nvm

[Narz]

Less spending & negative growth means less money moving around means less jobs. Society as it exists now depends on growth, we need to get out of that paradigm & start working to maximize efficiency instead (do more with less).

 

[PiMan]

Clearly you know that isn't true. Most governments/regulatory-bodies that aim to control inflation, try to keep it in the range of 2%-5% (depending on market circumstances).

 

[Integral]

From BLS -

THE EMPLOYMENT SITUATION: MAY 2009


Nonfarm payroll employment fell by 345,000 in May, about half the
average monthly decline for the prior 6 months, the Bureau of Labor
Statistics of the U.S. Department of Labor reported today. The unem-
ployment rate continued to rise, increasing from 8.9 to 9.4 percent.
Steep job losses continued in manufacturing, while declines moderated
in construction and several service-providing industries.

edit: more precisely, U3 is 9.36%

 

[Phlegmak]

The US government is saying that right now too. In a few years we will be loughing our asses off at how pathetic their lies were.

but the more inflation there is, the faster money moves, which matches with Narz's point. So in order to get a good economy, we need a ton of inflation.

if that were the case, hyperinflation(or at least double digits) would be the perfect economy. look at how fast money moves around then

Your absolutes are making you look bad.

Obviously, inflation is not desirable. It's perfectly reasonable to want an economy with money "moving around a lot" without wanting inflation.

If you're going to respond with some absolutist interpretation of that, then just don't bother.

 

[Phlegmak]

money moving aroundfast = people dont want to keep it. if they dont want to keep it, its value drops.

Have a good day.

 

[potatokiosk]

money moving aroundfast = people dont want to keep it. if they dont want to keep it, its value drops.

The velocity of money isn't the only thing that affects the value of money...

It's probably Narz's opinion that if money isn't moving around enough then less stuff will get produced.

 

[Rashiminos]

Over, $1000.

Spoiler :

JK.

He shoots, he scores!

 

[Integral]

He shoots, he scores!

You got lucky. It was over by seven-tenths of a basis point.

 

[Zelig]

On another note, not sure how well known this is, but a part of the law congress changed for credit cards, is a provision that would allow retailers to provide cash-paying customers with price incentives to avoid using their plastic (retailers generally pay credit-card companies 1.5-2% of the purchase price). This move could well accelerate the deflationary trend in the CPI.

I had not heard about this at all. Can retailers immediately take advantage of this with their existing contracts? Do you have any more information?

 

[PiMan]

if you want fast moving money, inflation is inevitable



It's probably Narz's opinion that if money isn't moving around enough then less stuff will get produced.

If savings dont keep value, people wont save capital, if people wont save, production cant increase.

As we've seen over the last decade and more, savings are not required for production, merely a continuing supply of loans. As long as income increases fast enough to pay for increasing interest, then loans and productivity can continue.

 

[Whomp]

I had not heard about this at all. Can retailers immediately take advantage of this with their existing contracts? Do you have any more information?

It's not a done deal but look up H.R. 2382 credit card interchange fees. The latest is allowing retailers to negotiate fees. This will have to be revenue neutral so my guess is reward programs will get skimpier and credit unions will have a tough time competing.

On the topic of consumers increasing debt to buy more I would ask how? Debt to net worth stands at 26 per cent. If it drops to pre bubble levels at 20 per cent or long run norm of 16 per cent then we are talking 3-5 trillion of debt eliminated before a new credit cycle begins.

I think some of you need to read up more on deflating credit cycles.

There's a secular change in spending and saving trends happening with the U.S. consumer and especially within the boomer demographic.
Frivolity has become frugality for them.

 

[mrt144]

Unemployment tops 9.4%

 

[PiMan]

http://freedom-school.com/money/how-an-economy-grows.pdf
btw, loans ARE savings. in order to lend something out, some other person has to save it first, instead of consuming

Not with computers and fiat currencies. The sum of all debt is greater than the sum of money saved (in some countries).

Banks often don't actually have the money they are loaning, it is only government regulation that prevents them from loaning out too much more than they don't have.

 

[mrt144]

Here's the insanity of the situation on housing prices and interest rates rising.

