Why do people laugh and call us stupid when we say the government is PRINTING MONEY?

[FiatDoodlegrubber]

I am a long term lurker on these boards and was reading thread about where the USA is getting the money to fund the stimulus package. A few references were made about printing money and a poster scoffed at the idea and told us that anyone with a college education should know that they are not printing money and if they were, we would quickly turn into a Weimar Germany post ww1 economy.

When the USA racks up a debt it either (in order from most preferable to least preferable):

1) sells treasury bonds to the public (eg: china, japan, etc)
2) sells treasury bonds to the Fed. This is called "monetizing" the debt and is currently being done http://www.newsneconomics.com/...fed-is-monetizing.html. The fed generates the money (ie prints) but the USA still owes it back to the Federal reserve and therefore increases the debt load (currently over 12trillion)
3) fed printing money or Fed forgiving debt owed
4) default on treasuries

The Fed is buying treasuries and monetizing the debt! This money is created out of thin air and is sent to slosh around our economy. Sure, it needs to be paid back at interest, but this creates huge inflationary forces in the short run and makes the budget deficit problem that much worse.

Whats going to happen if deficits start to hit 2 trillion, 3trillion, 4 trillion year over year while our economy sinks and GDP erodes? We must do one of the above 4 to service it...eventually we risk entering an inflationary and budget deficit feedback cycle then hyper inflation ensues.

 

[Miramonti]

Originally posted by: FiatDoodlegrubber
Sure, it needs to be paid back at interest, but this creates huge inflationary forces in the short run and makes the budget deficit problem that much worse.

Theoretically yes, but China is the major purchaser of our debt, and they are so desperate to head off a recession/depression, and keep their currency from becoming too strong, they will buy our debt at 0%, effectively neutralizing the additional inflationary forces that this might normally create.

 

[halik]

Wait so I was printing money when I took college loans?

All of deficit spending is funded by issuing debt, not running presses at the U.S. mint. In the longer run that will be inflationary, since it depreciates currency (USD supply and demand) which makes things more expensive in USD terms.

That being said, sterilized deficit spending is nowhere near as bad as printing money a la Zimbabe, which indeed causes hyperinflation. I mean look at the empirical evidence of what's been going on in the past couple months, CPI shot down like no other.

 

[FiatDoodlegrubber]

Originally posted by: halik
Wait so I was printing money when I took college loans?

All of deficit spending is funded by issuing debt, not running presses at the U.S. mint.

Then what do you call the Fed buying treasuries directly then? They are creating the money to buy treasuries. The inflation created will go away once the Fed has been paid back, but our government has been running perpetual and ever expanding deficits. Eventually it'll get to the point where they can't raise taxes enough to service existing debt...

 

[halik]

Originally posted by: FiatDoodlegrubber

Originally posted by: halik
Wait so I was printing money when I took college loans?

All of deficit spending is funded by issuing debt, not running presses at the U.S. mint.

Then what do you call the Fed buying treasuries directly then? They are creating the money to buy treasuries. The inflation created will go away once the Fed has been paid back, but our government has been running perpetual and ever expanding deficits. Eventually it'll get to the point where they can't raise taxes enough to service existing debt...

Two things:

They're buying FMC/FRE mortgage backed instruments, not us treasuries, in order to give them more liquidity to continue buying up mortgages. Second and more importantly they're selling their treasuries and/or issuing debt to pay for it.

Take a look at the fed balance sheet, you'll notice that both the Assets and Liabilities are going up. If they were printing money as you suggest, their assets would go up (since they bought stuff with money they printed), yet liabilities stayed the same since the assets just bought were purchased with printed money.

(If you don't have any background in accounting, the above won't make much sense to you)

edit:
But more on the latter half of your point, perpetual and expanding deficits is a bad thing, but U.S. is still in line with the G8 as far as debt as percentage of GDP goes. Actually everything held constant we can run some small deficits to infinity, so long the rate of debt growth is the same as the gdp growth (so that debt/gdp stays the same)

 

[rchiu]

Originally posted by: FiatDoodlegrubber

Originally posted by: halik
Wait so I was printing money when I took college loans?

