Inflation, deflation & the future of money

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Inflation, deflation & the future of money

The question of whether we are headed for a deflationary or an inflationary recession/depression seems to be one of the hottest topics on this forum and elsewhere in the financial blogosphere.  I've read a lot of arguments supporting both theories, and what I've come to realize is that there is significant confusion and disagreement on how inflation and deflation are actually defined.  

This is obviously a problem because it's impossible to say whether inflation or deflation is occurring or will occur without a definition of the terms we can agree on.  I don't claim to know the answer to this question myself, but the definition most people seem to agree on is this:

Quote:
Inflation and deflation are monetary phenomenons. Monetary inflation occurs when the supply of money increases faster than the supply of goods and services. This is different from the concept of price inflation, which, depending on several variables that may impact inputs along a given production chain, can cause an increase in the price level for certain goods and services at any given time. Otherwise said, monetary inflation causes price inflation, but a price rise isn't always a result of monetary inflation.

With monetary deflation you have the opposite effect, in that it relates to a contraction in the money supply. If the supply of money contracts, while the supply of goods and services either remains constant, increases, or contracts at a slower rate, then that can lead to price deflation. Otherwise said, a contraction in the supply of money will in most cases cause asset prices to fall, but falling asset prices are not always the result of a monetary deflation (the oil price can rise if the supply of oil is falling at a faster rate than a money supply contraction, for instance).

I suggest reading the full article that excerpt came from here: http://www.safehaven.com/article-11593.htm

Most people who claim that we are experiencing deflation now point to the fall in asset prices like real estate, stocks and commodities as evidence.  Yet during this same period we've seen a rather dramatic increase in the monetary supply without any increase in the supply of goods and services.  This is the textbook definition of inflation.  

The decline in asset prices is being caused by massive deleveraging of debt following the collapse of debt instruments tied to bad loans.  It is not being caused by a decrease in the supply of money, as we would expect with true monetary deflation.

So, according to the definitions for deflation and inflation used above, we are currently in a period of inflation - not deflation.  And what should we expect in the future?  Here's another quote from the same article:

Quote:
In a fiat money world with governments controlling the money printing presses you can be sure those governments will do everything in their power to fight off depressions. Anyone who continues to doubt this must have been living under a rock the past couple of months.


With much of the world holding the same toxic instruments and in similar, but not as horrific shape as the US, the ability of the US Treasury to tap its foreign creditors and borrow its way, to the tune of trillions, out of this mess has been severely impacted. On the domestic front, the savings rate is approximately zero, and increasing levels of unemployment will cause tax receipts to collapse. The only alternative will be the printing of money.

The US is the world's greatest debtor. Money printing will bring on monetary inflation, which will wipe out those debts, savings, as well as the US dollar. That is the real scare that markets today, as well as foreign creditors, should be pricing in. It is only a matter of time. To borrow a line from the classic film 'The Usual Suspects': The greatest trick the Devil ever pulled was convincing the world he didn't exist.

I don't claim to be an authority on any of this.  I simply post it as a way of stimulating a discussion.  I would love to hear your thoughts on it, whatever they are. 

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Re: Inflation, deflation & the future of money
[quote=switters]

Most people who claim that we are experiencing deflation now point to the fall in asset prices like real estate, stocks and commodities as evidence.  Yet during this same period we've seen a rather dramatic increase in the monetary supply without any increase in the supply of goods and services.  This is the textbook definition of inflation.  

[/quote]

Here is where sorting out this question gets even trickier. When you say "money supply" are you referring to M1, M2, M3 or some other definition? Derivatives are not officially included in any of those definitions, yet derivatives are used to manipulate corporate balance sheets and they are financial securities that directly impact the money supply in many ways.

Furthermore, in our system, money is debt (which depends on credit). So what is happening now is that there is a tremendous contraction in the money supply due to the credit problems (involving derivatives and more). This contraction is not reflected in the official money supply definitions, but it is so obvious that even the Fed is fighting it with everything they have.

