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Inflation/Deflation

Scorpio

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#1
rather than cluttering up a thread not meant for it,

let's do this different, I use some terms to differentiate that you won't find in a econ textbook,

first, some typical definitions

Deflation


In economics, deflation is a decrease in the general price level of goods and services.[1] Deflation occurs when the inflation rate falls below 0% (a negative inflation rate). Inflation reduces the value of currency over time, but sudden deflation increases it. This allows more goods and services to be bought than before with the same amount of currency. Deflation is distinct from disinflation, a slow-down in the inflation rate, i.e. when inflation declines to a lower rate but is still positive


Inflation

In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time.[1][2][3][4] When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy.[5][6] The opposite of inflation is deflation, a sustained decrease in the general price level of goods and services. The common measure of inflation is the inflation rate, the annualized percentage change in a general price index, usually the consumer price index, over time.[7]

https://en.wikipedia.org/wiki/Inflation
 

Scorpio

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#2
ok, so there is a problem,
they are using these definitions and not accounting for monetary supply, fractional reserve lending, and gross cb expansion

so I work with 2 levels of inflation/deflation, calling one monetary, which would be expansion and contraction of the money supply, and the other 'retail' as you see above.

most are familiar with the retail definitions,

to me, that doesn't come close to telling the story, where everything that happens at the monetary level, affects the outcomes below that.

a expanding monetary supply at the cb, and then into the economy can change prices of goods and services thru the economy and throwing that definition out of whack,

people are still hung up on keynes and his drivel from years ago, and many mistakes have been made in the monetary realm because of that. They follow keynes and expect a result, only to find out, oooops, either it did not work or a completely different result presented itself.

why? Because to me anyway, he didn't fully account for what we would consider, modern monetary actions. A fully floating fiat, a floating reserve currency, along with the politicians and the fed trying to drive the economy with monetary policy.

meaning I argue that monetary supply has to be factored in, leading me to ask others are we dealing with monetary inflation or retail inflation?

money supply growth over time is a huge player in all of this.

so one can consider me a monetarist or money supply drives the bus and manifests itself into the real economy as 'retail inflation'

with people familiar with the term 'inflation', it is more expedient to say monetary inflation instead of money supply changes.
 

Scorpio

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#3
The Money Supply


  • For decades, the Federal Reserve has published data on the money supply, and for many years the Fed set targets for money supply growth.

  • In the past two decades, a number of developments have broken down the relationship between money supply growth and the performance of the U.S. economy.

  • In July 2000, the Federal Reserve announced that it was no longer setting target ranges for money supply growth.

  • In March 2006, the Board of Governors ceased publishing the M3 monetary aggregate.

The Federal Reserve System and public- and private-sector analysts have long monitored the growth of the money supply because of the effects that money supply growth is believed to have on real economic activity and on the price level. Over time, the Fed has tried to achieve its macroeconomic goals of price stability, sustainable economic growth, and high employment in part by influencing the size of the money supply. In the past few decades, however, the relationship between growth in the money supply and the performance of the U.S. economy has become much weaker, and emphasis on the money supply as a guide to monetary policy has waned.
Money Supply Measures
The Federal Reserve publishes weekly and monthly data on two money supply measures M1 and M2. The money supply data, which the Fed reports at 4:30 p.m. every Thursday, appear in some Friday newspapers, and they are available online as well. The Fed publishes measures of large time deposits on a quarterly basis in the Flow of Funds Accounts statistical release.
The money supply measures reflect the different degrees of liquidity—or spendability—that different types of money have. The narrowest measure, M1, is restricted to the most liquid forms of money; it consists of currency in the hands of the public; travelers checks; demand deposits, and other deposits against which checks can be written. M2 includes M1, plus savings accounts, time deposits of under $100,000, and balances in retail money market mutual funds.
The chart below shows the relative sizes of the two monetary aggregates. In April 2008, M1 was approximately $1.4 trillion, more than half of which consisted of currency. While as much as two-thirds of U.S. currency in circulation may be held outside the United States, all currency held by the public is included in the money supply because it can be spent on goods and services in the U.S. economy. M2 was approximately $7.7 trillion and largely consisted of savings deposits.

