Best Thread Keynes Vs. Hayek

[Pat494]

If you are interested in inflation read about The Weimar Republic ( Germany 1920s)

I was amused to hear Trichet's summing up of his 8 years as head of the ECB - " impeccable " he said !!

It is partly his incompetency that has ruined the EU - silly old sod !!

 

[Martinghoul]

shortages also cause prices to go up

Sure, many things can have all sorts of effects on prices. And yes, all else being equal, increase in base money is likely to lead to inflation. My question is whether "all else being equal" is an accurate assumption in the current environment.

 

[Atilla]

Sure, many things can have all sorts of effects on prices. And yes, all else being equal, increase in base money is likely to lead to inflation. My question is whether "all else being equal" is an accurate assumption in the current environment.

I concur the same thoughts.

Money Supply * Velocity of Money = Quantity of Goods and Services * Prices

Just focusing on Ms is far too simplistic. One has to (MUST) consider level of economic activity (velocity), level of production (quantity) and subsequently prices.

Ignoring economic activity and productivity is where the bloody minded ignorance lies.

NT take note. Not disagreeing re: impact of Ms just trying to expand your appreciation of economics... :smart:

 

[new_trader]

READ!

Originally Posted by LuKOs.ro
Excuse me, but all these years of "rebranding" inflation have took a toll on some of us.

1. Inflation represents the expansion of the money supply (which influences the supply side of the money equation) Money Supply * Velocity of M of Goods and Services * Prices. Even taking into account the sticky prices and the instability of the money velocity, the inflation of the money supply generates increased prices.


UNDERSTAND IT and DIGEST...

Saying it is simply the Ms is far too simplistic.

Either you do not understand or you do but reject any other analysis outside of your narrow view.


NT Revelation 1
Inflation is an expansion of the money supply. :-0 :-0

I don't think you understand Atilla. I never said inflation will definitely lead to rising prices. I simply reiterated that the definition of inflation is an expansion of the money supply. It's the modern economists who use magic formulas to explain how prices will rise...or not. Whatever you think and whatever formula you want to use, there is no argument that modern economists only know and follow inflationist policies because they WANT prices to rise, mostly because inflationist policies benefit a profligate Government. I’m amazed at how effective their propaganda is.

 

[Martinghoul]

I don't think you understand Atilla. I never said inflation will definitely lead to rising prices. I simply reiterated that the definition of inflation is an expansion of the money supply. It's the modern economists who use magic formulas to explain how prices will rise...or not. Whatever you think and whatever formula you want to use, there is no argument that modern economists only know and follow inflationist policies because they WANT prices to rise, mostly because inflationist policies benefit a profligate Government. I’m amazed at how effective their propaganda is.

So you arbitrarily define inflation in a way that's different to how everybody else defines inflation? Obviously, in this case you can also construct any argument you like...

But what is "expansion of money supply"? Suppose I am a regular guy on the street and I have no idea what money supply is and whether it's rising or falling. Are you saying that the prices don't matter and what matters is some strange quantity that I can't measure and know nothing about?

Suppose I live in modern-day Japan. For me prices are falling. As it happens (not that I know or care), money supply is expanding at the same time. Are you suggesting that I am actually experiencing inflation?

 

[TheBramble]

I thought inflation was fairly easily (and simply) defined by the man in the street as increasing prices of goods and services.

I also thought money supply was simply currency in circulation (the kind that gets printed like when you get another burst of QE) and demand deposits. Nothing fancier than that.

That economists (bless them) attribute inflation to increase in money supply is their business and probably makes all their other formulas work so I’ll leave them alone for now. However, as your average man in the street, I always found it far simpler to measure the change in cost of products and services and if it was going up, I’d say we were in an inflationary phase. By my reckoning, even if you do not increase money supply BUT people decide to charge more for products and services, that’s still inflation.

 

[Martinghoul]

I thought inflation was fairly easily (and simply) defined by the man in the street as increasing prices of goods and services.