So right now we are in a severe money supply contraction and we are seeing deflationary trends.

That leads to the question of how long the deflation will last and what comes next. Will hyperinflation follow? 

Personally, I would think that Roubini would be sounding the alarm if hyperinflation were really a serious threat. Another bubble of some type seems a more realistic outcome, and Bernanke is already talking about that danger.

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Re: Inflation, deflation & the future of money

[quote]Yet during this same period we've seen a rather dramatic increase in the monetary supply without any increase in the supply of goods and services.  This is the textbook definition of inflation.[/quote]

That, switters, is because the text book definition of deflation has nothing whatsoever to do with the real world.

Inflation is, outside of the academic world, never discussed in these terms.   Worse, the academic definition is a flat out absurd declaration that begs the question -- e.g. Requires you to have accept monetarist, and related, economic theories.

Even sillier, these definitions were invented largely because economist found it too troublesome to calculate actual inflation and deflation.  So the redefined the terms to make things easier on themselves. 

 

Here is a definition of inflation/deflation that more closely matches that used in the real world.  These also reflect what Governments attempt to measure with their flawed inflation statistics:

Inflation -  Any general increase in prices within a constrained economy.

     e.g. Early this year, America was experiencing inflation.

Deflation - Any general decrease in prices within a constrained economy.

     e.g. For pretty much a year now, America has been experiencing deflation within the housing market.

 

Parts of the economy can deflate while others inflate at the same time.  Consumer prices in general increased thus far this year, while housing prices having been deflating all along.

Right now it appears general deflation has set in.  It is likely to continue in the near term and in absence of direct government attempts to 'print their way out'.   A sovereign default though, would instantly reverse this trend (for a period anyway) because the dollar is primarily backed by T-bonds.

[quote]

So, according to the definitions for deflation and inflation used above, we are currently in a period of inflation - not deflation.  And what should we expect in the future?  Here's another quote from the same article:

[/quote] 

If we use monetarist definitions of inflation we can't expect anything.  These economic theories have repeatedly failed to provide any meaningful predictive ability.  Especially durring a recessionary event.

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Re: Inflation, deflation & the future of money
That leads to the question of how long the deflation will last and what comes next. Will hyperinflation follow? 
Wouldn't we all like to know the future with precision. My strategy is to take advantage of the deflation while it lasts as best my means allow to prepare for the inflation to follow when it comes. As time passes, we'll see early warning signs and get a better idea of how bad it will be. There are some wild cards that could hasten events: a derivative implosion, an attack on Iran and a mass exodus from dollar assets by foreigners. We live in interesting times.
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Re: Inflation, deflation & the future of money

A good post by switters explaining the proper definitions. I have read many posts on this forum, and agree that there is some confusion on what inflation and deflation actually refers to.

 It is a bit worrying that the authorities appear to be firefighting the deflationary trends with disproportionate amounts of new money.

Are we experiencing aggregate delfation in the money supply (even with the extra trillions) due to economic downturn and reigning-in of debts, or is it due to a surplus of goods & services. If the former is true, then where does the money go? 

The principal of deflation assumes that money is removed from circulation. Where does it go? I assume back to the fed in interest payments

Strange that we are seeing a relatively strong dollar, but in the UK (where i come from) we have inflation and a weakening pound.

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Re: Inflation, deflation & the future of money
These economic theories have repeatedly failed to provide any meaningful predictive ability. 

srbarbour

I think you are unfamiliar with the Austrian School of Economics (mises.org). The Austrians maintain that boom and bust cycles are caused by bank credit and monetary expansion. As sure as night follows day, contractions follow at some indeterminent time. They don't have confidence in the predictability of statistics and see them as pseudo-science. Prices are not uniformily distributed and they don't necessarily all move in the direction with the money supply. For example, during the 30s, the money supply was expanding, but prices were stable because of improvements in productivity. So it is within Austrian Theory to see prices rising in some sectors and falling in others whether the money supply is falling or contracting. It is confusing which is why Austrians are opposed to market intervention. Intervention leads to bad calculations about future prices, causing imbalances that build up over time until they reach a critical threshold.