Historical Perspective

The Federal Reserve began reporting monthly data on the level of currency in circulation, demand deposits, and time deposits in the 1940s, and it introduced the aggregates M1, M2, and M3 in 1971. The original money supply measures totaled bank accounts by type of institution. The original M1, for example, consisted of currency plus demand deposits in commercial banks. Over time, however, new bank laws and financial innovations blurred the distinctions between commercial banks and thrift institutions, and the classification scheme for the money supply measures shifted to be based on liquidity and on a distinction between the accounts of retail and wholesale depositors.
The Full Employment and Balanced Growth Act of 1978, known as the Humphrey-Hawkins Act, required the Fed to set one-year target ranges for money supply growth twice a year and to report the targets to Congress. During the heyday of the monetary aggregates, in the early 1980s, analysts paid a great deal of attention to the Fed's weekly money supply reports, and especially to the reports on M1. If, for example, the Fed released a higher-than-expected M1 figure, the markets surmised that the Fed would soon try to curb money supply growth to bring it back to its target, possibly increasing short-term interest rates in the process.
Following the introduction of NOW accounts nationally in 1981, however, the relationship between M1 growth and measures of economic activity, such as Gross Domestic Product, broke down. Depositors moved funds from savings accounts—which are included in M2 but not in M1—into NOW accounts, which are part of M1. As a result, M1 growth exceeded the Fed's target range in 1982, even though the economy experienced its worst recession in decades. The Fed de-emphasized M1 as a guide for monetary policy in late 1982, and it stopped announcing growth ranges for M1 in 1987.
By the early 1990s, the relationship between M2 growth and the performance of the economy also had weakened. Interest rates were at the lowest levels in more than three decades, prompting some savers to move funds out of the savings and time deposits that are part of M2 into stock and bond mutual funds, which are not included in any of the money supply measures. Thus, in July 1993, when the economy had been growing for more than two years, Fed Chairman Alan Greenspan remarked in Congressional testimony that "if the historical relationships between M2 and nominal income had remained intact, the behavior of M2 in recent years would have been consistent with an economy in severe contraction." Chairman Greenspan added, "The historical relationships between money and income, and between money and the price level have largely broken down, depriving the aggregates of much of their usefulness as guides to policy. At least for the time being, M2 has been downgraded as a reliable indicator of financial conditions in the economy, and no single variable has yet been identified to take its place."
A variety of factors continue to complicate the relationship between money supply growth and U.S. macroeconomic performance. For example, the amount of currency in circulation rose rapidly in late 1999, as fears of Y2K-related problems led people to build up their holdings of the most liquid form of money, and then it showed no increase (even on a seasonally adjusted basis) in the first half of 2000. Also, the size of the M1 aggregate has been held down in recent years by "sweeps"—the practice that banks have adopted of shifting funds out of checking accounts that are subject to reserve requirements into savings accounts that are not subject to reserve requirements.
In 2000, when the Humphrey-Hawkins legislation requiring the Fed to set target ranges for money supply growth expired, the Fed announced that it was no longer setting such targets, because money supply growth does not provide a useful benchmark for the conduct of monetary policy. However, the Fed said, too, that "…the FOMC believes that the behavior of money and credit will continue to have value for gauging economic and financial conditions." Moreover, M2, adjusted for changes in the price level, remains a component of the Index of Leading Economic Indicators, which some market analysts use to forecast economic recessions and recoveries.
In March 2006, the Federal Reserve Board of Governors ceased publication of the M3 monetary aggregate. M3 did not appear to convey any additional information about economic activity that was not already embodied in M2. Consequently, the Board judged that the costs of collecting the data and publishing M3 outweigh the benefits.
July 2008


https://www.newyorkfed.org/aboutthefed/fedpoint/fed49.html
 

Scorpio

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#5
then we need to consider that the fed has been pushing on a string for some time,
quite worried about deflationary forces, and thus trying many different things to try to jumpstart inflation and get it to some farcical 2% number they have arrived at. So far, with little luck.