All of deficit spending is funded by issuing debt, not running presses at the U.S. mint.

Then what do you call the Fed buying treasuries directly then? They are creating the money to buy treasuries. The inflation created will go away once the Fed has been paid back, but our government has been running perpetual and ever expanding deficits. Eventually it'll get to the point where they can't raise taxes enough to service existing debt...

Yeah Feb buy treasuries, so big deal? Have u heard of the concept controlling money supply? Feb buy treasuries, like you said, to "create money" and increase money supply. But that's not because government got too much t-bill and no one wants it. It's because Fed wanna increase money supply in the system to boost economy, or for what ever reason. And they sell those treasury back to the market and reduce the money supply if they see a need. It's a mechanism for Fed to controll money supply, just like increasing/decreasing bank reserve requirement.

 

[RichardE]

Strong First post..

 

[FiatDoodlegrubber]

Originally posted by: halik

Originally posted by: FiatDoodlegrubber

Originally posted by: halik
Wait so I was printing money when I took college loans?

All of deficit spending is funded by issuing debt, not running presses at the U.S. mint.

Then what do you call the Fed buying treasuries directly then? They are creating the money to buy treasuries. The inflation created will go away once the Fed has been paid back, but our government has been running perpetual and ever expanding deficits. Eventually it'll get to the point where they can't raise taxes enough to service existing debt...

Two things:

They're buying FMC/FRE mortgage backed instruments, not us treasuries, in order to give them more liquidity to continue buying up mortgages. Second and more importantly they're selling their treasuries and/or issuing debt to pay for it.

Take a look at the fed balance sheet, you'll notice that both the Assets and Liabilities are going up. If they were printing money as you suggest, their assets would go up (since they bought stuff with money they printed), yet liabilities stayed the same since the assets just bought were purchased with printed money.

(If you don't have any background in accounting, the above won't make much sense to you)

edit:
But more on the latter half of your point, perpetual and expanding deficits is a bad thing, but U.S. is still in line with the G8 as far as debt as percentage of GDP goes. Actually everything held constant we can run some small deficits to infinity, so long the rate of debt growth is the same as the gdp growth (so that debt/gdp stays the same)

#1 - the FED HAS/IS purchasing US treasuries. Please google it. Here is one link:
http://www.bloggingstocks.com/...ncy-bonds-to-stimulat/
#2 - I do not have a background in accounting, but wouldn't treasury purchases by the fed count as both an asset and liability? In the same way I might consider a muni bond purchased by me both an asset (it has value) and a liability (they may default) ? If this is the case then the Fed can create inflation in this manner so long as assets and liabilities continue to increase.
#3 - Regardless, you touched on my very point in your Edit: that we must make sure that our debt levels are kept in check and that we cannot continue to bail out the economy forever

 

[FiatDoodlegrubber]

Originally posted by: rchiu

Originally posted by: FiatDoodlegrubber

Originally posted by: halik
Wait so I was printing money when I took college loans?

All of deficit spending is funded by issuing debt, not running presses at the U.S. mint.

Then what do you call the Fed buying treasuries directly then? They are creating the money to buy treasuries. The inflation created will go away once the Fed has been paid back, but our government has been running perpetual and ever expanding deficits. Eventually it'll get to the point where they can't raise taxes enough to service existing debt...

Yeah Feb buy treasuries, so big deal? Have u heard of the concept controlling money supply? Feb buy treasuries, like you said, to "create money" and increase money supply. But that's not because government got too much t-bill and no one wants it. It's because Fed wanna increase money supply in the system to boost economy, or for what ever reason. And they sell those treasury back to the market and reduce the money supply if they see a need. It's a mechanism for Fed to controll money supply, just like increasing/decreasing bank reserve requirement.

If the Fed starts selling back massive quantities of treasuries to the market then supply and demand will reduce the price (causing net inflation) and treasury yields will spike. A bond market collapse could be nasty and make the budget situation even worse.

