalist economy you really don’t want people to save, you want them to invest and buy shit. On the contrary, I understand exactly what it said. You just don't understand the implications Inflation is great for borrowing. I've already written paragraphs on this matter and included the method governments and banks use to enrich themselves at the expense of people down the ladder. This is how big banks make a killing selling US government debt that is handed out like candy (at the expense of general population) and public companies pump their stocks (since federal funds rate is so slow it's almost like they are borrowing money for free). And, since like we both agree (at least I think we do), inflation rewards borrowers, it creates a debt system that keeps the "consumers" enslaved for decades. The idea that there is zero downside to inflation is delusional. It is in direct conflict with one of the fundamental concepts of economics - EVERYTHING has a price. So basically, while inflation is great for people higher on the socio-economic ladder, it sucks the poorer someone is. Keynesians like yourself either don't understand or choose to ignore the situation poorer people are in. Life 101 is that you DO need to keep some cash under your pillow (in the bank) as an emergency fund. In the real world the working and middle classes are paid in USD. Not everything is an "investment" and for the low and middle class, investments are not a concern when they barely make ends meet. You are right and wrong. It is also good for regular people that have to borrow to buy a home, a car, or whatever else, instead of always renting as you complain. The main issue is when wages do not keep up with inflation, and that should have been your main focus, instead of inflation itself if you want to target regular people and the middle class slowly disappearing. With deflation, people can't afford their mortgages and get thrown out. With (controlled) inflation, money put in banks or under a mattress loses value over time (works best with rich people, no impact on paycheck to paycheck workers), and it is an incentive to invest that money into something useful for the economy, growing it. It also allows the government to lower the value of its debt, if only they were not stupid enough to use that as an incentive to grow it even more... Your life 101 is why in Europe, there is a guarantee on bank and savings account at 100,000€/person. Deregulation and increased power to corporations against workers (as the Supreme Court showed two days ago, getting a wonderful dissent from RBG) is why wages are not going up accordingly (basically current republican policies as I see them). Only extreme worker shortage, like there is currently, is getting the wages to catch up a little. And this is also a very fine line to thread for the economy, as it hinders its growth as companies can't find people. Of course, too much power to workers is also not good, it's always a matter of balance. Wages and money kept sitting in banks/under the mattress are irrelevant to what I am talking about. Wage control is another form on keynesianism which, together with the inflation, only fucks over poor people. Also, no doubt that the current debt system won't work if there is no inflation....that's the whole reason inflation exists - it's to create a borrowing friendly environment aka the debt slave system. Is that what we really want though? a system that has been, over the last several decades of keynesian monetary expansionist policy, leaving a continually increasing percentage of society unable to even dream of owning a home? Also, you say that inflation keeps rich people from hording fiat and that's a "good thing" as if most or rich people's net worth is composed of fiat money. The fact of the matter is that rich people keep so much of their wealth in non-fiat assets, whether it's property, equities, stores of value, capital, etc. This is how inflation helps rich people because the inflationary policies like QE artificially pump things like the stock market and make actual non-fiat assets more valuable (compared to basic unit of fiat) in comparison to the decreasing value of the cash money Inflation literally helps the rich I dont understand how you are all claiming that "controlled" inflation has no impact on paycheck to paycheck type working and middle class individuals. It is an entirely baseless claim that is in direct odds with the essence of inflation detailed in basic economics. Inflation hits hardest those who are at the bottom of the ladder and latest to see the new circulation, and it hits hardest those who deal the most with fiat money compared to other assets.... On April 29 2019 07:29 KwarK wrote:On April 29 2019 05:59 BerserkSword wrote:On April 28 2019 22:52 KwarK wrote:On April 28 2019 15:25 BerserkSword wrote:On April 28 2019 11:16 Sermokala wrote:
I think Berzerk sword is confusing basic monetary policy intending to continue inflation at a steady rate as a grand conpiracy thats somehow a ponzi scam where no one gets scamed and everyone benifits. I am not On April 28 2019 11:53 KwarK wrote:
[quote]
But individuals aren't investing in USD, the vast majority of US families can't lay their hands on $400. They've got clothes, cars, houses, food, land, many even have stocks and shares, but they don't generally have large amounts of liquid cash. It wouldn't make sense for them to have cash either, cash is a medium of exchange to avoid bartering. Wealth is still kept in noncash assets, cash simply lets you sell your noncash asset to person A for tokens and then give those tokens to person B for his noncash asset because person B didn't want the asset you would have bartered.
If cash becomes worthless people will be fine. The average American doesn't have hundreds of thousands of dollars under his mattress, he has physical possession of a house and a car, a loan on both of those denominated in dollars which is now essentially settled, student loan debt which is also now settled, and some credit cards. If he's lucky he also has some investments which, while valued in dollars, are ownership stakes in tangible things which will have preserved their value.
Dollars are lubrication, a way of making tangible assets exchangeable, it's not the value itself. If the dollars go we'll find something else, the physical paper is a negligible portion of overall wealth. Hell, I'm doing pretty well for myself but I generally have negative dollars on hand at any given time. If assets kept their value but currency ceased to be worth anything my net worth would rise because my liabilities are dollars but my assets are value generating. Every time someone gets paid in USD, he/she is investing in USD. Last time I checked Americans are paid in USD. You ignored when I said the situation in America is more nuanced and slow moving than a zimbabwe or venazuela type situation where pepole are wheelbarrowing around cash to by bread. Youre ignoring the factor of time and sequence that i described before. The basic principle is that people early in the sequence get enriched while the people at the end get impoverished. This happens in all degrees of inflation, just to a different extent depending on inflation rate. The people at the bottom of the socio-economic pyramid - the people who do not have access to non-depreciating assets and who live paycheck to paycheck with maybe a small cash sum in their bank account continually get fucked over. As this goes on the people who are affected spreads to higher up the economic ladder. Decades ago a high school grad had a solid chance of working 40 hrs a week in a factory and trading his labor for USD capable of getting his family a house as well as resources to live. The middle class used to NEVER worry about things like health insurance. Decades are going by and now we have the most college educated generation stuck renting most of the time and a health insurance crisis that is even affecting the middle class. On April 28 2019 12:52 KwarK wrote:
[quote]
The point is that inflation only impacts cash and cash flows. If the purchasing power of cash goes down I don't give a shit because I don't have any cash and my fixed cash outflows (mortgage payments) are greater than my fixed cash inflows (possibly my rate of pay but that's not really fixed, it increases with cost of living).
The idea that inflation is stealing wealth from the general population makes no sense. It's also not a Ponzi scheme, for what it's worth. Dude. It's good to hear that you are doing alright, but we are not talking about you, specifically.... And I explained in two ways (defining quantitative easing and your Mr Ponzi Adam, Bob, Charlie scenario) how inflation transfers wealth from the bottom to the top. As long as the general population gets paid in USD, inflation takes wealth from them. I’ll try to explain it a different way. Consider a car. In a period of inflation does it go slower? Is the mpg worse? Or is the utility provided by the car exactly the same? Because if it’s the same then the car can always be traded for whatever amount of currency represents that value, whether it’s ten thousand dollars or a million dollars, the value represented by each unit of currency does not impact the value of the car. Now consider the car note. The bank wants 48 equal monthly payments of $300. In a period of inflation are those $300 payments easier to get or harder? Inflation hurts people holding large amounts of cash and large amounts of fixed rate cash flows. Conversely it helps people who have assets and fixed rate debt payments. Yes I know lol Now tell me how any of this applies to a working class or middle class person working 60 hrs a week, living paycheck to paycheck, and drowning in debt. Inflation is great for people like you and me. I literally owe my great life to inflation (Obama's QE). I quit my career as a physician, and went balls deep in property, the stock market, and bitcoin because that's what the feds policy rewards the most......NOT slaving away at an extremely high stress, high responsiblity, profession, one that is being bogged down by more and more red tape, and having no life. Now I make money from the comfort of my home and do whatever i want. But how does my or your success help lower and middle classl people who are struggling in the U.S? Inflation is great if you're drowning in debt and living paycheck to paycheck. Paycheck to paycheck means 0 cash on hand. Debt means your future cash outflows exceed your future cash inflows. If cash becomes less precious and you have negative cash that means your debt has, in real terms, gone down. I explain, in pretty simple terms, how inflation is a good thing to people with no cash and lots of debt to which you respond "yes, I know, but how does any of that help people with no cash and lots of debt". This is economics 101. If you have cash and the value of cash goes down then you lose. If you have negative cash and the value of cash goes down then you win. The working American has negative cash. "paycheck to paycheck means 0 cash on hand" you do realize that when these people receive paychecks, they have cash on hand....that cash must be used to survive though. working/middle class literally spend 40 hrs or more per week working to obtain cash. They then use that cash to live. inflation is good for me and you who have most of net worth in something that is NOT cash, that increases in value at a higher rate than cash 1) Paycheck to paycheck means their paycheck is fully consumed by expenses with no leftover cash at the end of the month. If your definition of paycheck to paycheck includes leftover cash reserves you're not understanding the words. And if they have no leftover cash then they have nothing to be impacted by inflation. 2) No, real rate of return is net of inflation. The higher inflation, the lower real rate of return. If I have a bond that pays 4% annual interest and inflation increases from 2% to 3% then in real terms my rate of return has halved. 3) Debt can be considered a negative rate investment. Therefore the inverse of 2 applies for the exact same reason. If the nominal interest on your debt is 4% but the rate of inflation increases from 2% to 3% then in real terms your interest cost has halved. You need to get back out your textbook. Everything you're saying is the opposite of true. Can I use this argument to support the idea that poor people in Zimbabwe that were living paycheck to paycheck and in debt were helped by the inflation? Why do you think they inflated their currency? They do it to devalue their debt denominated in their currency. The problem is hyperinflation has a bunch of other really shitty problems. But hopefully you can understand that Zimbabwe's debt, denominated in Zimbabwe dollars, got a whole lot easier to pay back when they printed all that currency. And therefore you can understand why an individual's car payment might also be easier to pay off if the currency used was devalued. Zimbabwe is completely irrelevant to the case of 2% inflation in America. But if you want to bring it up then I hope you can follow why it makes debts easier to pay off. If you were to ever take the CFP exam this kind of stuff would come up a lot with foreign currency hedges and so forth. It's not debatable stuff, it's just math. You work out your net cash position (cash + cash inflows (rate adjusted) - cash outflows (rate adjusted)) and then you look at relative inflation/interest. If your net cash position is positive and the cash devalues that's bad. If your net cash position is negative and the cash devalues that's good. Does it though? If your wages don't keep up with the devaluation of the currency? That's to say if you owe for a payday loan, and are perpetually on payday loans (that are cashing checks worth less when they get there than when they were written), does your credit card debt (which is nominally fixed at it's legal cap after penalty rates) actually get easier to pay or more debt easier/better to have? Or do you effectively have inflation being used to mask a massive transfer of wealth through real monetary inflation that dwarfs the nominal and policy rate?
You're describing a different set of problems than the one under discussion. I don't deny that those problems exist, but they have absolutely nothing to do with Berserk's premise which is that inflation helps those with a net positive cash position and hurts those with a net negative cash position. That premise is simply false. It's like he was arguing that water is dry and that fire is cold.
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On April 29 2019 08:11 KwarK wrote:Show nested quote +On April 29 2019 08:05 GreenHorizons wrote:On April 29 2019 07:55 KwarK wrote:On April 29 2019 07:51 GreenHorizons wrote:On April 29 2019 07:49 KwarK wrote:On April 29 2019 07:39 BerserkSword wrote:On April 29 2019 07:05 Nouar wrote:On April 29 2019 05:50 BerserkSword wrote:On April 28 2019 21:00 Biff The Understudy wrote:
I don’t think you understand at all the interview you quoted because it’s a lesson on why inflation is good:
Suppose you want to buy a really good book about economics (for example). And the book costs 100 dollars. You are VERY tight with your money, not because you are stingy but because spoiler alert, you are a metaphor for a big company. Anyway. There is an inflation rate of 2% that means next year the book will be 102 dollars. Your most rational behaviour is to not delay and buy it immediately.
Suppose that there is a deflation of 2%. Now the book will be 98 dollars. No way you buy it now; it’s much better to put your cash under your pillow and wait for a year or two. Hell you make a profit by not investing.
Now, here is the thing: there is strictly no downside to a small dose of inflation. As long as it’s not a runaway phenomenon, it just incentivize people to spend their money and invest and punishes sleeping money, which is great.
