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the trillion dollar coin...

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moralist
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snapback.pngtadmjones, on 10 January 2013 - 05:44 PM, said:

What do you mean by 'new money'? A different kind, or adding more and if so how does someone add money without creating wealth?

This is probably a revelation to you, but all banks including private banks, create new money out of thin air. When a bank makes a loan that money does not come out of other people's savings which is a common misconception. Also, when you repay your loan, the bank deletes the money. Only the profit on the loan is retained. Now there are capital ratio requirements to prevent banks from infinitely creating money. The Fed though can create money without reference to it's capital.

Are you arguing that manipulation of the money supply is a needful thing? Or are you just learnin' me on the process of how the central planners do it? (and I'm not sure, but I think when a private entity 'creates' credit, its slightly different than a simple expansion of the total money supply, if a bank gives me a construction loan and I use that credit to purchase supplies, the bank or private entity is on the hook, if I fail to pay either the suppliers or repay the loan).

If economists can accruately predict what steps to take to manage 'things' and the interventions regarding money are benign or beneficial, why would inflation ultimately be harmful? Why is it necessary to forestall inflation?

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The Treasury has explicitly said that they have no plans for such a coin, and think it would be illegal anyway. Krugman says he's disappointed. He obviously thinks this would have been a good negotiating tactic, even though he was never serious about actually using such a coin. Hopefully this particular satire will be put to rest.

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What really amazes me is that Krugman thinks money grows on mentally synthesized trees.

I wonder if he ever pondered the calamity that befell Germany. The money became worthless in a thrice.

ruveyn1

I think he's studied it extensively, and I think he knows quite well what overinflation of the money supply does, and I think he advocates no such thing.

Krugman's politics might be mainstream socialist / democrat, but his economic precepts are fine. He starts with the premise of a welfare state. Given that premise, he's generally correct about the big stuff, as near as I can tell.

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The Treasury has explicitly said that they have no plans for such a coin, and think it would be illegal anyway. Krugman says he's disappointed. He obviously thinks this would have been a good negotiating tactic, even though he was never serious about actually using such a coin. Hopefully this particular satire will be put to rest.

Well, defaulting on our debt is also illegal, as is not paying for the things that Congress has decreed shall be paid. From a strictly legal standpoint, this is uncharted territory, and whatever gimmick (including flat ignoring the debt ceiling itself) is fair game, morally speaking. I suppose the Framers might have thought that this is the sort of situation where Scotus should step in and make a judgement, and procedurally that means the president needs to do something and that in turn needs to be legally challenged. I can't see it possibly getting that far.

So yeah, here's to hoping this whole thing goes away before it begins and we don't get another pointless stand-off with grandstanding Congresspeople telling the outside world that they are insane and want to blow up everything. The last spectacle hurt the markets because of the sheer stupidity of the whole thing--that Congress enacted laws that contradict each other on the most basic logical terms.

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The Treasury has explicitly said that they have no plans for such a coin, and think it would be illegal anyway. Krugman says he's disappointed. He obviously thinks this would have been a good negotiating tactic, even though he was never serious about actually using such a coin. Hopefully this particular satire will be put to rest.

The trillion dollar coin idea is a response to ridiculous ideas on the right, namely that voting for spending increases and then threatening not to fund those spending increases is a rational political strategy. As a response to ridiculous politics, I think the coin idea is measured and appropriate. The fact that you are not equally denouncing threats to have the US default on it's debt is revealing. Or do you think that a default would be a good thing?

Also, I am still waiting to hear about those Austrian and Libertarian economists who were right about low inflation! Or have you changed your mind and now agree with me that they don't exist?

There are a whole lot of economists, ranging from Austrian, Libertarian, Monetarist, and Keynesian who have been right about the U.S. (and the world) going through a period of deflation.

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Also, I am still waiting to hear about those Austrian and Libertarian economists who were right about low inflation! Or have you changed your mind and now agree with me that they don't exist?
Why would I change my mind about such a simple, obvious fact. You probably think that Peter Schiff is the model Austrian economist. I told you to read (near Marxist) Keen. To you, that's the one name I'll give. If you research him, you'll find the Austrians and others who were predicting deflation, and still are.
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Why would I change my mind about such a simple, obvious fact. You probably think that Peter Schiff is the model Austrian economist. I told you to read (near Marxist) Keen. To you, that's the one name I'll give. If you research him, you'll find the Austrians and others who were predicting deflation, and still are.

Thanks for the Keen tip - I'm halfway through listening to this - http://www.bbc.co.uk/programmes/b01j5h51 - very interesting stuff.

