I’ve been arguing for a while that inflation paranoia is best understood in affinity fraud terms. It’s true that some people benefit from deflation, but it’s hard to make a general case that this is what’s driving the phenomenon. And all the CNBC and Zero Hedge followers have been losing money if they believe what they’re hearing. To quote myself:
So who are the people who feel a deep affinity with a crotchety crank? Um, crotchety white guys feeling cranky. The whiteness is, I believe, an important part of the story, as I’ll explain in a minute.
The basic mindset of the kind of people who pay Ron Paul for his economic advice is pretty clear: they’ve made some money over the course of their lives, they believe that all of it reflects their own virtue, and they think they know from that experience what it takes to create wealth. They hear that the Fed is printing money, and it sounds to them like a violation of both the laws of economics and morality — and they surely think of it as a plot to take away their completely earned gains and give them to Those People (hence the whiteness issue).
You can try as hard as you like to tell such people that monetary policy is mainly a technical problem, that the Fed isn’t giving money away, and that predictions of runaway inflation have been utterly wrong; it will make no difference. You can point out that they would have done a much better job of investing if they had listened to the MIT gang; sorry, we’re just not their kind of people.
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?
The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly. Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
Yes. You seem to have a fairly unique definition of it, and I need to know what it is so I can "discuss" things with you.
If you assume my definition is in the dictionary you could stop playing these games and explain to me why you think QE is creating money that means something to you when it does not mean much to me.
I made it totally clear earlier where we disagree.
If you assume my definition is in the dictionary you could stop playing these games
You are the one playing games. You say you don't understand. I ask you which part you don't understand. You ignore the question and make up something I didn't say.
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explain to me why you think QE is creating money
Money is created as debt. When interest rates are low, more debt is created. Ergo: QE creates money. Q.E.D.
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when it does not mean much to me.
I can't explain why it doesn't mean much to you. I can only speculate. Would you like me to speculate? Ok, I will. Maybe you just don't have the mental capacity to understand. Maybe you believe in an ideology and the idea is in conflict with that ideology, so you experience cognitive dissonance. Maybe English is not your first language or you have reading comprehension difficulties.
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I made it totally clear earlier where we disagree.
Only in your own mind Andrew. However I can't perceive what it is you are hallucinating, so you are going to have to be specific and not play guessing games.
You are the one playing games. You say you don't understand. I ask you which part you don't understand. You ignore the question and make up something I didn't say.
Money is created as debt. When interest rates are low, more debt is created. Ergo: QE creates money. Q.E.D.
I can't explain why it doesn't mean much to you. I can only speculate. Would you like me to speculate? Ok, I will. Maybe you just don't have the mental capacity to understand. Maybe you believe in an ideology and the idea is in conflict with that ideology, so you experience cognitive dissonance. Maybe English is not your first language or you have reading comprehension difficulties.
Only in your own mind Andrew. However I can't perceive what it is you are hallucinating, so you are going to have to be specific and not play guessing games.
>>Money is created as debt. When interest rates are low, more debt is created. Ergo: QE creates money. Q.E.D.
I see. So new money is created as debt and and an existing debt is removed and you agree it is a swap but you cannot see how the two assets are money like.
And two days ago we established that when I say
QE introduces almost zero new buying power into the economy.
You respond by saying
"Also wrong.
But it's OK that your beliefs are wrong, because otherwise you would need to think about it logically. "
And for two days i have been attempting to find out why you think that QE produces a different result to the one i think is created.
I have several times asked you to focus on this statement of mine.
>>QE introduces almost zero new buying power into the economy.
Why do you think QE introduces new buying power into the economy?
>>Money is created as debt. When interest rates are low, more debt is created. Ergo: QE creates money. Q.E.D.
I see. So new money is created as debt and and an existing debt is removed and you agree it is a swap but you cannot see how the two assets are money like.
And two days ago we established that when I say
QE introduces almost zero new buying power into the economy.
You respond by saying
"Also wrong.
But it's OK that your beliefs are wrong, because otherwise you would need to think about it logically. "
And for two days i have been attempting to find out why you think that QE produces a different result to the one i think is created.
As I said earlier our disagreement which is totally clear has something to do with your idea they are creating money that means something very different to what i think it means.
I dont know what else I can do.
Are you going to discuss this topic with me or not??
Jesus, what a muddle.
You are going to have to define your terms, because you obviously have your own private definitions of just about everything, which I am tired of trying to guess.
Start by defining what the term "buying power" means to you. Because nobody else in the world thinks it means the same thing as money creation.
If you can't do that, then this discussion is over.
