Posted tagged ‘Inflation’

Some Econ. Homework

June 22, 2016

The Fed Has Whiffed Again: Massive Monetary Stimulus Has Not Helped Labor, by David Stockman, at davidstockmanscontracorner.com. The Feds injection of 4 Trillion electronically printed dollars into the economy hasn’t produced a return worth that kind of “investment”. Fewer workers working fewer hours means less is being produced. Just because you print money doesn’t mean goods and services are being produced. It only means goods and services are being demanded by using money not backed by any production. Say’s law is being shown to be true.

“Say’s Law can be explained in the following terms:”

1) “The way that a buyer demands a good is by supplying a different good.”

2) “The supply of one type of good constitutes the demand for other, different goods.”

3) “The source of demand is production, not money. Money is only a temporary parking place for past production.”

“In the modern economy with division of labor, most of us demand goods when we supply our labor. I work as a software engineer. I supply my labor writing computer software. And from that supply I am able to demand other goods, such as coffee.”

Pity The Poor Central Bankers: Playing Masters Of The Universe Is No Longer Fun, by Charles Hugh Smith, at oftwominds.com. Here is an excerpt from the article: “Central Banks can create free money for financiers, but they can’t move the needle of the real economy, except to distort and cripple it with perverse incentives to gamble borrowed money on malinvestments and skimming operations…….as former Master of the Universe Ben Bernanke noted: “higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending (that) will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.”

I guess former Master of the Universe Ben Bernanke has never read Say’s Law: “The Source of demand is production, not money. Money is only a temporary parking place for past production.

Printing money distorts the pricing system. Market discovery of prices (not Fed manipulated prices) is how information about how much to produce and consume is transmitted to producers and consumers in a free market. The interest rate is the most important of these discoveries, because interest rates coordinates production across time. We live in a world where resources and capital have misallocated for the last decade plus. The cure is to quit printing money and allow the market to set interest rates. What are the odds?

The Fed Pours Water On The Job-Growth Hype, by Ryan McMaken, at mises.org. The administration and the media has been telling us how good the economy has been doing. I guess the Fed hasn’t received the memo. The Fed would normally raise interest rates if the economy is doing well because it would be afraid of it overheating.  The Fed will adjust its monetary policy to weather they think the economy is too hot, or too cold, or just right. The fact that the Fed has raised the interest rate once by a 1/4 point since they lowered it to near zero in 2008 tells us everything about what the Fed thinks of the economy. So where has most of the $4 trillion in printed money ended up? If you say in the financial markets to prop up asset prices, in order to help banks, go to the head of the class. Do you think these false stock prices can stay afloat without more printed money???

Central Banks Are Wrong About Inflation and Deflation, by Frank Shostak, at mises.org. Let’s go to Murray Rothbard writing in Man Economy And State for the definition of inflation and deflation.

ROTHBARD: “The process of issuing money beyond any increase in the stock of specie, may be called inflation. A contraction in the money supply outstanding over any period, (aside from a possible net decrease in specie) may be called deflation. Clearly, inflation is the primary event and the primary purpose of monetary intervention. There can be no deflation without an inflation having occurred in some previous period of time.

Movements in the  supply-of-goods and in the demand-for-money schedules are all the results of voluntary changes of preferences on the market. The same is true for increases in the supply of gold or silver. But increases in fiduciary or fiat media (printed money) are acts of fraudulent intervention in the market, distorting voluntary preferences and voluntarily determined pattern of income and wealth. Therefore, the most expedient definition of inflation is one we have set forth above: an increase in the supply of money beyond any increase in specie.”

The absurdity of the various governmental programs for “fighting inflation” now becomes evident. Most people believe that government officials must constantly pace the ramparts, armed with a huge variety of “control” programs designed to combat the inflation enemy. Yet all that is really necessary is the government and the banks (nowadays controlled almost completely by the government) cease inflating. The absurdity of the term “inflationary pressure” also becomes clear. either the government and banks are inflating or they are not; there is no such thing as “inflationary pressure”.

CONCLUSION

Let’s not be fooled by the “Masters of the Universe’ when it comes to monetary policy and interest rates. With a little bit of reading on the topic, you could come up with the policy for fixing our economic problems. That policy would be to quit electronically printing counterfeit money and allow the market to set the interest rates. The solution is very simple but it is not easy. Why?  Because of the Fed’s previous inflationary policy, the resulting recession that would occur when we implement the cure would be politically difficult for politicians and the Fed to let happen. They have been trying to keep the correction from happening since 08, but at some point economic reality will correct all the Feds previous money printing, and it won’t be pretty.

