Originally Posted By: tonyc
How long do the economists you listen to say it generally takes for an increase in the money supply to affect prices? The Fed has been engaging in expansionary monetary policy for several years now, but we've seen no significant movement of core inflation or the broader inflation measures like the MIT index I mentioned earlier in the thread.

Please show me a source for the 50% food/gas/clothing spike over the least three years -- that's a lot higher than the numbers I've seen. One can cherry-pick the noisy food and gas prices over a short timespan, but once you zoom out, even those are relatively stable. I've never seen anything suggesting a 50% rise over 3 years in those

At this point, with 10% unemployment, some short-term inflation is a good thing. You'll get no argument from me that a big inflation shock later on would be a drag on a functioning economy, but our economy is not functioning, and needs some juice right now. Expansionary monetary policy can provide some of that.

As for my own situation, we're definitely not going to park any more money in our house than we need to, but we'll at least need to get to 80% loan-to-value to avoid mortgage insurance. If the house appraises high, we'll be able to take some money out, if it appraises low, we'll have to put some in. But you're right that there's no good reason for us to pay a whole lot of the loan down right now, and we probably won't.

Repair-wise, we decided that for now, we're going to just do the walkway and the retaining wall. Values in the neighborhood seem to have gone up quite a bit, so this might help us out a lot if we get a good number from the appraisal.


Sorry, but inflation does not help an economy. Inflation merely hides the adjustments that must happen. In high unemployment, wages must drop. In our current situation, housing prices must drop to clear the market. Rather than letting wages and house prices drop, we're inflating the currency instead. This is delusional, and worse in the long run than just letting the market adjust.

There's a million references to rising commodity prices, just look on google. You'd have to be blind to not realize prices are going up. Consider the prices of gold, silver and copper since 2005. Consider the price of gasoline vs. 3 years ago. This is not just volatility, and to dismiss it as such is wishful thinking, at best. Here's just one from the first page of google results: http://www.denverpost.com/business/ci_19151044

Here's a guy who tries to untangle the mess of the government's redefinition of terms:

http://www.shadowstats.com/alternate_data/inflation-charts

During the Great Depression, with unemployment around 30%, the government redefined what it meant to be unemployed by declaring that you needed to be 16 years old to be legally unemployed. This is just one manipulation. Today we're struggling with a "real" unemployment of at least 17%, with some suggesting it's close to 25%. The government number only includes those workers currently collecting unemployment benefits, and it's as crooked as the rest of the government statistics.

Remember "stagflation"? That's what we've got now. Rising prices are not good for anybody. The idea that deflation is horrible is a myth. I realize this makes me sound like a lunatic, but these are lies the government tells the people to get them to go along with the theft of their savings.

Read this short book by Murray Rothbard:

http://mises.org/books/whathasgovernmentdone.pdf

Edit: here's a paper describing the deliberately misleading and changing CPI calculation landscape. He also makes the important point that understating inflation overstates GDP growth. This is why "double dip" fears are stupid -- we're still in the midst of the huge first dip. Despite real inflation much higher than reported, the government was only able to fabricate a paltry 1.7% GDP growth in the last 12 months. In reality, the economy contracted around 5%.

http://www.shadowstats.com/article/consumer_price_index


Edited by TigerJimmy (20/10/2011 20:11)