here is the M2 over time, that they now use,
you can see it was pretty consistent until accelerating back when klinton was in office

it hasn't went parabolic, but it certainly has upped its game from per 1994 or so

one can even argue that the real acceleration began with the floating of the buck in the early 70's.

united-states-money-supply-m2.png
 

Scorpio

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#6
So the price of bread goes up and houses go down.
What is that called?
depends on the aggregate numbers, it would be either
if the price of bread went up in total (total loaves sold at a price) greater than the decrease in housing (completed transactions) then you would have overall inflation.

whereas if the decrease in housing was greater than the price of bread increase, again overall, the result is deflation.
 

Strawboss

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#7
are we dealing with monetary inflation or retail inflation?
How do you describe the difference between these 2 and their root causes?
 

Scorpio

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#8
now for reference to see what is going on,

if you look at the period of 94-95, money supply went up .45% and prices/gov budgets were relatively stable

since them, and especially as of late, big changes have been made

with the period of 2019 showing a 6.5% increase in money supply

this baby is on steroids, and has been for some time now

and yet, with all that monetary inflation current, they are having trouble getting to their inflation target as there are a great number of offsetting items.

you see that with the money supply manifesting itself in various areas such as bond markets and stock markets. You are actually seeing massive inflation in those markets, but in the prices of goods, depends.
united-states-money-supply-m2.png
 
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newmisty

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#9
Can someone expound on a "foating currency" for me please?
 

Scorpio

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#10
hey new,

it simply means, not pegged to some measuring stick.

for instance, prior to the free float, the buck was tied to a fixed unit of gold.
another would be a .gov determines a 'fixed' exchange rate, such as with chin li where he fixes his currency to ours at a rate of 7:1 I believe unless that has changed.
 

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#11
depends on the aggregate numbers, it would be either
if the price of bread went up in total (total loaves sold at a price) greater than the decrease in housing (completed transactions) then you would have overall inflation.

whereas if the decrease in housing was greater than the price of bread increase, again overall, the result is deflation.
Does the price of copper and the stock market go in to that calculation? If so, we have deflation...net...
But many citizens see their grocery store bill, and, rent, and they will see inflation...
 

hardmoney

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#12
So the price of bread goes up and houses go down.
What is that called?

That's when the shit really hits the fan and necessity drives prices; the things you need for survival become unattainable and the things you don't need,( like vacation homes and boats,etc. ) become very cheap.




Great post by the O.P., the meanings of the terms "inflation" and "deflation" have been hi-jacked to deceive the masses.
 

Cigarlover

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#13
now for reference to see what is going on,

if you look at the period of 94-95, money supply went up .45% and prices/gov budgets were relatively stable

since them, and especially as of late, big changes have been made

with the period of 2019 showing a 6.5% increase in money supply

this baby is on steroids, and has been for some time now

and yet, with all that monetary inflation current, they are having trouble getting to their inflation target as there are a great number of offsetting items.

you see that with the money supply manifesting itself in various areas such as bond markets and stock markets. You are actually seeing massive inflation in those markets, but in the prices of goods, depends.
Prices for houses and autos seem to be going up and keeping pack with or exceeding the posted inflation rate.
Durables not so much because we export that inflation to other countries. If we didn't import those durable from other countries and manufactured them here at home you would see the inflation in them be much higher.
Another way to export that inflation is in the MIC. We have bases all over the world. Money being spent there get dollars into other countries versus GI's spending that money in the US.
Another thing that would need to be factored into all of this is the tax rate. You could make the minimum wage 200k a year but if the tax rate is 75% none of that money would make it's way into the economy.

