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Politics : Mainstream Politics and Economics
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To: grusum who wrote (6883)1/14/2012 2:22:04 PM
From: Little Joe  Read Replies (1) of 85487
 
<"that would be the equivelent of saying that bank savings and demand deposits do not affect prices, which they clearly do.

how do they affect prices? don't show me correlations, because correlation is not causation. explain to me how savings and demand deposits affect prices..>

Simple I can buy something with paper dollars or by writing a check or taking money from my savings account, but all contribute to aggregate demand and pressure prices. I just had some work done at my home, I paid with a check, which will probably be deposited to another checking account and in turn the wages and materials will be paid by check, without any dollars changing hands. When treasuries are issued they are not paid for in dollars, it is all electronic and yet this money is used to pay for the government by check. I don't see how you can argue, if I understand your position, that these deposits don't affect inflation.

<However, as stated above demand deposits and savings deposits and other components of the money supply decreased. The reason they have to be included is that they are dollar equivelents i.e. easily convertible into dollars.

it's irrelevant how convertible something is into dollars. the fact is that you can only own one thing at a time. dollars or what's convertible to dollars. you can't own them both at the same moment. so dollars and convertibles are separate. you can call the convertibles money if you want to, but the convertibles aren't dollars.>

Remember what is a dollar but a Federal Reserve Note . In other words it is an obligation of the government to pay the holder a dollar, whatever that means. A treasury note is the thing an obligation of the government to pay off the note. I have a checking account I hardly ever carry any money I pay using a bank card. If you are right none of my purchases contribute to inflation. that cant be.

Also if every bank deposit and every check were cashed and every government bond or note were cashed the government would simply print the dollars to pay them off.

lj
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