The people who understand Austrian Theory, including me, saw this coming years and decades ago. And it is entirely predictable how this will end.

In Mises' words:

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."

For that reason when we consider the herculean extremes to which central banks have gone to prevent the market from correcting itself, we're looking at a collapse far beyond anything ever seen in recorded history. That's about as best anyone can predict at this time.

 

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Re: Inflation, deflation & the future of money
[quote=hewittr]
That leads to the question of how long the deflation will last and what comes next. Will hyperinflation follow? 

Wouldn't we all like to know the future with precision. My strategy is to take advantage of the deflation while it lasts as best my means allow to prepare for the inflation to follow when it comes. As time passes, we'll see early warning signs and get a better idea of how bad it will be. There are some wild cards that could hasten events: a derivative implosion, an attack on Iran and a mass exodus from dollar assets by foreigners. We live in interesting times.[/quote]

What measures are you speaking of in terms of "taking advantage of deflation"? 

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Re: Inflation, deflation & the future of money
[quote=switters]

What measures are you speaking of in terms of "taking advantage of deflation"? 

[/quote]

Deflation means that cash is appreciating (because the supply of money is contracting). Therefore, holding cash is a great way to take advantage of deflation. Gold hasn't been so great in times of deflation.

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Re: Inflation, deflation & the future of money
[quote=ds][quote=switters]

What measures are you speaking of in terms of "taking advantage of deflation"? 

[/quote]

Deflation means that cash is appreciating (because the supply of money is contracting). Therefore, holding cash is a great way to take advantage of deflation. Gold hasn't been so great in times of deflation.

[/quote]

I'm aware that cash generally outperforms commodities during deflation.  I thought perhaps hewitt was referring to something else.

Also, there seems to be controversy about how gold will perform even in a deflationary recession.  The paper price has fallen considerably over the past week, but the physical supply is extremely tight.  That suggests that the demand for bullion, on the retail level at least, is high.

 

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Re: Inflation, deflation & the future of money

Switters

I have some debts to pay off so I'll have better cash flow when inflation returns. I'm referring to prices, not monetary aggregates.

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Re: Inflation, deflation & the future of money

Here's a scenario I'd like to hear your thoughts on:

It becomes clear that we're mired in a deflationary recession/depression.  The price of gold and silver continues to fall due to widespread selling of paper contracts.

However, those holding physical metals do not sell.  They think it foolish to let go of their physical bullion, because they are convinced that at some point the price will rise again.  Although deflation is winning out over inflation, they are losing confidence in the future strength of paper money and in central banking.  So they deem it wise to hold on to their metal.

Because of this, the shortage of physical gold and silver that has become pronounced over the last few weeks continues.

At some point, the government's efforts to print its way out of deflation begin to take effect.  Inflation and then hyperinflation ensue.  Then the dollar crashes.  At that point there is a massive rush to own physical gold and silver.  Only there isn't much left to buy, since those who were holding during deflation are certainly not going to sell when the dollar collapses and paper money is looking worse and worse as a store of value.

This seems possible and perhaps even likely to me.  What about you?

Perhaps this is one reason why Chris (and others) believe that it's still wise to hold gold and silver even if we're headed for deflation? 

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Re: Inflation, deflation & the future of money

 

With all due respect Gentleman, I do not doubt your knowledge.

But we are in a period of information overload. Academics and other have been crapping on for so many years to guarantee themselves an income that we have lost sight of what its all about.

