In Fed and Out, Many Now Think Inflation Helps

your new definition includes: "or a persistent increase in the purchasing power of money."

LOL --I forget the name of the economic principle where every negative one place is a positive elsewhere (mass death = soaring undertaker profits). Just the same, we really need to say this is either "our" definition because it's the "only" definition. Your saying it's "my" definition suggests that you've got one. Do you?

"The good times toward the end of the 19th century, which 1010RD alluded to... ...overall prices dropped by about half." ... ...the website you pointed to proves my statement...

Ah, you were right about the prices dropping by half --I'd glanced at the inflation from 1850-1899 but we do in fact see a 50% drop in the 1865 to 1899 segment. What we're still missing though is the "good times" part. The '65 - '99 block was an era mostly in economic contraction (from US Business Cycle Expansions and Contractions) while since 1899 there were three times as many months of expansion than contraction months. This is the kind of correlation that give economists the "Deflation = contraction & Inflation = expansion" approach that's at odds with your "deflation is not necessarily a bad thing".

a huge bubble began inflating after the fed was created, and famously burst in 1929 -- leading to the Great Depression.

Some say the Fed caused the depression and others say the FOMC caused the recovery.

I don't recall taking a position one way or another regarding the Fed

Life does go on and we do need to work to feed our families. So while others think about making up their minds the rest of us can go with the Fed till we find something better.

"Just the same, we really need to say this is either "our" definition because it's the "only" definition. Your saying it's "my" definition suggests that you've got one. Do you?"

I've already told you "my" definition several times. Here's an excerpt from #118 above: "Let me offer my preferred definition first: Deflation = a state of falling prices." You might prefer: "Deflation is a persistent fall in the general price level of goods and services." It's a "clean" definition, without all of the assumptions and speculation about the causes and possible effects of falling prices built in.

I'm fully aware that it's become common for deflation to be defined, with the built-in negative connotations. And, yes, our language continually evolves; so no one can say the definitions you prefer are "wrong". However, I will say that they aren't helpful. If deflation is "bad" by definition then deflation is bad. No one can argue with that. (Although, the "dismal science" is already chock-a-block with words that mean bad things -- such as "depression".) If we're discussing "X", where "X" is a "persistent fall in the general price level of goods or services"; then we can discuss whether "X" is always a bad thing, or whether it can also be a good thing -- depending on other factors. I hold to the latter view.

"What we're still missing though is the "good times" part. The '65 - '99 block was an era mostly in economic contraction (from US Business Cycle Expansions and Contractions) while since 1899 there were three times as many months of expansion than contraction months."

I had considered preempting the need for that comment, by posting a follow-up to my own post -- but I thought that might be just too much for a forum such as this. Anyhow, you're right as far as you go. There was a lot of turmoil then (to begin with, the Civil War had just ended). A whole lot of stuff was going on. And there were recessions, panics, and depressions (I have never said that deflation always equals good times. As you've noted yourself; I said: "deflation is not necessarily a bad thing". See the difference?). What you're missing is that, overall, there was an incredible increase in real wealth, and real purchasing power, during that time. This increase in real wealth resulted from incredible gains in productivity (mostly due to railways). The increase in productivity also lead to lower prices (i.e. deflation).

Ever since the beginning of the Industrial Revolution (at least), the "western world" has experienced previously unimaginable increases in productivity, growth in real wealth, increase in spending power, decrease in prices -- all facets of the same gem. The Tech revolution kicked things up by several notches. Our economic system has adjusted to those changes fitfully, more often than smoothly. When our money supply, credit, etc. don't adjust well enough to falling prices (deflation) we get deflationary gaps, deflationary spirals, that have led to depressions. We have shorter-period business cycles, where we experience relatively frequent inventory-clearing recessions. As you yourself point out, we're getting better at smoothing out those bumps on the road to prosperity.

I said: "deflation is not necessarily a bad thing"

--and I'm saying that if it isn't actually a bad thing then it'll sure do until a real one comes along.

All the numbers are online open to all; we can compare the record of historical inflation rates to historical records on unemployment and gdp growth. We've got unemployment back to 1890 and real gdp back to 1790. Of course you're more than welcome to look up the numbers yourself, but until then this is what we've got:

yr/yr price trend	real per capita gdp	average unemployment rate

inflation	3%	6%
deflation	0%	11%

Deflation means no-growth double digit unemployment that should have been full employment with solid growth. Deflation is definitely a bad thing.

Sorry, been out of the FR zone for a bit...

So they can make the dollar one ounce of silver, 1/2 ounce of silver or no ounces of silver.

In theory, correct. Do you read that to mean anything else? I see no other authority.

But, could you imagine the up-rising when people noted the change in the value of their $$ by decree from D.C. (unlike the invisible de/inflation by the Fed Reserve)? I don't see that happening if we were still a Free people. Too, the re-melting of coinage to adjust to the new measures? Uhhh..no again.

A1S8, again, specially states it can ONLY *MINT* = metal based.

