Originally Posted By: tonyc
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I did, actually, but you dismissed it as volatility and too short a time sample.


I really don't think you did.

You said prices are "up around 50%" for food, gas, clothing etc. I asked you for evidence of this specific claim, and you told me to do my own googling to find it, providing only a single link from a news story that cited exactly two annual number for price increases, those being a 10.2 rise in dairy prices and a 33.3% rise in gas prices.


Yes, those are in a single year. Compound over 3 years.

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In what universe does that count as support for an increase of "around 50%" over three years? Suppose I offered you an investment opportunity and promised you a rate of return of 50% over three years. You give me some money, and I come back in a few years and say "well, I got you 33% from oil company stocks and 10.2% from dairy industry stocks, but the overall rate of return was in the single digits." You'd say I over-promised and under-delivered on the investment.


33% in one year is considerably more than 50% in 3 years. For dairy, 10.6% CAGR is 35% over 3 years, which is "about 50%". Prices on commodities are up substantially over the last 3 years. I don't really understand how anyone could argue that point. Gold is up around 100% in that same period. Cotton is up almost 400%.

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My core argument is simpler than just volatility and cherry-picking the time window -- you have also provided no support for your 50% number, and have only shown double-digit rises in prices within a very small number of commodities (gas and dairy products.)


Well, those are just the first couple that came up. Commodities are up substantially across the board, like I said, and it doesn't take much looking to see that.

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I totally concede the point that prices are rising higher within certain sectors and commodoties, but you significantly overstated your claim of a much greater rise within those volatile sectors. Further, I do think the volatility argument has merit, especially with the gas prices.and you've provided no evidence to the contrary.

I'm happy to engage in a higher-level discussion of the relative evils of inflation and deflation with you, but before we do that, we need to at least agree on the problem we're trying to solve. It's widely understood that the Fed is pursuing an inflation target in the low single digits, and all evidence now points to them meeting that target, even if it spikes higher within specific months in specific sectors.

Our economy has a LOT of problems. Inflation barely makes the list.


OK. You know what? I just don't know what to say to this. I really don't.

There is no dispute that money supply has expanded dramatically. Even the Federal Reserve admits that it has done that deliberately.

So I guess your argument is, "so what? inflation is a good thing." Inflation is a mechanism by which the government and its cronies (wall street banks and other preferred industries) get an unfair advantage by using what is essentially counterfeit money. The effect of this is to diminish the value of savings in federal reserve notes or US dollar-denominated assets. It is literally stealing from people who have saved.

We've seen several decades of expansionary monetary policy and artificially-low interest rates and we're now (just barely starting) to reap the results. The problems with our economy are directly related to these misguided ideas and the central planning which seeks to manipulate markets by inflating bubbles (.com, housing, and now commodities).

I don't understand how someone can stand on the brink of economic apocalypse (where we are right now) and call a group with different ideas "Cassandras".

Edit: I guess to a certain extent, you're right. IF the extra money entered the system uniformly, there would be no issue. In that sense, inflation doesn't really matter. It doesn't matter if we all added a zero to the money in our pockets. But when SOME people do, and not others, then it matters a great deal. It's stealing.

The problem isn't inflation, per se. The problem is central planning as opposed to a free market in money. When the government controls the money, they can and will manipulate it to the destruction of the economy. This has been the case repeatedly throughout history, and it's the case here, too.


Edited by TigerJimmy (25/10/2011 18:47)