The share market employs people because we the human race breeds too much, the Pyramid of consumption has under written the human population explosion, because nature can no longer feed the masses. Unfortunately it has always been greed that has undermined the foundations of this Pyramid. It is all of the consumers coming in on the base and the money/economy flowing up that is in itself the economy. When the money reaches the point, somebody/something removes the cash and turns it to Gold, starving the economy at its base by high unemployment and government debt because the Tax man and the Bankers who normally take their share as the money flows up are suddenly starved of funds. Depressions follow, Wars follow to reduce the starving masses by 68 million in two world Wars which were both started by the yanks in 1890 and 1930. However there were still too many people in Europe so people migrated to Australia from England and Europe.

Recently Australia invented the Superannuation Industry to create employment for the people the banks were throwing out onto the streets. The USA was loosing Jobs to India and China because U.S corporations were chasing cheap labor, the yanks tried the housing boom to employ those people, it packaged those bad loans to foreign banks and it has now come home to roost. The problem is the Yanks lost the plot because they thought they were hero's who fought for freedom and democracy when they really only got rid of humanity that we couldn't feed and who themselves were of no use to the Pyramid of consumption which had collapsed. Most other Pyramid games are Illegal why?

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Re: Boom and Busts

[quote]I think you are unfamiliar with the Austrian School of Economics (mises.org). The Austrians maintain that boom and bust cycles are caused by bank credit and monetary expansion.[/quote]

They are wrong.  The California Gold Rush is an example of a boom and bust caused by events completely unrelated to credit and monetary expansion.

That is only one of dozens of examples.  But as with any theory, one counter example is all it takes.

[quote]They don't have confidence in the predictability of statistics and see them as pseudo-science. [/quote]

There is nothing pseudo-scientific about statistics, though lots of pseudo scientists make use of them.    In fact, with out quantification (and hence statistics) you can't really have science at all.

I will therefore extend, that any science that does not attempt to measure the world and then use those measurements to verify their hypothesis, is not a science, but rather, a pseudo science.

[quote] Prices are not uniformily distributed and they don't necessarily all move in the direction with the money supply.[/quote]

Which proves that defining changes in money supply as inflation/deflation, which were terms intended reference the real world experiences and challenges real people face, is inheriantly wrong.

[quote]It is confusing which is why Austrians are opposed to market intervention. Intervention leads to bad calculations about future prices, causing imbalances that build up over time until they reach a critical threshold.[/quote]

That might have some merit, if prices weren't distorted in the first place.

Don't believe me?  How does the free market calculate in Peak Oil?  Climate Change?   It doesn't. If it did, these situations would be of no cause for alarm.   Instead, we watch in horror as the market willfully ignores the dangers and plunges itself off a cliff.  No government intervention needed for the market to accomplish these tasks.

These are hardly the only examples either.  There are, again, dozens of real world examples of the market continuing to drive a exponentially expanding rate of production in this finite world right up until the system collapses whole sale.  It shouldn't be at all surprising either, because the market are in the end based off the same principles of 'natural law' as the biological world... and guess what animal populations often do in the real world?  Boom and bust.  (Again, no credit expansion there...)

The market starts with its prices distorted.  Though I give Austrians kudos for pointing out that wielding such monetary manipulates like a cudgel will never help.

--

Steve 

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Re: Inflation, deflation & the future of money

Top notch thread.   A really good documentary that illustrates these points and principles is "Millennium Money".  Which is available on GOOGLE video. (I don't think I can embed it in here, simply google the title). 

Strange days indeed.  A great wealth transfer igreater than we've recorded in last 4,000 years could take place in our lifetime.  If you get a chance to view this film, let me know what you think. 

 

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Re: Inflation, deflation & the future of money

Statistics are a measure of ignorance. Let me give an example from a completely different area.

A little over five years ago I was diagnosed with colon cancer. During the process of treatment, the physicians kept trying to force-feed me statistics: this treatment increases your 5-year survival rate by 15% over a baseline of 50% from that treatment, etc. I finally told them to knock it off, and explained why, but they didn't really get it.

