[ExI] Inflation graph

[Mirco Romanato]

Il 29/11/2013 22:32, John Clark ha scritto:

> On Fri, Nov 29, 2013 at 2:42 PM, Rafal Smigrodzki
> <rafal.smigrodzki at gmail.com <mailto:rafal.smigrodzki at gmail.com>> wrote:
> 
>     > Seriously, John, are you claiming, based on your anecdotes,

>  Anecdotes? Is it a anecdote that the money printing presses have been
> operating at warp speed for years but that interest rates and price
> increases for goods and services remain at record lows? 

The printing presses went warp speed even in WWI Germany (to finance the
war) but the prices do not skyrocket in 1914 nor in 1918 nor in 1920.
They exploded in the following years.

If you have the printing presses producing currency at warp speed but
have, also and at the same time, something soaking liquidity outside the
US (China/Japan buying bonds other countries needing $ reserves to
commerce and buy oil), you have a real small increase of internal
prices. Then, a lot of money (not savers money) went to finance the
DOTCOM bubble and the Housing bubble (do the stock first and housing
second increased in prices prices? Where do you think the money came from?

Low interest rates are an effect of the initial expansion of money.

They go down until there is no way to push them lower.
Then they get up.
In the mean time people are full of debts; affordable when the rates
were low, no more affordable when the rates go up.

Now, with China signaling the end of US bond buying (they will not
increase and probably will not roll over all the T-bonds they have) who
will buy the bonds? If they do not, who will take the slack to buy
T-bonds? The US people? The 50 millions (or likes) on food-stamp? I
think the Fed Res will not be able to avoid to buy them all.

By the way, food prices are rising around the world and, given they are
priced in US$, a good part of the price increase is due to $ inflation.
You do not see it on the price because a lot of other costs are a lot
larger than the cost of the ingredient used for the food (electricity,
labor, transport, etc.).


> I am saying that prices, which is what you're so worried about, is equal
> to the money supply which is all you want to talk about, TIMES  the
> velocity of money which you don't want to talk about because it is the
> product of about a zillion independent factors, DIVIDED  by the quantity
> of things produced which you also don't want to talk about because it is
> the product of a bazillion QUITE different independent factors. MV=PQ
> may be true but is useless in predicting what P will be next year if you
> don't know what V or Q will be next year. It's as useless as the Drake
> equation is in figuring out if ET exists because we don't know what
> values to stick into the equation.


All the factors you talk about are the reasons is difficult to know the
development of the money printing from monetary inflation to price
inflation.

You can not precisely foresee where the money will flow first
(increasing prices), how much the trust on the money will last, who will
the first to go broke, etc.

Mirco