And that’s what the interview says: inflation is great for investment, deflation for savings. And in a capitalist economy you really don’t want people to save, you want them to invest and buy shit. On the contrary, I understand exactly what it said. You just don't understand the implications Inflation is great for borrowing. I've already written paragraphs on this matter and included the method governments and banks use to enrich themselves at the expense of people down the ladder. This is how big banks make a killing selling US government debt that is handed out like candy (at the expense of general population) and public companies pump their stocks (since federal funds rate is so slow it's almost like they are borrowing money for free). And, since like we both agree (at least I think we do), inflation rewards borrowers, it creates a debt system that keeps the "consumers" enslaved for decades. The idea that there is zero downside to inflation is delusional. It is in direct conflict with one of the fundamental concepts of economics - EVERYTHING has a price. So basically, while inflation is great for people higher on the socio-economic ladder, it sucks the poorer someone is. Keynesians like yourself either don't understand or choose to ignore the situation poorer people are in. Life 101 is that you DO need to keep some cash under your pillow (in the bank) as an emergency fund. In the real world the working and middle classes are paid in USD. Not everything is an "investment" and for the low and middle class, investments are not a concern when they barely make ends meet. You are right and wrong. It is also good for regular people that have to borrow to buy a home, a car, or whatever else, instead of always renting as you complain. The main issue is when wages do not keep up with inflation, and that should have been your main focus, instead of inflation itself if you want to target regular people and the middle class slowly disappearing. With deflation, people can't afford their mortgages and get thrown out. With (controlled) inflation, money put in banks or under a mattress loses value over time (works best with rich people, no impact on paycheck to paycheck workers), and it is an incentive to invest that money into something useful for the economy, growing it. It also allows the government to lower the value of its debt, if only they were not stupid enough to use that as an incentive to grow it even more... Your life 101 is why in Europe, there is a guarantee on bank and savings account at 100,000€/person. Deregulation and increased power to corporations against workers (as the Supreme Court showed two days ago, getting a wonderful dissent from RBG) is why wages are not going up accordingly (basically current republican policies as I see them). Only extreme worker shortage, like there is currently, is getting the wages to catch up a little. And this is also a very fine line to thread for the economy, as it hinders its growth as companies can't find people. Of course, too much power to workers is also not good, it's always a matter of balance. Wages and money kept sitting in banks/under the mattress are irrelevant to what I am talking about. Wage control is another form on keynesianism which, together with the inflation, only fucks over poor people. Also, no doubt that the current debt system won't work if there is no inflation....that's the whole reason inflation exists - it's to create a borrowing friendly environment aka the debt slave system. Is that what we really want though? a system that has been, over the last several decades of keynesian monetary expansionist policy, leaving a continually increasing percentage of society unable to even dream of owning a home? Also, you say that inflation keeps rich people from hording fiat and that's a "good thing" as if most or rich people's net worth is composed of fiat money. The fact of the matter is that rich people keep so much of their wealth in non-fiat assets, whether it's property, equities, stores of value, capital, etc. This is how inflation helps rich people because the inflationary policies like QE artificially pump things like the stock market and make actual non-fiat assets more valuable (compared to basic unit of fiat) in comparison to the decreasing value of the cash money Inflation literally helps the rich I dont understand how you are all claiming that "controlled" inflation has no impact on paycheck to paycheck type working and middle class individuals. It is an entirely baseless claim that is in direct odds with the essence of inflation detailed in basic economics. Inflation hits hardest those who are at the bottom of the ladder and latest to see the new circulation, and it hits hardest those who deal the most with fiat money compared to other assets.... On April 29 2019 07:29 KwarK wrote:On April 29 2019 05:59 BerserkSword wrote:On April 28 2019 22:52 KwarK wrote:On April 28 2019 15:25 BerserkSword wrote:
[quote]
I am not
[quote]
Every time someone gets paid in USD, he/she is investing in USD. Last time I checked Americans are paid in USD.
You ignored when I said the situation in America is more nuanced and slow moving than a zimbabwe or venazuela type situation where pepole are wheelbarrowing around cash to by bread. Youre ignoring the factor of time and sequence that i described before. The basic principle is that people early in the sequence get enriched while the people at the end get impoverished. This happens in all degrees of inflation, just to a different extent depending on inflation rate. The people at the bottom of the socio-economic pyramid - the people who do not have access to non-depreciating assets and who live paycheck to paycheck with maybe a small cash sum in their bank account continually get fucked over.
As this goes on the people who are affected spreads to higher up the economic ladder. Decades ago a high school grad had a solid chance of working 40 hrs a week in a factory and trading his labor for USD capable of getting his family a house as well as resources to live. The middle class used to NEVER worry about things like health insurance. Decades are going by and now we have the most college educated generation stuck renting most of the time and a health insurance crisis that is even affecting the middle class.
[quote]
Dude. It's good to hear that you are doing alright, but we are not talking about you, specifically....
And I explained in two ways (defining quantitative easing and your Mr Ponzi Adam, Bob, Charlie scenario) how inflation transfers wealth from the bottom to the top. As long as the general population gets paid in USD, inflation takes wealth from them.
I’ll try to explain it a different way. Consider a car. In a period of inflation does it go slower? Is the mpg worse? Or is the utility provided by the car exactly the same? Because if it’s the same then the car can always be traded for whatever amount of currency represents that value, whether it’s ten thousand dollars or a million dollars, the value represented by each unit of currency does not impact the value of the car. Now consider the car note. The bank wants 48 equal monthly payments of $300. In a period of inflation are those $300 payments easier to get or harder? Inflation hurts people holding large amounts of cash and large amounts of fixed rate cash flows. Conversely it helps people who have assets and fixed rate debt payments. Yes I know lol Now tell me how any of this applies to a working class or middle class person working 60 hrs a week, living paycheck to paycheck, and drowning in debt. Inflation is great for people like you and me. I literally owe my great life to inflation (Obama's QE). I quit my career as a physician, and went balls deep in property, the stock market, and bitcoin because that's what the feds policy rewards the most......NOT slaving away at an extremely high stress, high responsiblity, profession, one that is being bogged down by more and more red tape, and having no life. Now I make money from the comfort of my home and do whatever i want. But how does my or your success help lower and middle classl people who are struggling in the U.S? Inflation is great if you're drowning in debt and living paycheck to paycheck. Paycheck to paycheck means 0 cash on hand. Debt means your future cash outflows exceed your future cash inflows. If cash becomes less precious and you have negative cash that means your debt has, in real terms, gone down. I explain, in pretty simple terms, how inflation is a good thing to people with no cash and lots of debt to which you respond "yes, I know, but how does any of that help people with no cash and lots of debt". This is economics 101. If you have cash and the value of cash goes down then you lose. If you have negative cash and the value of cash goes down then you win. The working American has negative cash. "paycheck to paycheck means 0 cash on hand" you do realize that when these people receive paychecks, they have cash on hand....that cash must be used to survive though. working/middle class literally spend 40 hrs or more per week working to obtain cash. They then use that cash to live. inflation is good for me and you who have most of net worth in something that is NOT cash, that increases in value at a higher rate than cash 1) Paycheck to paycheck means their paycheck is fully consumed by expenses with no leftover cash at the end of the month. If your definition of paycheck to paycheck includes leftover cash reserves you're not understanding the words. And if they have no leftover cash then they have nothing to be impacted by inflation. 2) No, real rate of return is net of inflation. The higher inflation, the lower real rate of return. If I have a bond that pays 4% annual interest and inflation increases from 2% to 3% then in real terms my rate of return has halved. 3) Debt can be considered a negative rate investment. Therefore the inverse of 2 applies for the exact same reason. If the nominal interest on your debt is 4% but the rate of inflation increases from 2% to 3% then in real terms your interest cost has halved. You need to get back out your textbook. Everything you're saying is the opposite of true. Can I use this argument to support the idea that poor people in Zimbabwe that were living paycheck to paycheck and in debt were helped by the inflation? Why do you think they inflated their currency? They do it to devalue their debt denominated in their currency. The problem is hyperinflation has a bunch of other really shitty problems. But hopefully you can understand that Zimbabwe's debt, denominated in Zimbabwe dollars, got a whole lot easier to pay back when they printed all that currency. And therefore you can understand why an individual's car payment might also be easier to pay off if the currency used was devalued. Zimbabwe is completely irrelevant to the case of 2% inflation in America. But if you want to bring it up then I hope you can follow why it makes debts easier to pay off. If you were to ever take the CFP exam this kind of stuff would come up a lot with foreign currency hedges and so forth. It's not debatable stuff, it's just math. You work out your net cash position (cash + cash inflows (rate adjusted) - cash outflows (rate adjusted)) and then you look at relative inflation/interest. If your net cash position is positive and the cash devalues that's bad. If your net cash position is negative and the cash devalues that's good. Does it though? If your wages don't keep up with the devaluation of the currency? That's to say if you owe for a payday loan, and are perpetually on payday loans (that are cashing checks worth less when they get there than when they were written), does your credit card debt (which is nominally fixed at it's legal cap after penalty rates) actually get easier to pay or more debt easier/better to have? Or do you effectively have inflation being used to mask a massive transfer of wealth through real monetary inflation that dwarfs the nominal and policy rate? You're describing a different set of problems than the one under discussion. I don't deny that those problems exist, but they have absolutely nothing to do with Berserk's premise which is that inflation helps those with a net positive cash position and hurts those with a net negative cash position. That premise is simply false. It's like he was arguing that water is dry and that fire is cold.
Isn't my point more interesting and really what even you think he's trying to describe and your grilling him over the fact that economics has euphemistic language and politics implements a series of systems that turn that simple economic truth into the phenomena/s that are at the root of his concern about how "basic monetary policy" combined with it's political implementation has essentially the opposite outcome of looking at "inflation" isolated in economic terms?
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United States43195 Posts
On April 29 2019 08:14 GreenHorizons wrote:Show nested quote +On April 29 2019 08:11 KwarK wrote:On April 29 2019 08:05 GreenHorizons wrote:On April 29 2019 07:55 KwarK wrote:On April 29 2019 07:51 GreenHorizons wrote:On April 29 2019 07:49 KwarK wrote:On April 29 2019 07:39 BerserkSword wrote:On April 29 2019 07:05 Nouar wrote:On April 29 2019 05:50 BerserkSword wrote:On April 28 2019 21:00 Biff The Understudy wrote:
I don’t think you understand at all the interview you quoted because it’s a lesson on why inflation is good:
Suppose you want to buy a really good book about economics (for example). And the book costs 100 dollars. You are VERY tight with your money, not because you are stingy but because spoiler alert, you are a metaphor for a big company. Anyway. There is an inflation rate of 2% that means next year the book will be 102 dollars. Your most rational behaviour is to not delay and buy it immediately.
Suppose that there is a deflation of 2%. Now the book will be 98 dollars. No way you buy it now; it’s much better to put your cash under your pillow and wait for a year or two. Hell you make a profit by not investing.
Now, here is the thing: there is strictly no downside to a small dose of inflation. As long as it’s not a runaway phenomenon, it just incentivize people to spend their money and invest and punishes sleeping money, which is great.
And that’s what the interview says: inflation is great for investment, deflation for savings. And in a capitalist economy you really don’t want people to save, you want them to invest and buy shit. On the contrary, I understand exactly what it said. You just don't understand the implications Inflation is great for borrowing. I've already written paragraphs on this matter and included the method governments and banks use to enrich themselves at the expense of people down the ladder. This is how big banks make a killing selling US government debt that is handed out like candy (at the expense of general population) and public companies pump their stocks (since federal funds rate is so slow it's almost like they are borrowing money for free). And, since like we both agree (at least I think we do), inflation rewards borrowers, it creates a debt system that keeps the "consumers" enslaved for decades. The idea that there is zero downside to inflation is delusional. It is in direct conflict with one of the fundamental concepts of economics - EVERYTHING has a price. So basically, while inflation is great for people higher on the socio-economic ladder, it sucks the poorer someone is. Keynesians like yourself either don't understand or choose to ignore the situation poorer people are in. Life 101 is that you DO need to keep some cash under your pillow (in the bank) as an emergency fund. In the real world the working and middle classes are paid in USD. Not everything is an "investment" and for the low and middle class, investments are not a concern when they barely make ends meet. You are right and wrong. It is also good for regular people that have to borrow to buy a home, a car, or whatever else, instead of always renting as you complain. The main issue is when wages do not keep up with inflation, and that should have been your main focus, instead of inflation itself if you want to target regular people and the middle class slowly disappearing. With deflation, people can't afford their mortgages and get thrown out. With (controlled) inflation, money put in banks or under a mattress loses value over time (works best with rich people, no impact on paycheck to paycheck workers), and it is an incentive to invest that money into something useful for the economy, growing it. It also allows the government to lower the value of its debt, if only they were not stupid enough to use that as an incentive to grow it even more... Your life 101 is why in Europe, there is a guarantee on bank and savings account at 100,000€/person. Deregulation and increased power to corporations against workers (as the Supreme Court showed two days ago, getting a wonderful dissent from RBG) is why wages are not going up accordingly (basically current republican policies as I see them). Only extreme worker shortage, like there is currently, is getting the wages to catch up a little. And this is also a very fine line to thread for the economy, as it hinders its growth as companies can't find people. Of course, too much power to workers is also not good, it's always a matter of balance. Wages and money kept sitting in banks/under the mattress are irrelevant to what I am talking about. Wage control is another form on keynesianism which, together with the inflation, only fucks over poor people. Also, no doubt that the current debt system won't work if there is no inflation....that's the whole reason inflation exists - it's to create a borrowing friendly environment aka the debt slave system. Is that what we really want though? a system that has been, over the last several decades of keynesian monetary expansionist policy, leaving a continually increasing percentage of society unable to even dream of owning a home? Also, you say that inflation keeps rich people from hording fiat and that's a "good thing" as if most or rich people's net worth is composed of fiat money. The fact of the matter is that rich people keep so much of their wealth in non-fiat assets, whether it's property, equities, stores of value, capital, etc. This is how inflation helps rich people because the inflationary policies like QE artificially pump things like the stock market and make actual non-fiat assets more valuable (compared to basic unit of fiat) in comparison to the decreasing value of the cash money Inflation literally helps the rich I dont understand how you are all claiming that "controlled" inflation has no impact on paycheck to paycheck type working and middle class individuals. It is an entirely baseless claim that is in direct odds with the essence of inflation detailed in basic economics. Inflation hits hardest those who are at the bottom of the ladder and latest to see the new circulation, and it hits hardest those who deal the most with fiat money compared to other assets.... On April 29 2019 07:29 KwarK wrote:On April 29 2019 05:59 BerserkSword wrote:On April 28 2019 22:52 KwarK wrote:
[quote]
I’ll try to explain it a different way.
Consider a car. In a period of inflation does it go slower? Is the mpg worse? Or is the utility provided by the car exactly the same? Because if it’s the same then the car can always be traded for whatever amount of currency represents that value, whether it’s ten thousand dollars or a million dollars, the value represented by each unit of currency does not impact the value of the car.
Now consider the car note. The bank wants 48 equal monthly payments of $300. In a period of inflation are those $300 payments easier to get or harder?
