We are on the Verge of Economic Catastrophe

[Loren Pechtel]

They aren't pumping money into the system every year to create 2% annual inflation. 2% annual inflation in the economy is the goal to maintain pricing stability. They manage that through the Fed lending rate to banks. That controls how much it costs to have debt. Cheaper debt means more spending of money you don't have.

How about just leaving the money supply alone. Laughing Dog says they replace defective currency and I'm fine with that if they just don't add more.

If the economy does need a boost with sales, do it without debasing the currency. Use tax breaks or some other means.

The Fed doesn't create more. Deficit spending creates more. And while MAGA pretends to be about reducing the deficit they are doing exactly what we said they would: tax cuts for the rich, increasing the deficit.

 

[Loren Pechtel]

It's not clear what system of money RVonse would prefer.

Fiat currency that was backed by gold and gold by itself wasn't perfect but it worked for hundreds of years. That kind of money was good enough for the central banks in the past and gold is still desired by the modern central banks today.

It did a piss poor job of "working". Others have already shown the reality.

But if you don't like gold, than your fiat currency can be tied to some other commodity like oil, uranium, or group of commodities that will always have value. That way if someone like myself does not trust his government, that fiat currency can be redeemed for the real commodities of value. That would be honest money where no one gets screwed. Rather than making huge sums by financial manipulation and shorting dollars to buy real assets intelligent people would otherwise be motivated to earn a living by providing real goods and services.

They always have value but the relative value changes over time and place. And that value can be artificially manipulated. DeBeers and diamonds being a prime example. Or, more recently, The Felon playing insider games with crypto.

Such an honest unit of exchange for society would help the middle class to flourish,. Lets say you earn the equivalent to a barrel of oil in currency today and put that currency in a retirement savings account with no interest. In 50 years when you retire, your currency will still purchase the barrel of oil in the future. It won't be like putting your money in a leaking bucket because of a corrupt government.

History says you're very wrong.

You've been promised pie in the sky and don't want to listen to us telling you there's no pie.

 

[Elixir]

Only when a country messes up do you see big changes in the exchange rate.

True. That is a 100% sure indicator that installing the Trump regime was a big mess up.
A currency losing 10% of its value in 8 months vs other currencies, is a vanishingly rare phenomenon outside of the third world. Never in the US in the last 50 years.

 

[Loren Pechtel]

I'm not fucked over by that 2% because all our long term stuff is in the stock market. And note that this is a good thing for people--the economy works better when that money is doing something useful than when it's sitting around.

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You will not say this if you end up unlucky enough to retire at the wrong time! The poor suckers who cashed their long term life saving stocks to retire during these periods got fucked heavily:

The Great Depression (1929–1932)
The Early 1970s (1973–1974)
The Great Recession (2008–2009)
The Lost Decade (2000–2013)
COVID-19 Pandemic (2020)

While I agree that the stock market is a great place for long term growth it has proven to have serious downturns antithetical to cashing out for retirement.

The average wage earner should not have to be a professional stock trader or gambler just to make sure his family is covered for retirement after he becomes too old to work.

Over the span I specified the market has always been ahead.

As your need for money becomes closer to reality you move some of it more stable but less productive things. It works, it's just not baby simple.

 

[Swammerdami]

• Real Wage Rigidity: It's very difficult to cut nominal wages (the actual dollar amount on a paycheck). Workers resist pay cuts. In a deflationary environment, if prices fall by 3% and wages stay the same, real wages (wages adjusted for purchasing power) actually rise by 3%. This sounds good for workers, but it's terrible for employers. Their labor costs become unsustainably high, forcing them to lay people off instead.

Most employers offer pay raises to keep pace with inflation. Employers who don't will have trouble attracting talent.

I've worked where there was extreme deadwood that needed to be laid off, but obstacles made layoffs difficult. Give everyone else a 3% minimum raise to keep pace with inflation, while zero raise for deadwood (effectively a cut by the inflation rate) encourages them to leave.

Does anyone really feel sorry that Bezo's might have to pay more if prices should fall faster than wages? I for one don't. So why do people like Swammerdani enjoy worshiping the oligarchs while spitting on the middle class?

Why do you need to impute unfounded views to me? What have I EVER said (outside your wet-dreams) to make you think I take the side of billionaires over workers?

Rudeness I can tolerate. Rudeness derived from ignorance and crazed delusions just tell us something sad about you.

2. It Gives Central Banks More Room to Maneuver​

I say fuck the banks! The taxpayers bailed them out 100% back in 2008 so they could give themselves more bonuses! Its time to give the middle class more "room to maneuver".

This is the 2nd or 3rd time you've written "central banks" in a context where you seem to mean "private banks." PLEASE teach yourself a basic 6th grade-level understanding before you continue to embarrass yourself.

I tend to agree that "too big to fail" banks should be subject to "moral hazard." A bank can be forced to recapitalize (perhaps at a big loss to stockholders) without being rendered bankrupt.

But what about YOU? In your preferred model would banks, whether central or private, even exist?

... Predictable 2% inflation will be paid for and by middle class Americans to help out the oligarchs and the bankers. Full stop. Most people are too busy working to notice how much 2%inflation fucks them over by the end of their useful work life. After a lifetime of toil they have no quality savings to retire on because our government (controlled by oligarchs) decided it needed to be inflated away.

You continue to miss the most basic point. Real people do NOT keep their savings in banknotes placed under their mattress. After current expenses, they spend what's left for an automobile or a house or other goods. Once they've bought the house, that money doesn't suffer inflation -- Just the opposite; they can expect the house's rise in value to exceed inflation. If the house price rises 8% in real terms, then with 2% inflation it will rise 10% in nominal terms.

Similarly for savings invested in businesses. All else equal, costs, revenues and share prices will rise to keep pace with inflation. A stock that gains 8% in real terms will rise 10% when inflation is 2%.

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You mentioned petroleum as an alternative commodity to use as a monetary base! Are you aware petroleum prices fluctuate hugely? Do you think HUGE unpredictable fluctuations are better than a well-managed predictable inflation of 2%? Would you be happy to see countries like Russia, Iran and Saudi Arabia have control of the monetary base?

The FRB already ties the Dollar to commodities, to wit the basket of consumer items defined by the Consumer Price Index. Would that be acceptable to you if they targeted 0% inflation instead of 2%? Do you think the ding-bat loons who feed you lies on YouTube have a better understanding of economics than a majority of PhD-trained economists?

 

[Elixir]