Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: GraceZ who wrote (25872)	12/11/2004 11:46:33 PM
From: Mike Johnston	Read Replies (1) \| Respond to of 306849

Ideally the money supply should grow at the long run rate of productivity growth which is around 2-3%. That is correct, in that case inflation would be 0, an ideal situation. The problem is that money supply is growing at much higher rates than productivity growth + population growth, thus we have constant inflation. Great for the bankers and great for the government, especially when they can fool the population into believing that there is no inflation. try to imagine the US with the same amount of money we had in say 1965. If money supply was constant then increases in productivity and innovation would lead to a mild deflation (2-3% a year), which would actually not be a bad thing. When Ford Model T was introduced in 1908 it retailed for $825. By 1912 the price has dropped to $199. Two years later it was $99. Talk about good deflation, huge real productivity increase and rising standard of living ! Compare that to today's situation where rising house prices and inflation actually lower living standards. When talking about deflation one has to consider two kinds of deflation: a)bad deflation is caused by a decline in demand. b)good deflation which is caused by increases in innovation and productivity.

To: GraceZ who wrote (25872)	12/12/2004 1:51:31 AM
From: Elroy Jetson	Respond to of 306849

You have accurately pinpointed the basic dishonesty of Monetarism. If the wealth of an economy increases by 50% over a ten or twenty year period, while the amount of money remains constant, there will be a tendency for general price levels to decrease by 33%. Whether and how much price levels actually change also depends on what people do with their money. Although many societys over thousands of years have not been inconvenienced by this, bankers see a problem with this. Bankers know that declining collateral value can make it impossible to realize the full value on a foreclosed loan. Although there is no proof that this has ever been a problem, the Federal Reserve answers to it's shareholders, the banks, rather than the public. More importantly, this provides a plausible excuse for the operation of the entire Monetarist system and monetary debasement. The "additional" money has to be introduced into the economy in some manner. The central bank could declare a 3% dividend to those holding money, but this would preserve the value of money, and there's nothing Monetarist about that. Since the economy has increased it's wealth by 3% Monetarists believe someone, someone like them, should spend 3% more money into the economy. Theft legitimized under the cover of "price stability". Favorite Monetarist methods for introducing these funds are unfunded government spending, (like tax cuts funded with debt) and increased debt in sectors of the economy which can be easily leveraged. Both of these methods used to expand the money supply introduce major problems of misdirected investment and speculation leading to bubbles. But Monetarists believe that a torrent of "free money" or the availability of infinite credit is a normal market function. How this is normal, or what market has ever operated like this, they are unable to say and quickly change the subject. In any case they claim the central bank can easily make other fiddles and adjustments to correct these problems they have introduced, and further adjustments to correct their adjustments. Economist and central banker Charles Rist, author of "History of Monetary and Credit Theory from John Law to the Present Day" pointed out this critical flaw in Monetarism, "A policy aimed at monetary stability will secure a relative stability of prices, but the economic history of the 1920s teaches us that a policy whose goal is stabilization of prices may result in inflation of money and credit, and very unsound speculation." As the availability of credit is infinite under a Monetarist system the level of credit increases until an economic depression restores the normal state of affairs. This is the reason why Monetarism will eventually be rejected once again in favor of capitalism, rather than the delusion of Monetarists that Monetarism will push Capitalism into the trash bin of history. home.pacbell.net Monetarists see a terrible problem, if after 50 or 100 years of declining prices, Mils would have to be re-issued to provide currency representing one tenth of a cent. On the other hand they find it entirely ordinary that Mils were removed from circulation, just as they point the the inevitability of the eventual need to eliminate pennies. .