 

[Vic]

Inflation is not a risk at this time given the recent significant decreases in asset values. Try looking at the big picture. Trillions have been wiped out. If anything, inflation and a bond market collapse would be almost welcome right about now, because it would mean the economy would be growing into other more aggressive areas into of just a sell-off with a flight to safety.

 

[FiatDoodlegrubber]

Originally posted by: Vic
Inflation is not a risk at this time given the recent significant decreases in asset values. Try looking at the big picture. Trillions have been wiped out. If anything, inflation and a bond market collapse would be almost welcome right about now, because it would mean the economy would be growing into other more aggressive areas into of just a sell-off with a flight to safety.

Asset values have gone down, yes. Housing values down, stocks down, commodities down for the most part (gold has made a comeback). These are paper asset values and have come down from fear and forced selling after one of the largest debt bubbles of all time. When the stock market goes down loses a trillion dollars in paper value that doesn't mean we've taken a trillion dollars out of the economy... Inflation has more to do with the money supply and velocity of money. Our economy is slowing and velocity decreasing but the fed is expanding the money supply.

They might not be able to fully take the excess money out of the system. Check out this article http://www.bloomberg.com/apps/...Gq2B3XeGKok&refer=home - US taxpayers risk 9.7 Trillion on bailout programs... It seems likely that the trillions of dollars of assets the fed purchased may decline in value and therefore make it difficult to remove those dollars from the system, causing inflation.

 

[Vic]

Originally posted by: FiatDoodlegrubber

Originally posted by: Vic
Inflation is not a risk at this time given the recent significant decreases in asset values. Try looking at the big picture. Trillions have been wiped out. If anything, inflation and a bond market collapse would be almost welcome right about now, because it would mean the economy would be growing into other more aggressive areas into of just a sell-off with a flight to safety.

Asset values have gone down, yes. Housing values down, stocks down, commodities down for the most part (gold has made a comeback). These are paper asset values and have come down from fear and forced selling after one of the largest debt bubbles of all time. When the stock market goes down loses a trillion dollars in paper value that doesn't mean we've taken a trillion dollars out of the economy... Inflation has more to do with the money supply and velocity of money. Our economy is slowing and velocity decreasing but the fed is expanding the money supply.

They might not be able to fully take the excess money out of the system. Check out this article http://www.bloomberg.com/apps/...Gq2B3XeGKok&refer=home - US taxpayers risk 9.7 Trillion on bailout programs... It seems likely that the trillions of dollars of assets the fed purchased may decline in value and therefore make it difficult to remove those dollars from the system, causing inflation.

Um... yes, it does.

I don't necessarily support these bailouts, especially not the lack of transparency behind them disguised as urgency, but you have no idea what you're talking about. Inflation is the least of our economic worries at this point.

 

[FiatDoodlegrubber]

Originally posted by: Vic

Originally posted by: FiatDoodlegrubber

Originally posted by: Vic
Inflation is not a risk at this time given the recent significant decreases in asset values. Try looking at the big picture. Trillions have been wiped out. If anything, inflation and a bond market collapse would be almost welcome right about now, because it would mean the economy would be growing into other more aggressive areas into of just a sell-off with a flight to safety.

Asset values have gone down, yes. Housing values down, stocks down, commodities down for the most part (gold has made a comeback). These are paper asset values and have come down from fear and forced selling after one of the largest debt bubbles of all time. When the stock market goes down loses a trillion dollars in paper value that doesn't mean we've taken a trillion dollars out of the economy... Inflation has more to do with the money supply and velocity of money. Our economy is slowing and velocity decreasing but the fed is expanding the money supply.

They might not be able to fully take the excess money out of the system. Check out this article http://www.bloomberg.com/apps/...Gq2B3XeGKok&refer=home - US taxpayers risk 9.7 Trillion on bailout programs... It seems likely that the trillions of dollars of assets the fed purchased may decline in value and therefore make it difficult to remove those dollars from the system, causing inflation.

Um... yes, it does.