Inflation hurts people holding large amounts of cash and large amounts of fixed rate cash flows. Conversely it helps people who have assets and fixed rate debt payments. Yes I know lol Now tell me how any of this applies to a working class or middle class person working 60 hrs a week, living paycheck to paycheck, and drowning in debt. Inflation is great for people like you and me. I literally owe my great life to inflation (Obama's QE). I quit my career as a physician, and went balls deep in property, the stock market, and bitcoin because that's what the feds policy rewards the most......NOT slaving away at an extremely high stress, high responsiblity, profession, one that is being bogged down by more and more red tape, and having no life. Now I make money from the comfort of my home and do whatever i want. But how does my or your success help lower and middle classl people who are struggling in the U.S? Inflation is great if you're drowning in debt and living paycheck to paycheck. Paycheck to paycheck means 0 cash on hand. Debt means your future cash outflows exceed your future cash inflows. If cash becomes less precious and you have negative cash that means your debt has, in real terms, gone down. I explain, in pretty simple terms, how inflation is a good thing to people with no cash and lots of debt to which you respond "yes, I know, but how does any of that help people with no cash and lots of debt". This is economics 101. If you have cash and the value of cash goes down then you lose. If you have negative cash and the value of cash goes down then you win. The working American has negative cash. "paycheck to paycheck means 0 cash on hand" you do realize that when these people receive paychecks, they have cash on hand....that cash must be used to survive though. working/middle class literally spend 40 hrs or more per week working to obtain cash. They then use that cash to live. inflation is good for me and you who have most of net worth in something that is NOT cash, that increases in value at a higher rate than cash 1) Paycheck to paycheck means their paycheck is fully consumed by expenses with no leftover cash at the end of the month. If your definition of paycheck to paycheck includes leftover cash reserves you're not understanding the words. And if they have no leftover cash then they have nothing to be impacted by inflation. 2) No, real rate of return is net of inflation. The higher inflation, the lower real rate of return. If I have a bond that pays 4% annual interest and inflation increases from 2% to 3% then in real terms my rate of return has halved. 3) Debt can be considered a negative rate investment. Therefore the inverse of 2 applies for the exact same reason. If the nominal interest on your debt is 4% but the rate of inflation increases from 2% to 3% then in real terms your interest cost has halved. You need to get back out your textbook. Everything you're saying is the opposite of true. Can I use this argument to support the idea that poor people in Zimbabwe that were living paycheck to paycheck and in debt were helped by the inflation? Why do you think they inflated their currency? They do it to devalue their debt denominated in their currency. The problem is hyperinflation has a bunch of other really shitty problems. But hopefully you can understand that Zimbabwe's debt, denominated in Zimbabwe dollars, got a whole lot easier to pay back when they printed all that currency. And therefore you can understand why an individual's car payment might also be easier to pay off if the currency used was devalued. Zimbabwe is completely irrelevant to the case of 2% inflation in America. But if you want to bring it up then I hope you can follow why it makes debts easier to pay off. If you were to ever take the CFP exam this kind of stuff would come up a lot with foreign currency hedges and so forth. It's not debatable stuff, it's just math. You work out your net cash position (cash + cash inflows (rate adjusted) - cash outflows (rate adjusted)) and then you look at relative inflation/interest. If your net cash position is positive and the cash devalues that's bad. If your net cash position is negative and the cash devalues that's good. Does it though? If your wages don't keep up with the devaluation of the currency? That's to say if you owe for a payday loan, and are perpetually on payday loans (that are cashing checks worth less when they get there than when they were written), does your credit card debt (which is nominally fixed at it's legal cap after penalty rates) actually get easier to pay or more debt easier/better to have? Or do you effectively have inflation being used to mask a massive transfer of wealth through real monetary inflation that dwarfs the nominal and policy rate? You're describing a different set of problems than the one under discussion. I don't deny that those problems exist, but they have absolutely nothing to do with Berserk's premise which is that inflation helps those with a net positive cash position and hurts those with a net negative cash position. That premise is simply false. It's like he was arguing that water is dry and that fire is cold. Isn't my point more interesting and really what even you think he's trying to describe and your grilling him over the fact that economics has euphemistic language and politics implements a series of systems that turn that simple economic truth into the phenomena/s that are at the root of his concern about how "basic monetary policy" combined with it's political implementation has essentially the opposite outcome of looking at "inflation" isolated in economic terms?
No, your point is irrelevant. This is a guy who read a bunch of dumb articles on Zerohedge or whatever, then threw them into a blender, then came on here trying to argue that monetary policy = Ponzi scheme. It's essentially the facebook mom antivaxxer of economics and it should be treated as such. He's unable to even articulate what a Ponzi scheme is, or what monetary policy is for that matter, and has to come up with creative definitions of paycheck to paycheck that include large amounts of cash savings.
What I'm engaging in right now is a form of public education. I'll get to whatever you're upset about later.
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On April 29 2019 08:18 KwarK wrote:Show nested quote +On April 29 2019 08:14 GreenHorizons wrote:On April 29 2019 08:11 KwarK wrote:On April 29 2019 08:05 GreenHorizons wrote:On April 29 2019 07:55 KwarK wrote:On April 29 2019 07:51 GreenHorizons wrote:On April 29 2019 07:49 KwarK wrote:On April 29 2019 07:39 BerserkSword wrote:On April 29 2019 07:05 Nouar wrote:On April 29 2019 05:50 BerserkSword wrote:
[quote]
On the contrary, I understand exactly what it said. You just don't understand the implications
Inflation is great for borrowing. I've already written paragraphs on this matter and included the method governments and banks use to enrich themselves at the expense of people down the ladder. This is how big banks make a killing selling US government debt that is handed out like candy (at the expense of general population) and public companies pump their stocks (since federal funds rate is so slow it's almost like they are borrowing money for free). And, since like we both agree (at least I think we do), inflation rewards borrowers, it creates a debt system that keeps the "consumers" enslaved for decades.
The idea that there is zero downside to inflation is delusional. It is in direct conflict with one of the fundamental concepts of economics - EVERYTHING has a price.
So basically, while inflation is great for people higher on the socio-economic ladder, it sucks the poorer someone is.
Keynesians like yourself either don't understand or choose to ignore the situation poorer people are in. Life 101 is that you DO need to keep some cash under your pillow (in the bank) as an emergency fund. In the real world the working and middle classes are paid in USD. Not everything is an "investment" and for the low and middle class, investments are not a concern when they barely make ends meet. You are right and wrong. It is also good for regular people that have to borrow to buy a home, a car, or whatever else, instead of always renting as you complain. The main issue is when wages do not keep up with inflation, and that should have been your main focus, instead of inflation itself if you want to target regular people and the middle class slowly disappearing. With deflation, people can't afford their mortgages and get thrown out. With (controlled) inflation, money put in banks or under a mattress loses value over time (works best with rich people, no impact on paycheck to paycheck workers), and it is an incentive to invest that money into something useful for the economy, growing it. It also allows the government to lower the value of its debt, if only they were not stupid enough to use that as an incentive to grow it even more... Your life 101 is why in Europe, there is a guarantee on bank and savings account at 100,000€/person. Deregulation and increased power to corporations against workers (as the Supreme Court showed two days ago, getting a wonderful dissent from RBG) is why wages are not going up accordingly (basically current republican policies as I see them). Only extreme worker shortage, like there is currently, is getting the wages to catch up a little. And this is also a very fine line to thread for the economy, as it hinders its growth as companies can't find people. Of course, too much power to workers is also not good, it's always a matter of balance. Wages and money kept sitting in banks/under the mattress are irrelevant to what I am talking about. Wage control is another form on keynesianism which, together with the inflation, only fucks over poor people. Also, no doubt that the current debt system won't work if there is no inflation....that's the whole reason inflation exists - it's to create a borrowing friendly environment aka the debt slave system. Is that what we really want though? a system that has been, over the last several decades of keynesian monetary expansionist policy, leaving a continually increasing percentage of society unable to even dream of owning a home? Also, you say that inflation keeps rich people from hording fiat and that's a "good thing" as if most or rich people's net worth is composed of fiat money. The fact of the matter is that rich people keep so much of their wealth in non-fiat assets, whether it's property, equities, stores of value, capital, etc. This is how inflation helps rich people because the inflationary policies like QE artificially pump things like the stock market and make actual non-fiat assets more valuable (compared to basic unit of fiat) in comparison to the decreasing value of the cash money Inflation literally helps the rich I dont understand how you are all claiming that "controlled" inflation has no impact on paycheck to paycheck type working and middle class individuals. It is an entirely baseless claim that is in direct odds with the essence of inflation detailed in basic economics. Inflation hits hardest those who are at the bottom of the ladder and latest to see the new circulation, and it hits hardest those who deal the most with fiat money compared to other assets.... On April 29 2019 07:29 KwarK wrote:On April 29 2019 05:59 BerserkSword wrote:
[quote]
Yes I know lol
Now tell me how any of this applies to a working class or middle class person working 60 hrs a week, living paycheck to paycheck, and drowning in debt.
Inflation is great for people like you and me. I literally owe my great life to inflation (Obama's QE). I quit my career as a physician, and went balls deep in property, the stock market, and bitcoin because that's what the feds policy rewards the most......NOT slaving away at an extremely high stress, high responsiblity, profession, one that is being bogged down by more and more red tape, and having no life. Now I make money from the comfort of my home and do whatever i want.
But how does my or your success help lower and middle classl people who are struggling in the U.S? Inflation is great if you're drowning in debt and living paycheck to paycheck. Paycheck to paycheck means 0 cash on hand. Debt means your future cash outflows exceed your future cash inflows. If cash becomes less precious and you have negative cash that means your debt has, in real terms, gone down. I explain, in pretty simple terms, how inflation is a good thing to people with no cash and lots of debt to which you respond "yes, I know, but how does any of that help people with no cash and lots of debt". This is economics 101. If you have cash and the value of cash goes down then you lose. If you have negative cash and the value of cash goes down then you win. The working American has negative cash. "paycheck to paycheck means 0 cash on hand" you do realize that when these people receive paychecks, they have cash on hand....that cash must be used to survive though. working/middle class literally spend 40 hrs or more per week working to obtain cash. They then use that cash to live. inflation is good for me and you who have most of net worth in something that is NOT cash, that increases in value at a higher rate than cash 1) Paycheck to paycheck means their paycheck is fully consumed by expenses with no leftover cash at the end of the month. If your definition of paycheck to paycheck includes leftover cash reserves you're not understanding the words. And if they have no leftover cash then they have nothing to be impacted by inflation. 2) No, real rate of return is net of inflation. The higher inflation, the lower real rate of return. If I have a bond that pays 4% annual interest and inflation increases from 2% to 3% then in real terms my rate of return has halved. 3) Debt can be considered a negative rate investment. Therefore the inverse of 2 applies for the exact same reason. If the nominal interest on your debt is 4% but the rate of inflation increases from 2% to 3% then in real terms your interest cost has halved. You need to get back out your textbook. Everything you're saying is the opposite of true. Can I use this argument to support the idea that poor people in Zimbabwe that were living paycheck to paycheck and in debt were helped by the inflation? Why do you think they inflated their currency? They do it to devalue their debt denominated in their currency. The problem is hyperinflation has a bunch of other really shitty problems. But hopefully you can understand that Zimbabwe's debt, denominated in Zimbabwe dollars, got a whole lot easier to pay back when they printed all that currency. And therefore you can understand why an individual's car payment might also be easier to pay off if the currency used was devalued. Zimbabwe is completely irrelevant to the case of 2% inflation in America. But if you want to bring it up then I hope you can follow why it makes debts easier to pay off. If you were to ever take the CFP exam this kind of stuff would come up a lot with foreign currency hedges and so forth. It's not debatable stuff, it's just math. You work out your net cash position (cash + cash inflows (rate adjusted) - cash outflows (rate adjusted)) and then you look at relative inflation/interest. If your net cash position is positive and the cash devalues that's bad. If your net cash position is negative and the cash devalues that's good. Does it though? If your wages don't keep up with the devaluation of the currency? That's to say if you owe for a payday loan, and are perpetually on payday loans (that are cashing checks worth less when they get there than when they were written), does your credit card debt (which is nominally fixed at it's legal cap after penalty rates) actually get easier to pay or more debt easier/better to have? Or do you effectively have inflation being used to mask a massive transfer of wealth through real monetary inflation that dwarfs the nominal and policy rate? You're describing a different set of problems than the one under discussion. I don't deny that those problems exist, but they have absolutely nothing to do with Berserk's premise which is that inflation helps those with a net positive cash position and hurts those with a net negative cash position. That premise is simply false. It's like he was arguing that water is dry and that fire is cold. Isn't my point more interesting and really what even you think he's trying to describe and your grilling him over the fact that economics has euphemistic language and politics implements a series of systems that turn that simple economic truth into the phenomena/s that are at the root of his concern about how "basic monetary policy" combined with it's political implementation has essentially the opposite outcome of looking at "inflation" isolated in economic terms? No, your point is irrelevant. This is a guy who read a bunch of dumb articles on Zerohedge or whatever, then threw them into a blender, then came on here trying to argue that monetary policy = Ponzi scheme. It's essentially the facebook mom antivaxxer of economics and it should be treated as such. He's unable to even articulate what a Ponzi scheme is, or what monetary policy is for that matter, and has to come up with creative definitions of paycheck to paycheck that include large amounts of cash savings. What I'm engaging in right now is a form of public education. I'll get to whatever you're upset about later.
Not upset, just find this tedious when there is actually an important phenomena at play that's worthy of further investigation, but I can try once this has run it's course.
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On April 29 2019 08:09 KwarK wrote:Show nested quote +On April 29 2019 08:04 BerserkSword wrote:On April 29 2019 07:49 KwarK wrote:On April 29 2019 07:39 BerserkSword wrote:On April 29 2019 07:05 Nouar wrote:On April 29 2019 05:50 BerserkSword wrote:On April 28 2019 21:00 Biff The Understudy wrote:
I don’t think you understand at all the interview you quoted because it’s a lesson on why inflation is good:
Suppose you want to buy a really good book about economics (for example). And the book costs 100 dollars. You are VERY tight with your money, not because you are stingy but because spoiler alert, you are a metaphor for a big company. Anyway. There is an inflation rate of 2% that means next year the book will be 102 dollars. Your most rational behaviour is to not delay and buy it immediately.
Suppose that there is a deflation of 2%. Now the book will be 98 dollars. No way you buy it now; it’s much better to put your cash under your pillow and wait for a year or two. Hell you make a profit by not investing.
Now, here is the thing: there is strictly no downside to a small dose of inflation. As long as it’s not a runaway phenomenon, it just incentivize people to spend their money and invest and punishes sleeping money, which is great.
