I'm not an economist, wu, but my understanding of the issues is that the situation is much more complex than your sketch here. Given particular situations and developments there may not even be any inflation at all as a result of present fiscal actions in the USA. Even following a very over-simplified model, in a deflationary situation, precisely tuned quantative easing might just balance out deflation (a bit like pouring water into a leaking bucket at the exact rate of the leak - of course, while this leaves the same amount of water in the bucket, it doesn't fix the leak!).
The reality is far more complicated. First of all, we have to realise that the very question, what is money? doesn't have a simple answer. You just have to ask yourself the question, in relation to what is the dollar debased? That lands you in the whole area of international exchange rates. To take one simple example, in 2001, 1 $ bought you 1,12 € (Euros). In 2008 (before the crisis really got going), the same dollar only bought 0.67 €. So, following a simplistic model, the dollar was debased by over 40% in comparison to the euro during Bush's two terms. But even this very simple model of part of a very complex globalised economic system of sytems can't just be seen as black and white (a strong currency is good, a weak one is bad). A strong euro relative to the dollar means that I (living in Germany) can buy books printed in the US more cheaply (and I do!), but it also means that my neighbour, who works for a company producing parts for the German auto industry is worried about his job, because the same strong euro makes German cars more expensive in the US (and the US printing company which produced the books I bought makes extra sales). Then throw in the fact that the books I bought were actually printed for an American firm in South Korea and you start to see how danged complex the whole thing starts to get. And that's before we even start to try to factor in the changing global prices of commodities (like oil - priced in dollars, so that OPEC has direct influence over the value of the dollar, a factor over which the US Treasury has little control). And then the fact that commodities prices are also effected by dealings in futures (people gambling on the price of things in 30, 60 or 90 days time, or next year) and the effect that such deals done in the past have on current prices. And that's before you take in the whole area of financial services and products and what all this does when added to the mix. All this before you even start to look at issues like comparative GNP, productivity, confidence and so on, as well as the decisions and actions made in other economic areas and the effects these have on each other. Not to mention unforseen things like wars and weather. Economics is so complex that, I would argue, nobody really deeply understands it all. That's why economists have to work with models. Seen from one point of view, quantative easing is "creating money", seen from another (given that an increased money supply is conterbalanced by notional assets, like government bonds), it's borrowing from the future. Where things are better, so that it won't cause much pain. Or so the theory, or the hope. Or the argument that, if you DON'T do it, the future will be even worse. There are lots of models, which produce lots more theories, explanations and predictions. Like the one that a devaluation of the dollar is necessary and inevitable, because the bill for US foreign policy in the past eight years (Iraq, Afghanistan, etc.) is now coming due. Or that the USA (collectively and individually) has been living beyond its means for the past twenty years and THAT bill is now coming due - a theory which others just as passionately refute. You pays your economist and takes your choice. Sometimes I suspect that most of them don't have a clue, and the old lady around the corner who reads tea- leaves could do just as well. Francis On 19 Mrz., 06:40, wu wei <[email protected]> wrote: > Is there any way of knowing how long it takes before the inflation > caused by " Quantitative Easing" begins to show? > > No-one on Bloomberg or CNN seems to know but I am assuming for now > that the currency is debased by the amount of counterfeit, borrowed or > printed money added to it according to it's proportion of the new > total money supply. > > If the American M3 for 2008 is $14 trillion and the amount of money > added to it is something like $5 trillion, of loans and duds, then the > added amount should debase the Dollar by 30%, but over what timescale? > By the time it arrives back at the treasury in the form of taxes etc? --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups ""Minds Eye"" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [email protected] For more options, visit this group at http://groups.google.com/group/Minds-Eye?hl=en -~----------~----~----~----~------~----~------~--~---