Government: Is It Ever Big Enough? by Prager University

April 26, 2016

Will Government ever stop its intrusion into our lives?

How can the growth of Government be stopped?

Here some excerpts from the video.

“A government powerful enough to give you everything you want, will also necessarily be powerful enough to take away everything you have. Including your freedom. Government power must be limited because the alternative is unlimited Government.

(Modern day) “Liberals believe that if there is a societal problem they believe the best solution is a new Government program. If it fails to achieve its goal, which it invariably does, the solution is a bigger Government program – More – and when does more become enough? The honest answer is NEVER“.

SHACKLE  THE GOVERNMENT TO SOUND MONEY

The Constitution was supposed to control the size of government. Since “the Constitution is no threat to our current form of government,” as Joseph Sobran has said, the only way to shrink Government is to get back to sound money. As long as Government can fund itself via The Fed’s electronically printed counterfeit money, there isn’t much that can be done. Cutting the size and scope of government is the real solution to the problem, but we all know that shrinking government is almost impossible because of our political process. No matter who gets in control of congress and/or the presidency, government keeps growing.  In this article by Paul-Martin Foss titled, Sound Money And Fiscal Policy (read here at mises.org), he talks about the relationship between the growth of government and a central banks ability to print money. Here are some excerpts from the article.

“Sound money….. is the most important check on government spending. If money is sound, meaning that the government cannot inflate the money supply at will, then government spending will be limited. Remember that governments can fund their operations through three methods: 1.) Taxation; 2.) Bonds, or borrowing; 3.) Inflation.”

“Taxation is self-limiting because at higher tax rates there will be massive tax avoidance and tax revenues will fall, or the government might be voted out or overthrown if people are angry enough. Bonds have to be repaid, which comes from future taxation, so we are back to the self-limiting aspect of tax funding. Bonds also require interest payments, and if a government isn’t creditworthy then the interest payments may make borrowing money prohibitively expensive.”

“This leads us to the third and preferred method, inflation. By creating more money, the government decreases the value of each monetary unit. But it normally does so in a slow enough manner as to be barely perceptible to the average person. And where does this newly-created money go? Why, to the government’s coffers, of course. There it gets spent on wars, welfare, and other boondoggles. In the meantime, the newly-created money causes the prices of goods to increase, driving up the cost of living for the average person. In this way, inflation is a stealth tax. Its effects are just as insidious as direct taxation in that it takes money from citizens and deposits it into government coffers, but it does so in such an imperceptible way that very few people realize that they are being fleeced. That allows governments to spend far more money than they otherwise would be able to by relying on taxes and borrowing alone, which is why governments prefer it.”

Sound money and the Fed are subjects not many people had heard about, let alone understood, until Ron Paul shed light on them during his run for president. More people have to understand the concept of sound money, on the one hand, and how the Federal Reserve produces counterfeit fiat money on the other, if there is any chance of reigning in Leviathan.

 

Must Reads For The Week 12/12/14

December 13, 2014
The pen is mightier than the sword...

 The pen is mightier than the sword… (Photo credit: mbshane)

Why So Many Health Insurance Plans Canceled By Obamacare, by John Lott , at johnrlott.blogspot.com. This short video explains how insane the rules are in the The Affordable Care Act. The only reason you would make rules like this is if you want them to fail, so you can try to go to a single payer Government system.

Indications Of What Obamacare Is Really Going To Be Like Begin To Emerge, at economicpolicyjournal.com. It doesn’t matter if Government promises you healthcare, free or otherwise, if there is no one willing to supply it.

30 of the 60 Democrat Senators Who Voted For Obamacare Are No Longer Employed By “The People”, by Philip Klein, at washingtonexaminer.com. The cost of voting for a socialist healthcare scheme is a Senate seat. Unfortunately I don’t think the establishment Republicans want to get rid of Obamacare.

Fighting Free Markets: Orlando Government Wants Uber To Charge 25% More Than Taxis, at economicpolicyjournal.com. This is one way Government tries to “level the playing field”.  Orlando Fla. is trying to reclassify Uber rides as livery vehicles. Uber drivers would be forced to charge 25% more than the minimum taxi rate. Get this, taxi companies say they are afraid Uber drivers would ignore the new regulation; no, really, they wouldn’t do that. The next step would be to have the police enforce the new regulation. I can see the headline now: “Uber Driver Shot Dead By Police For Failing To Charge Rider A Higher Fare”.