And that’s what the interview says: inflation is great for investment, deflation for savings. And in a capitalist economy you really don’t want people to save, you want them to invest and buy shit. On the contrary, I understand exactly what it said. You just don't understand the implications Inflation is great for borrowing. I've already written paragraphs on this matter and included the method governments and banks use to enrich themselves at the expense of people down the ladder. This is how big banks make a killing selling US government debt that is handed out like candy (at the expense of general population) and public companies pump their stocks (since federal funds rate is so slow it's almost like they are borrowing money for free). And, since like we both agree (at least I think we do), inflation rewards borrowers, it creates a debt system that keeps the "consumers" enslaved for decades. The idea that there is zero downside to inflation is delusional. It is in direct conflict with one of the fundamental concepts of economics - EVERYTHING has a price. So basically, while inflation is great for people higher on the socio-economic ladder, it sucks the poorer someone is. Keynesians like yourself either don't understand or choose to ignore the situation poorer people are in. Life 101 is that you DO need to keep some cash under your pillow (in the bank) as an emergency fund. In the real world the working and middle classes are paid in USD. Not everything is an "investment" and for the low and middle class, investments are not a concern when they barely make ends meet. You are right and wrong. It is also good for regular people that have to borrow to buy a home, a car, or whatever else, instead of always renting as you complain. The main issue is when wages do not keep up with inflation, and that should have been your main focus, instead of inflation itself if you want to target regular people and the middle class slowly disappearing. With deflation, people can't afford their mortgages and get thrown out. With (controlled) inflation, money put in banks or under a mattress loses value over time (works best with rich people, no impact on paycheck to paycheck workers), and it is an incentive to invest that money into something useful for the economy, growing it. It also allows the government to lower the value of its debt, if only they were not stupid enough to use that as an incentive to grow it even more... Your life 101 is why in Europe, there is a guarantee on bank and savings account at 100,000€/person. Deregulation and increased power to corporations against workers (as the Supreme Court showed two days ago, getting a wonderful dissent from RBG) is why wages are not going up accordingly (basically current republican policies as I see them). Only extreme worker shortage, like there is currently, is getting the wages to catch up a little. And this is also a very fine line to thread for the economy, as it hinders its growth as companies can't find people. Of course, too much power to workers is also not good, it's always a matter of balance. Wages and money kept sitting in banks/under the mattress are irrelevant to what I am talking about. Wage control is another form on keynesianism which, together with the inflation, only fucks over poor people. Also, no doubt that the current debt system won't work if there is no inflation....that's the whole reason inflation exists - it's to create a borrowing friendly environment aka the debt slave system. Is that what we really want though? a system that has been, over the last several decades of keynesian monetary expansionist policy, leaving a continually increasing percentage of society unable to even dream of owning a home? Also, you say that inflation keeps rich people from hording fiat and that's a "good thing" as if most or rich people's net worth is composed of fiat money. The fact of the matter is that rich people keep so much of their wealth in non-fiat assets, whether it's property, equities, stores of value, capital, etc. This is how inflation helps rich people because the inflationary policies like QE artificially pump things like the stock market and make actual non-fiat assets more valuable (compared to basic unit of fiat) in comparison to the decreasing value of the cash money Inflation literally helps the rich I dont understand how you are all claiming that "controlled" inflation has no impact on paycheck to paycheck type working and middle class individuals. It is an entirely baseless claim that is in direct odds with the essence of inflation detailed in basic economics. Inflation hits hardest those who are at the bottom of the ladder and latest to see the new circulation, and it hits hardest those who deal the most with fiat money compared to other assets.... On April 29 2019 07:29 KwarK wrote:On April 29 2019 05:59 BerserkSword wrote:On April 28 2019 22:52 KwarK wrote:On April 28 2019 15:25 BerserkSword wrote:On April 28 2019 11:16 Sermokala wrote:
I think Berzerk sword is confusing basic monetary policy intending to continue inflation at a steady rate as a grand conpiracy thats somehow a ponzi scam where no one gets scamed and everyone benifits. I am not On April 28 2019 11:53 KwarK wrote:On April 28 2019 07:33 BerserkSword wrote:
[quote]
I'm guessing you didnt understand my explanation then lol
Mr. Ponzi = U.S government circle as i described above
The high yield investment Adam - Zach is offered is investment in the U.S. Dollar. Adam - Zach are told they should invest their labor/skills/capital into USD.
The mechanism of transfer is getting people to invest in the USD (exchange it for skills/capital/etc) and then decreasing the ability of the dollar to exchange for goods/services. keep in mind i am talking about the transfer of wealth/capital to Mr. Ponzi, not raw fiat money.
It continues until the Yaneck's and Zach's are virtually no longer able to be paid for their dollars (ie, the dollars they hold cannot buy anything). The exit strategy is amassing a bunch of food and shelter and other excesses (remember these are the things Yaneck and Zack want to trade their USD for but really cant) and live like kings for when the economy collapses. The safe haven is the military compound surrounded by slums and starvation. See zimbabwe, venezuela, or so. Or maybe some other country. I dont know the detailed plans of the world's elite
obviously it's more nuanced than that and I am not saying the U.S is going to replicate zimbabwe (at least anytime soon) but that is the concept.
the essence of this whole thign is a ponzi scheme
But individuals aren't investing in USD, the vast majority of US families can't lay their hands on $400. They've got clothes, cars, houses, food, land, many even have stocks and shares, but they don't generally have large amounts of liquid cash. It wouldn't make sense for them to have cash either, cash is a medium of exchange to avoid bartering. Wealth is still kept in noncash assets, cash simply lets you sell your noncash asset to person A for tokens and then give those tokens to person B for his noncash asset because person B didn't want the asset you would have bartered. If cash becomes worthless people will be fine. The average American doesn't have hundreds of thousands of dollars under his mattress, he has physical possession of a house and a car, a loan on both of those denominated in dollars which is now essentially settled, student loan debt which is also now settled, and some credit cards. If he's lucky he also has some investments which, while valued in dollars, are ownership stakes in tangible things which will have preserved their value. Dollars are lubrication, a way of making tangible assets exchangeable, it's not the value itself. If the dollars go we'll find something else, the physical paper is a negligible portion of overall wealth. Hell, I'm doing pretty well for myself but I generally have negative dollars on hand at any given time. If assets kept their value but currency ceased to be worth anything my net worth would rise because my liabilities are dollars but my assets are value generating. Every time someone gets paid in USD, he/she is investing in USD. Last time I checked Americans are paid in USD. You ignored when I said the situation in America is more nuanced and slow moving than a zimbabwe or venazuela type situation where pepole are wheelbarrowing around cash to by bread. Youre ignoring the factor of time and sequence that i described before. The basic principle is that people early in the sequence get enriched while the people at the end get impoverished. This happens in all degrees of inflation, just to a different extent depending on inflation rate. The people at the bottom of the socio-economic pyramid - the people who do not have access to non-depreciating assets and who live paycheck to paycheck with maybe a small cash sum in their bank account continually get fucked over. As this goes on the people who are affected spreads to higher up the economic ladder. Decades ago a high school grad had a solid chance of working 40 hrs a week in a factory and trading his labor for USD capable of getting his family a house as well as resources to live. The middle class used to NEVER worry about things like health insurance. Decades are going by and now we have the most college educated generation stuck renting most of the time and a health insurance crisis that is even affecting the middle class. On April 28 2019 12:52 KwarK wrote:On April 28 2019 12:02 GreenHorizons wrote:
[quote]
Indeed the value is "stored" in private ownership and the expansion of the concept of personal property into the commons. Then the paper (and digital records) that document it and the forces which enforce those concepts. From my perspective anyway.
That's to say your ownership is only as valuable as your ability to secure it against those who would claim ownership themselves, so the value of your property isn't really yours so much as it is allowed you by the system which assures you it is.
The manifestation of this (because it may be confusing) would be Japanese Americans in the 40's. They had property that held value until the system (people) decided they didn't. The property I think we agree had value, but their ownership of that value is less obvious (granted there were some formal reparations). The point is that inflation only impacts cash and cash flows. If the purchasing power of cash goes down I don't give a shit because I don't have any cash and my fixed cash outflows (mortgage payments) are greater than my fixed cash inflows (possibly my rate of pay but that's not really fixed, it increases with cost of living). The idea that inflation is stealing wealth from the general population makes no sense. It's also not a Ponzi scheme, for what it's worth. Dude. It's good to hear that you are doing alright, but we are not talking about you, specifically.... And I explained in two ways (defining quantitative easing and your Mr Ponzi Adam, Bob, Charlie scenario) how inflation transfers wealth from the bottom to the top. As long as the general population gets paid in USD, inflation takes wealth from them. I’ll try to explain it a different way. Consider a car. In a period of inflation does it go slower? Is the mpg worse? Or is the utility provided by the car exactly the same? Because if it’s the same then the car can always be traded for whatever amount of currency represents that value, whether it’s ten thousand dollars or a million dollars, the value represented by each unit of currency does not impact the value of the car. Now consider the car note. The bank wants 48 equal monthly payments of $300. In a period of inflation are those $300 payments easier to get or harder? Inflation hurts people holding large amounts of cash and large amounts of fixed rate cash flows. Conversely it helps people who have assets and fixed rate debt payments. Yes I know lol Now tell me how any of this applies to a working class or middle class person working 60 hrs a week, living paycheck to paycheck, and drowning in debt. Inflation is great for people like you and me. I literally owe my great life to inflation (Obama's QE). I quit my career as a physician, and went balls deep in property, the stock market, and bitcoin because that's what the feds policy rewards the most......NOT slaving away at an extremely high stress, high responsiblity, profession, one that is being bogged down by more and more red tape, and having no life. Now I make money from the comfort of my home and do whatever i want. But how does my or your success help lower and middle classl people who are struggling in the U.S? Inflation is great if you're drowning in debt and living paycheck to paycheck. Paycheck to paycheck means 0 cash on hand. Debt means your future cash outflows exceed your future cash inflows. If cash becomes less precious and you have negative cash that means your debt has, in real terms, gone down. I explain, in pretty simple terms, how inflation is a good thing to people with no cash and lots of debt to which you respond "yes, I know, but how does any of that help people with no cash and lots of debt". This is economics 101. If you have cash and the value of cash goes down then you lose. If you have negative cash and the value of cash goes down then you win. The working American has negative cash. "paycheck to paycheck means 0 cash on hand" you do realize that when these people receive paychecks, they have cash on hand....that cash must be used to survive though. working/middle class literally spend 40 hrs or more per week working to obtain cash. They then use that cash to live. inflation is good for me and you who have most of net worth in something that is NOT cash, that increases in value at a higher rate than cash 1) Paycheck to paycheck means their paycheck is fully consumed by expenses with no leftover cash at the end of the month. If your definition of paycheck to paycheck includes leftover cash reserves you're not understanding the words. And if they have no leftover cash then they have nothing to be impacted by inflation. 2) No, real rate of return is net of inflation. The higher inflation, the lower real rate of return. If I have a bond that pays 4% annual interest and inflation increases from 2% to 3% then in real terms my rate of return has halved. 3) Debt can be considered a negative rate investment. Therefore the inverse of 2 applies for the exact same reason. If the nominal interest on your debt is 4% but the rate of inflation increases from 2% to 3% then in real terms your interest cost has halved. You need to get back out your textbook. Everything you're saying is the opposite of true. 1) Leftover cash reserves or not, they are still dealing primarily with cash. This is why working AND middle class (who may or may not be pay check to paycheck, but are still barely managing to stay afloat) are getting bent over. Even if they have no cash balance at the end of the month, they still had to use cash to support themselves. The bottom line is that those who cannot afford to diversify their net worth, such as people who are living pay check to pay check, get screwed over to some extent by inflation. 2) your rate of return is still better than the poor guy who has no bond and only gets paid in cash and whose net value of investments (infestment in the USD) is going down. Why do you think the bond yield would be high enough for you to profit anyway? Bond yields are determined by expected inflation - the higher the expected inflation, the higher the bond yields are. And youre ignoring the elephant in the room which is the stock market, probably the biggest target of QE. QE artificially pumps (distorts) the stock market like crazy. That's why the stock market soared under Obama, and that's why Trump lambasts the Fed when they engage in even a small modicum of monetary tightening - Trump wants the stock market to look good during his regime. 3) I never denied that inflation is good for borrowing....i literally said that inflation rewards taking on debt several times already lol. I don't see how this is relevant to this whole discussion. 1) Everyone is transacting in cash. I don't trade Apple stock for bread at Walmart. 2) Yes, having money is better than not having money for a bunch of reasons. But inflation is not one of those reasons. People who have no investments are screwed. But they're not screwed by inflation, they're helped by inflation, they're screwed by poverty. 3) People who have debt have negative future cash outflows. Their net cash position is negative. That means they're helped by inflation. The working poor, for example, with a car, phone, and house payment are having their interest rates reduced by inflation. If you understand that people with a net negative cash position are helped by inflation and you understand that the working poor are living paycheck to paycheck and saddled with debt then I'm not sure where I'm losing you. Paycheck to paycheck + saddled with debt = net negative cash position = helped by inflation. Where did you get lost there?
1) Yes, but Apple is among the first to receive the effects to inflation, thereby enriching you. The starbucks worker is down at the bottom. This is why Apple shareholders saw their wealth increase dramatically over the period of QE, while things just got harder for the working/middle class.
2) So now youre bringing up this idea of poverty as if it's not tied to the macroeconomic policies of the nation. You just cemented my point - in this climate, this system that decades of monetary expansion has created, the working class is fucked. Believe it or not, there was once a time where a worker could use his paycheck to support his family pretty comfortably and his whole family would have health insurance
3) this is some real ivory tower shit now....
working poor with house payments ??? WTF?? do you think banks hand out mortgages like candy to poor people anymore? (fyi, when banks used to do that, it lead to the liquidity crisis and so many people who had no business having a mortgage lost the shirts off their backs)
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United States24728 Posts
BerserkSword, just to check, if Kwark or someone else from this discussion were to lay out incontrovertible proof that supports the argument Kwark is trying to make, what would your response be? Would it be to try to come up with counterarguments?
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United States43195 Posts
On April 29 2019 08:27 BerserkSword wrote:Show nested quote +On April 29 2019 08:09 KwarK wrote:On April 29 2019 08:04 BerserkSword wrote:On April 29 2019 07:49 KwarK wrote:On April 29 2019 07:39 BerserkSword wrote:On April 29 2019 07:05 Nouar wrote:On April 29 2019 05:50 BerserkSword wrote:On April 28 2019 21:00 Biff The Understudy wrote:
I don’t think you understand at all the interview you quoted because it’s a lesson on why inflation is good:
Suppose you want to buy a really good book about economics (for example). And the book costs 100 dollars. You are VERY tight with your money, not because you are stingy but because spoiler alert, you are a metaphor for a big company. Anyway. There is an inflation rate of 2% that means next year the book will be 102 dollars. Your most rational behaviour is to not delay and buy it immediately.
