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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: gpowell who wrote (50664)	1/21/2006 6:24:32 PM
From: mishedlo	Read Replies (1) \| Respond to of 110194

The bottom line, once the currency holding demands of the public are accounted for, the money supply has not grown much if at all since 1986 as this chart of the inflation/disinflation bubble indicate. i10.photobucket.com; That is a presumably a chart of the CPI or other price measure. WTF does that have to do with your assertion that money supply has not grown since 1986? It is point blank a stupid assumption. =========================================================== Clearly, this confirms your 19th century view of money as exogenous, as your list contains predominately exogenous disturbances. BTW, you should be clearer about what you mean by “prices being set.” I assume you mean “price level.” Are you dense? I mean really are you really that FN dense? I provided examples OTHER than increase in money supply that can cause prices to rise and fall. And some of them like peak oil and weather are VERY important. That is why price targeting is stupid. Over the long haul prices of goods will tend to rise if there is ever increasing money supply. My views are nothing like you distort them to be. Furthermore I think you know it so I am calling you point blank a liar. Is that clear? I hope so. =============================================================== I didn’t provide a scenario. You might want to read some of the research done on actual hyperinflations, I suggest start with Cagan’s and get back to me. Well I call this a scenario. "Given that the price level is the intersection of money supply and money demand. It must be a measure of how thoroughly the monetarist position has influenced monetary thought that everyone, including those that would label themselves Austrian, assumes that monetary demand is constant and therefore the price level is completely determined by the supply of money. It may have escaped your attention the one of the characteristics of a hyperinflation is a falling demand for money, such that money supply measures may actually shrink even as prices "hyper" inflate. Hyperinflation = delta P > 50% per month." If you want to call that scenario a turnip then OK I will agree that it is a turnip. At any rate in your turnip you state "It may have escaped your attention the one of the characteristics of a hyperinflation is a falling demand for money, such that money supply measures may actually shrink even as prices "hyper" inflate." The only way I can see that happening is a governmental crisis or lack of faith in a government. I tried to give you an out. I see you do not want that out. In normal circumstances hyperinflation of prices occurs BECAUSE of rapid printing of money. Other than some sort of governmental crises I doubt you can find any meaningful examples of money supply shrinking as prices hyperinflate. In a vacuum the statement is preposterous. I was generous to provide you a way it could be true, some sort of massive loss of faith in a government. ============================================================= I mentioned the supply of money, not interest rates. I suppose you might believe that interest rates are entirely determined by liquidity? You are not demonstrating that you have a detailed knowledge of monetary theory, nor, I say, a comprehensive and objective view of current economic conditions. Once again distorting my position. Presumably on purpose. I propose interest rates to be determined by the market. No more no less. As for controlling the supply of money itself it is a long topic. Given how pissy some people have gotten here I am not sure I even want to get into it. But I would eliminate fractional reserve lending for starters and I would probably do a lot of other things. I would consider something like allowing money supply to rise and fall with population growth but I am not sure, I need to to think about that. If the FED (which I would eliminate but that will not happen) absolutely HAD to have 2% inflation then I would not look at prices for reasons that should be clear to everyone except the extremely dense headed. I would would instead target a 2% increase in money supply. You are asking for a long theoretical dissertation on something that is not likely to be done soon if at all. Why should I waste time on it. As for what you are demonstrating, I would rather not say. Mish