The case for higher inflation

[Francesca R]

I'm losing count, but some of the threads where Tippit's garbled mess of false pretences about inflation are put down are here, here and here.

Once Tippit does more than regurgitate already debunked myths on this subject, there may be something new to reply to.

(ETA--Here's where Tippit is captured on video admitting that (i) interest rates [leaving aside other real assets like condos or businesses] do compensate currency holders for "some measure of expected inflation" and (ii) monetary base expansion does not necessarily push prices up.)

 

[Tippit]

Now isn't that an amazing assertion given how anti-profit Obama and the democrats seem to be? They rail against profit at every turn. So do many of Obama's supporters on this forum. They seem to disagree with Keynes about the goodness of profit, don't they.

I agree that Keynes is widely misunderstood, but that doesn't make him any less wrong. Profit inflation depends on monetary inflation, which, as I've already described is an inequitable and regressive form of taxation. Output growth in the context of sound money results in lower costs and lower wages. Profit inflation isn't important, profit margin is. Monetary inflation distorts price signals and leads to malinvestment which must eventually be liquidated. This should not be confused with growth.

In short, Keynes said inflation over 1 to 2 percent a year is bad.

Keynes was again wrong. Monetary inflation at any rate is bad, because it's not equitable. It is simply not fair. Both the scope at which it is done, and its beneficiaries are entirely arbitrary and subject only to the whim of an elite group of central bankers. Profits should accrue to those who most successfully deploy their savings in fulfilling the needs and wants of consumers, not those who have the lowest costs of capital because of their relationship to bankers, or a banking system.

In short, Obama supporters have it wrong. Keynes wouldn't have agreed with Obama's inflationary policies. Far from it.

In order to fulfill Keynes' misplaced desire for "price stability" (which is not important, it is the stability of final demand that's important), it requires a fractional reserve fiat money system such as administered by the Federal Reserve. In this sense it matters little how closely Obama subscribes to Keynes to the extent that the Fed is the problem and should be abolished entirely, as opposed to bickering over who will inflate the least (or the most).

 

[Tippit]

I'm losing count, but some of the threads where Tippit's garbled mess of false pretences about inflation are put down are here, here and here.

Once Tippit does more than regurgitate already debunked myths on this subject, there may be something new to reply to.

(ETA--Here's where Tippit is captured on video admitting that (i) interest rates [leaving aside other real assets like condos or businesses] do compensate currency holders for "some measure of expected inflation" and (ii) monetary base expansion does not necessarily push prices up.)

Francesca, only someone as dishonest as yourself could possibly conclude that my position on this matter has been debunked, in spite of direct video evidence of the Chairman of the most powerful central bank in the world reiterating exactly what I claimed.

As if I needed Chairman Ben to understand what is already painfully obvious. I don't know if it's this patent dishonesty that causes you to take such delusional positions, or if it's the fact that you have a vested interest in the status quo, but either way, you're wrong. The fact that you still act like you have some credibility on this subject is just one of life's mysteries.

 

[Francesca R]

Welll you debunked yourself, see? You informed the forum all about how it was illogical to view inflation as a tax, and illogical to view monetary base expansion as robbery, all by yourself.

Interest rates compensate people primarily for the time value of money, and [for] some measure of expected inflation.

Of course it [debt monetisation] is inflationary - not necessarily of the general price level

That you remain unaware you did that is one of life's amusements.

 

[Tippit]

Welll you debunked yourself, see? You informed the forum all about how it was illogical to view inflation as a tax, and illogical to view monetary base expansion as robbery, all by yourself.



That you remain unaware you did that is one of life's amusements.

I didn't debunk myself, Francesca, you fail to understand why that isn't relevant. The fact that some financial assets compensate you imperfectly for some measure of expected inflation doesn't change the fact that purchasing power was diluted, it merely shifts the burden. In fact, I used an analogy which I thought you understood. If a burglar breaks into your home and steals $10,000 worth of personal items, all of which are insured, the cost of the theft isn't ameliorated, it is spread out and bourne by everyone who pays insurance premiums. The thief still gets away, at the added expense of society-at-large.

If output grows 1% and a counterfeiter increases the money supply by 1%, the monetary inflation may or may not offset what would ordinarily be a decline in the general price level. This doesn't change the fact that everyone else has bourne a proportional loss in relative purchasing power. In other words, even though the sum of goods and services increased, your claims on them have been diluted. You suffer an opportunity cost in the form of prices that otherwise would have been lower had the inflation not occured.

These are both very simple concepts to understand, yet, perhaps until now they have eluded you.

 

[Loss Leader]

Profit inflation depends on monetary inflation, which, as I've already described is an inequitable and regressive form of taxation.

Can we please stop conflating the concepts of inflation and taxation. A tax is levied by a government upon an entity. Inflation may be partially based on government actions but: 1) it is also determined by about a million other things the government doesn't control; and 2) it doesn't directly benefit the government.

Even if you are correct that inflation is an inequitable cost, it's certainly not a tax.

 

[Puppycow]

Except, the guy with $10 has a far larger proportion of current assets (checking accounts paying negative real returns, cash, and cash equivalents) than the millionaire. He is affected far more adversely than people with hard or financial assets.

No, because the guy with 10$ is probably going to use it pretty soon. He's not going to save it long enough for inflation to significantly erode his purchasing power.