I don't necessarily support these bailouts, especially not the lack of transparency behind them disguised as urgency, but you have no idea what you're talking about. Inflation is the least of our economic worries at this point.

Inflation is defined as an increase in the money supply. Rising prices are a symptom of inflation.

Deflation is a decrease in the money supply. Lower prices and wages are a symptom of deflation.

Please explain how 1 trillion dollars of paper losses necessarily means that the money supply has decreased (deflation). Don't just say "um... yes, it does"... YOU have no idea what you are talking about sir!

Check this AP article out http://business.theglobeandmai...me?cid=al_gam_mostview

U.S. wholesale inflation takes biggest jump in six months

EDIT: I can't believe you're telling me I don't know what I'm talking about when you believe that 1 trillion in paper losses = 1 trillion taken away from money supply.

 

[Zebo]

IMO 50/50... we are headed for another Great Depression with hyper inflation this time massive civil unrest, therefore, - Zebo's survival keys on a budget this may save your life.

Attitude Free - like anything in life it all starts there - positive attitude is important to success, and all survival manuals stress it makes the difference between living or dying! Never quit. Never give up. Always look at things half full!

Health Free- Again if we truley get into a SHTF scenario medicines will not be around so you taking insulin or heart medicine you're in big trouble. And the exercise part is good for you no matter what, SHTF or Not. Live longer feel better, sleep better, have more energy etc - and will be crucial in survival situation where foraging for food, planting food or running from predators two legged and four will pay big dividends.

A good water proof Sleeping bag $100 - When grid shuts down, you have no idea how cold world gets - In a true survival situation, most people die because of hypothermia, not because of lack of water or food. You don't want to build fires for warmth, alerts zombies to your presence, and is a waste of energy that could be used for food acquisition.

A Rugar 10/22 and 2000 rounds ammo $300 - Can kill small game for protein and Keep Zombies at bay one per family is fine.

A knife and first aid kit and lights and radio $100 -
I prefer those wind up & inertia radios and LED flashlights - batteries are too heavy and go bad quick especially if you don't keep them dry or leave them on ground or get them hot.



One month supply of food $150-$250 per person - It's better not to have to worry about food right away when SHTF
*Beans and rice are cheap and keep almost forever if stored right. Can eat for $40 a month on beans and rice!
*Canned foods will be good if static, last about three years depending what it is. Only issue is weight/calories ratio should you have to move.
* Peanut butter is the best all round survival food. Keeps 2 years. Don't have to prepare it and it's loaded with protein, carbs and fats. Very high weight/calories ratio

Peers FREE - Groups of people provide security and emotional support in many ways - You are going to have to be with honest and trustworthy people who help each other out in order to survive. No Robinson Crusoe - you won't make it.

 

[Vic]

Originally posted by: FiatDoodlegrubber

Originally posted by: Vic

Originally posted by: FiatDoodlegrubber

Originally posted by: Vic
Inflation is not a risk at this time given the recent significant decreases in asset values. Try looking at the big picture. Trillions have been wiped out. If anything, inflation and a bond market collapse would be almost welcome right about now, because it would mean the economy would be growing into other more aggressive areas into of just a sell-off with a flight to safety.

Asset values have gone down, yes. Housing values down, stocks down, commodities down for the most part (gold has made a comeback). These are paper asset values and have come down from fear and forced selling after one of the largest debt bubbles of all time. When the stock market goes down loses a trillion dollars in paper value that doesn't mean we've taken a trillion dollars out of the economy... Inflation has more to do with the money supply and velocity of money. Our economy is slowing and velocity decreasing but the fed is expanding the money supply.

They might not be able to fully take the excess money out of the system. Check out this article http://www.bloomberg.com/apps/...Gq2B3XeGKok&refer=home - US taxpayers risk 9.7 Trillion on bailout programs... It seems likely that the trillions of dollars of assets the fed purchased may decline in value and therefore make it difficult to remove those dollars from the system, causing inflation.

Um... yes, it does.

I don't necessarily support these bailouts, especially not the lack of transparency behind them disguised as urgency, but you have no idea what you're talking about. Inflation is the least of our economic worries at this point.