N.Y.C. Would Have City Develop Its Own Taxi-Hailing App, by Eric Pfeiffer, at govexec.com. Here is another way Government tries to create a level playing field. City Council Member Ben Kallos is proposing a bill to authorize the creation of a city sponsored app for hailing traditional city cabs. First question, is there a reason taxi companies can’t create the app themselves? Answer, yes, because there is a New York City Taxi and Limousine Commission that regulates these businesses. The Taxi Cartel didn’t know that when they made their deal with the devil to protect their monopoly position, that the devil would some day prevent them from competing with an upstart competitor that could not be foreseen when the deal was made. Does anyone really think the Government can create a competitive app? Before you answer, think healthcare.gov. Ah: “Hoisted by one’s own petard“.

Do Leftists Have Any Idea How Supply And Demand Work? at economicpolicyjournal.com. Is Uber price Gouging in San Francisco, or are they rationing a scarce resource according to the law of supply and demand?

The Runaway Trillions, at targetliberty.com. The national debt is $18,000,000,000,000.00 (that’s 18 trillion), and growing exponentially.

Detroit West: California Pension Plans Are Running Dry, at economicpolicyjournal.com. This is what happens when you pay labor more than what it produces. The difference between California’s debt and the Federal Governments debt? The Federal Government can get the Fed to electronically print counterfeit money to finance their debt, and States can’t.

How The Fed Grows Government, by Hunter Hastings, at mises.org. Money printing by central banks is the only thing that has allowed Governments to grow so big.

With Q3 Buy Back Surging, These Are The Top 20 purchasers Of Their Own Stock, at zerohedge.com. Using the Feds electronically printed counterfeit money, companies are purchasing back their stock in order to boost the price. Low supply means higher price. The stock market is a bubble activity.

Peter Schiff Educates CNBC Host About Inflation, at targetliberty.com.

 

Must Reads For The Week 10/26/13

October 26, 2013
The pen is mightier than the sword...

The pen is mightier than the sword… (Photo credit: mbshane)

Yale Professor Surprised: Tea Party Supporters More Scientifically Literate, by Kyle Becker, at ijreview.com. From the article, “…all my impressions come from watching cable tv…..and reading the paper…I’m a little embarrassed, but glad…I no longer hold this particular mistaken view.”

Obamacare Tech Firm (CGI) Tried, Failed To Build Gun Registry In Canada, by Joel B. Pollak, at breitbart.com. Does the choice of CGI to build the website tells us the administration is either less scientifically literate than the average person, corrupt, incompetent, or just unlucky?

Why The Fed Will NEVER End Quantitative Easing, by Patrick Barron, at patrickbarron.blog.blogspot.com. An excellent one paragraph analysis of why the Fed can’t escape the Groundhog Day movie it created for itself.

Alan Greenspan Warns Of Double Digit Price Inflation, at economicpolicyjournal.com. Former fed chairman warns, “the feds balance sheet expansion may unleash inflation.” A moment of candor from an insider.

With Debt Ceiling Lifted, Federal Government Resumes Borrowing Spree, by J. D. Tuccille, at reason.com. The “kick the can” debt ceiling deal, allows the U. S. Treasury to borrow as much as it wants until February 7th 2014. I Guess this shows how serious “socialists of both parties” are about controlling spending.

Debt Limit: A Guide To American Debt Limit Made Easy, youtube video. I found this at Carpe Deim Blog, This is a short video that puts the Governments debt problem in perspective.

The Diverse Beer Economy As An Ecosystem, by Mark J. Perry, at Carpe Deim Blog. Explains how brewpubs and microbreweries are finding a niche market among all the big beer makers.

Higher Education: The Conventional Wisdom Is Wrong, by George Leef, at faculityrow.com. Here’s the money quote, “….for many students, their K-12 years leave them pitiably unprepared, both for post-secondary education and the world of work.”  And this, “Any increase in college enrollment will overwhelmingly come from such academically marginal students.”

How Bitcoin Will Be Neutralized By The Government, at economicpolicyjournal.com. The Gov. will do anything to protect its monopoly on money creation.

Must Reads For The Week 9/14/13

September 14, 2013
The pen is mightier than the sword...

The pen is mightier than the sword… (Photo credit: mbshane)

3D Printing Is The Future, at economicpolicyjournal.com. The creative destruction of the market is on full display.

Global Cooling Arctic Ice Caps Grows By 60% In A Year, by David Rose, at dailymail.co.uk. I found this at Carpe Diem Blog. Once again the man made global warming believers are wrong.