Suppose that there is a deflation of 2%. Now the book will be 98 dollars. No way you buy it now; it’s much better to put your cash under your pillow and wait for a year or two. Hell you make a profit by not investing.
Now, here is the thing: there is strictly no downside to a small dose of inflation. As long as it’s not a runaway phenomenon, it just incentivize people to spend their money and invest and punishes sleeping money, which is great.
And that’s what the interview says: inflation is great for investment, deflation for savings. And in a capitalist economy you really don’t want people to save, you want them to invest and buy shit. On the contrary, I understand exactly what it said. You just don't understand the implications Inflation is great for borrowing. I've already written paragraphs on this matter and included the method governments and banks use to enrich themselves at the expense of people down the ladder. This is how big banks make a killing selling US government debt that is handed out like candy (at the expense of general population) and public companies pump their stocks (since federal funds rate is so slow it's almost like they are borrowing money for free). And, since like we both agree (at least I think we do), inflation rewards borrowers, it creates a debt system that keeps the "consumers" enslaved for decades. The idea that there is zero downside to inflation is delusional. It is in direct conflict with one of the fundamental concepts of economics - EVERYTHING has a price. So basically, while inflation is great for people higher on the socio-economic ladder, it sucks the poorer someone is. Keynesians like yourself either don't understand or choose to ignore the situation poorer people are in. Life 101 is that you DO need to keep some cash under your pillow (in the bank) as an emergency fund. In the real world the working and middle classes are paid in USD. Not everything is an "investment" and for the low and middle class, investments are not a concern when they barely make ends meet. You are right and wrong. It is also good for regular people that have to borrow to buy a home, a car, or whatever else, instead of always renting as you complain. The main issue is when wages do not keep up with inflation, and that should have been your main focus, instead of inflation itself if you want to target regular people and the middle class slowly disappearing. With deflation, people can't afford their mortgages and get thrown out. With (controlled) inflation, money put in banks or under a mattress loses value over time (works best with rich people, no impact on paycheck to paycheck workers), and it is an incentive to invest that money into something useful for the economy, growing it. It also allows the government to lower the value of its debt, if only they were not stupid enough to use that as an incentive to grow it even more... Your life 101 is why in Europe, there is a guarantee on bank and savings account at 100,000€/person. Deregulation and increased power to corporations against workers (as the Supreme Court showed two days ago, getting a wonderful dissent from RBG) is why wages are not going up accordingly (basically current republican policies as I see them). Only extreme worker shortage, like there is currently, is getting the wages to catch up a little. And this is also a very fine line to thread for the economy, as it hinders its growth as companies can't find people. Of course, too much power to workers is also not good, it's always a matter of balance. Wages and money kept sitting in banks/under the mattress are irrelevant to what I am talking about. Wage control is another form on keynesianism which, together with the inflation, only fucks over poor people. Also, no doubt that the current debt system won't work if there is no inflation....that's the whole reason inflation exists - it's to create a borrowing friendly environment aka the debt slave system. Is that what we really want though? a system that has been, over the last several decades of keynesian monetary expansionist policy, leaving a continually increasing percentage of society unable to even dream of owning a home? Also, you say that inflation keeps rich people from hording fiat and that's a "good thing" as if most or rich people's net worth is composed of fiat money. The fact of the matter is that rich people keep so much of their wealth in non-fiat assets, whether it's property, equities, stores of value, capital, etc. This is how inflation helps rich people because the inflationary policies like QE artificially pump things like the stock market and make actual non-fiat assets more valuable (compared to basic unit of fiat) in comparison to the decreasing value of the cash money Inflation literally helps the rich I dont understand how you are all claiming that "controlled" inflation has no impact on paycheck to paycheck type working and middle class individuals. It is an entirely baseless claim that is in direct odds with the essence of inflation detailed in basic economics. Inflation hits hardest those who are at the bottom of the ladder and latest to see the new circulation, and it hits hardest those who deal the most with fiat money compared to other assets.... On April 29 2019 07:29 KwarK wrote:On April 29 2019 05:59 BerserkSword wrote:On April 28 2019 22:52 KwarK wrote:On April 28 2019 15:25 BerserkSword wrote:On April 28 2019 11:16 Sermokala wrote:
I think Berzerk sword is confusing basic monetary policy intending to continue inflation at a steady rate as a grand conpiracy thats somehow a ponzi scam where no one gets scamed and everyone benifits. I am not On April 28 2019 11:53 KwarK wrote:
[quote]
But individuals aren't investing in USD, the vast majority of US families can't lay their hands on $400. They've got clothes, cars, houses, food, land, many even have stocks and shares, but they don't generally have large amounts of liquid cash. It wouldn't make sense for them to have cash either, cash is a medium of exchange to avoid bartering. Wealth is still kept in noncash assets, cash simply lets you sell your noncash asset to person A for tokens and then give those tokens to person B for his noncash asset because person B didn't want the asset you would have bartered.
If cash becomes worthless people will be fine. The average American doesn't have hundreds of thousands of dollars under his mattress, he has physical possession of a house and a car, a loan on both of those denominated in dollars which is now essentially settled, student loan debt which is also now settled, and some credit cards. If he's lucky he also has some investments which, while valued in dollars, are ownership stakes in tangible things which will have preserved their value.
Dollars are lubrication, a way of making tangible assets exchangeable, it's not the value itself. If the dollars go we'll find something else, the physical paper is a negligible portion of overall wealth. Hell, I'm doing pretty well for myself but I generally have negative dollars on hand at any given time. If assets kept their value but currency ceased to be worth anything my net worth would rise because my liabilities are dollars but my assets are value generating. Every time someone gets paid in USD, he/she is investing in USD. Last time I checked Americans are paid in USD. You ignored when I said the situation in America is more nuanced and slow moving than a zimbabwe or venazuela type situation where pepole are wheelbarrowing around cash to by bread. Youre ignoring the factor of time and sequence that i described before. The basic principle is that people early in the sequence get enriched while the people at the end get impoverished. This happens in all degrees of inflation, just to a different extent depending on inflation rate. The people at the bottom of the socio-economic pyramid - the people who do not have access to non-depreciating assets and who live paycheck to paycheck with maybe a small cash sum in their bank account continually get fucked over. As this goes on the people who are affected spreads to higher up the economic ladder. Decades ago a high school grad had a solid chance of working 40 hrs a week in a factory and trading his labor for USD capable of getting his family a house as well as resources to live. The middle class used to NEVER worry about things like health insurance. Decades are going by and now we have the most college educated generation stuck renting most of the time and a health insurance crisis that is even affecting the middle class. On April 28 2019 12:52 KwarK wrote:
[quote]
The point is that inflation only impacts cash and cash flows. If the purchasing power of cash goes down I don't give a shit because I don't have any cash and my fixed cash outflows (mortgage payments) are greater than my fixed cash inflows (possibly my rate of pay but that's not really fixed, it increases with cost of living).
The idea that inflation is stealing wealth from the general population makes no sense. It's also not a Ponzi scheme, for what it's worth. Dude. It's good to hear that you are doing alright, but we are not talking about you, specifically.... And I explained in two ways (defining quantitative easing and your Mr Ponzi Adam, Bob, Charlie scenario) how inflation transfers wealth from the bottom to the top. As long as the general population gets paid in USD, inflation takes wealth from them. I’ll try to explain it a different way. Consider a car. In a period of inflation does it go slower? Is the mpg worse? Or is the utility provided by the car exactly the same? Because if it’s the same then the car can always be traded for whatever amount of currency represents that value, whether it’s ten thousand dollars or a million dollars, the value represented by each unit of currency does not impact the value of the car. Now consider the car note. The bank wants 48 equal monthly payments of $300. In a period of inflation are those $300 payments easier to get or harder? Inflation hurts people holding large amounts of cash and large amounts of fixed rate cash flows. Conversely it helps people who have assets and fixed rate debt payments. Yes I know lol Now tell me how any of this applies to a working class or middle class person working 60 hrs a week, living paycheck to paycheck, and drowning in debt. Inflation is great for people like you and me. I literally owe my great life to inflation (Obama's QE). I quit my career as a physician, and went balls deep in property, the stock market, and bitcoin because that's what the feds policy rewards the most......NOT slaving away at an extremely high stress, high responsiblity, profession, one that is being bogged down by more and more red tape, and having no life. Now I make money from the comfort of my home and do whatever i want. But how does my or your success help lower and middle classl people who are struggling in the U.S? Inflation is great if you're drowning in debt and living paycheck to paycheck. Paycheck to paycheck means 0 cash on hand. Debt means your future cash outflows exceed your future cash inflows. If cash becomes less precious and you have negative cash that means your debt has, in real terms, gone down. I explain, in pretty simple terms, how inflation is a good thing to people with no cash and lots of debt to which you respond "yes, I know, but how does any of that help people with no cash and lots of debt". This is economics 101. If you have cash and the value of cash goes down then you lose. If you have negative cash and the value of cash goes down then you win. The working American has negative cash. "paycheck to paycheck means 0 cash on hand" you do realize that when these people receive paychecks, they have cash on hand....that cash must be used to survive though. working/middle class literally spend 40 hrs or more per week working to obtain cash. They then use that cash to live. inflation is good for me and you who have most of net worth in something that is NOT cash, that increases in value at a higher rate than cash 1) Paycheck to paycheck means their paycheck is fully consumed by expenses with no leftover cash at the end of the month. If your definition of paycheck to paycheck includes leftover cash reserves you're not understanding the words. And if they have no leftover cash then they have nothing to be impacted by inflation. 2) No, real rate of return is net of inflation. The higher inflation, the lower real rate of return. If I have a bond that pays 4% annual interest and inflation increases from 2% to 3% then in real terms my rate of return has halved. 3) Debt can be considered a negative rate investment. Therefore the inverse of 2 applies for the exact same reason. If the nominal interest on your debt is 4% but the rate of inflation increases from 2% to 3% then in real terms your interest cost has halved. You need to get back out your textbook. Everything you're saying is the opposite of true. 1) Leftover cash reserves or not, they are still dealing primarily with cash. This is why working AND middle class (who may or may not be pay check to paycheck, but are still barely managing to stay afloat) are getting bent over. Even if they have no cash balance at the end of the month, they still had to use cash to support themselves. The bottom line is that those who cannot afford to diversify their net worth, such as people who are living pay check to pay check, get screwed over to some extent by inflation. 2) your rate of return is still better than the poor guy who has no bond and only gets paid in cash and whose net value of investments (infestment in the USD) is going down. Why do you think the bond yield would be high enough for you to profit anyway? Bond yields are determined by expected inflation - the higher the expected inflation, the higher the bond yields are. And youre ignoring the elephant in the room which is the stock market, probably the biggest target of QE. QE artificially pumps (distorts) the stock market like crazy. That's why the stock market soared under Obama, and that's why Trump lambasts the Fed when they engage in even a small modicum of monetary tightening - Trump wants the stock market to look good during his regime. 3) I never denied that inflation is good for borrowing....i literally said that inflation rewards taking on debt several times already lol. I don't see how this is relevant to this whole discussion. 1) Everyone is transacting in cash. I don't trade Apple stock for bread at Walmart. 2) Yes, having money is better than not having money for a bunch of reasons. But inflation is not one of those reasons. People who have no investments are screwed. But they're not screwed by inflation, they're helped by inflation, they're screwed by poverty. 3) People who have debt have negative future cash outflows. Their net cash position is negative. That means they're helped by inflation. The working poor, for example, with a car, phone, and house payment are having their interest rates reduced by inflation. If you understand that people with a net negative cash position are helped by inflation and you understand that the working poor are living paycheck to paycheck and saddled with debt then I'm not sure where I'm losing you. Paycheck to paycheck + saddled with debt = net negative cash position = helped by inflation. Where did you get lost there? 1) Yes, but Apple is among the first to receive the effects to inflation, thereby enriching you. The starbucks worker is down at the bottom. This is why Apple shareholders saw their wealth increase dramatically over the period of QE, while things just got harder for the working/middle class. 2) So now youre bringing up this idea of poverty as if it's not tied to the macroeconomic policies of the nation. You just cemented my point - in this climate, this system that decades of monetary expansion has created, the working class is fucked. Believe it or not, there was once a time where a worker could use his paycheck to support his family pretty comfortably and his whole family would have health insurance 3) this is some real ivory tower shit now.... working poor with house payments ??? WTF?? do you think banks hand out mortgages like candy to poor people anymore? (fyi, when banks used to do that, it lead to the liquidity crisis and so many people who had no business having a mortgage lost the shirts off their backs)
A mortgage is an example of debt that would cause them to have a net negative cash position. So would a loan to their cousin if that's less elitist for you. The point remains that your argument only works if they have a net positive cash position. People who live paycheck to paycheck and buried in debt do not have a net positive cash position and are therefore not the victims of inflation.
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On April 29 2019 08:30 micronesia wrote:
BerserkSword, just to check, if Kwark or someone else from this discussion were to lay out incontrovertible proof that supports the argument Kwark is trying to make, what would your response be? Would it be to try to come up with counterarguments?
no. If I see what I deem to be unequivocal proof that I am wrong, I will admit that I was wrong.
so far I'm the only one in this topic who has given proof/sources of anything though.
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United States43195 Posts
On April 29 2019 08:32 BerserkSword wrote:Show nested quote +On April 29 2019 08:30 micronesia wrote:
BerserkSword, just to check, if Kwark or someone else from this discussion were to lay out incontrovertible proof that supports the argument Kwark is trying to make, what would your response be? Would it be to try to come up with counterarguments? no. If I see what I deem to be unequivocal proof that I am wrong, I will admit that I was wrong. so far I'm the only one in this topic who has given proof/sources of anything though.
If you have cash but you can only buy half as much with that cash because the value has gone down, that's bad for you.
If you owe cash, but you only need to sell half as much stuff to get the cash to repay the debt, that's good for you.
This is incontrovertible in the same way that 1+1=2 is incontrovertible.
