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View Full Version : Back to Basics: Can Reflation work?



phirang
01-04-09, 01:28 AM
KD argues no:

http://market-ticker.org/archives/709-Why-What-Theyre-Doing-Cant-Work.html

BiscayneSunrise
01-04-09, 06:00 AM
I'd say that pretty well sums it up.

we_are_toast
01-04-09, 09:11 AM
Very interesting.

I'm not sure about this dollar definition.


So therefore, a dollar is in fact an indefinite-maturity bond carrying zero interest written upon the future production of the citizens of The United States.I'd sure like to see someone dispute this article, because if he's right, we are toast!

WDCRob
01-04-09, 10:41 AM
I'm definitely in over my head on these things... but I think this all depends on your definition of 'work.'

As I understand it, iTulip (and others) aren't saying reflation is a way to avoid the pain we've got coming. It's just the most politically palatable option given the mess we're in.

25% unemployment for a couple years or a 100% inflation over several - take your pick. But either way the U.S. standard of living falls precipitously and nothing will 'work' to stop that.

metalman
01-04-09, 11:23 AM
I'm definitely in over my head on these things... but I think this all depends on your definition of 'work.'

As I understand it, iTulip (and others) aren't saying reflation is a way to avoid the pain we've got coming. It's just the most politically palatable option given the mess we're in.

25% unemployment for a couple years or a 100% inflation over several - take your pick. But either way the U.S. standard of living falls precipitously and nothing will 'work' to stop that.

the fed will prevent a deflation spiral. how? when? but at what cost? those are the questions! i'll take a stab at it...

how... dollar devaluation
when... in 2010
cost... financial sector wiped out and reset

GRG55
01-04-09, 11:32 AM
Very interesting.

I'm not sure about this dollar definition.

I'd sure like to see someone dispute this article, because if he's right, we are toast!

A Dollar is a claim on the current production [and existing means of production] of the US economy. A T-bond is a claim on the future production.

They are related. They can each be exchanged for the other. But they are not the same thing.

pksubs
01-04-09, 11:50 AM
A Dollar is a claim on the current production [and existing means of production] of the US economy. A T-bond is a claim on the future production.

This definition makes more sense to me. In the 1930's depression, a paper dollar was an IOU on present(not future) gold reserves. Substitute gold reserve for a country's productive capacity in the present system. Therefore money printing with constant productive capacity can devalue dollars and thereby inflate away debt measured in fixed numbers of dollars. The author of the article claims that increasing the dollar supply proportionately increases debt(since he equates a newly created dollar to be of equal value to all existing dollars), which acts as an overall drag on the economy.

phirang
01-04-09, 11:59 AM
This definition makes more sense to me. In the 1930's depression, a paper dollar was an IOU on present(not future) gold reserves. Substitute gold reserve for a country's productive capacity in the present system. Therefore money printing with constant productive capacity can devalue dollars and thereby inflate away debt measured in fixed numbers of dollars. The author of the article claims that increasing the dollar supply proportionately increases debt(since he equates a newly created dollar to be of equal value to all existing dollars), which acts as an overall drag on the economy.

It's confusing because almost ALL money is commercially generated by loans through banks, and so THAT money DOES fall under his definition.

However, NEW money PRINTED would NOT be commercially generated, and so it has no future claim associated with it.