 

[TriskettheKid]

Can we please stop conflating the concepts of inflation and taxation. A tax is levied by a government upon an entity. Inflation may be partially based on government actions but: 1) it is also determined by about a million other things the government doesn't control; and 2) it doesn't directly benefit the government.

Even if you are correct that inflation is an inequitable cost, it's certainly not a tax.

But he needs it to be a tax so he can say it's a tax, and thus make it sound all scary-like.....

Duh.

 

[brazilianevil]

Paul Krugman is a Keynesian hack.

And a Nobel laureate.

As if the Nobel wasnt about politics
Nevermind, one way or another thats a fallacy
http://en.wikipedia.org/wiki/Appeal_to_authority

 

[drkitten]

As if the Nobel wasnt about politics
Nevermind, one way or another thats a fallacy
http://en.wikipedia.org/wiki/Appeal_to_authority

You know, you really should read the pages you link to, before they make you look a fool.

From the Wikipedia page:

On the other hand, arguments from authority are an important part of informal logic. Since we cannot have expert knowledge of many subjects, we often rely on the judgments of those who do. There is no fallacy involved in simply arguing that the assertion made by an authority is true. The fallacy only arises when it is claimed or implied that the authority is infallible in principle and can hence be exempted from criticism.

Krugman is demonstably a recognized and decorated economic expert. Tippit is demonstrably an ill-informed nutcase. While being an expert doesn't make one infallible or immune to criticism, it certainly make one's statements more "authoritative."

 

[mhaze]

Can we please stop conflating the concepts of inflation and taxation. A tax is levied by a government upon an entity. Inflation may be partially based on government actions but: 1) it is also determined by about a million other things the government doesn't control; and 2) it doesn't directly benefit the government.

Even if you are correct that inflation is an inequitable cost, it's certainly not a tax.

No, because a point is being made and (1, 2) no, and no.

 

[drkitten]

No, because a point is being made and (1, 2) no, and no.

Three statements, all wrong. 100% error rate.

Mhaze maintains his perfect record.

 

[mhaze]

I didn't debunk myself, Francesca, you fail to understand why that isn't relevant. The fact that some financial assets compensate you imperfectly for some measure of expected inflation doesn't change the fact that purchasing power was diluted, it merely shifts the burden. ....
These are both very simple concepts to understand, yet, perhaps until now they have eluded you.

When Francesca produces facts to support her ridicule and smearing of John Williams website, or reverses her position on the matter, then maybe she's got it.

So far, nothing....except that the conclusions reached by Williams are not to her liking.

www.Shadowstats.com

 

[Francesca R]

Incorrect.

With respect to your challenges to the debunking of the inflation conspiracy . . . oh wait. You have none.

 

[Andrew Wiggin]

If I had lots of debt, which I do (school not being cheap, and scholarships eventually running out, leaving one to resort to borrowing), then inflation is great. I borrowed the money when it was worth something, and every time the inflation rate rises, the money I pay the loans back with is worth less and thus easier to come by. Inflation makes the day when I'm debt free and working for my own gain ever closer.

A

 

[a3sigma]

Inflation occurs when the money supply grows faster than the economy -- more dollars chasing fewer goods and services. A moderate rate of inflation helps to ensure that the money supply is adequate to capitalize economic growth. Not only governments create money. Every time a bank makes a loan, it increases the money supply. This is why easy credit is necessary for economic growth, and interest rates affect the rate of inflation.

 

[Francesca R]

If I had lots of debt, which I do (school not being cheap, and scholarships eventually running out, leaving one to resort to borrowing), then inflation is great. I borrowed the money when it was worth something, and every time the inflation rate rises, the money I pay the loans back with is worth less and thus easier to come by. Inflation makes the day when I'm debt free and working for my own gain ever closer.

No it doesn't, unless the inflation is unanticipated. Student loan rates are priced to give the lender inflation protection. If you borrowed from a Sallie Mae (US) program or via the SLC (UK) the rate you borrow at will be lower than credit card rates, but some way above mortgate rates (and a long way above wholesale interbank rates).

In some cases, governments subsidise the interest rate for undergraduates, but that's an illusion (not much different from a "teaser mortgage rate").

 

[JJM 777]

your hard earned purchasing power being stolen

I have believed that Americans have more purchasing power than Africans, Central Asians etc. because of historical and present major injustice in international economy, not because Americans have "hard earned" their purchasing power.

Anyway, inflation is born from the fact that people are willing to pay interest rate to others, who are willing to lend their money only if they get some interest for it. Here the biggest injustice is hereditary wealth, some people must pay interest to get access to wealth which the lenders got for free from their ancestors, doing nothing to "earn" it.

 

[Francesca R]

inflation is born from the fact that people are willing to pay interest rate to others, who are willing to lend their money only if they get some interest for it.

That doesn't generate inflation all by itself.

Here the biggest injustice is hereditary wealth, some people must pay interest to get access to wealth which the lenders got for free from their ancestors, doing nothing to "earn" it.

It's just or unjust depending on your philosophy.

 

[Puppycow]

Here the biggest injustice is hereditary wealth, some people must pay interest to get access to wealth which the lenders got for free from their ancestors, doing nothing to "earn" it.

That's not injustice, just luck and fate.

The universe isn't fair.