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On April 29 2019 08:31 KwarK wrote:Show nested quote +On April 29 2019 08:27 BerserkSword wrote:On April 29 2019 08:09 KwarK wrote:On April 29 2019 08:04 BerserkSword wrote:On April 29 2019 07:49 KwarK wrote:On April 29 2019 07:39 BerserkSword wrote:On April 29 2019 07:05 Nouar wrote:On April 29 2019 05:50 BerserkSword wrote:On April 28 2019 21:00 Biff The Understudy wrote:
I don’t think you understand at all the interview you quoted because it’s a lesson on why inflation is good:
Suppose you want to buy a really good book about economics (for example). And the book costs 100 dollars. You are VERY tight with your money, not because you are stingy but because spoiler alert, you are a metaphor for a big company. Anyway. There is an inflation rate of 2% that means next year the book will be 102 dollars. Your most rational behaviour is to not delay and buy it immediately.
Suppose that there is a deflation of 2%. Now the book will be 98 dollars. No way you buy it now; it’s much better to put your cash under your pillow and wait for a year or two. Hell you make a profit by not investing.
Now, here is the thing: there is strictly no downside to a small dose of inflation. As long as it’s not a runaway phenomenon, it just incentivize people to spend their money and invest and punishes sleeping money, which is great.
And that’s what the interview says: inflation is great for investment, deflation for savings. And in a capitalist economy you really don’t want people to save, you want them to invest and buy shit. On the contrary, I understand exactly what it said. You just don't understand the implications Inflation is great for borrowing. I've already written paragraphs on this matter and included the method governments and banks use to enrich themselves at the expense of people down the ladder. This is how big banks make a killing selling US government debt that is handed out like candy (at the expense of general population) and public companies pump their stocks (since federal funds rate is so slow it's almost like they are borrowing money for free). And, since like we both agree (at least I think we do), inflation rewards borrowers, it creates a debt system that keeps the "consumers" enslaved for decades. The idea that there is zero downside to inflation is delusional. It is in direct conflict with one of the fundamental concepts of economics - EVERYTHING has a price. So basically, while inflation is great for people higher on the socio-economic ladder, it sucks the poorer someone is. Keynesians like yourself either don't understand or choose to ignore the situation poorer people are in. Life 101 is that you DO need to keep some cash under your pillow (in the bank) as an emergency fund. In the real world the working and middle classes are paid in USD. Not everything is an "investment" and for the low and middle class, investments are not a concern when they barely make ends meet. You are right and wrong. It is also good for regular people that have to borrow to buy a home, a car, or whatever else, instead of always renting as you complain. The main issue is when wages do not keep up with inflation, and that should have been your main focus, instead of inflation itself if you want to target regular people and the middle class slowly disappearing. With deflation, people can't afford their mortgages and get thrown out. With (controlled) inflation, money put in banks or under a mattress loses value over time (works best with rich people, no impact on paycheck to paycheck workers), and it is an incentive to invest that money into something useful for the economy, growing it. It also allows the government to lower the value of its debt, if only they were not stupid enough to use that as an incentive to grow it even more... Your life 101 is why in Europe, there is a guarantee on bank and savings account at 100,000€/person. Deregulation and increased power to corporations against workers (as the Supreme Court showed two days ago, getting a wonderful dissent from RBG) is why wages are not going up accordingly (basically current republican policies as I see them). Only extreme worker shortage, like there is currently, is getting the wages to catch up a little. And this is also a very fine line to thread for the economy, as it hinders its growth as companies can't find people. Of course, too much power to workers is also not good, it's always a matter of balance. Wages and money kept sitting in banks/under the mattress are irrelevant to what I am talking about. Wage control is another form on keynesianism which, together with the inflation, only fucks over poor people. Also, no doubt that the current debt system won't work if there is no inflation....that's the whole reason inflation exists - it's to create a borrowing friendly environment aka the debt slave system. Is that what we really want though? a system that has been, over the last several decades of keynesian monetary expansionist policy, leaving a continually increasing percentage of society unable to even dream of owning a home? Also, you say that inflation keeps rich people from hording fiat and that's a "good thing" as if most or rich people's net worth is composed of fiat money. The fact of the matter is that rich people keep so much of their wealth in non-fiat assets, whether it's property, equities, stores of value, capital, etc. This is how inflation helps rich people because the inflationary policies like QE artificially pump things like the stock market and make actual non-fiat assets more valuable (compared to basic unit of fiat) in comparison to the decreasing value of the cash money Inflation literally helps the rich I dont understand how you are all claiming that "controlled" inflation has no impact on paycheck to paycheck type working and middle class individuals. It is an entirely baseless claim that is in direct odds with the essence of inflation detailed in basic economics. Inflation hits hardest those who are at the bottom of the ladder and latest to see the new circulation, and it hits hardest those who deal the most with fiat money compared to other assets.... On April 29 2019 07:29 KwarK wrote:On April 29 2019 05:59 BerserkSword wrote:On April 28 2019 22:52 KwarK wrote:On April 28 2019 15:25 BerserkSword wrote:
[quote]
I am not
[quote]
Every time someone gets paid in USD, he/she is investing in USD. Last time I checked Americans are paid in USD.
You ignored when I said the situation in America is more nuanced and slow moving than a zimbabwe or venazuela type situation where pepole are wheelbarrowing around cash to by bread. Youre ignoring the factor of time and sequence that i described before. The basic principle is that people early in the sequence get enriched while the people at the end get impoverished. This happens in all degrees of inflation, just to a different extent depending on inflation rate. The people at the bottom of the socio-economic pyramid - the people who do not have access to non-depreciating assets and who live paycheck to paycheck with maybe a small cash sum in their bank account continually get fucked over.
As this goes on the people who are affected spreads to higher up the economic ladder. Decades ago a high school grad had a solid chance of working 40 hrs a week in a factory and trading his labor for USD capable of getting his family a house as well as resources to live. The middle class used to NEVER worry about things like health insurance. Decades are going by and now we have the most college educated generation stuck renting most of the time and a health insurance crisis that is even affecting the middle class.
[quote]
Dude. It's good to hear that you are doing alright, but we are not talking about you, specifically....
And I explained in two ways (defining quantitative easing and your Mr Ponzi Adam, Bob, Charlie scenario) how inflation transfers wealth from the bottom to the top. As long as the general population gets paid in USD, inflation takes wealth from them.
I’ll try to explain it a different way. Consider a car. In a period of inflation does it go slower? Is the mpg worse? Or is the utility provided by the car exactly the same? Because if it’s the same then the car can always be traded for whatever amount of currency represents that value, whether it’s ten thousand dollars or a million dollars, the value represented by each unit of currency does not impact the value of the car. Now consider the car note. The bank wants 48 equal monthly payments of $300. In a period of inflation are those $300 payments easier to get or harder? Inflation hurts people holding large amounts of cash and large amounts of fixed rate cash flows. Conversely it helps people who have assets and fixed rate debt payments. Yes I know lol Now tell me how any of this applies to a working class or middle class person working 60 hrs a week, living paycheck to paycheck, and drowning in debt. Inflation is great for people like you and me. I literally owe my great life to inflation (Obama's QE). I quit my career as a physician, and went balls deep in property, the stock market, and bitcoin because that's what the feds policy rewards the most......NOT slaving away at an extremely high stress, high responsiblity, profession, one that is being bogged down by more and more red tape, and having no life. Now I make money from the comfort of my home and do whatever i want. But how does my or your success help lower and middle classl people who are struggling in the U.S? Inflation is great if you're drowning in debt and living paycheck to paycheck. Paycheck to paycheck means 0 cash on hand. Debt means your future cash outflows exceed your future cash inflows. If cash becomes less precious and you have negative cash that means your debt has, in real terms, gone down. I explain, in pretty simple terms, how inflation is a good thing to people with no cash and lots of debt to which you respond "yes, I know, but how does any of that help people with no cash and lots of debt". This is economics 101. If you have cash and the value of cash goes down then you lose. If you have negative cash and the value of cash goes down then you win. The working American has negative cash. "paycheck to paycheck means 0 cash on hand" you do realize that when these people receive paychecks, they have cash on hand....that cash must be used to survive though. working/middle class literally spend 40 hrs or more per week working to obtain cash. They then use that cash to live. inflation is good for me and you who have most of net worth in something that is NOT cash, that increases in value at a higher rate than cash 1) Paycheck to paycheck means their paycheck is fully consumed by expenses with no leftover cash at the end of the month. If your definition of paycheck to paycheck includes leftover cash reserves you're not understanding the words. And if they have no leftover cash then they have nothing to be impacted by inflation. 2) No, real rate of return is net of inflation. The higher inflation, the lower real rate of return. If I have a bond that pays 4% annual interest and inflation increases from 2% to 3% then in real terms my rate of return has halved. 3) Debt can be considered a negative rate investment. Therefore the inverse of 2 applies for the exact same reason. If the nominal interest on your debt is 4% but the rate of inflation increases from 2% to 3% then in real terms your interest cost has halved. You need to get back out your textbook. Everything you're saying is the opposite of true. 1) Leftover cash reserves or not, they are still dealing primarily with cash. This is why working AND middle class (who may or may not be pay check to paycheck, but are still barely managing to stay afloat) are getting bent over. Even if they have no cash balance at the end of the month, they still had to use cash to support themselves. The bottom line is that those who cannot afford to diversify their net worth, such as people who are living pay check to pay check, get screwed over to some extent by inflation. 2) your rate of return is still better than the poor guy who has no bond and only gets paid in cash and whose net value of investments (infestment in the USD) is going down. Why do you think the bond yield would be high enough for you to profit anyway? Bond yields are determined by expected inflation - the higher the expected inflation, the higher the bond yields are. And youre ignoring the elephant in the room which is the stock market, probably the biggest target of QE. QE artificially pumps (distorts) the stock market like crazy. That's why the stock market soared under Obama, and that's why Trump lambasts the Fed when they engage in even a small modicum of monetary tightening - Trump wants the stock market to look good during his regime. 3) I never denied that inflation is good for borrowing....i literally said that inflation rewards taking on debt several times already lol. I don't see how this is relevant to this whole discussion. 1) Everyone is transacting in cash. I don't trade Apple stock for bread at Walmart. 2) Yes, having money is better than not having money for a bunch of reasons. But inflation is not one of those reasons. People who have no investments are screwed. But they're not screwed by inflation, they're helped by inflation, they're screwed by poverty. 3) People who have debt have negative future cash outflows. Their net cash position is negative. That means they're helped by inflation. The working poor, for example, with a car, phone, and house payment are having their interest rates reduced by inflation. If you understand that people with a net negative cash position are helped by inflation and you understand that the working poor are living paycheck to paycheck and saddled with debt then I'm not sure where I'm losing you. Paycheck to paycheck + saddled with debt = net negative cash position = helped by inflation. Where did you get lost there? 1) Yes, but Apple is among the first to receive the effects to inflation, thereby enriching you. The starbucks worker is down at the bottom. This is why Apple shareholders saw their wealth increase dramatically over the period of QE, while things just got harder for the working/middle class. 2) So now youre bringing up this idea of poverty as if it's not tied to the macroeconomic policies of the nation. You just cemented my point - in this climate, this system that decades of monetary expansion has created, the working class is fucked. Believe it or not, there was once a time where a worker could use his paycheck to support his family pretty comfortably and his whole family would have health insurance 3) this is some real ivory tower shit now.... working poor with house payments ??? WTF?? do you think banks hand out mortgages like candy to poor people anymore? (fyi, when banks used to do that, it lead to the liquidity crisis and so many people who had no business having a mortgage lost the shirts off their backs) A mortgage is an example of debt that would cause them to have a net negative cash position. So would a loan to their cousin if that's less elitist for you. The point remains that your argument only works if they have a net positive cash position. People who live paycheck to paycheck and buried in debt do not have a net positive cash position and are therefore not the victims of inflation.
If the nominal interest rate of the cousin's loan is higher than the inflation rate, then the real interest rate is greater than 0% and it means that the debtor is losing out
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United States43195 Posts
On April 29 2019 08:38 BerserkSword wrote:Show nested quote +On April 29 2019 08:31 KwarK wrote:On April 29 2019 08:27 BerserkSword wrote:On April 29 2019 08:09 KwarK wrote:On April 29 2019 08:04 BerserkSword wrote:On April 29 2019 07:49 KwarK wrote:On April 29 2019 07:39 BerserkSword wrote:On April 29 2019 07:05 Nouar wrote:On April 29 2019 05:50 BerserkSword wrote:On April 28 2019 21:00 Biff The Understudy wrote:
I don’t think you understand at all the interview you quoted because it’s a lesson on why inflation is good:
Suppose you want to buy a really good book about economics (for example). And the book costs 100 dollars. You are VERY tight with your money, not because you are stingy but because spoiler alert, you are a metaphor for a big company. Anyway. There is an inflation rate of 2% that means next year the book will be 102 dollars. Your most rational behaviour is to not delay and buy it immediately.
Suppose that there is a deflation of 2%. Now the book will be 98 dollars. No way you buy it now; it’s much better to put your cash under your pillow and wait for a year or two. Hell you make a profit by not investing.
Now, here is the thing: there is strictly no downside to a small dose of inflation. As long as it’s not a runaway phenomenon, it just incentivize people to spend their money and invest and punishes sleeping money, which is great.