Using my city's median housing price as an example and a household income 50% higher than the median plus a 20% downpayment. I'm trying to be generous and assume a potential house buyer can at least assess their financial position.

360,000 asking price
60k income
5% interest
1546 monthly payment for 360 months.
House payment = 31% of pretax household income at time of sale.


If mortgage rates went up to 6% there would have to be a reduction of the asking price to 321k to retain the same "affordability" for the buyer. That'd be a 12% reduction on median housing ask prices. And that's at this level of housing demand.

Same exercise expect using the 25th percentile number of 250k asking price which would be considered a starter home.

that's 4.167x income, 21% of pretax paycheck, 1073 monthly payment at 5%. Interest rate goes to 6% and that 250k asking price would have to be lowered to 214680, a 16% price reduction to maintain the same "affordability" to the buyer.

Okay, so you might say "Well people whose household income is 60k shouldn't buy houses" and I hear ya but let's look at this using a ask price that is only 3x Income (and is 4x Median Income). It'd be the same % price drop but the number of people that have that 120k household income is less.

Lower interest rates will only lure back those that have the income to support it and probably don't already own a home. A return to normal is going to require lower asking prices period, not higher asking prices at lower interest rates. The housing price foodchain needs buyers at the bottom to support trade ups for sellers.

Now if normal has shifted from 20% down, 3x income then the paradigm of what financial responsibility is has been altered.

I'm of the belief that there needs to be ask price cramdowns ahead of interest rate and mortgage rate moves upward (We're at unprecedent lows that can't be maintained forever as we've just seen in the bond market. Deficits do matter to people who buy our debt.) before those bottom of chain buyers can actually afford to buy anything.

 

[Rashiminos]

You got lucky. It was over by seven-tenths of a basis point.

Luck had nothing to do with it. I don't suffer Paulson's and Geithner's delusions.

 

[Bill3000]

government regulation is what allows them to lend out too much without being crushed by bank runs. remember what excuses were used to legitimize starting the federal reserve (panic of '1907)

Honestly, xarthaz? No one cares.

 

[PiMan]

government regulation is what allows them to lend out too much without being crushed by bank runs. remember what excuses were used to legitimize starting the federal reserve (panic of '1907)

but still, every piece of money that is borrowed and used can be used so because someone else has saved the physical capital that is equivelant to that amount of money. only in the case of expanding fiat currencies, part of the savings is confiscated through inflation.

You seem to think that for every asset, there is capital to back it up. This is shoddy accounting to a great degree. Basic accounting (stuff I learned in high school), says that every asset is balanced by a combination of capital, liabilities and/or revenues.

In the case of bank loans, the bank gains you as an asset of future revenue, initially balanced by the liability of money that never existed. When the loan is paid, the only money of it that still exists will be the interest.

 

[Narz]

 

[Cutlass]

You seem to think that for every asset, there is capital to back it up. This is shoddy accounting to a great degree. Basic accounting (stuff I learned in high school), says that every asset is balanced by a combination of capital, liabilities and/or revenues.

not for asset, but money. every money note has physical capital behind it according to the value of the money note. in what way the note was created is irrelevant, the physical goods that are equivalent to it come from its value to be exchanged for them.

Also in the news: Ahmadinejad warns US of hyperinflation and suggests austrian economics as an alternative: http://www.youtube.com/watch?v=MhpKu8C2TA0

Oh. Yeah. That's a reliable source. Someone who can't manage their own economy and wants to destroy the US wants the US to adopt Austrian economics. And you don't consider that maybe, just maybe, the way in which they hope to destroy the US is to get us to adopt Austrian economics? After all, if I wanted to destroy a country I would want them to adopt Austrian economics too.

 

[PiMan]

You seem to think that for every asset, there is capital to back it up. This is shoddy accounting to a great degree. Basic accounting (stuff I learned in high school), says that every asset is balanced by a combination of capital, liabilities and/or revenues.

not for asset, but money. every money note has physical capital behind it according to the value of the money note. in what way the note was created is irrelevant, the physical goods that are equivalent to it come from its value to be exchanged for them.

This it partly why I mentioned fiat and computers. There is far more money circulating than there is notes to back it all up. This would not be possible without fiat, and it would be difficult without computers.