Statistics apply only to ensembles. Which is a technical term for "group." They do not apply in any way to individual cases. If you take 1000 people with colon cancer, give them all treatments X, Y, and Z, and then check on them five years later, you'll find that 700 of them (pick a number here) are still alive, and 300 are dead. If you look at any one of them, however, that one person either lived or died. They had either a 0% chance of survival, or a 100% chance of survival - they aren't going to end up 70% alive and 30% dead.

The reason statistics are used is that physicians and researchers have absolutely no idea what differentiates the 700 survivors from the 300 mortalities. None. Zero. It's a complete mystery. That doesn't mean there isn't a reason - it just means that the doctors don't know what that reason is. If they knew, they'd offer an effective treatment based on that knowledge (or a death sentence if the cause was untreatable), approaching 100% certainty as the last of the underlying causes is fully understood.

The statistics are a quantitative measure of their ignorance. A 50% measure in a two-outcome system represents complete ignorance. A 100% measure (or 0% measure) in a two-outcome system represents complete knowledge.

Statistics are psychologically useful for the physicians themselves, because they are dealing with ensembles of patients, and a lot of their patients are going to die, which is distressing to any physician. It is very comforting to know that 30% of their patients, more or less, are already beyond their help when they walk in the door the first time, for reasons beyond their knowledge or power to change. However, there is no way for them to determine which of their patients is which. The statistics have absolutely zero predictive value at the individual patient level.

Statistics can also be useful in determining whether a treatment is working, even when you don't know why it works. For instance, if you treat 1000 patients one way, and 700 of them survive, and then you treat the next batch a different way, and 900 of them survive, you MIGHT be on to something. Correlations of this sort are suggestive of possible underlying causes. Please note: suggestive of possible causes. Not proof. The results could be a pure coincidence. There are statistical measures that can give you the likelihood of a coincidence (likelihood => ignorance), and some commonly-accepted cutoff levels for acceptable degrees of "statistical significance," but these again boil down to specific measures of ignorance, and the cutoff levels are based on a balance of risk versus cost, and should normally be re-evaluated for any instance, based on the cost of the experiment, versus the risks involved with making a wrong decision.

As a predictive tool, you can only use statistics on ensembles. So you could say, for instance, that out of 10,000 different instances where money supply was increased over production, it was followed within one month by inflation in 70% of the cases, and by no effect or deflation in 30%, with a statistical significance of X. Therefore, we can predict that if we see another 10,000 instances of money supply increasing, we predict between 6,500 and 7,500 cases of inflation, with a confidence of X%, and between 6,900 and 7,100 with a confidence of Y%. However, if you try to turn that around and say, "The money supply has just increased, and therefore there is a 70% chance that we will have inflation within one month," it's like the doctor telling me that I have a 70% chance of surviving. It doesn't actually mean anything at all. If I try to use that information to decide whether to invest in gold or invest in cash, and the outcome of guessing wrong is total financial ruin, the statistics are of almost no value to me. I do say "almost" - knowing that there is a better chance of inflation than not, I'm (of course) going to play with the odds, not against them. But in the end, I either win, or lose, and there is no way to predict which it will be.

From what I've seen so far - and this has been a common complaint I've heard, which is one reason I've never been much interested in economics - economics has very little empirical basis, statistical or otherwise.

Instead, it has lots of a priori theories backed by cherry-picked examples (all of them competing, none of them consistently predictive in practice), and a vast number of rationalizations (listen to any investment advisor "explaining" why the market did this or did that). It isn't clear to me that there are enough instances of inflation in different economies (or any other particular event) to even provide a decent ensemble size for a true neutral statistical analysis.

However, the academic field of economics is inherently politicized (the Chicago school, the von Mises school, the Keynesians, the Marxist school, the Joe Six-Pack school,...), and the outcomes are extremely politicized, with "right answers" and "wrong answers" based on who takes the blame and who ends up holding the bag of wealth. Doing physics in a politicized environment is hard enough. Doing economics...?