And that’s what the interview says: inflation is great for investment, deflation for savings. And in a capitalist economy you really don’t want people to save, you want them to invest and buy shit. On the contrary, I understand exactly what it said. You just don't understand the implications Inflation is great for borrowing. I've already written paragraphs on this matter and included the method governments and banks use to enrich themselves at the expense of people down the ladder. This is how big banks make a killing selling US government debt that is handed out like candy (at the expense of general population) and public companies pump their stocks (since federal funds rate is so slow it's almost like they are borrowing money for free). And, since like we both agree (at least I think we do), inflation rewards borrowers, it creates a debt system that keeps the "consumers" enslaved for decades. The idea that there is zero downside to inflation is delusional. It is in direct conflict with one of the fundamental concepts of economics - EVERYTHING has a price. So basically, while inflation is great for people higher on the socio-economic ladder, it sucks the poorer someone is. Keynesians like yourself either don't understand or choose to ignore the situation poorer people are in. Life 101 is that you DO need to keep some cash under your pillow (in the bank) as an emergency fund. In the real world the working and middle classes are paid in USD. Not everything is an "investment" and for the low and middle class, investments are not a concern when they barely make ends meet. You are right and wrong. It is also good for regular people that have to borrow to buy a home, a car, or whatever else, instead of always renting as you complain. The main issue is when wages do not keep up with inflation, and that should have been your main focus, instead of inflation itself if you want to target regular people and the middle class slowly disappearing. With deflation, people can't afford their mortgages and get thrown out. With (controlled) inflation, money put in banks or under a mattress loses value over time (works best with rich people, no impact on paycheck to paycheck workers), and it is an incentive to invest that money into something useful for the economy, growing it. It also allows the government to lower the value of its debt, if only they were not stupid enough to use that as an incentive to grow it even more... Your life 101 is why in Europe, there is a guarantee on bank and savings account at 100,000€/person. Deregulation and increased power to corporations against workers (as the Supreme Court showed two days ago, getting a wonderful dissent from RBG) is why wages are not going up accordingly (basically current republican policies as I see them). Only extreme worker shortage, like there is currently, is getting the wages to catch up a little. And this is also a very fine line to thread for the economy, as it hinders its growth as companies can't find people. Of course, too much power to workers is also not good, it's always a matter of balance. Wages and money kept sitting in banks/under the mattress are irrelevant to what I am talking about. Wage control is another form on keynesianism which, together with the inflation, only fucks over poor people. Also, no doubt that the current debt system won't work if there is no inflation....that's the whole reason inflation exists - it's to create a borrowing friendly environment aka the debt slave system. Is that what we really want though? a system that has been, over the last several decades of keynesian monetary expansionist policy, leaving a continually increasing percentage of society unable to even dream of owning a home? Also, you say that inflation keeps rich people from hording fiat and that's a "good thing" as if most or rich people's net worth is composed of fiat money. The fact of the matter is that rich people keep so much of their wealth in non-fiat assets, whether it's property, equities, stores of value, capital, etc. This is how inflation helps rich people because the inflationary policies like QE artificially pump things like the stock market and make actual non-fiat assets more valuable (compared to basic unit of fiat) in comparison to the decreasing value of the cash money Inflation literally helps the rich I dont understand how you are all claiming that "controlled" inflation has no impact on paycheck to paycheck type working and middle class individuals. It is an entirely baseless claim that is in direct odds with the essence of inflation detailed in basic economics. Inflation hits hardest those who are at the bottom of the ladder and latest to see the new circulation, and it hits hardest those who deal the most with fiat money compared to other assets.... On April 29 2019 07:29 KwarK wrote:On April 29 2019 05:59 BerserkSword wrote:On April 28 2019 22:52 KwarK wrote:
[quote]
I’ll try to explain it a different way.
Consider a car. In a period of inflation does it go slower? Is the mpg worse? Or is the utility provided by the car exactly the same? Because if it’s the same then the car can always be traded for whatever amount of currency represents that value, whether it’s ten thousand dollars or a million dollars, the value represented by each unit of currency does not impact the value of the car.
Now consider the car note. The bank wants 48 equal monthly payments of $300. In a period of inflation are those $300 payments easier to get or harder?
Inflation hurts people holding large amounts of cash and large amounts of fixed rate cash flows. Conversely it helps people who have assets and fixed rate debt payments. Yes I know lol Now tell me how any of this applies to a working class or middle class person working 60 hrs a week, living paycheck to paycheck, and drowning in debt. Inflation is great for people like you and me. I literally owe my great life to inflation (Obama's QE). I quit my career as a physician, and went balls deep in property, the stock market, and bitcoin because that's what the feds policy rewards the most......NOT slaving away at an extremely high stress, high responsiblity, profession, one that is being bogged down by more and more red tape, and having no life. Now I make money from the comfort of my home and do whatever i want. But how does my or your success help lower and middle classl people who are struggling in the U.S? Inflation is great if you're drowning in debt and living paycheck to paycheck. Paycheck to paycheck means 0 cash on hand. Debt means your future cash outflows exceed your future cash inflows. If cash becomes less precious and you have negative cash that means your debt has, in real terms, gone down. I explain, in pretty simple terms, how inflation is a good thing to people with no cash and lots of debt to which you respond "yes, I know, but how does any of that help people with no cash and lots of debt". This is economics 101. If you have cash and the value of cash goes down then you lose. If you have negative cash and the value of cash goes down then you win. The working American has negative cash. "paycheck to paycheck means 0 cash on hand" you do realize that when these people receive paychecks, they have cash on hand....that cash must be used to survive though. working/middle class literally spend 40 hrs or more per week working to obtain cash. They then use that cash to live. inflation is good for me and you who have most of net worth in something that is NOT cash, that increases in value at a higher rate than cash 1) Paycheck to paycheck means their paycheck is fully consumed by expenses with no leftover cash at the end of the month. If your definition of paycheck to paycheck includes leftover cash reserves you're not understanding the words. And if they have no leftover cash then they have nothing to be impacted by inflation. 2) No, real rate of return is net of inflation. The higher inflation, the lower real rate of return. If I have a bond that pays 4% annual interest and inflation increases from 2% to 3% then in real terms my rate of return has halved. 3) Debt can be considered a negative rate investment. Therefore the inverse of 2 applies for the exact same reason. If the nominal interest on your debt is 4% but the rate of inflation increases from 2% to 3% then in real terms your interest cost has halved. You need to get back out your textbook. Everything you're saying is the opposite of true. 1) Leftover cash reserves or not, they are still dealing primarily with cash. This is why working AND middle class (who may or may not be pay check to paycheck, but are still barely managing to stay afloat) are getting bent over. Even if they have no cash balance at the end of the month, they still had to use cash to support themselves. The bottom line is that those who cannot afford to diversify their net worth, such as people who are living pay check to pay check, get screwed over to some extent by inflation. 2) your rate of return is still better than the poor guy who has no bond and only gets paid in cash and whose net value of investments (infestment in the USD) is going down. Why do you think the bond yield would be high enough for you to profit anyway? Bond yields are determined by expected inflation - the higher the expected inflation, the higher the bond yields are. And youre ignoring the elephant in the room which is the stock market, probably the biggest target of QE. QE artificially pumps (distorts) the stock market like crazy. That's why the stock market soared under Obama, and that's why Trump lambasts the Fed when they engage in even a small modicum of monetary tightening - Trump wants the stock market to look good during his regime. 3) I never denied that inflation is good for borrowing....i literally said that inflation rewards taking on debt several times already lol. I don't see how this is relevant to this whole discussion. 1) Everyone is transacting in cash. I don't trade Apple stock for bread at Walmart. 2) Yes, having money is better than not having money for a bunch of reasons. But inflation is not one of those reasons. People who have no investments are screwed. But they're not screwed by inflation, they're helped by inflation, they're screwed by poverty. 3) People who have debt have negative future cash outflows. Their net cash position is negative. That means they're helped by inflation. The working poor, for example, with a car, phone, and house payment are having their interest rates reduced by inflation. If you understand that people with a net negative cash position are helped by inflation and you understand that the working poor are living paycheck to paycheck and saddled with debt then I'm not sure where I'm losing you. Paycheck to paycheck + saddled with debt = net negative cash position = helped by inflation. Where did you get lost there? 1) Yes, but Apple is among the first to receive the effects to inflation, thereby enriching you. The starbucks worker is down at the bottom. This is why Apple shareholders saw their wealth increase dramatically over the period of QE, while things just got harder for the working/middle class. 2) So now youre bringing up this idea of poverty as if it's not tied to the macroeconomic policies of the nation. You just cemented my point - in this climate, this system that decades of monetary expansion has created, the working class is fucked. Believe it or not, there was once a time where a worker could use his paycheck to support his family pretty comfortably and his whole family would have health insurance 3) this is some real ivory tower shit now.... working poor with house payments ??? WTF?? do you think banks hand out mortgages like candy to poor people anymore? (fyi, when banks used to do that, it lead to the liquidity crisis and so many people who had no business having a mortgage lost the shirts off their backs) A mortgage is an example of debt that would cause them to have a net negative cash position. So would a loan to their cousin if that's less elitist for you. The point remains that your argument only works if they have a net positive cash position. People who live paycheck to paycheck and buried in debt do not have a net positive cash position and are therefore not the victims of inflation. If the nominal interest rate of the cousin's loan is higher than the inflation rate, then the real interest rate is greater than 0% and it means that the debtor is losing out
Yes, this is true. It's rare for inflation to be higher than the nominal rate. I wasn't arguing that paying interest on debt is a good thing, the working poor who are broke and owe money are certainly fucked, I'm not debating that.
But is it better for them to have a nominal rate on their debt of 5% and inflation at 2% or a nominal rate on their debt of 5% and inflation at 4%? Which would lead to the higher real rate of interest on their debt?
Remember, the question was never "is it good to have debt?", it was "to what extent does inflation hurt those with a negative cash position?". My argument was that inflation serves to reduce their real rate of interest on debt, yours that it serves to increase it.
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On April 29 2019 08:41 KwarK wrote:Show nested quote +On April 29 2019 08:38 BerserkSword wrote:On April 29 2019 08:31 KwarK wrote:On April 29 2019 08:27 BerserkSword wrote:On April 29 2019 08:09 KwarK wrote:On April 29 2019 08:04 BerserkSword wrote:On April 29 2019 07:49 KwarK wrote:On April 29 2019 07:39 BerserkSword wrote:On April 29 2019 07:05 Nouar wrote:On April 29 2019 05:50 BerserkSword wrote:
[quote]
On the contrary, I understand exactly what it said. You just don't understand the implications
Inflation is great for borrowing. I've already written paragraphs on this matter and included the method governments and banks use to enrich themselves at the expense of people down the ladder. This is how big banks make a killing selling US government debt that is handed out like candy (at the expense of general population) and public companies pump their stocks (since federal funds rate is so slow it's almost like they are borrowing money for free). And, since like we both agree (at least I think we do), inflation rewards borrowers, it creates a debt system that keeps the "consumers" enslaved for decades.
The idea that there is zero downside to inflation is delusional. It is in direct conflict with one of the fundamental concepts of economics - EVERYTHING has a price.
So basically, while inflation is great for people higher on the socio-economic ladder, it sucks the poorer someone is.
Keynesians like yourself either don't understand or choose to ignore the situation poorer people are in. Life 101 is that you DO need to keep some cash under your pillow (in the bank) as an emergency fund. In the real world the working and middle classes are paid in USD. Not everything is an "investment" and for the low and middle class, investments are not a concern when they barely make ends meet. You are right and wrong. It is also good for regular people that have to borrow to buy a home, a car, or whatever else, instead of always renting as you complain. The main issue is when wages do not keep up with inflation, and that should have been your main focus, instead of inflation itself if you want to target regular people and the middle class slowly disappearing. With deflation, people can't afford their mortgages and get thrown out. With (controlled) inflation, money put in banks or under a mattress loses value over time (works best with rich people, no impact on paycheck to paycheck workers), and it is an incentive to invest that money into something useful for the economy, growing it. It also allows the government to lower the value of its debt, if only they were not stupid enough to use that as an incentive to grow it even more... Your life 101 is why in Europe, there is a guarantee on bank and savings account at 100,000€/person. Deregulation and increased power to corporations against workers (as the Supreme Court showed two days ago, getting a wonderful dissent from RBG) is why wages are not going up accordingly (basically current republican policies as I see them). Only extreme worker shortage, like there is currently, is getting the wages to catch up a little. And this is also a very fine line to thread for the economy, as it hinders its growth as companies can't find people. Of course, too much power to workers is also not good, it's always a matter of balance. Wages and money kept sitting in banks/under the mattress are irrelevant to what I am talking about. Wage control is another form on keynesianism which, together with the inflation, only fucks over poor people. Also, no doubt that the current debt system won't work if there is no inflation....that's the whole reason inflation exists - it's to create a borrowing friendly environment aka the debt slave system. Is that what we really want though? a system that has been, over the last several decades of keynesian monetary expansionist policy, leaving a continually increasing percentage of society unable to even dream of owning a home? Also, you say that inflation keeps rich people from hording fiat and that's a "good thing" as if most or rich people's net worth is composed of fiat money. The fact of the matter is that rich people keep so much of their wealth in non-fiat assets, whether it's property, equities, stores of value, capital, etc. This is how inflation helps rich people because the inflationary policies like QE artificially pump things like the stock market and make actual non-fiat assets more valuable (compared to basic unit of fiat) in comparison to the decreasing value of the cash money Inflation literally helps the rich I dont understand how you are all claiming that "controlled" inflation has no impact on paycheck to paycheck type working and middle class individuals. It is an entirely baseless claim that is in direct odds with the essence of inflation detailed in basic economics. Inflation hits hardest those who are at the bottom of the ladder and latest to see the new circulation, and it hits hardest those who deal the most with fiat money compared to other assets.... On April 29 2019 07:29 KwarK wrote:On April 29 2019 05:59 BerserkSword wrote:
[quote]
Yes I know lol
Now tell me how any of this applies to a working class or middle class person working 60 hrs a week, living paycheck to paycheck, and drowning in debt.
Inflation is great for people like you and me. I literally owe my great life to inflation (Obama's QE). I quit my career as a physician, and went balls deep in property, the stock market, and bitcoin because that's what the feds policy rewards the most......NOT slaving away at an extremely high stress, high responsiblity, profession, one that is being bogged down by more and more red tape, and having no life. Now I make money from the comfort of my home and do whatever i want.