EU Exploring Scheme To Install Speed-Limiting Devices In Cars, by Alex Newman, at thenewamerican.com. I saw this on libertypenblog.blogspot.com. I know, “This can’t happen here”, or can it? Watch the video in the link below before you answer.

Mandatory Black Boxes, VIDEO: Fox News, at libertypenblog.blogspot.com. It most certainly can happen here.

Help Kick Start World War Three, at zerohedge.com. Send in a donation to support the funding of world war III.

Video: Karl Marx Endorsed By Obama As Next President, by Mark Dice. Is this video funny or depressing?

Here’s Why You Think Price Inflation Is Much Higher Than What The Government Says, at economicpolicyjournal.com. When the Government doesn’t count energy and food in their Consumer Price Index, of course inflation isn’t bad.

Must Reads For The Week 8/31/13

August 31, 2013
The pen is mightier than the sword...

The pen is mightier than the sword… (Photo credit: mbshane)

As Long As You Don’t Eat, Price Inflation Is Under Control, at economicpolicyjournal.com. Have you noticed that certain items, like raisins and tuna, have less in the box or can, for the same or higher price, than six months ago. Is this a way to hide inflation?

Airbnb And Its Enemies: Who’s Afraid Of A $10 a Night Sofa, by Jim Epstein, at reason.com. The free market finds a less costly way to provide a service, but the incumbents in the hotel industry try to get Government to stop this voluntary activity. When businesses lobby Government for protection from competition, it proves Government has exceeded its explicit constitutional powers.

Texas Oil Output Has Almost Doubled In The Last Two Years, by Mark J. Perry, at aei-ideas.org. The decisions of individuals, which is the market, is an unstoppable force. These economic forces are creating an oil boom. These same forces are working to correct Obamacare, which is why the President has stopped the implementation of some of the provisions.

The Huffington Post On Ludwig von Mises, at economicpolicyjournal.com. The fact that the Huffington post wrote an article about the great Austrian economist, Ludwig von Mises, gives us hope. This wouldn’t have happened just five years ago.

Is The Secular Bear About To Growl? at zerohedge.com. These are interesting charts about historical stock market run ups and declines. History isn’t a predictor of the future, it can only show past trends that may be similar to today. These trends are subject to change as the variables may not act as they did in the past.

Bitcoin Group To Meet With 7 Government Agencies, at economicpolicyjournal.com. The Government doesn’t like the free market, especially in money creation. Governments know if they lose their monopoly on money creation, their power will erode substantially because they won’t be able to fund their expansion.

NSA’s Surveillance  Programs Are The “Most Serious Attack On Free Speech We Have Ever Seen”, by Josh Levy, at informationclearinghouse.info. Government action creates incentives and constraints that individuals consider when they act. People will begin to censor themselves when they feel their speech is being monitored.

When It Comes To Obamacare, Ignorance Is Bliss For Young Americans, by Scott W. Atlas, at forbes.com. The administration is propagandizing young people into signing up for the health care exchanges, for one reason only. They want young people to pay more in insurance than they receive in benefits, essentially funding the Obamacare boondoggle. You got what you voted for.

A Truly Great Phony, by Thomas Sowell, at jewishworldreview.com. An article by Thomas Sowell, enough said.

Re-education At George Mason, by Walter E. Williams, at jewishworldreview.com. An article by Walter Williams, enough said.

Is The Economy Improving? It Depends On How You Define Improving.

August 20, 2013
Real GDP Contracts Most in 27 Years

Real GDP Contracts Most in 27 Years (Photo credit: inspecie.co.uk)

QUANTITATIVE VS. QUALITATIVE ANALYSIS

We keep hearing  from the administration, and the media, that the economy is slowly improving. They cite unemployment data and GDP data to back this assertion, hoping we won’t dig below the surface in search of the truth hidden in the numbers. How you arrive at the specific numbers, is more important than the numbers themselves. Here’s an example. The environmentalists try to prove global warming by using a vaguely defined  point in the past, and comparing it to this years, or this decades, temperature. If you let me pick the year to be used in the comparison, I could prove global cooling. All I’d have to do is pick a year that was hotter than this year. If you can pick the starting point in a  comparison, you can make the data say whatever you want it to say. This is just one sleight of hand trick that politicians, the elites, and the media use in an attempt to shape our opinion, and move it toward their desired outcome. You have to have a definable standard for a comparison to be made. If the standard can be manipulated, comparisons are meaningless. When they say the economy is improving, we have to ask, “compared to what”. Normally the economy is judged to be improving if (more…)