What I like about Chris's approach is that it is very general, and its conclusions are pretty inescapeable. The current monetary system does require exponential expansion of the money supply, simply because of interest. That's pretty inescapeable. Also clear is the fact that the true basics that underlie all of economics - population, resources, energy, trade - have been growing exponentially in a closed system, and are now approaching all their natural limits more or less simultaneously. The underlying economy has no choice but to level off, or shrink (barring a technological revolution that changes this whole picture and delays the inevitable for a while). That puts the monetary system in direct conflict with the emerging economic reality, and it is clear that (barring technological revolution), the money system is going to lose.

What kind of monetary system works in a flat or shrinking economy?

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Re: Inflation, deflation & the future of money

Srbarbour misunderstands Austrian Theory:

They [Austrians] are wrong.  The California Gold Rush is an example of a boom and bust caused by events completely unrelated to credit and monetary expansion.

The money supply certainly did expand, only with gold. As I recall, the boom and bust was local. The gold was shipped to England until the mines went dry. Then prices dropped.

There is nothing pseudo-scientific about statistics, though lots of pseudo scientists make use of them.    In fact, with out quantification (and hence statistics) you can't really have science at all.

It depends on how the statistics are used. Economics is not a good subject for statistical analyses because they cannot predict changes in human behavior. The statistics will almost always miss turning points. Despite the best minds that have labored over mathematical models, it is a primary reason why this bust promises to be so severe. At best they are crude tools.

Which proves that defining changes in money supply as inflation/deflation, which were terms intended reference the real world experiences and challenges real people face, is inheriantly wrong. 

There is nothing wrong with the theory. It's a simple relationship: general price level = money supply / supply of goods and services. The problem is that credit and money are so intermingled that it is impossible to come up with a meaningful quantitative measure of money, not to mention a meaningful quantitative measure of goods and services. This is another reason why statistical analyses is so flawed.

That might have some merit, if prices weren't distorted in the first place. 

It is the intervention that distorts the prices. That's why we've seen prices rise to $140 then drop to $70 in a short time.

How does the free market calculate in Peak Oil?

There is no free market anywhere on this planet. If there was, prices would rise with the cost of discovery and production. As they rose, other forms of energy would become competitive.

The market starts with its prices distorted.

Markets are always in disequilibrium as the factors of supply and demand change. It is government intervention that acts to prevent prices from changing in according with supply and demand that prevents the market from making the necessary adjustments. We would not be in this fix if it were otherwise.

There are, again, dozens of real world examples of the market continuing to drive a exponentially expanding rate of production in this finite world right up until the system collapses whole sale. 

That's a direct outgrowth of excessive expansion of the money supply. Cheap money creates false expections of future prosperity.

Though I give Austrians kudos for pointing out that wielding such monetary manipulates like a cudgel will never help. 

As long as the political class refuses to let the market correct itself, things will continue to get worse. No one can blame them for not warning of the disastrous consequences.

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Re: Inflation, deflation & the future of money

To Switters at #10

At some point, the government's efforts to print its way out of deflation begin to take effect.  Inflation and then hyperinflation ensue.  Then the dollar crashes.  

I'm more certain of the dollar crashing than I am of hyperinflation, though I'm not ruling out hyperinflation. A crash of  the dollar would cut us off from foreign sources - not a pleasant thought either way.

This seems possible and perhaps even likely to me.  What about you?

I'm well stocked in silver. I ponder about whether to stock up on freeze dried food.

When we think of hyperinflation we tend to relate it to Weimer Germany and Zimbabwe. Those events happened within a few years while it's taken the dollare almost a hundred years to depreciate 95%. Given how big our economy is, it's a question if the feds have the means to cause hyperinflation in the Weimer sense.