But how does my or your success help lower and middle classl people who are struggling in the U.S? Inflation is great if you're drowning in debt and living paycheck to paycheck. Paycheck to paycheck means 0 cash on hand. Debt means your future cash outflows exceed your future cash inflows. If cash becomes less precious and you have negative cash that means your debt has, in real terms, gone down. I explain, in pretty simple terms, how inflation is a good thing to people with no cash and lots of debt to which you respond "yes, I know, but how does any of that help people with no cash and lots of debt". This is economics 101. If you have cash and the value of cash goes down then you lose. If you have negative cash and the value of cash goes down then you win. The working American has negative cash. "paycheck to paycheck means 0 cash on hand" you do realize that when these people receive paychecks, they have cash on hand....that cash must be used to survive though. working/middle class literally spend 40 hrs or more per week working to obtain cash. They then use that cash to live. inflation is good for me and you who have most of net worth in something that is NOT cash, that increases in value at a higher rate than cash 1) Paycheck to paycheck means their paycheck is fully consumed by expenses with no leftover cash at the end of the month. If your definition of paycheck to paycheck includes leftover cash reserves you're not understanding the words. And if they have no leftover cash then they have nothing to be impacted by inflation. 2) No, real rate of return is net of inflation. The higher inflation, the lower real rate of return. If I have a bond that pays 4% annual interest and inflation increases from 2% to 3% then in real terms my rate of return has halved. 3) Debt can be considered a negative rate investment. Therefore the inverse of 2 applies for the exact same reason. If the nominal interest on your debt is 4% but the rate of inflation increases from 2% to 3% then in real terms your interest cost has halved. You need to get back out your textbook. Everything you're saying is the opposite of true. 1) Leftover cash reserves or not, they are still dealing primarily with cash. This is why working AND middle class (who may or may not be pay check to paycheck, but are still barely managing to stay afloat) are getting bent over. Even if they have no cash balance at the end of the month, they still had to use cash to support themselves. The bottom line is that those who cannot afford to diversify their net worth, such as people who are living pay check to pay check, get screwed over to some extent by inflation. 2) your rate of return is still better than the poor guy who has no bond and only gets paid in cash and whose net value of investments (infestment in the USD) is going down. Why do you think the bond yield would be high enough for you to profit anyway? Bond yields are determined by expected inflation - the higher the expected inflation, the higher the bond yields are. And youre ignoring the elephant in the room which is the stock market, probably the biggest target of QE. QE artificially pumps (distorts) the stock market like crazy. That's why the stock market soared under Obama, and that's why Trump lambasts the Fed when they engage in even a small modicum of monetary tightening - Trump wants the stock market to look good during his regime. 3) I never denied that inflation is good for borrowing....i literally said that inflation rewards taking on debt several times already lol. I don't see how this is relevant to this whole discussion. 1) Everyone is transacting in cash. I don't trade Apple stock for bread at Walmart. 2) Yes, having money is better than not having money for a bunch of reasons. But inflation is not one of those reasons. People who have no investments are screwed. But they're not screwed by inflation, they're helped by inflation, they're screwed by poverty. 3) People who have debt have negative future cash outflows. Their net cash position is negative. That means they're helped by inflation. The working poor, for example, with a car, phone, and house payment are having their interest rates reduced by inflation. If you understand that people with a net negative cash position are helped by inflation and you understand that the working poor are living paycheck to paycheck and saddled with debt then I'm not sure where I'm losing you. Paycheck to paycheck + saddled with debt = net negative cash position = helped by inflation. Where did you get lost there? 1) Yes, but Apple is among the first to receive the effects to inflation, thereby enriching you. The starbucks worker is down at the bottom. This is why Apple shareholders saw their wealth increase dramatically over the period of QE, while things just got harder for the working/middle class. 2) So now youre bringing up this idea of poverty as if it's not tied to the macroeconomic policies of the nation. You just cemented my point - in this climate, this system that decades of monetary expansion has created, the working class is fucked. Believe it or not, there was once a time where a worker could use his paycheck to support his family pretty comfortably and his whole family would have health insurance 3) this is some real ivory tower shit now.... working poor with house payments ??? WTF?? do you think banks hand out mortgages like candy to poor people anymore? (fyi, when banks used to do that, it lead to the liquidity crisis and so many people who had no business having a mortgage lost the shirts off their backs) A mortgage is an example of debt that would cause them to have a net negative cash position. So would a loan to their cousin if that's less elitist for you. The point remains that your argument only works if they have a net positive cash position. People who live paycheck to paycheck and buried in debt do not have a net positive cash position and are therefore not the victims of inflation. If the nominal interest rate of the cousin's loan is higher than the inflation rate, then the real interest rate is greater than 0% and it means that the debtor is losing out Yes, this is true. It's rare for inflation to be higher than the nominal rate. I wasn't arguing that paying interest on debt is a good thing, the working poor who are broke and owe money are certainly fucked, I'm not debating that. But is it better for them to have a nominal rate on their debt of 5% and inflation at 2% or a nominal rate on their debt of 5% and inflation at 4%? Which would lead to the higher real rate of interest on their debt? Remember, the question was never "is it good to have debt?", it was "to what extent does inflation hurt those with a negative cash position?". My argument was that inflation serves to reduce their real rate of interest on debt, yours that it serves to increase it.
Where did I say that inflation increases real interest rate???
I said that inflation is bad for someone living paycheck to paycheck and drowning in debt.
Like you said it's rare for inflation to be higher than nominal rate. So that already means that the debtor is losing out.
It's also impossible for someone investing in the USD as a working class individual to benefit from inflation, because his investment (USD) is depreciating
So any "benefit" a debtor receives from an increase in inflation (and this benefit is actually just a decrease of his losses - he is still net loss) is offset by the same inflation rate screwing over his purchasing power.
By the way, in your hypothetical situation, rarely will the nominal rate be the same thing whether teh inflation rate is 2% or 4%. Nominal rates usually go up when inflation goes up. Lenders arent dumb.
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United States43195 Posts
On April 29 2019 09:03 BerserkSword wrote:Show nested quote +On April 29 2019 08:41 KwarK wrote:On April 29 2019 08:38 BerserkSword wrote:On April 29 2019 08:31 KwarK wrote:On April 29 2019 08:27 BerserkSword wrote:On April 29 2019 08:09 KwarK wrote:On April 29 2019 08:04 BerserkSword wrote:On April 29 2019 07:49 KwarK wrote:On April 29 2019 07:39 BerserkSword wrote:On April 29 2019 07:05 Nouar wrote:
[quote]
You are right and wrong.
It is also good for regular people that have to borrow to buy a home, a car, or whatever else, instead of always renting as you complain.
The main issue is when wages do not keep up with inflation, and that should have been your main focus, instead of inflation itself if you want to target regular people and the middle class slowly disappearing. With deflation, people can't afford their mortgages and get thrown out. With (controlled) inflation, money put in banks or under a mattress loses value over time (works best with rich people, no impact on paycheck to paycheck workers), and it is an incentive to invest that money into something useful for the economy, growing it. It also allows the government to lower the value of its debt, if only they were not stupid enough to use that as an incentive to grow it even more...
Your life 101 is why in Europe, there is a guarantee on bank and savings account at 100,000€/person. Deregulation and increased power to corporations against workers (as the Supreme Court showed two days ago, getting a wonderful dissent from RBG) is why wages are not going up accordingly (basically current republican policies as I see them). Only extreme worker shortage, like there is currently, is getting the wages to catch up a little. And this is also a very fine line to thread for the economy, as it hinders its growth as companies can't find people.
Of course, too much power to workers is also not good, it's always a matter of balance. Wages and money kept sitting in banks/under the mattress are irrelevant to what I am talking about. Wage control is another form on keynesianism which, together with the inflation, only fucks over poor people. Also, no doubt that the current debt system won't work if there is no inflation....that's the whole reason inflation exists - it's to create a borrowing friendly environment aka the debt slave system. Is that what we really want though? a system that has been, over the last several decades of keynesian monetary expansionist policy, leaving a continually increasing percentage of society unable to even dream of owning a home? Also, you say that inflation keeps rich people from hording fiat and that's a "good thing" as if most or rich people's net worth is composed of fiat money. The fact of the matter is that rich people keep so much of their wealth in non-fiat assets, whether it's property, equities, stores of value, capital, etc. This is how inflation helps rich people because the inflationary policies like QE artificially pump things like the stock market and make actual non-fiat assets more valuable (compared to basic unit of fiat) in comparison to the decreasing value of the cash money Inflation literally helps the rich I dont understand how you are all claiming that "controlled" inflation has no impact on paycheck to paycheck type working and middle class individuals. It is an entirely baseless claim that is in direct odds with the essence of inflation detailed in basic economics. Inflation hits hardest those who are at the bottom of the ladder and latest to see the new circulation, and it hits hardest those who deal the most with fiat money compared to other assets.... On April 29 2019 07:29 KwarK wrote:
[quote]
Inflation is great if you're drowning in debt and living paycheck to paycheck. Paycheck to paycheck means 0 cash on hand. Debt means your future cash outflows exceed your future cash inflows. If cash becomes less precious and you have negative cash that means your debt has, in real terms, gone down.
I explain, in pretty simple terms, how inflation is a good thing to people with no cash and lots of debt to which you respond "yes, I know, but how does any of that help people with no cash and lots of debt".
This is economics 101. If you have cash and the value of cash goes down then you lose. If you have negative cash and the value of cash goes down then you win. The working American has negative cash. "paycheck to paycheck means 0 cash on hand" you do realize that when these people receive paychecks, they have cash on hand....that cash must be used to survive though. working/middle class literally spend 40 hrs or more per week working to obtain cash. They then use that cash to live. inflation is good for me and you who have most of net worth in something that is NOT cash, that increases in value at a higher rate than cash 1) Paycheck to paycheck means their paycheck is fully consumed by expenses with no leftover cash at the end of the month. If your definition of paycheck to paycheck includes leftover cash reserves you're not understanding the words. And if they have no leftover cash then they have nothing to be impacted by inflation. 2) No, real rate of return is net of inflation. The higher inflation, the lower real rate of return. If I have a bond that pays 4% annual interest and inflation increases from 2% to 3% then in real terms my rate of return has halved. 3) Debt can be considered a negative rate investment. Therefore the inverse of 2 applies for the exact same reason. If the nominal interest on your debt is 4% but the rate of inflation increases from 2% to 3% then in real terms your interest cost has halved. You need to get back out your textbook. Everything you're saying is the opposite of true. 1) Leftover cash reserves or not, they are still dealing primarily with cash. This is why working AND middle class (who may or may not be pay check to paycheck, but are still barely managing to stay afloat) are getting bent over. Even if they have no cash balance at the end of the month, they still had to use cash to support themselves. The bottom line is that those who cannot afford to diversify their net worth, such as people who are living pay check to pay check, get screwed over to some extent by inflation. 2) your rate of return is still better than the poor guy who has no bond and only gets paid in cash and whose net value of investments (infestment in the USD) is going down. Why do you think the bond yield would be high enough for you to profit anyway? Bond yields are determined by expected inflation - the higher the expected inflation, the higher the bond yields are. And youre ignoring the elephant in the room which is the stock market, probably the biggest target of QE. QE artificially pumps (distorts) the stock market like crazy. That's why the stock market soared under Obama, and that's why Trump lambasts the Fed when they engage in even a small modicum of monetary tightening - Trump wants the stock market to look good during his regime. 3) I never denied that inflation is good for borrowing....i literally said that inflation rewards taking on debt several times already lol. I don't see how this is relevant to this whole discussion. 1) Everyone is transacting in cash. I don't trade Apple stock for bread at Walmart. 2) Yes, having money is better than not having money for a bunch of reasons. But inflation is not one of those reasons. People who have no investments are screwed. But they're not screwed by inflation, they're helped by inflation, they're screwed by poverty. 3) People who have debt have negative future cash outflows. Their net cash position is negative. That means they're helped by inflation. The working poor, for example, with a car, phone, and house payment are having their interest rates reduced by inflation. If you understand that people with a net negative cash position are helped by inflation and you understand that the working poor are living paycheck to paycheck and saddled with debt then I'm not sure where I'm losing you. Paycheck to paycheck + saddled with debt = net negative cash position = helped by inflation. Where did you get lost there? 1) Yes, but Apple is among the first to receive the effects to inflation, thereby enriching you. The starbucks worker is down at the bottom. This is why Apple shareholders saw their wealth increase dramatically over the period of QE, while things just got harder for the working/middle class. 2) So now youre bringing up this idea of poverty as if it's not tied to the macroeconomic policies of the nation. You just cemented my point - in this climate, this system that decades of monetary expansion has created, the working class is fucked. Believe it or not, there was once a time where a worker could use his paycheck to support his family pretty comfortably and his whole family would have health insurance 3) this is some real ivory tower shit now.... working poor with house payments ??? WTF?? do you think banks hand out mortgages like candy to poor people anymore? (fyi, when banks used to do that, it lead to the liquidity crisis and so many people who had no business having a mortgage lost the shirts off their backs) A mortgage is an example of debt that would cause them to have a net negative cash position. So would a loan to their cousin if that's less elitist for you. The point remains that your argument only works if they have a net positive cash position. People who live paycheck to paycheck and buried in debt do not have a net positive cash position and are therefore not the victims of inflation. If the nominal interest rate of the cousin's loan is higher than the inflation rate, then the real interest rate is greater than 0% and it means that the debtor is losing out Yes, this is true. It's rare for inflation to be higher than the nominal rate. I wasn't arguing that paying interest on debt is a good thing, the working poor who are broke and owe money are certainly fucked, I'm not debating that. But is it better for them to have a nominal rate on their debt of 5% and inflation at 2% or a nominal rate on their debt of 5% and inflation at 4%? Which would lead to the higher real rate of interest on their debt? Remember, the question was never "is it good to have debt?", it was "to what extent does inflation hurt those with a negative cash position?". My argument was that inflation serves to reduce their real rate of interest on debt, yours that it serves to increase it. Where did I say that inflation increases real interest rate??? I said that inflation is bad for someone living paycheck to paycheck and drowning in debt. Like you said it's rare for inflation to be higher than nominal rate. So that already means that the debtor is losing out. It's also impossible for someone investing in the USD as a working class individual to benefit from inflation, because his investment (USD) is depreciating So any "benefit" a debtor receives from an increase in inflation (and this benefit is actually just a decrease of his losses - he is still net loss) is offset by the same inflation rate screwing over his purchasing power. By the way, in your hypothetical situation, rarely will the nominal rate be the same thing whether teh inflation rate is 2% or 4%. Nominal rates usually go up when inflation goes up. Lenders arent dumb.
An individual with fewer than zero dollars, for example someone with no cash savings and debt, is not an investor in the USD.
You keep trying to describe the working poor as investors in the USD but if they had significant numbers of USD they wouldn't be poor.
Investors in USD are foreign governments who buy treasury bonds or who have large amounts of cash on hand. Your broke cousin who has no cash on hand and who has an outstanding note on his car should not be considered an investor in USD because he has negative USD. Honestly if anything he should be considered to be shorting USD.
We're going to keep running into this problem if you keep insisting that people living paycheck to paycheck are hoarding all the dollars.
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We are hoarding all of our dollars Kwark. Just like Midas and his gold. I have several mattresses filled to the brim with USD waiting for the day they increase in value. It's a small community of us that do this. We meet on Wednesdays via Skype.
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EPT