Florida can't print their own bills, but if they want to mint gold or silver coins, that's okay. The Federal government has no such metallic requirement.

A1S10 specially prohibits the State from minting OR bills of credit (fiat currency). Aside from debt, all entities can use what they will (trade/barter/bank notes/mud/soda caps/I care not) as, or in lieu, of $$

That's covered by the Legal Tender Act.

Aside from above, NO State 'may make any Thing but gold and silver Coin a Tender in Payment of Debts'. I don't see where any Act could give the Fed. any further power to define what is/isn't per the Constitution (though I do note, these days, we are FAR from a Const. gov't).

Sure, Congress can borrow money on the credit of the U.S., but I don't read where the authority to create fiat currency to tack onto the national debt, let alone remember a Const. Amendment to allow Congress to give their power of minting to any other entity, equals that of being lent X tonnes of gold at Y% interest (REAL money).

The Fed, and, the national debt per fiat currency, IMHO, strike at the heart of the 5th Amend (Takings)

Make, not take.

Believe you understood the context...aside from the fat fingering.

Still, it's a great topic for discussion.

So they can make the dollar one ounce of silver, 1/2 ounce of silver or no ounces of silver.

In theory, correct. Do you read that to mean anything else? I see no other authority.

Anything else? If they can make coins out of metals other than silver, they can make bills without silver. Don't you agree?

But, could you imagine the up-rising when people noted the change in the value of their $$ by decree from D.C.

They didn't rise up in the 30s, when FDR changed convertibility or in the 60s, when LBJ removed silver coinage.

A1S8, again, specially states it can ONLY *MINT* = metal based.

I'm pretty sure that coin meant make. So they can make coins or bills. States could only make gold or silver coins.

Sure, Congress can borrow money on the credit of the U.S., but I don't read where the authority to create fiat currency to tack onto the national debt

Not sure what you mean here. Creating fiat currency doesn't tack anything onto the national debt.

let alone remember a Const. Amendment to allow Congress to give their power of minting to any other entity

Both the US Mint (coins) and the Bureau of Engraving and Printing (bills), are part of the Treasury Department.

Believe you understood the context...aside from the fat fingering.

Take made sense in your context.

The Weimar Republic inflation story:

Few people understood what had happened. Even today, three generations later, much of it sounds pretty incredible.

Take for example the family that sold its house to emigrate to America. On arrival at the port of Hamburg, they found that the money wasn't enough to pay for their crossing -- in fact, it didn't even pay for their tickets back home. Then there was the man who drank two cups of coffee at 5,000 marks each, only to be presented with a bill for 14,000. When he asked why this was he was told he should have ordered the coffees at the same time because the price had gone up in between. And then there's the story about the couple that took a few hundred million marks to the theater box office hoping to see a show, but discovered it wasn't nearly enough. Tickets were now a billion marks each.

—and back then those that bought gold jewelry were able to sell it at a million times the purchase price.

What’s happening now is there are folks on these threads that recently bought gold for $1,900 and were later happy to sell it for $1,200. You’re right though, these times are similar to the early 1920’s, but instead of Hamburg we’re in Moscow and the very real problem is not the fed with our money it’s the Marxists with our entire economy.

imho the Freerepublic has a serious problem with trolls that want us to be anti-bank when we should be anti-Bolshevik.

1). Anything else? They do (the penny, the nickel, etc.). Those have historically been ‘fiat’; but they are NOT valid for debt (only gold/silver).

2). No, those was the failing of our G/Great-grandparents. D.C. should have been a smoldering heap IMHO. Let’s not forget Nixon in the theft as well.

3). I can’t see how ‘coining’ = ‘printing’ = ‘make’. States are not allowed to mint/print/make/etc., they can ONLY assure gold/silver are payment of debt (A1S10) [note, it specifies gold and silver COIN as the latter]

4). Fiat currency is a its heart DEBT. It is a fiction masquerading as value, created out of NOTHING. It goes hand in hand with spending and interest. Do you believe, if we still had a true monetary policy, Congress could rack up $17+TRILLION ($120T+ unfunded liabilities)??

5). Those functions/departments are under control of Congress, the ‘Federal Reserve’ is not.

They do (the penny, the nickel, etc.). Those have historically been ‘fiat’; but they are NOT valid for debt (only gold/silver).

I can pay debts with pennies and nickels.

States are not allowed to mint/print/make/etc., they can ONLY assure gold/silver are payment of debt

Correct. If states want to make their own money, they must use gold and silver. The Federal government doesn't need to use gold and silver.

Fiat currency is a its heart DEBT.

The $20 in my wallet isn't debt.

It goes hand in hand with spending and interest. Do you believe, if we still had a true monetary policy, Congress could rack up $17+TRILLION

Did a gold standard stop Lincoln, Wilson and FDR from racking up enormous debts?

Those functions/departments are under control of Congress, the ‘Federal Reserve’ is not.

The Fed is under the control of Congress. The Fed could be eliminated tomorrow, with a majority vote in both Houses and the signature of the president.

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