I also thought money supply was simply currency in circulation (the kind that gets printed like when you get another burst of QE) and demand deposits. Nothing fancier than that.

That economists (bless them) attribute inflation to increase in money supply is their business and probably makes all their other formulas work so I’ll leave them alone for now. However, as your average man in the street, I always found it far simpler to measure the change in cost of products and services and if it was going up, I’d say we were in an inflationary phase. By my reckoning, even if you do not increase money supply BUT people decide to charge more for products and services, that’s still inflation.

Well, that's always been my understanding as well...

 

[LuKOs.ro]

So you arbitrarily define inflation in a way that's different to how everybody else defines inflation? Obviously, in this case you can also construct any argument you like...

But what is "expansion of money supply"? Suppose I am a regular guy on the street and I have no idea what money supply is and whether it's rising or falling. Are you saying that the prices don't matter and what matters is some strange quantity that I can't measure and know nothing about?

Suppose I live in modern-day Japan. For me prices are falling. As it happens (not that I know or care), money supply is expanding at the same time. Are you suggesting that I am actually experiencing inflation?

I want to point out that in the Money Equation there is a reference to the General Level of Prices not to the consumer prices (measured by the useless CPI). The reason I`m telling you that is because most economists now use Consumer Price Indexes. The shortcomings (benefits for the government) of this are the following:

1. Inflation appears at the level of consumer prices slower than at the level of assets.
2. The CPI can be masked, camouflaged, painted into whatever the statistics bureau wants it to be.
3. The CPI doesn't really represent neither the inflation of the monetary base (because its just a part of the general level of prices), neither its effects on the standard of living (because it also has hedonic adjustments and the basket of goods is just an average)
4. It diverts our attention from the real inflation that occurs at the asset level. When asset prices are inflated by the surplus in monetary base up to an unsustainable level, that's when a deflationary period is required

Keynesian economics just don't understand the benefits of deflation. I'll repeat that: the benefits of deflation . If Money = Narrow Money + Credit Money and a deflationary period lowers the amount of credit money and increases the value of narrow money then what is to be worried about ?

PS: everybody is talking about the DOW losing 10 bilion in value, but what if that 10 bilion was never value, what if it was inflated prices of stocks flipped by investment desks?

Cheers!
Lucian

 

[Martinghoul]

I want to point out that in the Money Equation there is a reference to the General Level of Prices not to the consumer prices (measured by the useless CPI). The reason I`m telling you that is because most economists now use Consumer Price Indexes. The shortcomings (benefits for the government) of this are the following:

1. Inflation appears at the level of consumer prices slower than at the level of assets.
2. The CPI can be masked, camouflaged, painted into whatever the statistics bureau wants it to be.
3. The CPI doesn't really represent neither the inflation of the monetary base (because its just a part of the general level of prices), neither its effects on the standard of living (because it also has hedonistic adjustments and the basket of goods is just an average)
4. It diverts our attention from the real inflation that occurs at the asset level. When asset prices are inflated by the surplus in monetary base up to an unsustainable level, that's when a deflationary period is required

Keynesian economics just don't understand the benefits of deflation. I'll repeat that: the benefits of deflation . If Money = Narrow Money + Credit Money and a deflationary period lowers the amount of credit money and increases the value of narrow money then what is to be worried about ?

PS: everybody is talking about the DOW losing 10 bilion in value, but what if that 10 bilion was never value, what if it was inflated prices of stocks flipped by investment desks?

Cheers!
Lucian

1. Define "General Level of Prices".
2. It's "hedonic adjustments", not "hedonistic".
3. Who says what constitutes "asset inflation" and what doesn't?
4. As to what there's to worry about deflation, see my example above.

 

[China Diapers]

Hazlitt anyone?