It's all way to complicated for this simple mind. Give me an oz of gold for a weeks wages and I'm happy.
 

edsl48

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#14
One might add the "velocity" of money to that original post up there. Velocity, according to WIKI is "The velocity of money is a measure of the number of times that the average unit of currency is used to purchase goods and services within a given time period. The concept relates the size of economic activity to a given money supply and the speed of money exchange is one of the variables that determine inflation. Wikipedia "


Now here is my question. I remember the LBJ years. LBJ, when confronted with the "old guns or butter" decision decided to do both. His Vietnam fiasco and at the same time great society spending greatly increased the money supply resulting in double digit inflation. So, with that in mind, what speculation is there on what the effect of this massive spending bill will cause in a couple of years? I ask because that should have a lot to do with the price of gold and silver. Back in the 70's silver almost hit $50 per ounce and gold flirted with the mid $800s and there was considerable projections on how the currency would collapse. So we have to wonder will there be a big run of inflation a few years down the road? Fiat historically seems to be printed out of existence and there is one hell of a lot of printing going on and coming up. I wish I knew, with certainty, the answer.
 

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#15
exactly right Cigar,

we export our monetary inflation in my terms to keep retail inflation low, which also puts dollars out into the world as the reserve currency
 

Scorpio

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#16
I am with you edsl,
where or when does the continued supply of money finally tip the scales to retail inflation,

if we still made washing machines here, what would the price of a washing machine be now?
or if it weren't for foreign vehicle manufacturers, what would the price of a chevy now be?

our standard of living for decades has been dependent on importing deflation to counter the effects of this monetary expansion,

in addition to this, there have been other benefits to us, and they are lengthy,

if one remembers, back in the 70's, you could virtually walk across Lake Erie with the industrial pollution being so bad. Now, all these years later, mother earth has virtually healed itself, and Erie is far better now for it. We have exported nasty pollution and the liability to corps associated with it. That pollution is still happening, just not as great in the US. That has allowed a large jump in quality of life for us all.

back to edsl and the 70's, which is very interesting as that period of inflation and rising metals prices occurred right after the free float of the dollar. Interest rates to 18%, wages increasing, housing up and of course the cost of living jumping, gas, bread, etc. They of course still maintain that one was due to Opec and the importing of oil (importing inflation) as oil prices were elevated. The effects of increasing oil prices overwhelming the system.

when Reagan came in, a couple of things changed, more importing of overseas products, at that time Japan, and a expanding budget at the fed level to continuous deficits that are still in place today. This along with more stable oil prices.

that slammed the door on the bond bear market, and the inflation that was occurring, along with metals.

what will be the genesis of a dose of inflation at the retail level? Is it possible that a decrease in imports, or bringing manufacturing back here will do that? They have already used expanding money supply for 4 decades to limited effect. Is there a external shock that could usher in the central banks worst nightmare?
 

Scorpio

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#17
where BB and I are at currently is related,

that is, what is the marginal utility of debt created?
What?

what we have been bantering back and forth on for years, is when does each unit of debt input create lower and lower output? When do we cross that point where a $1 of debt created provides no gain in output?

what was posted above, if the calcs are correct, money supply is running +6.5%, yet GDP is running 2.5-3%. There is currently still a gain, but it is approximately less than half of inputs.

that speaks to monetary value decreasing. As more and more is created, it is worth less and less.

yet we are adding a wrinkle to this, what if the debt created is discounted because of quantity?

typically, a bond consists of time and value. A million dollar bond, 20 years, at 1%. Meaning that bond holder will be contracted to receive a 1% return on his dough for the 20 years. You have a mortgage, you agree to pay 4% over 30 years on the original amount, same thing. Someone holds the paper, a bond on your mortgage.

A bond value decreases over time as the bond ages or less time exists on the original issuance.

you go into a bank for a loan. They ask you for collateral, then on that collateral, they offer 75% paper on that 'value'. They discount the value of your collateral.

what I am asking, is the bond market 'discounting' debt created? Are they stating the collateral is less than optimum and discounting the amount they are willing to pay for that bond? Is there a way to do this that we can see it happening?

it is further complicated by the fact that many bond issuances are oversubscribed, in that there are more takers than there are bonds offered. Bond investors state they are willing to take $1.5 M in bonds, and the offering is $1.0M, it is oversubscribed.
 

