Posted on 09/04/2014 12:10:11 AM PDT by Citizen Zed
One of the great mysteries of the post-financial crisis world is why the U.S. has lacked inflation despite all the money being pumped into the economy.
The St. Louis Federal Reserve thinks it has the answer: A paper the central bank branch published this week blames the low level of money movement in large part on consumers and their "willingness to hoard money."
The paper also cites the Fed's own policies as a reason for consumers' unwillingness to spend.
Though American consumers might dispute the notion that inflation has been low, the indicators the Fed follows show it to be running well below the target rate of 2 percent that would have to come before interest rates would get pushed higher. That has happened despite nearly six years of a zero interest rate policy and as the Fed has pushed its balance sheet to nearly $4.5 trillion.
Much of that liquidity, however, has sat fallow. Banks have put away close to $2.8 trillion in reserves, and households are sitting on $2.15 trillion in savings -- about a 50 percent increase over the past five years.
"So why did the monetary base increase not cause a proportionate increase in either the general price level or (gross domestic product)?" economist Yi Wen and associate Maria A. Arias asked in the St. Louis Fed paper. "The answer lies in the private sector's dramatic increase in their willingness to hoard money instead of spend it. Such an unprecedented increase in money demand has slowed down the velocity of money."
(Excerpt) Read more at money.msn.com ...
Prayers sent. He has hurt us too. Conversation last night: “Honey, you can get exercise and we can save $6,000.00/yr if you sell your SUV and take the city bus”. Sad thing is....it makes sense. Now I need to up my life insurance and carry a gun if I take the bus. Obama, taxes, and gas may just make us a one car household.
“only producing 800 washing machines the cost of those sold is now $1,000 each, therefore the GDP has gone up”
Same thing with the stock market. How can the markets be at an “all-time high” when the dollar is worth less than two cents (compared to the date on which the first income tax was signed into law)?
Yes. The money supply has more than tripled since 2008. If the stock market was at, say, 8,000 then, it should be at 24,000 now, just to stay even. But it’s nowhere near that.
In 1964 a silver dollar bought three gallons of gas. Today that .7 of an ounce, with no rarity value, costs $26 dollars. So, it buys 6.6 gallons of gas. In real, non-adjusted terms, gas is half as expensive as it was in 1964. (3.89/gallon vs. .33/gallon) It doesn’t feel that way because the government has stolen our purchasing power as our wages haven’t gone up at the same rate. So, even though in real terms gas is cheaper the average Joe has less buying power than he did then.
I read the other day that the “average wage” has declined 23% since 2008.
I know Obastard and Dick Holder cost ME 40%...
Well what fits the scenario too, Plenty of idiots out there... what was the percentage that voted for Obama?? 53% of Americans as of 2012 would be classified as Idiots in my book!
Yeah, but they hoard Obamaphones and EBT credits not Fed Res Notes (otherwise known as expensive TP).
“I know Obastard and Dick Holder cost ME 40%...”
They cost me 100%. I haven’t even had an interview for a crap job since 2010.
My brother involuntarily retired - he was a coal plant design engineer. Had a zero emissions plant in the works, but Obastard’s EPA shut it down.
“Had a zero emissions plant in the works, but Obastard’s EPA shut it down.”
I am not comforted by the thought that he will almost certainly burn in Hell for all eternity.
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