4 ms·

> If they have a liquidity crisis the western world will essentially end. Already had one in 2008. Thankfully, our currency’s value is notional and the fed can

> If they have a liquidity crisis the western world will essentially end. Already had one in 2008. Thankfully, our currency’s value is notional and the fed can print more until such time as the bank run ends.

candiddevmike 3y ago
Are we still waiting for the 2008 bank run to end then?
akira2501 3y ago
> Thankfully, our currency’s value is notional and the fed can print more until such time as the bank run ends. It's value is not notional. If you make more currency then all currency in circulation now has less value. "Quantitative Easing" is simply a way of taxing you after the fact. Worse still if bonds are involved. Now it's a way of taxing your children before they're even born.
- User23 3y ago
  > It's value is not notional. If you make more currency then all currency in circulation now has less value. That's not how pricing works. It's easy to see. Consider the following. Treasury could mint a 10^33 dollar platinum coin[1], stick it in a vault at Fort Knox, and forget about it. At that point the money supply would nominally be almost all in that vault. Yet prices not only wouldn't go asymptotic, they wouldn't even budge. But wait, you say, that's not in circulation. Treasury could easily swap that coin with the Fed for an equal number of reserves. Now Treasury's reserve account is flush, which is surely circulating money. And yet prices still wouldn't budge. Not until Congress appropriated that money to be spent would we start seeing it moving prices, and even then only if Congress designed their spending to do so[2]. It's pretty easy to imagine ways that could be done, so I won't belabor the obvious unless asked to. The point of all this is that price inflation is everywhere and always caused by an increase of the ratio of money-being-spent:things-being-bought. This is why hyperinflation is always kicked off not by money printing, but rather by a productivity collapse. The money printing only comes afterwards, because it's an effect not a cause. This is also true for wage inflation, which is why US wages have remained flat in real terms since the mid 60s immigration reforms: the labor supply has been grown as fast as the demand for labor. [1] This authority exists under current law. [2] For a counter-example, if Congress passed a law appropriating 10^33 dollars for the Social Security Administration to buy gold from citizens in any amount they desired at a price of $20 per ounce, the price of gold wouldn't budge a cent on account of it, despite an absurd amount of money on the buy side of the gold order book.
  - akira2501 3y ago
    > The point of all this is that price inflation is everywhere and always caused by an increase of the ratio of money-being-spent:things-being-bought. Yes.. and if you increase the amount of money in circulation this impacts the amount of money being spent. You can imagine all sorts of ways that money can be minted without being circulated, but as soon as you do, this becomes a factor in this ratio, does it not? > This is why hyperinflation is always kicked off not by money printing, but rather by a productivity collapse. Has this occured in the US before? Are the examples you are using to draw this inference something that applies to the US? > This is also true for wage inflation, which is why US wages have remained flat in real terms since the mid 60s immigration reforms: the labor supply has been grown as fast as the demand for labor. The labor market has changed _drastically_ in this time. You're really willing to assume such a simplistic explanation for these facts?
    - User23 3y ago
      > You can imagine all sorts of ways that money can be minted without being circulated, but as soon as you do, this becomes a factor in this ratio, does it not? Yes, I think you're starting to get the point. It's not the money stock that causes inflation, but rather the money flow. Back to the original point that started this thread, increasing the money stock alone, that is to say growing the notional money supply, doesn't move prices. What moves prices is changes in the money flow, for which growing the money stock is neither necessary nor sufficient. > Has this occured in the US before? No, the USA has never experienced hyperinflation. Thankfully the principles involved are not specific to the USA. They apply generally. The operational particulars do change depending on whether or not the foreign exchange rate is floating or not. That's not really relevant here though. It all adds up to a collapse in the value of a currency being caused by a collapse in the goods and services that can be bought in that currency. That's why back when the world was more or less on the gold standard a single economy's collapse couldn't cause hyperinflation. However if, somehow, there were a collapse in global productivity then even gold would see hyperinflation, because you can't eat it and there'd be too much gold chasing too little food, fuel, and other essentials. > The labor market has changed _drastically_ in this time. You're really willing to assume such a simplistic explanation for these facts? At the aggregate level? Yes absolutely the law of supply and demand holds. It's the same as how I'm willing to apply the laws of thermodynamics to monstrously complex systems that I don't fully understand. I might not know how the parts all add up, but I do know that the equations will hold.

candiddevmike 3y ago

Are we still waiting for the 2008 bank run to end then?

akira2501 3y ago

> Thankfully, our currency’s value is notional and the fed can print more until such time as the bank run ends. It's value is not notional. If you make more currency then all currency in circulation now has less value. "Quantitative Easing" is simply a way of taxing you after the fact. Worse still if bonds are involved. Now it's a way of taxing your children before they're even born.