OK, so it does seem like I'm wrong on the Austrian deflation thing. So far I have found Mike Shedlock - http://globaleconomicanalysis.blogspot.co.uk/2011/08/yes-virginia-us-back-in-deflation.html and a couple of others in the econoblogs. I am genuinely interested in learning about Austrian's who aren't Schiff style, so if you think there is someone who is worth reading I would appreciate it. And I still don't understand how any Austrian can make a deflation prediction when there is nothing in their model that can warrant this.

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So far I have found Mike Shedlock - http://globaleconomi...-deflation.html and a couple of others in the econoblogs.
Blog leads on to blog.

As for the model of the Austrians warranting deflation: are you suggesting that some aspect of their model would say that a credit bust is inflation. Or are you talking about the "Linear Quantity Theory of Money" (MV=PQ)? I ask because a lot of people mistake the monetarist view with the Austrian one. Further, even Milton Friedman himself would not be surprised to see very low price-rise accompanied by huge government deficits and Fed money-creation. So, I don;t want to caricature his views by suggesting that he would be in Schiff's camp. The (MV=PQ) is the pop view of monetarism rather than Friedman's strict view.

Edited by softwareNerd
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Also, I am still waiting to hear about those Austrian and Libertarian economists who were right about low inflation!

Low inflation? Have you checked the costs of taxes, insurance, healthcare, education, rentals, utilities, gas, and food lately?

Edited by moralist
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As for the model of the Austrians warranting deflation: are you suggesting that some aspect of their model would say that a credit bust is inflation.

After reading some Austrians, it seems that Austrian economics makes no predictions in relation to inflation in a post-financial crisis. There is nothing in the model to definitively say one way or another. So you have some Austrians saying inflation and some deflation based on no model at all.

This is similar to PK's point in a recent post:

http://krugman.blogs.nytimes.com/2012/12/31/on-not-learning-continued/

First, it’s really important to distinguish between fundamental predictions of a model and predictions that an economist happens to make that don’t really come from the model. The prediction that huge increases in the monetary base will cause large increases in the price level, and that big government deficits will cause big increases in interest rates, are more or less inescapable if your model of the economy is one in which recessions are supply-side problems, not the result of inadequate demand. Conversely, the prediction that neither of these things will happen if the economy is in a liquidity trap is a fundamental prediction of Keynesian models.

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Have you? CPI is at 1.8%. And if you have a conspiracy theory as to why CPI is rigged you can use independent measures such as http://bpp.mit.edu/usa/

Your link isn't valid... which makes it roughly equivalent to your viewpoint. The way the government calculates the CPI is fraudulent because it excludes food and energy.

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Your link isn't valid... which makes it roughly equivalent to your viewpoint. The way the government calculates the CPI is fraudulent because it excludes food and energy.

The fact you consider food and energy costs as relavent to a consumer price index shows your covert conspiratoric nature, academic economists have it all figured out, just watch, ttsst .. doubter.( I used to be a denier, but now I'm like yeah it's gettin a little warmer in here) Edited by tadmjones
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The fact you consider food and energy costs as relavent to a consumer price index shows your covert conspiratoric nature, academic economists have it all figured out, just watch, ttsst .. doubter.( I used to be a denier, but now I'm like yeah it's gettin a little warmer in here)

Kate makes a great counterpoint on behalf of the left, and adds a lot to the discussions. Every forum is allotted at least one diehard statist.

Edited by moralist
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The way the government calculates the CPI is fraudulent because it excludes food and energy.
This is not true. The CPI does include food and energy. Apart from the CPI, the "core rate" is also reported, and this excludes food and energy. Most things that are indexed to inflation -- e.g. social security benefits, or interest rates on I-bonds -- use the complete rate, including food and energy.

There are some valid criticism to be made of the CPI, but it does include food and energy.

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Demand pull inflation, cost push inflation, etc it's all in an economics textbook. Ultimately though, inflation is targeted by the central bank. So they use monetary policy operations to cause low and stable inflation. QE is one of those policy tools. Interest rates cannot go below zero so without QE we'd probably have deflation at the moment, so QE is causing enough inflation for CPI to be modestly positive at 1.8%. As soon as that number starts to rise significantly, the Fed will reverse QE and/or raise interest rates.

But I still don't see the causal entity(ies) identified here. Demand pull inflation, cost push inflation are proposition which themselves depend on underlying premises.
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There are some valid criticism to be made of the CPI, but it does include food and energy.

OK. CPI for 2012 was supposedly 2.2%. In my opinion that is still fraudulent as it benefits the government to cheat to minimise true costs because its salaries and entitlements are linked to the CPI. Jiggering the numbers for public consumption also hides the government's purposeful dilution of the value of its currency.

Edited by moralist
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