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1/29/2009 12:03:19 PM

http://www.youtube.com/watch?v=aeb247Vc1eY

2/3/2009 1:12:17 PM

CharlesHF

WAIT, YOU MEAN TO TELL ME THAT RECESSIONS/DEPRESSIONS ACTUALLY END?!

OH MY GOD!!

REALLY!?

2/4/2009 9:48:39 AM

http://www.youtube.com/watch?v=w84EiCt0Lqk&feature=related

2/4/2009 4:24:12 PM

If we aren't careful...

2/5/2009 8:31:37 PM

2/8/2009 11:30:19 PM

http://www.boingboing.net/2009/02/09/rep-kanjorski-550-bi.html

The woman screaming at the representative at the beginning of the clip is priceless.
Oh that note, how the hell does she have $600 in utility bills in one week?

[Edited on February 10, 2009 at 2:02 PM. Reason : ]

2/10/2009 2:00:41 PM

HERE COMES THE INFLATION WE'VE ALL BEEN WAITING FOR!!!

Great articles dispelling the myth of deflation. Deflation is purely a monetary phenomenon. It's discouraging the way people are confusing demand destruction for deflation. Get rid of your dollars while you still can.


http://news.goldseek.com/GoldSeek/1234468288.php

http://www.capmag.com/article.asp?ID=2555 As early as 2003 this guy had it nailed

2/16/2009 11:09:14 AM

I don't know if inflation or deflation is a purely monetary phenomenon. Now, it is true that the ultimate source of deflation or inflation will be when growth in the money supply is different from growth in the real economy.

Faster monetary growth induces inflation, slower deflation.

However, the economy can be moved by things other than changes in the money supply. If for example, terrorists blew up have of the factories in the world. The the next day we captured and executed all of the terrorist, so that there was no fear of future attacks, we would expect that unless central banks altered the production of money, inflation would rise sharply.

Why? Because the economy is now smaller.



Also, regardless of the ultimate cause of inflation the channel that it runs through is supply and demand in individual markets. This is why things like capacity utilization are important. Money drives inflation by increasing nominal demand. But, if nominal demand is falling and nominal supply is fixed then there cannot be inflation. Or, at least it operates through some mechanism that is not inline with economic theory.

[Edited on February 18, 2009 at 3:37 PM. Reason : .]

2/18/2009 3:28:46 PM

^in your post above why is capturing the terrorist and executing them important to the creation of inflation. doesn't the single act of bombing the factories reduce the size of the economy and act as the catalyst for inflation? how does the capturing of the terrorist play a role in this scenario. i'm sure it does, as you would not have mentioned it otherwise, so please explain the effects of that variable to me, if you would.


could you also please elaborate on

Quote :

"Money drives inflation by increasing nominal demand"

2/18/2009 4:25:18 PM

^^ There would be inflation, but only in the short term and only for industrial goods. The vast majority of what people spend money on is not an industrial product. Also, it would take a month or so for warehoused spare parts to restore production at critical industries (fuel/food/machinetools) and within a year or two everything would be back to normal. Afterall, right now industrial utilization is around 70%; if you blew up half of it and prices jumped to place utilization around 100%, society's industrial output would only be 29% lower, and that is before any further adjustments were made to re-open currently shut factories, shift production, etc.

2/18/2009 6:52:15 PM

^^

Because I didn't want to get into issue of decreased demand because of an increase uncertainty. That is, people would save more because they didn't know if future attacks would make them even poorer.

As for nominal demand: When the central bank increases the money supply it causes businesses and consumers to try to purchase more stuff. Since, there is a limit to how much stuff can be produced prices must rise to bring the economy into equilibrium.

Economists aren't settled on exactly how this takes place. The basic theory says - more money implies lower interest rates. Lower interest rates cause consumers to shift spending from the future to the present.

There are some issues here though because that doesn't quite explain the evolution in exchange rates. If this were true short run exchange rates should respond predictably to monetary changes, but they don't. Also, it doesn't quite explain why business investment is so sensitive to changes in monetary policy.

Bernanke did some work on "the black box" trying to explain how monetary policy drives spending and he suggested that it has to do with corporate balance sheets.

^

So yes, you only have one impulse on the economy. How long it would take to work through the economy depends on the "stickiness" of prices. If all wages and prices were fully flexible then you would instantly jump to a new higher price level. Though I think it would be for most if not all goods since industry is an input to most output.

My point here is only that real events can effect the evolution of prices, if monetary policy is constant.

So in some sense you can say "all price level effects are monetary" if you mean that changes in the money supply could offset them. But that doesn't mean the impetus comes from changing monetary policy.

[Edited on February 19, 2009 at 12:58 PM. Reason : monetary policy and nominal demand]

2/19/2009 12:49:30 PM