Scorpio

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#18
and yes, this has been overly simplified and I am leaving an awful lot out, as well as taking some liberty with terms, I get that, but this is for discussion purposes, not a textbook.
 

Cigarlover

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#19
I'm certainly not qualified but offer some thoughts that may or may not be correct.

We did in fact export our manufacturing to China. I would argue that that move was more to get them to start using the dollar and buying some of our bonds. We make you rich and you buy our worthless paper and we repay you with more worthless paper kind of thing.
At the end of the day did the consumer really save any money by having things like TV's and appliances made in China? Toasters and coffee pots maybe but certainly not washing machines and refrigerators. What incentive was a there for corporations to move their manufacturing to China? Corporate profits.. The prices of items stayed the same but corporate profits went through the roof. Corporations further benefitted by lower tax liabilities here in the US as well as reduced insurance costs for employees. All of that added up to more profits for them to give the appearance of continued growth. Meanwhile consumers in the US didn't notice any increase but definitely did not notice any decrease either. And thats the big issue, why didn't consumers get a discount in the US after the corporations moved? Because the corps knew what they could charge for products.
Of course bringing those same companies back to the US is going to be costly for them 1) for the move back and 2) for the environmental concerns.

what is the marginal utility of debt created?
What?

what we have been bantering back and forth on for years, is when does each unit of debt input create lower and lower output? When do we cross that point where a $1 of debt created provides no gain in output?

what was posted above, if the calcs are correct, money supply is running +6.5%, yet GDP is running 2.5-3%. There is currently still a gain, but it is approximately less than half of inputs.
This sorta ties right in with what I have been posting in that every President needs to double the debt to maintain status quo. Bush took us from 5 trillion to 10. Obama took us from 10 trillion to 19 trillion plus. 3 years into trump and he only added 4 trillion which I believe is the reason for these massive stimulus packages they are throwing around.
So yes it makes sense that money supply is growing at 6.5% but gap is only 3. Part of that 6.5 is now servicing debt. Not only at the gov level but student loans, cars, housing. Americans are saturated with debt. The story would be much different if the starting point was 0 and Americans were debt free to include the government.
My best guess as to when we get to the point where 1$ of debt creates 0 output is when the debt itself gets so high that debt is created merely to service debt.

The world is at what about 1/4 quadrillion in debt? I don't even understand who could possibly have that much money to lend even in a fractional reserve banking system. That would be 25 trillion in reserves. Every country is in debt so how can anyone be a buyer of debt?
And this is where the smoke is coming out my ears from to much thinking before proper coffee.. Thanks for frying my brain so early in the morning. :). Definitely things to think about though.
 

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#20
while we are on this, and mentioned earlier,
velocity of money

you can see where the expansion of money has driven the velocity of money to huge lows,

which stands to reason with me, and only adds to the theory that money and assets degrade over time due to the inflation of money in existence

but, what we can take from it might be a bit interesting, the initial large increases in velocity from trend occurred at a time of a stable US, a moderate money growth % YOY, and a collapse of the Japanese economy which then entered a long period of flat to deflationary growth.

and then it peaked, with the advent of the asian contagion back then. In '97, that trend reversed and it has been declining since.

there was a noticeable bump up during the period of the early 2000's and the mortgage bubble at the time. But that experiment failed in 07 and down she comes ever since to all time lows, as massive fiat creation since is swamping the system.

vel.jpg


https://fred.stlouisfed.org/series/M2V
 

Scorpio

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#21
Yep Cigar, all good points by you,

yet I cannot discount the value received by US slaves in all of this with a increased standard of living,

and you touch on another quite important point, where what is reasonable?

like a apple phone made by chin li, surely the cost to manufacture isn't that great, and even if you allow for development costs to recoup, there still is a massive difference between cost vs retail price.

with these corps, when is enough enough?

when are they going to realize that if the slaves cannot purchase their product due to price, then their product no longer has utility to them

currently corps are cannibalizing each other. Apple wants $1100 of your disposable income, and to get it, the consumer has to give up something else. The insurance company wants more of your dough, but it isn't available because apple already squeezed them for the vig.
 