All we can do is prepare for the worst as best we can. The details will get more obvious with time. By staying informed, we'll see what comes ahead of the ignorant masses.

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Re: Inflation, deflation & the future of money

 I am yet another person that thinks of economics as 'the dismal science.' It makes few testable predictions, and the serious folks in the field are drowned out by shills who are told to support business as usual. Alfred Nobel never thought to attach his name to a prize in the field of economics-it was shoehorned in by a bunch of banks during the '20s, if memory serves. 

 The amount of money out there is controlled by a few people. Those people and a few more decide if most of the money is stored or spent. It looks to me like the money supply is growing exponentially, and it also looks to me like many big players are sitting on much of the newly created money at present. If true, then we could have very fast changes in the value of money if a few people change their actions. What will they do? I don't know, and increasingly don't care.

 What I do know is that there are more and more people on this planet, and that means that essentials will become increasingly harder to afford. It matters very little to me if the price of McMansions, SUVs, and electronics decline in price faster than the price of food (and, until recently, energy) increases, because I cannot live without food and some sources of energy. So, in my humble opinion, forget the pieces of paper with dead politicians' faces printed on them. Make sure that you can get essential goods in the future, even if you have to grow your own food and purify your own water. An unsustainable system must break at some point unless it is changed first, and it looks to me like the unsustainable economic system is being propped up as it breaks. Don't depend upon this unsustainable system any more than you have to. 

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Re: Inflation, deflation & the future of money

[quote=KKPSTEIN]Top notch thread.   A really good documentary that illustrates these points and principles is "Millennium Money".  Which is available on GOOGLE video. (I don't think I can embed it in here, simply google the title).[/quote]

All registered users are able to embed Google and YouTube videos on the site.  See the "Input format" section below any entry field for information on how to do so.  Just need the URL prefaced by "video:" and surrounded by brackets.  Let me know if any questions.

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Re: Inflation, deflation & the future of money
[quote=JoeNemeth]

What kind of monetary system works in a flat or shrinking economy?

[/quote]

One that's not lent into existence, at interest.

The concept of 'Money' rightfully belongs to  the Commons, but has been 'privatised' for several hundred years. 

The most fundamental change that's needed is to strip private interests ( such as the 'Fed' ) of their privilege of issuing or creating money and place it firmly back in the hands of the people ( through their representatives ) who will [i]spend[/i] it into existence, with NO interest component.

http://alt-money.tribe.net/thread/70e5eb29-853d-44ca-9faa-b789d1757037

http://circ2.home.mindspring.com/TGWoerglCommentDistributed.htm

http://www.appropriate-economics.org/ebooks/neo/neo.htm

I'd ban fractional-reserve banking and impose severe ( taxation ) penalties on any form of speculation.

Regards,  Paul.

KKPSTEIN's picture
KKPSTEIN
Status: Silver Member (Offline)
Joined: Oct 20 2008
Posts: 120
Re: Inflation, deflation & the future of money

Here is Millennium Money:

 Video (http://video.google.com/videoplay?docid=7786804090607217621)

gregroberts's picture
gregroberts
Status: Diamond Member (Offline)
Joined: Oct 6 2008
Posts: 1024
Re: Inflation, deflation & the future of money

Gold and silver do not change in value, it does not matter if you have inflation or deflation they will still buy the same amount of things. (there are probably some exceptions to this) You can still buy a gallon of gas for a silver quarter (in California it is $2.57/gallon for regular) and I have read that you could buy a nice suit for a ounce of gold 200 years ago and you can do the same today. Fiat currencies are what are changing so it really does not matter if you buy gold or silver at a high or a low, it's just the paper that is changing in value.

 The difference between paper silver and physical silver has been widening lately, a minute ago it was $13.37 - $9.78 = $3.59. When I bought silver they were almost identical, I'm keeping an eye on this, I've heard some rumors that they might default on paper silver.

http://www.marketoracle.co.uk/Article7059.html

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