4 ms·

I believe in inflation. I just said it is not the problem now. Inflation happens when there is more demand from the economy that economy can satisfy or when th

I believe in inflation. I just said it is not the problem now. Inflation happens when there is more demand from the economy that economy can satisfy or when there are too much strong demand of imported goods. What it is a fiction is public debt in monetary sovereign governments: http://bilbo.economicoutlook.net/blog/?p=31715 http://bilbo.economicoutlook.net/blog/?p=31715

cm2187 11y ago
The sort of inflation we are talking about here is when the government will print money to pay their debt. This type of inflation will be wiping out savings and pensioners.
- RobertoG 11y ago
  So, we agree that default is not an issue? If there is any doubt here is in the words of Alan Greespan: "The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default" http://www.cnbc.com/id/44051683 http://www.cnbc.com/id/44051683 Can we agree also that inflation is not a problem at the moment?
  - cm2187 11y ago
    I am not sure what is the point of inflation being a problem at the moment. What I am saying is that savings will be wiped out by inflation. As for governments defaults, history is full of governments defaulting even on debt in their own currencies, particularly in time of political instability. I am not sure what gives you the confidence that now things are different and that this will not happen.
    - RobertoG 11y ago
      Money is debt. Debt is a promise of something. You default when you can't keep your promise. If you promise gold or another country currency in exchange of yours, you can be in a position where you can't pay. If the only thing you promise is to accept your currency back as tax payment, you are never in a position where you can't pay. That inflation is low now is relevant because it invalidate the quantity of money view of inflation. We are in the middle of a huge "quantitative easing" and we don't see inflation. In fact we see the opposite. For instance, the ECB is injecting (if I remember properly, I didn't check) 80000 millions every month. So, the "common sense" view of inflation have been proved wrong again and again but, we continue hearing the same thing again and again.
  - msandford 11y ago
    "Technical default" and "Effective default" are obviously different, but if the purchasing power of the dollars you're paid in are only 1% of the dollars you've loaned, that's effective default. If the government practices effective default over a period of 50 years most people don't really get it. If the government practices effective default over 3-6 months, everyone will understand and it could be very destructive. It would definitely cause a lot of social unrest.
    - RobertoG 11y ago
      Do you know what makes people poorer? Closing public services, not investing in infrastructure, reducing spending in science and technology, reducing spending in public education and public health. Those are real things. Why not we worry about this?
      - msandford 11y ago
        Do you know what else makes people poorer? Having fixed expenses (housing) and roughly fixed income (salary) and growing expenses (food, clothing, energy, entertainment, etc). As your income grows slower than inflation -- and for many people it does -- your variable expenses grow and you have to start giving things up. You can't give up housing and you can't give up food so you have to buy cheaper food, cheaper clothing, etc. Of course, infrastructure spending is totally dwarfed by wars/military budget, so it's kind of disingenuous to suggest that in order to spend on infrastructure, public education or public health that debt must be accumulated. Cut the military budget by half and you can go hog wild, while still balancing the budget.
        RobertoG 11y ago
        Maybe you can explain what is the mechanism in what salaries are fixed but inflation grow. "Cut the military budget by half " You will not hear me complain about that.
        msandford 11y ago
- kspaans 11y ago
  That's why you shouldn't keep most of your savings in cash. Non-cash assets can help you protect against inflation like this. But I do agree that if you've got a defined-benefit pension plan, your e.g. $500/mo will be doing less for you each year.

cm2187 11y ago

The sort of inflation we are talking about here is when the government will print money to pay their debt. This type of inflation will be wiping out savings and pensioners.

RobertoG 11y ago
So, we agree that default is not an issue? If there is any doubt here is in the words of Alan Greespan: "The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default" http://www.cnbc.com/id/44051683 http://www.cnbc.com/id/44051683 Can we agree also that inflation is not a problem at the moment?
- cm2187 11y ago
  I am not sure what is the point of inflation being a problem at the moment. What I am saying is that savings will be wiped out by inflation. As for governments defaults, history is full of governments defaulting even on debt in their own currencies, particularly in time of political instability. I am not sure what gives you the confidence that now things are different and that this will not happen.
  - RobertoG 11y ago
    Money is debt. Debt is a promise of something. You default when you can't keep your promise. If you promise gold or another country currency in exchange of yours, you can be in a position where you can't pay. If the only thing you promise is to accept your currency back as tax payment, you are never in a position where you can't pay. That inflation is low now is relevant because it invalidate the quantity of money view of inflation. We are in the middle of a huge "quantitative easing" and we don't see inflation. In fact we see the opposite. For instance, the ECB is injecting (if I remember properly, I didn't check) 80000 millions every month. So, the "common sense" view of inflation have been proved wrong again and again but, we continue hearing the same thing again and again.
- msandford 11y ago
  "Technical default" and "Effective default" are obviously different, but if the purchasing power of the dollars you're paid in are only 1% of the dollars you've loaned, that's effective default. If the government practices effective default over a period of 50 years most people don't really get it. If the government practices effective default over 3-6 months, everyone will understand and it could be very destructive. It would definitely cause a lot of social unrest.
  - RobertoG 11y ago
    Do you know what makes people poorer? Closing public services, not investing in infrastructure, reducing spending in science and technology, reducing spending in public education and public health. Those are real things. Why not we worry about this?
    - msandford 11y ago
      Do you know what else makes people poorer? Having fixed expenses (housing) and roughly fixed income (salary) and growing expenses (food, clothing, energy, entertainment, etc). As your income grows slower than inflation -- and for many people it does -- your variable expenses grow and you have to start giving things up. You can't give up housing and you can't give up food so you have to buy cheaper food, cheaper clothing, etc. Of course, infrastructure spending is totally dwarfed by wars/military budget, so it's kind of disingenuous to suggest that in order to spend on infrastructure, public education or public health that debt must be accumulated. Cut the military budget by half and you can go hog wild, while still balancing the budget.
      - RobertoG 11y ago
        Maybe you can explain what is the mechanism in what salaries are fixed but inflation grow. "Cut the military budget by half " You will not hear me complain about that.
        msandford 11y ago
kspaans 11y ago
That's why you shouldn't keep most of your savings in cash. Non-cash assets can help you protect against inflation like this. But I do agree that if you've got a defined-benefit pension plan, your e.g. $500/mo will be doing less for you each year.