I expect that the reason the Fed is printing money and keeping interest rates
low is because the economy is in a stalled state. And yes, the value of the US
dollar is being deflated which means that the economy is being inflated.
However, the rate at which American inflation is happening is very slow
compared to what happened in the Weimar Republic and Zimbabwe. Adjustments can
be made.
With respect to changes in the value of the US dollar, much the same thing has
happened in Canada. For example, currently $1,000 are needed for equivalence
to $100 in 1950. It's the way things are and we have to live with it. It
really doesn't matter if incomes rise to compensate for the decline in the
value of a currency. Where they don't, as in Weimar and Zimbabwe, people are
in deep trouble. My dad was in Germany at the time of Weimar and he used to
talk about people taking wheelbarrows full of money to do their day to day
shopping.
Ed
________________________________
From: Keith Hudson <[email protected]>
To: "RE-DESIGNING WORK, INCOME DISTRIBUTION, EDUCATION"
<[email protected]>; Ray Harrell <[email protected]>
Sent: Friday, May 3, 2013 1:50:47 PM
Subject: Re: [Futurework] Capitalism is killing our morals, our future
At 06:03 03/05/2013, REH wrote:
May 2, 2013
>Not Enough Inflation
>By PAUL KRUGMAN
>Ever since the financial crisis struck, and the Federal Reserve
began
>"printing money" in an attempt to contain the damage, there
have been dire
>warnings about inflation - and not just from the Ron Paul/Glenn Beck
types.
>
>Thus, in 2009, the influential conservative monetary economist Allan
Meltzer
>warned that we would soon become "inflation nation." In 2010,
the
>Paris-based Organization for Economic Cooperation and Development urged
the
>Fed to raise interest rates to head off inflation risks (even though its
own
>models showed no such risk). In 2011, Representative Paul Ryan, then
the
>newly installed chairman of the House Budget Committee, raked Ben
Bernanke,
>the Fed chairman, over the coals, warning of looming inflation and
intoning
>solemnly that it was a terrible thing to "debase" the
dollar.
(KH) It certainly is a terrible thing to debase the dollar and history
will judge Greenspan and Bernanke unkindly for having done so. Present
day inflation hasn't taken the form of hyperinflation but of the fact
that the dollar is now worth 1/20th of what it did in 1913, or one 1/5th
of what it did in 1971 or has lost almost 1/10th during Obama's office.
The present cumulative rate of inflation is 8%, not the 1%s and 2%s that
are usually quoted by the government. How do they get away with it?
Because they're in charge of the Consumer Price Index where they quote
most of the things that most of us buy all the time, but not any of the
thousands of things that most of us also buy. To be really accurate, the
CPI ought to be at least 20 times larger so that it catches enough of the
minor items that each of us also buy.
It's interesting that Krugman doesn't explain why America doesn't have
the rampant hyperinflation of the Weimar Republic in the 1920s or
Zimbabwe or Hungary more recently, but of the insiduous sort that can
only be accurately measured retrospectively. In this way, by avoiding the
explanation, he can score cheap points against Ron Paul and Glenn Beck
types (tempting targets though they may be). The reason why they are
wrong is that the previous hyperinflated currencies were only minor
currencies. They were only inflating in desperate attempts to
increase trade with the rest of the world. However, the American dollar
is in an entirely different situation because, ever since the end of
World War II, it has been the world's reserve currency. Today, 80% of the
world's financial transactions involve the dollar -- even trade between
non-American countries. The inflating dollar becomes a bow wave that
causes all other currencies to defend their countries' exports by
inflating their currencies also. But by then America has gained
first-mover advantage by cheapening its exports before the others have
to.
Quite a number of comments might be made in the est of his
piece.
Keith
(PK) And now, sure enough, the
Fed really is worried about inflation. You see,
>it's getting too low.
>
>Before I get to the trouble with low inflation, however, let's talk
about
>what we should have learned so far.
>
>It's not hard to see where inflation fears were coming from. In its
efforts
>to prop up the economy, the Fed has bought more than $2 trillion of stuff
-
>private debts, housing agency debts, government bonds. It has paid for
these
>purchases by crediting funds to the reserves of private banks, which
isn't
>exactly printing money, but is close enough for government work. Here
comes
>hyperinflation!
>
>Or, actually, not. From the beginning, it was or at least should have
been
>obvious that the financial crisis had plunged us into a "liquidity
trap," a
>situation in which many people figure that they might just as well sit
on
>cash. America spent most of the 1930s in a liquidity trap; Japan has been
in
>one since the mid-1990s. And we're in one now.
>
>Economists who had studied such traps - a group that included Ben
Bernanke
>and, well, me - knew that some of the usual rules of economics are
in
>abeyance as long as the trap lasts.
> Budget deficits, for example, don't
>drive up interest rates; printing money isn't inflationary; slashing
>government spending has really destructive effects on incomes and
>employment.
>
>The usual suspects dismissed all this analysis; it was "liquidity
claptrap,"
>declared Alan Reynolds of the Cato Institute. But that was four years
ago,
>and the liquidity trappers seem to have been right, after all.
>
>And it's worth mentioning another issue on which the inflation
non-worriers
>have been vindicated: how to measure inflation trends. The Fed relies on
a
>measure that excludes food and energy prices, which fluctuate widely
from
>month to month. Many commentators ridiculed this focus on
"core" inflation,
>especially in early 2011, when rising food and energy prices briefly
sent
>"headline" inflation above 4 percent even as the core stayed
low. But, sure
>enough, inflation came back down.