Inflation is defined as an increase in the money supply. Rising prices are a symptom of inflation.

Deflation is a decrease in the money supply. Lower prices and wages are a symptom of deflation.

Please explain how 1 trillion dollars of paper losses necessarily means that the money supply has decreased (deflation). Don't just say "um... yes, it does"... YOU have no idea what you are talking about sir!

Check this AP article out http://business.theglobeandmai...me?cid=al_gam_mostview

U.S. wholesale inflation takes biggest jump in six months

Oh really? While consumer prices are falling. Text

Your definitions are childishly simplistic. Consider: if asset holders could borrow against the paper value of their assets in the past, and can't now because those assets have significantly depreciated (even if only on paper), how might that affect the money supply?

 

[FiatDoodlegrubber]

Originally posted by: Vic

Originally posted by: FiatDoodlegrubber

Originally posted by: Vic

Originally posted by: FiatDoodlegrubber

Originally posted by: Vic
Inflation is not a risk at this time given the recent significant decreases in asset values. Try looking at the big picture. Trillions have been wiped out. If anything, inflation and a bond market collapse would be almost welcome right about now, because it would mean the economy would be growing into other more aggressive areas into of just a sell-off with a flight to safety.

Asset values have gone down, yes. Housing values down, stocks down, commodities down for the most part (gold has made a comeback). These are paper asset values and have come down from fear and forced selling after one of the largest debt bubbles of all time. When the stock market goes down loses a trillion dollars in paper value that doesn't mean we've taken a trillion dollars out of the economy... Inflation has more to do with the money supply and velocity of money. Our economy is slowing and velocity decreasing but the fed is expanding the money supply.

They might not be able to fully take the excess money out of the system. Check out this article http://www.bloomberg.com/apps/...Gq2B3XeGKok&refer=home - US taxpayers risk 9.7 Trillion on bailout programs... It seems likely that the trillions of dollars of assets the fed purchased may decline in value and therefore make it difficult to remove those dollars from the system, causing inflation.

Um... yes, it does.

I don't necessarily support these bailouts, especially not the lack of transparency behind them disguised as urgency, but you have no idea what you're talking about. Inflation is the least of our economic worries at this point.

Inflation is defined as an increase in the money supply. Rising prices are a symptom of inflation.

Deflation is a decrease in the money supply. Lower prices and wages are a symptom of deflation.

Please explain how 1 trillion dollars of paper losses necessarily means that the money supply has decreased (deflation). Don't just say "um... yes, it does"... YOU have no idea what you are talking about sir!

Check this AP article out http://business.theglobeandmai...me?cid=al_gam_mostview

U.S. wholesale inflation takes biggest jump in six months

Oh really? While consumer prices are falling. Text

Your definitions are childishly simplistic. Consider: if asset holders could borrow against the paper value of their assets in the past, and can't now because those assets have significantly depreciated (even if only on paper), how might that affect the money supply?

#1 the title of the link you sent is "Consumer prices may fall on an annual basis for the first time in more than 50 years. Is this the beginning of a deflationary spiral or just a blip"... The numbers aren't out yet. Also, wholesale inflation numbers are historically a leading indicator which could indicate higher CPI numbers to come

#2: Your reasoning is equally childish. Asset holders were once able to borrow against their paper asset values and now they CANT borrow against these assets and therefore can't contribute to expanding the money supply. It slows down money supply expansion but doesn't necessarily mean the money supply will contract because of an inability to borrow against paper assets. I think you are talking about DISINFLATION and not DEFLATION. Asset values decreasing slows the inflation rate but doesn't necessarily mean it will go negative (deflation)...

 

[Vic]

Why do I come here only to cast pearls before swine?

Disinflation is an Orwellian-esque term. There is no such thing.

 

[FiatDoodlegrubber]

Originally posted by: Vic
Why do I come here only to cast pearls before swine?

Disinflation is an Orwellian-esque term. There is no such thing.

You are an idiot.

