Posted on 09/28/2005 4:09:54 PM PDT by hubbubhubbub
No, I would not try to manage the money supply nor would I tell people what they and may not use as a means of exchange. You want to electronic uranium backed credits, fine. Electronic commodities bundle, fine? Just don't give the government the power to control the medium of trade. That sort of power is far too dangerous to be trusted to governments.
Are you saying M3 growth equals (true, Adam Selene, not fake politburo)CPI growth?
There is no way to predict the consequences of currency debasement. Nor is there any such thing as a general price level.
Doomers regularly cite Japan's high personal savings rate as an example of what we should be doing oblivious to the the fact that we possess tremendous liquid wealth.
we have lots of 401K chock full of "high quality" Fannie Mae bonds, money market funds full of Fannie repos, and stock in Fannie's derivative counterparties like Citigroup and JPM.
So now accounting woes at Fannie Mae are going to bring down our economy? $11 billion in accounting errors, (smoothing) to ensure maximum bonuses were earned, is going to bankrupt the system and kill originations? Well, like you say, time will tell.
We have massive equity in homes whose value is inflated by GSE money pumps.
Only 20% of our net worth is in our homes. Do you totally ignore the demand side of the equation when looking at the housing market? When was the last time the housing market in this country showed a year over year decline in aggregate values?
Hey, when was the last time FNM posted reliable earnings?
All those years will be restated and some will show profits and some will show losses. This house will get cleaned but it will not create the disaster you portend.
And when do you reckon commodity prices are going to stop rising?
You, being ahead of the curve, should know this. Individual commodities are extremely volatile and bull markets come in short durations. Better hope your crystal ball is working.
Many think that demand from China will continue to drive this but you know that even in a long term bull market there is significant down side risk.
Commodities bottomed out around 2000 and hit their lowest point, adjusted for inflation, in our history. I'd say they were long overdue for an upward run.
Do you think this will mean a return to the 70's when commodities rose and financial assets dropped? Do commodities always trend inversely to equities? There's always the possibility that rapidly rising commodity prices will lead to that historically proven war cycle. Nothing like a lot of world tension and unrest to send Gold skyrocketing. Once again, time will tell.
So if there is no general price level, why do you complain that CPI under counts housing inflation?
"In constant dollars our family income purchasing power is less now than 50 years ago. That's why husband and wife must both work."
Color me skeptical. While I was growing up (I'm 45), our family income was above average with just my dad working - when my mom worked weekends (she was a nurse), it was higher still. But my hubby and I have more kids and more stuff, and are living in a bigger house, even though he's the only one working and our family income is a touch below average (while we sometimes charge up a bit and pay it off in a year, generally our only debt is the mortgage, which was my parents' position as well). Our siblings who're married where both spouses are working are living way better than our parents did, even though both our moms worked at least part time.
If we're below average income now, living better than above average income thirty years back, in what way have things gotten worse? Plus now there's more stuff available at cheaper prices - not just a wider variety of fresh fruit and vegetables, but things like computers, DVDs and VCRs that weren't even around when I was a kid are easily affordable. And heaven knows the cars today are generally more powerful and nifty. Except for the fact that it can be hard to get a stick shift, which is sometimes annoying...
I cannot see any possible way that your statement can be true in any practical sense. My money goes way further than my mom's did when I was a kid. If I got on the Internet and made more of an effort to track down sales, it'd go further still. Modern poor people in the U.S. are living considerably better than my grandparents did. Our income hasn't gotten worse; our expectations have gotten higher.
First, never trust an article that flatters you in the first paragraph and basically says someday you'll agree with us in the last.
Second. It could happen. It might not. Predicting the future is a really, really risky business to be in. Optimist OR Pessimist.
OK, risk is part of life. We don't know what's going to happen-- maybe Martians will invade and maybe owning gold will be profitable. Reasonable people see what has been and accept the fact that Martians and gold are not important.
We can observe the fact that we are so much better off than our grandparents were even as they enjoyed so many advantages that their grandparents didn't have. By studying how that happened and by looking at how things are now, it makes sense that our grandchildren will have it better than us and that doomers are idiots.
Which means that it essentially measures nothing. Food, energy, and housing should be among the first three items on the CPI list.
Note to self: read up on this a bit more.
This is true. My rent is cheaper than it was 5 years ago for roughly the same size apartment in roughly the same neighborhood.
As they say: Bulls make money, bears make money, pigs get slaughtered.
Wouldn't it be something like 8% minus the rate of growth of the population (including illegals, of course)?
And don't forget the underground economy. It has been estimated to be about 10% of GDP. So our GDP growth is probably understated by something like 10%. IOW 3% growth should be 3.3%
The government calculates CPI numbers that include food and energy as well as the core rate which omits food and energy. Housing is included in both measures.
From the BLS website:
"The CPI represents all goods and services purchased for consumption by the reference population (U or W) BLS has classified all expenditure items into more than 200 categories, arranged into eight major groups. Major groups and examples of categories in each are as follows:"
"Also included within these major groups are various government-charged user fees, such as water and sewerage charges, auto registration fees, and vehicle tolls. In addition, the CPI includes taxes (such as sales and excise taxes) that are directly associated with the prices of specific goods and services. However, the CPI excludes taxes (such as income and Social Security taxes) not directly associated with the purchase of consumer goods and services."
It's probably a good idea to question the motivations and the information being disseminated by the doom and gloomers who want us to believe that our eyes are deceiving us and the worst economy since Hoover is just around the corner.
It's so easy for some to just say that inflation is high and real wages are lower, as well as just "say" that 2+2=5. I get tired of arguing that 2+2=4 but that's no excuse; we still have to restate the truth when others speak fantasy.
I was doomed yesterday ,today Im alright
So, if you think the economy hasn't grown over the last decade, then Adam is correct and inflation is 8%. If you understand that 10 year treasuries are yielding 4.25%, you'd realize that inflation is nowhere near 8%.
Ahhh, perhaps that's a better definition as GDP grows through other factors besides population (or at least working population).
It's probably a good idea to question the motivations and the information being disseminated by the doom and gloomers who want us to believe that our eyes are deceiving us and the worst economy since Hoover is just around the corner.
I won't approach the point of saying that the economy is horrible, or even weak, though I'm not certain that it is flourishing as much as it could or should be. Anyway, I believe, based on my own purchasing power, that the CPI does understate things a bit. No, we're not in an 8% inflationary situation, but the 3.3% figure isn't accurate IMHO.
BTW, want to buy some gold? ;)
Yes. Here is the theory, if GDP grows at 3%, money supply must grow at 3%. If money supply grows more slowly, you get deflation. Too many goods chasing too few dollars. Good for consumers but bad for businesses. Profit squeezes will cause business failure. It's been happening in Japan for the last few years.
If money supply grows faster, the extra money fuels inflation.
Read the OFHEO systemic risk report.
When was the last time the housing market in this country showed a year over year decline in aggregate values?
Just before FDR created the GSEs.
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