“Talk sense to a fool and he calls you foolish.” - Euripides
You are going to have to define your terms, because you obviously have your own private definitions of just about everything, which I am tired of trying to guess.
Start by defining what the term "buying power" means to you. Because nobody else in the world thinks it means the same thing as money creation.
If you can't do that, then this discussion is over.
The term buying or purchasing power is a familiar term to you. A person with only one dollar has one dollars worth of purchasing power.
If a person has a bond they have a means of buying things. Once the bond is sold their ability or wherewithal to buy things is not very much different. The situation would be very different if the bond was illiquid or there was some long winded process involved in selling the bond - but clearly there is no such delay or lack of liquidity.
If the central bank (the government) buys the governments very very highly liquid bond the ability of the public to buy things is more or less unchanged, (and since the government has bought its own debt that debt no longer exists). Therefore there is essentially the same amount of purchasing power as there was before the QE.
The term buying or purchasing power is a familiar term to you.
Yes, but I use it in the conventional sense. i.e. the definition that everybody else uses, not your private definition.
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A person with only one dollar has one dollars worth of purchasing power.
No, that is not what purchasing power means. No wonder you are so confused.
If you live in a country where one dollar will buy you 1 banana, and I live in a country where one dollar will buy me 2 bananas, then my dollars have twice the purchasing power of your dollars.
If you own a deposit $100 and you earn $2 of interest this year and the price of bananas goes up by 3% this year, your purchasing power has decreased despite the fact that you now have more dollars.
Conversely, if you own $100 and you buy $100 worth of bonds and a year later you sell those bonds for $104 and the price of bananas goes up 1.5% during the same period, your purchasing power has increased AND you have more dollars.
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If a person has a bond they have a means of buying things.
No. If a person has a bond, they have a financial asset they can exchange for cash by selling it and they can use the cash to buy things. If they sell the bond for more than they paid for it, i.e. the market value of the bond increases, then when they sell the bond they will have more dollars than when they bought the bond. More dollars is exactly the same as more dollars. If the market price of bonds rises faster than inflation (which it did last year in Australia by a 5.9% margin), people who owned bonds at the start of the year and sold them at the end of the year have more dollars at the end of the year than the start of the year. I was one of those people. I earned a risk-free 8% return.
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Once the bond is sold their ability or wherewithal to buy things is not very much different. The situation would be very different if the bond was illiquid or there was some long winded process involved in selling the bond - but clearly there is no such delay or lack of liquidity.
Irrelevant. If they sell the bond for more than they paid for it then they have more dollars after they sell than before they bought.
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If the central bank (the government) buys the governments very very highly liquid bond the ability of the public to buy things is more or less unchanged, (and since the government has bought its own debt that debt no longer exists). Therefore there is essentially the same amount of purchasing power as there was before the QE.
Only under your private definition of purchasing power that nobody else in the world shares. The great thing about having your own definitions for words is that you will always be correct within your circle of one.
“Talk sense to a fool and he calls you foolish.” - Euripides
Yes, but I use it in the conventional sense. i.e. the definition that everybody else uses, not your private definition.
No, that is not what purchasing power means. No wonder you are so confused.
If you live in a country where one dollar will buy you 1 banana, and I live in a country where one dollar will buy me 2 bananas, then my dollars have twice the purchasing power of your dollars.
If you own a deposit $100 and you earn $2 of interest this year and the price of bananas goes up by 3% this year, your purchasing power has decreased despite the fact that you now have more dollars.
Conversely, if you own $100 and you buy $100 worth of bonds and a year later you sell those bonds for $104 and the price of bananas goes up 1.5% during the same period, your purchasing power has increased AND you have more dollars.
No. If a person has a bond, they have a financial asset they can exchange for cash by selling it and they can use the cash to buy things. If they sell the bond for more than they paid for it, i.e. the market value of the bond increases, then when they sell the bond they will have more dollars than when they bought the bond. More dollars is exactly the same as more dollars. If the market price of bonds rises faster than inflation (which it did last year in Australia by a 5.9% margin), people who owned bonds at the start of the year and sold them at the end of the year have more dollars at the end of the year than the start of the year. I was one of those people. I earned a risk-free 8% return.
Irrelevant. If they sell the bond for more than they paid for it then they have more dollars after they sell than before they bought.
Only under your private definition of purchasing power that nobody else in the world shares. The great thing about having your own definitions for words is that you will always be correct within your circle of one.
Even though you constantly feel the need to be abusive, the point of view I have tried explained to you is a very well known one, and one that is assumed to be correct by people who are known to be amongst the best minds in central banking.
I am assuming you are feigning ignorance here for some purpose that is not obvious.
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