You believe that 1 trillion in stock market capitalization losses = 1 trillion removed from the money supply. IM STILL WAITING FOR A PROOF OF THAT!!!

You gave the scenario about what happens when consumers are unable to take on new debt against the value of their paper. Are you trying to tell me that this is your proof of the 1-1 stock market, money supply correspondence???

Inability to borrow against paper assets will slow the inflation rate. You won't be able to borrow and cause inflation through the fractional reserve system.

Im still waiting for your proof...

 

[FiatDoodlegrubber]

Originally posted by: Vic
Why do I come here only to cast pearls before swine?

Disinflation is an Orwellian-esque term. There is no such thing.

straight from wikipedia http://en.wikipedia.org/wiki/Disinflation

"Disinflation is a decrease in the rate of inflation. This phase of the business cycle, in which retailers can no longer pass on higher prices to their customers, often occurs during a recession. In contrast, deflation occurs when prices are actually dropping.[1]"

And yet you say this term doesn't exist??? All it means is a decrease in the rate of inflation....how does that not exist? And besides, you know what the hell I mean. You give some stupid example and ask what effect that would have on the money supply. I tell you that it would slow the rate of money supply growth (inflation)... Who cares what the term for it is

Article about disinflation vs inflation http://www.voxeu.org/index.php?q=node/3025

 

[bamacre]

Originally posted by: Vic
Disinflation is an Orwellian-esque term. There is no such thing.

http://en.wikipedia.org/wiki/Disinflation



I'm not getting in this or choosing sides, just looking for clarification.

 

[bamacre]

Originally posted by: FiatDoodlegrubber
You are an idiot.

Vic is not an idiot.

This is a good argument, and neither of you should start the name calling.

 

[rchiu]

Originally posted by: FiatDoodlegrubber

Originally posted by: rchiu

Originally posted by: FiatDoodlegrubber

Originally posted by: halik
Wait so I was printing money when I took college loans?

All of deficit spending is funded by issuing debt, not running presses at the U.S. mint.

Then what do you call the Fed buying treasuries directly then? They are creating the money to buy treasuries. The inflation created will go away once the Fed has been paid back, but our government has been running perpetual and ever expanding deficits. Eventually it'll get to the point where they can't raise taxes enough to service existing debt...

Yeah Feb buy treasuries, so big deal? Have u heard of the concept controlling money supply? Feb buy treasuries, like you said, to "create money" and increase money supply. But that's not because government got too much t-bill and no one wants it. It's because Fed wanna increase money supply in the system to boost economy, or for what ever reason. And they sell those treasury back to the market and reduce the money supply if they see a need. It's a mechanism for Fed to controll money supply, just like increasing/decreasing bank reserve requirement.

If the Fed starts selling back massive quantities of treasuries to the market then supply and demand will reduce the price (causing net inflation) and treasury yields will spike. A bond market collapse could be nasty and make the budget situation even worse.

So? To sell back massive quanitities of treasury back to the market, the Fed must have bought massive quantities of treasuries in the first place. Then the treasury price must have increased because the supply was all taken up by the Fed and the yield would have been lowered. Fed selling those treasuries back to the market would have just correct the price/yield caused by the purchase in the first place.

 

[FiatDoodlegrubber]

Originally posted by: rchiu

Originally posted by: FiatDoodlegrubber

Originally posted by: rchiu

Originally posted by: FiatDoodlegrubber

Originally posted by: halik
Wait so I was printing money when I took college loans?

All of deficit spending is funded by issuing debt, not running presses at the U.S. mint.

Then what do you call the Fed buying treasuries directly then? They are creating the money to buy treasuries. The inflation created will go away once the Fed has been paid back, but our government has been running perpetual and ever expanding deficits. Eventually it'll get to the point where they can't raise taxes enough to service existing debt...

Yeah Feb buy treasuries, so big deal? Have u heard of the concept controlling money supply? Feb buy treasuries, like you said, to "create money" and increase money supply. But that's not because government got too much t-bill and no one wants it. It's because Fed wanna increase money supply in the system to boost economy, or for what ever reason. And they sell those treasury back to the market and reduce the money supply if they see a need. It's a mechanism for Fed to controll money supply, just like increasing/decreasing bank reserve requirement.