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#22
now to bring this to today,

they are issuing a $2T outright helicopter dough, along with another $4T in central bank dough to throw at the current blow up.

with a follow on question, who is going to finance all of this debt created?

then too, all this arguing about what is in the bill, is it really material? Isn't the real discussion that they want to inject x amount of dollars, and the pork is all just fulfilling the desires of the ptb in quantity?
 

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#23
just to throw another variable at you guys, that was touched on earlier,

we cannot discount the deflationary value of machines and modern tech. Crazy cool, but also a huge component in the marginalization of slave labor.

I have even stated, give me a automated burger flipper over a human any day.

But, with that type of thinking, we can be assured their are serious consequences, and the how to handle that in the relative near future coming.
 

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#24
now to bring this to today,

they are issuing a $2T outright helicopter dough, along with another $4T in central bank dough to throw at the current blow up.

with a follow on question, who is going to finance all of this debt created?

then too, all this arguing about what is in the bill, is it really material? Isn't the real discussion that they want to inject x amount of dollars, and the pork is all just fulfilling the desires of the ptb in quantity?
Finally - a question with a relatively simple answer...

The Fed will buy all the Treasuries issued to fund the $2T helicopter dough.

The Fed will do currency swaps with other CBs on the other $4T (soon to be much, MUCH higher). For example - the Fed and the Euro CB agree to create say a trillion in fresh digital cash...and then exchange with each other at current exchange rates...so - each side now has fresh new cash - yet on their balance sheet- its like it never happened because the credit/debit balance each other out...at least initially.

Its a way to inject significant amounts of cash at the CB level that is essentially an "off balance sheet" transaction.
 

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#25
one last thing for now, a word of caution to all of us,

let's not get our opinions and viewpoints from ragwriters or whatever source, take the time and give it some original thought, your own view, as no one is going to be there to help you cover your six with decisions.

getting a opinion/view from a rag writer than parroting that as your own is a whole lot different than formulating your own vision and version.

you can see guys above doing exactly that, giving it some thought, coming to their own conclusions, all cool stuff for sure

edsl asking is that inflation episode ever coming,
or Cigar stating that expansion greater than previous has to occur

all great stuff, and certainly apropos
 

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#26
yet on their balance sheet- its like it never happened because the credit/debit balance each other out...
that is not how balance sheets work, the asset column would rise, and so would the liability column. Balance sheet is expanding. The net may be zero, but make no mistake, it has to be accounted for.

Not saying it isn't something they wouldn't do as I don't know.

and you are correct in stating 'initially' due to currency flop rates, that valuation will be changing from the moment the transaction occurs.
 

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#27
that is not how balance sheets work, the asset column would rise, and so would the liability column. Balance sheet is expanding. The net may be zero, but make no mistake, it has to be accounted for.

Not saying it isn't something they wouldn't do as I don't know.

and you are correct in stating 'initially' due to currency flop rates, that valuation will be changing from the moment the transaction occurs.
Yeah - I meant to say that on the balance sheet - they would net each other out. But - as exchange rates fluctuate...one will get stronger and the other weaker...so the "net" effect on the CB balance sheet wouldnt be the gross amount - but the % gained/lost on the exchange rate.
 

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#28
Yep
 

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#29
and you bring up a good point that we tossed around back the last time this happened,
where we were arguing that the fed was stuffing their balance sheet with garbage assets not marked to market,

where for instance, home loans worth $1T on paper, but really only worth $500B, were shown as $1T and never marked to market and never heard from again.

we called it marked to fantasy

the bank balance sheets were cleaned, and the difference was moved over to the fed and onto the taxpayer, while the paper degraded over time
 

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#30
FAS 157 if memory serves...
 