User23 3y ago
> It's value is not notional. If you make more currency then all currency in circulation now has less value. That's not how pricing works. It's easy to see. Consider the following. Treasury could mint a 10^33 dollar platinum coin[1], stick it in a vault at Fort Knox, and forget about it. At that point the money supply would nominally be almost all in that vault. Yet prices not only wouldn't go asymptotic, they wouldn't even budge. But wait, you say, that's not in circulation. Treasury could easily swap that coin with the Fed for an equal number of reserves. Now Treasury's reserve account is flush, which is surely circulating money. And yet prices still wouldn't budge. Not until Congress appropriated that money to be spent would we start seeing it moving prices, and even then only if Congress designed their spending to do so[2]. It's pretty easy to imagine ways that could be done, so I won't belabor the obvious unless asked to. The point of all this is that price inflation is everywhere and always caused by an increase of the ratio of money-being-spent:things-being-bought. This is why hyperinflation is always kicked off not by money printing, but rather by a productivity collapse. The money printing only comes afterwards, because it's an effect not a cause. This is also true for wage inflation, which is why US wages have remained flat in real terms since the mid 60s immigration reforms: the labor supply has been grown as fast as the demand for labor. [1] This authority exists under current law. [2] For a counter-example, if Congress passed a law appropriating 10^33 dollars for the Social Security Administration to buy gold from citizens in any amount they desired at a price of $20 per ounce, the price of gold wouldn't budge a cent on account of it, despite an absurd amount of money on the buy side of the gold order book.
- akira2501 3y ago
  > The point of all this is that price inflation is everywhere and always caused by an increase of the ratio of money-being-spent:things-being-bought. Yes.. and if you increase the amount of money in circulation this impacts the amount of money being spent. You can imagine all sorts of ways that money can be minted without being circulated, but as soon as you do, this becomes a factor in this ratio, does it not? > This is why hyperinflation is always kicked off not by money printing, but rather by a productivity collapse. Has this occured in the US before? Are the examples you are using to draw this inference something that applies to the US? > This is also true for wage inflation, which is why US wages have remained flat in real terms since the mid 60s immigration reforms: the labor supply has been grown as fast as the demand for labor. The labor market has changed _drastically_ in this time. You're really willing to assume such a simplistic explanation for these facts?
  - User23 3y ago
    > You can imagine all sorts of ways that money can be minted without being circulated, but as soon as you do, this becomes a factor in this ratio, does it not? Yes, I think you're starting to get the point. It's not the money stock that causes inflation, but rather the money flow. Back to the original point that started this thread, increasing the money stock alone, that is to say growing the notional money supply, doesn't move prices. What moves prices is changes in the money flow, for which growing the money stock is neither necessary nor sufficient. > Has this occured in the US before? No, the USA has never experienced hyperinflation. Thankfully the principles involved are not specific to the USA. They apply generally. The operational particulars do change depending on whether or not the foreign exchange rate is floating or not. That's not really relevant here though. It all adds up to a collapse in the value of a currency being caused by a collapse in the goods and services that can be bought in that currency. That's why back when the world was more or less on the gold standard a single economy's collapse couldn't cause hyperinflation. However if, somehow, there were a collapse in global productivity then even gold would see hyperinflation, because you can't eat it and there'd be too much gold chasing too little food, fuel, and other essentials. > The labor market has changed _drastically_ in this time. You're really willing to assume such a simplistic explanation for these facts? At the aggregate level? Yes absolutely the law of supply and demand holds. It's the same as how I'm willing to apply the laws of thermodynamics to monstrously complex systems that I don't fully understand. I might not know how the parts all add up, but I do know that the equations will hold.