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> As they should be, given that populations increase. Is the U.S. Population increasing like this? [1] That's what the U.S. monetary supply looks like. More c
by sigil 15y ago
> As they should be, given that populations increase.
Is the U.S. Population increasing like this? [1] That's what the U.S. monetary supply looks like.
More correctly, fiat money supply should ideally match total economic output, not population. But the GDP graph also doesn't look anything like that monetary supply graph.
Given this, the BitCoin phenomenon is understandable: savers are looking for a currency that's not subject to manipulation and is most of all predictable in terms of supply. Whether or not it succeeds, I'm glad there's the pressure of a competing, not-centrally-manipulated currency.
[1] http://research.stlouisfed.org/fred2/graph/?s%5B1%5D%5Bid%5D=AMBNS http://research.stlouisfed.org/fred2/graph/?s%5B1%5D%5Bid%5D...
- acslater00 15y agoActually money supply should ideally match total demand for money. Real economic output is not super relevant.
- sigil 15y agoMilton Friedman disagrees and measures inflation relative to output in his book on monetary phenomena [1]. Since you're an economist (right?) I'd be interested in why you think he's got the wrong measure. [1] http://books.google.com/books?id=ZNAhXe2pz1cC&lpg=PA196&ots=s51lXrnrkZ&dq=milton%20friedman%20money%20mischief%20match&pg=PA193#v=onepage&q&f=false http://books.google.com/books?id=ZNAhXe2pz1cC&lpg=PA196&...
- acslater00 15y agoI'm not disagreeing with Milton Friedman at all. Read the sentence "Prices might even fall gradually as higher incomes led people to want to hold a large fraction of their wealth in the form of money." Inflation is a Money Supply / Money Demand phenomenon. In the long term, Money Demand tracks real output, but in the short term (such as the recession we're currently in) you can see major swings in demand that counteract what would normally be a quite inflationary money printing exercise.
- sigil 15y agoSo you agree that in the long term, money supply should closely follow real output. It's only in the short term that the Fed is allowed to untether them for the purposes of intervention. Let's not forget that the Fed's monetary policy in the 2000's helped create this situation: economic intervention necessitates further economic interventions. It's no wonder people are heading for the exits via BitCoin.
- achompas 15y agoBut the GDP graph also doesn't look anything like that monetary supply graph. Huh? [0] [0] http://www.google.com/publicdata?ds=wb-wdi&met_y=ny_gdp_mktp_cd&idim=country:USA&dl=en&hl=en&q=us+gdp+chart http://www.google.com/publicdata?ds=wb-wdi&met_y=ny_gdp_...
- sigil 15y agoCompare those two graphs from say 2006 on. I am mystified that you would look at a graph with a giant, dominant spike, and conclude my point was about the shape before the spike. Edits: To make it clear I'm not arguing with the statement that money supply has tracked GDP fairly well until recently. Or that GDP has trended up exponentially.
- achompas 15y agoOh I get it: this is one of those "man, the Fed is messing up" rants! Yeah, I won't take part except to say (a) you're sampling 4 years of incredibly volatile economic activity, and (b) the other, uh, 96 years exhibit a pretty strong exponential trend.
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