If the Fed starts selling back massive quantities of treasuries to the market then supply and demand will reduce the price (causing net inflation) and treasury yields will spike. A bond market collapse could be nasty and make the budget situation even worse.

So? To sell back massive quanitities of treasury back to the market, the Fed must have bought massive quantities of treasuries in the first place. Then the treasury price must have increased because the supply was all taken up by the Fed and the yield would have been lowered. Fed selling those treasuries back to the market would have just correct the price/yield caused by the purchase in the first place.

Ok so using your logic the fed should be able to buy up unlimited quantities of treasuries at 0% and expect to be able to sell those treasuries to investors at 0% at a later date... No i wouldn't imagine that would be true. I'd imagine supply and demand would require that yields would need to come up and face values to go down in order for the Fed to unload all of their 0% treasuries. This has the effect of causing net inflation because the fed paid more for the bills than it received.

 

[rchiu]

Originally posted by: FiatDoodlegrubber

Originally posted by: Vic

Originally posted by: FiatDoodlegrubber

Originally posted by: Vic
Inflation is not a risk at this time given the recent significant decreases in asset values. Try looking at the big picture. Trillions have been wiped out. If anything, inflation and a bond market collapse would be almost welcome right about now, because it would mean the economy would be growing into other more aggressive areas into of just a sell-off with a flight to safety.

Asset values have gone down, yes. Housing values down, stocks down, commodities down for the most part (gold has made a comeback). These are paper asset values and have come down from fear and forced selling after one of the largest debt bubbles of all time. When the stock market goes down loses a trillion dollars in paper value that doesn't mean we've taken a trillion dollars out of the economy... Inflation has more to do with the money supply and velocity of money. Our economy is slowing and velocity decreasing but the fed is expanding the money supply.

They might not be able to fully take the excess money out of the system. Check out this article http://www.bloomberg.com/apps/...Gq2B3XeGKok&refer=home - US taxpayers risk 9.7 Trillion on bailout programs... It seems likely that the trillions of dollars of assets the fed purchased may decline in value and therefore make it difficult to remove those dollars from the system, causing inflation.

Um... yes, it does.

I don't necessarily support these bailouts, especially not the lack of transparency behind them disguised as urgency, but you have no idea what you're talking about. Inflation is the least of our economic worries at this point.

Inflation is defined as an increase in the money supply. Rising prices are a symptom of inflation.

Deflation is a decrease in the money supply. Lower prices and wages are a symptom of deflation.

Please explain how 1 trillion dollars of paper losses necessarily means that the money supply has decreased (deflation). Don't just say "um... yes, it does"... YOU have no idea what you are talking about sir!

Check this AP article out http://business.theglobeandmai...me?cid=al_gam_mostview

U.S. wholesale inflation takes biggest jump in six months

EDIT: I can't believe you're telling me I don't know what I'm talking about when you believe that 1 trillion in paper losses = 1 trillion taken away from money supply.

Your definition of inflation/deflation is totally wrong. Money supply is just one of the factor in inflation/deflation equation. The oil price can jump three fold and cause inflation yet it has notiong to do with money supply in the US. The US currency can depreciate all of the sudden and cause inflation and it has nothing to do with money supply. And of course you can increase money supply yet some external factor I just cited happens and no inflation occur.

1 trillion dollar loss doesn't directly translate to deflation. But there will be indirect result for sure. The loss, paper or not, will lead to reduced demand for goods/services, and unless there is corresponding reduction in supply, there will be deflation.

 

[FiatDoodlegrubber]

Originally posted by: bamacre

Originally posted by: FiatDoodlegrubber
You are an idiot.

Vic is not an idiot.

This is a good argument, and neither of you should start the name calling.

Whatever, he started it...

You guys can continue to call me an idiot for believing that inflation is coming sooner rather than later (1 -1.5 years). I have been building my position in gold and silver since november