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#31
helps to give people more info than that, I know what you mean, but most won't
and fwiw, I am pretty confident the fed isn't following gaap procedures
 

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#32
so I arrive back at this thread with the most elemental, the lowest class you can take in econ or econ 101

supply/demand chart

any dumbass knows as supply increases, price drops is demand remains constant, etc.

if supply and demand are at equilibrium, price will be constant at whatever the market considers that price to be

1.jpg
 

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#33
so if the above is true, and going back to monetary inflation, rather than retail inflation,

why does the quantity of fiat continue to grow uncontrollably, along with its price?

massive massive supply of fiat, and prices keep going up,

speaks to insatiable demand, as the supply comes onstream

bond.jpg
 

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#34
The way I try to make sense of it in my head is that the CB buying of bonds is the source of the insatiable demand to fund the gov deficits (and prevent true price discovery). So that explains the monetary inflation.

However - the retail inflation isnt following along...which begs the question of...why isnt it?

I think its because they have successfully managed (up until now anyways) to keep most of that fresh cash contained within the financial universe...and endless list of buckets (ETFs, swaps, derivatives of derivatives, etc...) where the cash can be "invested" to make even more cash...

Same way they suppress the gold price by creating all these gold based "instruments" that divert investment dollars into actual gold.

Thought of in a casino metaphor...when there is more cash on the premises - the casino opens up more tables...
 

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#35
What is the $1200 checks and extra $600 kicker going to do to prices?

How do you think most people will use the money? Remember 2/3rds of the country do not have $1000 and are broke because they typically make foolish money decisions.
 

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#36
I am looking at it differently,

what you say is all ho hum and same old same old,
chasin' yield, all playin' the game as they always do,
those are natural reactions to the supply

yet, I am coming to see something different. For quite some time I have considered the true cause to be a degradation of value. As time goes on, each unit created degrades faster and faster, and at this level now, those supposed assets are 'discounted' rather rapidly.

A 1M bond is not 1M, but some value discounted below that.

On your books, you can carry it as 1M, but to any downstream players, it will be some derivative of that number. A 10%, a 20% haircut? Not in the know, so can't answer it.

And if that discounting is going on enmasse, it would certainly explain the velocity issue also, as a great deal of that created is virtually discounted out of existence but still sitting on the books ie dead weight, not moving.
 

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#37
Scorp,
If that is the case would not the sheer mass of the dead weight prevent velocity from increasing? much like a black hole? But it would explain the slashing of prices in the oil and metals as countries backed into dollar denominated nose dives sell to try to maintain some form movement..

So are you suggesting that it isn't the debt per se it's the cement around it thats the problem? If we found a way to move the not moveable would that fix the problem?
 

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#38
1% control HALF the worlds wealth. Half of the worlds wealth has almost no velocity.
 

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#39
here is that bond price increasing over time,

have we finally topped out after all these years/decades?

the 1980 there is where prices last bottomed or rates topped out
(for some it is confusing, as prices and %rate are inverse related)

tbond price.jpg
 

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#40
helps to give people more info than that, I know what you mean, but most won't
and fwiw, I am pretty confident the fed isn't following gaap procedures
That there.
Totally.
NON GAAP
GAAP is just for us peons
:)
They do whatever they want in the Beeg Marble and Granite Building.
JMHO

Create it on the left hand, some others juggle it in the middle for xyz time,
Catch it in the right hand, squeeze it to a pulp or incinerate it.
SWEC style ( Solid Waste Energy Conversion---but in this case DWEC--Digital Waste Energy Conversion )
Keeps the " flow " going.
I remember when we were talking about how they would not be able to
legislate $ fast enough etc etc.
Good stuff man, good stuff.
Did not see this thread when I was yacking yesterday about Velocity.
94 today.
Will see what tomorrow will bring.