 

[LuKOs.ro]

All four:

1. Ludwig von Mises
2. Murray Rothbard
3. Friedrich Hayek
4. Henry Hazlitt

Plus the bonus

Peter Schiff

 

[Pat494]

In Pat494's world

1. Everyone keeps their jobs
2. full employment is aimed for
3. troops home from Afghanistan etc.
4. wealth tax on multi-millionaires
5. promote the idea of working for public service rather than selfish greed
6. Out of EU
7. Stop giving away tax payer's money to 3rd world
8. Prosecute those responsible for the financial disaster and heavily fine the guilty.
9. Law to stop foreign money taking over British firms like Cadburies/British Steel etc. Foreign ownership of shares limited to 49%.
10. Take the tax off petrol and beer
11. legalize drugs, to be sold by Govt over the counter to over 18s
12. No immigration. Temporary work permits only issued to foreigners if a UK person can't be found to do the job.
13. Wages are more fairly distributed for a minimum 8 hour day
14. Any shortfall in revenue made up by a % decrease in wages in bad times and gradually returned in good times. Keeping Britain solvent for a change.

 

[China Diapers]

Pat you should hook up with the Occupy Wallstreeters

Proposed List Of Demands For Occupy Wall St Movement! | OccupyWallSt.org Forum

 

[Pat494]

Pat you should hook up with the Occupy Wallstreeters

Proposed List Of Demands For Occupy Wall St Movement! | OccupyWallSt.org Forum

They do make a few good points but would certainly go bust in a few months imho

 

[Pat494]

I think a lot of people are tired of the same old 2 has-been parties. They got us into this mess and are not likely to get us out of it.
They have got the spin of fine words and come up short all the time. The US political system is so bad they can't implement any decent policies if they had any.

Time for a major change alright.

 

[Atilla]

Time for Revolution

French helped Canadians I'm sure they could do the same with the Americans. That would also remove us from poodle status to the yanks.

Cooommmmoooooonnnnnnnnnn let's do this!

 

[China Diapers]

I agree there needs to be a change, but the idea of revolution worries me as somebody who has a decent job and owns property, that I would be caught on the wrong side.

I don't think those guys trashing London the few few weeks back would see me as one of their own.

Then again you have somebody like Bob Crow who is apparently working class but earns more money than I do (but lives in a council flat).

 

[China Diapers]

Speaking of the French, What is property?

 

[Atilla]

Speaking of the French, What is property?

Depends who's, what type and the location of property we're talking about

 

[new_trader]

In Pat494's world

1. Everyone keeps their jobs
2. full employment is aimed for
3. troops home from Afghanistan etc.
4. wealth tax on multi-millionaires
5. promote the idea of working for public service rather than selfish greed
6. Out of EU
7. Stop giving away tax payer's money to 3rd world
8. Prosecute those responsible for the financial disaster and heavily fine the guilty.
9. Law to stop foreign money taking over British firms like Cadburies/British Steel etc. Foreign ownership of shares limited to 49%.
10. Take the tax off petrol and beer
11. legalize drugs, to be sold by Govt over the counter to over 18s
12. No immigration. Temporary work permits only issued to foreigners if a UK person can't be found to do the job.
13. Wages are more fairly distributed for a minimum 8 hour day
14. Any shortfall in revenue made up by a % decrease in wages in bad times and gradually returned in good times. Keeping Britain solvent for a change.

You can't honestly believe in this list can you? Everyone keeps their jobs and everyone working for public service rather than greed? What utter nonsense. Steve Jobs dies and the world mourns the loss of one of the greatest entrepreneurs of our times. He gave the world macs, iphones, ipads and ipods and made Apple one of the worlds most valuable companies. There is no doubt that society benefited immensely from what he achieved, he did more for America and the world than any or all of those moronic protesters combined and what do you want to do? Discourage any future entrepreneurs from doing the same...vilifying success as if it is some kind of evil that must be purged from society...

I though this forum was filled with intelligent thinkers...What an Orwellian world this is.