Tag Archives: Inflation

An inflation discussion

  By Mystic | December 10, 2012 - 01:31 | ,
56 Comments

Inflation causes people to work and to strive and leads to production and improved living standards.
Deflation causes people to stop and save and leads to decline and loss of living standards.

(the above is a Mystic altered version of a comment on PragCap)

To keep people `striving`, the idea is to keep them spending … for, after they have spent, they must go and earn some more.
For this, they general population must have the idea that it is a good idea to spend now (maybe even to `buy now on credit`).
Deflation is the breaking of this spell. In deflation, people stop and think before they spend. This is not good for the consumer economy.
But what is inflation~?
Inflation is when people can buy things without thinking … safe in the knowledge that they will earn more in the future and so will be able to justify that purchase.
Inflation, in my mind, is more about wages than prices. As long as wages go up enough to cover past purchases … all is well in the economy.

Ideas 3.0 (The Chicago Plan)

  By Mystic | October 24, 2012 - 03:19 | , ,
17 Comments

The IMF go back and have another look at the `Chicago Plan`.

This paper revisits the Chicago Plan, a proposal for fundamental monetary reform that was put forward by many leading U.S. economists at the height of the Great Depression.

In its conclusion, it says stuff like -

The critical feature of this model is that the economy’s money supply is created by banks,
through debt,
rather than being created debt-free by the government.

and -

This ability to generate and live with zero steady state inflation is an important result,
because it answers the somewhat confused claim of opponents of an exclusive government monopoly on money issuance,
namely that such a monetary system would be highly inflationary.
There is nothing in our theoretical framework to support this claim.

10:42 min.


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The Great Moderation ….. (except….)

  By Mystic | October 23, 2012 - 11:33 | , ,
70 Comments

In the video/audio, I ask you a question.
1. Money is based on the value of our work …. not.
2. Money intermediates between people and goods and services.
3. Our `wages` are really a quantity of goods and services (intermediated by money).

The question (in the end) is – Why has CPI stayed low, when house prices have gone mad~?

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Price of Russian natural gas 38% higher in one year

  By Hans Verbeek | February 10, 2012 - 08:42 | ,
2 Comments

In january 2011 1000 m³ of Russian natural gas cost 247 euro. One year later that price is 343 euro: an increase of 38%.
Many European countries import large quantities of gas, mainly from Russia. Paradox made an overview:

Gas-import 2010 miljard m³
Germany 84
Italy 75
France 49
Poland 11
Portugal 5
Greece 4


In 2011 and 2012 those countries will import roughly the same amounts of natural gas. Using the price of january 2011 (247 euro per 1000 m³) and january 2012 (343 euro per 1000 m³) we can roughly calculate the gasbill over 2011 and 2012.


 2011 2012
Germany 20,7 28,6
Italy 18,5 25,6
France 12,1 16,7
Poland 2,7 3,7
Portugal 1,2 1,7
Greece 1,0 1,4

in billion euros

In 2012 Germany will have to come up with an extra 8 billion euro for the same amount of natural gas. And guess what, they didn’t put any money aside in the bank for that higher gasbill. It will cost every single German 100 euros extra this year.
The average Italian will have to pay 120 euros more than last year. For the average Italian family it will be 480 euros more.

It is very smart to use less natural gas in these desperate times. If Germany wants to keep the natural gasbill the same: 20,7 billion euro. Then Germany will have to cut its natural gas-use by 28% (!!!). Which of course is impossible.

Maybe Greece can manage a reduction of 28% in their gas-use. IMF, ECB and the gang of European Finance-ministers will twist the arms of Greece until it’s economy has shrunken by 28%.
Germany will have no trouble at all to loan another 8 billion euros to pay for the increased gasbill.
The banks, backed up by the ECB, will gladly lend the billions to Germany and the German people at a very low interest of 2%.

But this cannot be sustained very long.
Maybe the ECB should stop stimuating the economy and the burning of fossil fuel. Let’s be very wise and save some natural gas for the next generation.

Parsson #1 – Europe at War with America ?

  By Richard from Canada | December 11, 2011 - 13:00 | ,
2 Comments

 

I have taken some time to start reading Dying of Money, by Jens O. Parsson.  Some free PDF versions can still be found on line or the family has reprinted it as well.

 http://dyingofmoney.com/Home_Page.php

I had glanced at this document months ago but it was well worth returning to it after a year or so of OTP and other reading.  My initial conclusion taken from Chapter 44 A World of Nations, specifically page 175 is that Europe has elected to go to War Against America.  It has choosen to defend itself against US exported inflation, no longer by inflating themselves, but by digging in with “tight money and tight economics” and ” a constantly rising exchange rate”.   However will they be successful at winning the currency war ?

My initial view is that the US, because it cannot stop inflating (as per the thesis in his book) will therefore do everything in its power to destroy the European efforts to change course from their past  inflationary policy (not a thesis of the book but a defined course of action), which had been the defense choosen to fight US exported inflation in the past.  His book was written in the 1974 time period.

The UK is of course siding with the US early on this one, although the US media has yet to figure this out.

http://www.nytimes.com/2011/12/10/world/europe/britain-isolated-after-vetoing-euro-zone-pact.html

My guess is that the Europeans will ultimately cave in and inflate.   However in the meantime there will be a game played where some people want other people to think the strategy has changed.   That just means lots of unwelcomed uncertainty. 

 

 

Who will it be~?

  By Mystic | October 5, 2011 - 11:27 |
6 Comments

I think `the economy` (if it really exists), is something that no one has ever understood….
….and it did not matter, after all, everything was going well enough and if things did seem to go wrong…….well, someone did something and it all turned out well enough.
Now, so many things are going wrong, that it is rather more important to find the people who may know what is wrong.
It won’t be one person. It won’t be a group of people (because no one knows enough to know which people to make up the group).
It won’t be `the normal suspects`……that is for sure.
Who will it be~?
I suspect that no one will ever be found, but `the normal suspects` will go on playing.
The problem is, that now, their playing is not neutral…It may be a matter of life and death.
[audio:http://overthepeak.com/wordpress/wp-content/uploads/2011/10/Wed5Oct-111.mp3|titles=Wed5Oct '11(1)]
[audio:http://overthepeak.com/wordpress/wp-content/uploads/2011/10/Wed5Oct-112.mp3|titles=Wed5Oct '11(2)]
19:30 min.

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