>
>So all those inflation fears were wrong, and those who fanned those
fears
>proved, in case you were wondering, that their economic doctrine is
>completely wrong - not that any of them will ever admit such a
thing.
>
>And, at this point, inflation - at barely above 1 percent by the
Fed's
>favored measure - is dangerously low.
>
>Why is low inflation a problem? One answer is that it discourages
borrowing
>and spending and encourages sitting on cash. Since our biggest
economic
>problem is an overall lack of demand, falling inflation makes that
problem
>worse.
>
>Low inflation also makes it harder to pay down debt, worsening the
>private-sector debt troubles that are a main reason overall demand is
too
>low.
>
>So why is inflation falling? The answer is the economy's persistent
>weakness, which keeps workers from bargaining for higher wages and
forces
>many businesses to cut prices. And if you think about it for a minute,
you
>realize that this is a vicious circle, in which a weak economy leads
to
>too-low inflation, which perpetuates the economy's weakness.
>
>And this brings us to a broader point: the utter folly of not acting
to
>boost the economy, now.
>
>Whenever anyone talks about the need for more stimulus, monetary and
fiscal,
>to reduce unemployment, the response from people who imagine themselves
wise
>is always that we should focus on the long run, not on short-run fixes.
The
>truth, however, is that by failing to deal with our short-run mess,
we're
>turning it into a long-run, chronic economic malaise.
>
>I wrote recently about how, by allowing long-term unemployment to
persist,
>we're creating a permanent class of unemployed Americans. The problem
of
>too-low inflation is very different in detail, but similar in its
>implications: here, too, by letting short-run economic problems fester
we're
>setting ourselves up for a long-run, perhaps permanent, pattern of
economic
>failure.
>
>The point is that we are failing miserably in responding to our
economic
>challenge - and we will be paying for that failure for many years to
come.
>
>
>-----Original Message-----
>From: [email protected]
>[mailto:[email protected]] On Behalf Of Ray
Harrell
>Sent: Thursday, May 02, 2013 12:15 AM
>To: [email protected]; 'RE-DESIGNING WORK, INCOME DISTRIBUTION,
>EDUCATION'
>Subject: Re: [Futurework] Capitalism is killing our morals, our
future
>
>Well said:
>
>REH
>
>-----Original Message-----
>From: [email protected]
>[mailto:[email protected]] On Behalf Of Mike
Spencer
>Sent: Tuesday, April 30, 2013 11:50 PM
>To: [email protected]
>Subject: [Futurework] Re: Capitalism is killing our morals, our
future
>
>
>REH wrote:
>
>> First we think of the mega system of the US as a home budget and now
a
>> human body.
>>
>> I don't think I would "buy" either metaphor. It's a
big blinking
>> system much too complicated for such comparisons even though the
body
>> is complicated and doesn't break down well into the mechanical
models
>> when it comes to mapping.
>
>It's hard to put find a metaphor for how a computer works that could
explain
>it to, say, a bright, literate, educated late 17th c, gentleman. And
a
>computer is an engineered, blueprinted artifact.
>
>The biological system -- the biosphere in all its Gaian complexity -- is
sui
>generis. Nothing else exists that will serve as a model or metaphor
to
>explain it. We can model little pieces -- Isle of Langerhans function
or
>population dynamics of Sable Island horses, say.
>But, in general, we have to find out what's there and discover how a
given
>"what" interacts with its surroundings, then do that a million
times,
>building up our knowledge of Gaia.
>
>The human body, the human brain or the socio-economic system of the US
(or
>of the Pakistan or of the world) are similarly sui generis or nearly so.
And
>they're subsets of Gaia, of the global biology system.
>
>A unique factor of the global system of living things is that
evolution,
>popularly described at the level of ecological niches, actually takes
place
>at the molecular level so Gaia is integrated all the way down from
>populations of large organisms to the level molecules -- from giraffes
and
>forests down to dietary trace elements in diet or systemic effect of
ppm
>pollutants.
>
>I my view, the chief failure of economics is just about what McClosky
points
>to: failure to look at what's actually there at all scales and try
to
>describe it. Instead, simple models are constructed, their
properties
>hypothesized as properties of the real world and and further models
are
>constructed in an attempt to match the real world.
>It doesn't work well.
>
>The result is, as the piece from Marketwatch [1] opines, pressure to
create
>a society that matches market concepts in place of a market economy
that
>serves society.
>
>Good medical practitioners understand and allow for the underlying
>complexity of biology, for the fact that "disease models" and
therapies are
>"best guesses" and "best practice". Pharma companies,
in contrast, do not.
>For them, a pathological condition, a set of presenting symptoms, is
a
>marketing opportunity.
>
>Just as we're appalled that some physicians adopt the viewpoint of
the
>pharma companies, we should be appalled when people in government,
>education, justice and other social domains adopt the viewpoint of
Wall
>Street and Madison Avenue. We should be outraged when such
people
>manipulate those social domains into operating under the rubric of
Wall
>Street and Madison Avenue.
>
>Hmm.., Not sure I've said anything new here. So there you
go...
>
>- Mike
>
>
>[1] http://www.marketwatch.com/Story/story/print?guid=01AA1916-AEA6-11E2
> -BA04-002128040CF6
>
>--
>Michael
Spencer
Nova Scotia, Canada .~.
>
/V\
>[email protected]
/( )\
>http://home.tallships.ca/mspencer/ ^^-^^
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