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This is why rising commodity prices are deflationary. They shrink the economy because less money is available to spend on other things. The situation doesn't become inflationary until central banks start printing money to counter the economic slowdown.
Yes - but they are printing, aren't they? It may be disguised as "liquidity injections", which in turn is temporary loans by the central banks against (questionable) collateral at below market interest rates, but the net effect is the same - additional money is available for a while.
Francois
Indeed they are! And they started printing years before commodity prices started their latest rise, which is going to tend to blunt the effect of the latest round of printing (which of course means they'll have to print much, much more to have any effect at all).
The problem with printing.
You can't print trillions or even 100's of billions.
Unless you start adding zeros to the pound/dollar notes.
And eith the insolvency crisis we have now, actual cash on hand wil be demanded.
Not bytes on a screen.
That's deflation.
How do you see "bytes on a screen" becoming inaccessible in the short term?
If the bytes on the screen in the form of debt are no longer accepted in lieu of cash for everyday transactions as explained in papers by Fekete.
Even today there is a "spread" hidden from people in the form of CC merchant fees that so far they choose to eat.
The best example of the past is when you tried to buy for example a car and put it on a credit card for convenience, they would never take it and insist on a wire transfer because they did not want to eat the fee. It could spread to the smallest of purchases like a gallon of gas. There is precedent for it as at times in the past there have been different prices for cash and credit.
Exactly. With the Depression will come millions foreclosed on, jobless, etc. Like me, Homeland Suckurity won't let them have a bank account. They'll lose their cars since those with bad credit in the US pay 2X-3X or more for car insurance, although that practice is illegal. They'll start trading on a cash-only basis. I don't even trust paper money and plan to put what savings I can squirrel away into "junk" US silver coins. A profitable sketching or busking session downtown may be followed by a trip to the pawn shop or coin dealer, to buy some junk silver.
Also, there's a growing "get out of debt" and "frugality" movement in the US. One of my favorite TV shows is one called 'Big Spender". The hero of the show goes around in really loud Western shirts and boots, it's hilarious. He goes around to people who've applied to be on the show, who want their debt problems solved. Typically the debtor is making about $6k a month and spending about twice that. The hero tells them to deal on a CASH ONLY basis, start cooking at home, etc. So far about 3/4 of the debtors are able to make the rather drastic changes needed. The hero advocates selling off any spare Bentleys one may have, canceling gym memberships, cutting all fat out of one's life. Credit cards are cut up. Money is to be treated as REAL, not 1's and 0's.
1's and 0's are very very easy to have taken from one anyway. Doesn't anyone remember that horrible movie, "The Net"? Can't anyone learn from that potboiler that all "they" have to do is cancel your account and that's that? Oh and math equations fly around on your screen..... maybe that was another movie?
But imagine going to your ATM and you can't withdraw money, your account is canceled, and you can't get an answer. And neither can millions of others. If you're lucky you may get 50% of your 1's and 0's back like Northern Rock is supposedly giving back, but this being the US, I'd doubt it. All those 1's and 0's were once genuine US coins'n'toilet paper, and now they're gone. Those hours of work you put in earning them, gone.
Gold and silver are money. USbucks should make good compost, finely shredded.
Living where you live now you probably figured out that the old money people walk around in jeans and t shirts and drive old decrepit pickup trucks.
All the new bling crowd are just targets.
LOLZ Musash'!
Yeah the "old money" drive their old trucks and wear Dickies overalls, it's true. There are actually Priuses out here, it's hilarious! And blingin' rims are not unknown, nor are X5's.
But, since most of that "wealth" is a put-on, it won't stay away from the repo man long, my Prius sure didn't.
There's a sort of "look" around here..... jeans, about 1/2" - 1" of beard, ciggie or Skoal in mouth, lined face, sort of "kicked from pillar to post" expression. Look on kids = hungry.
Actually most of the people around here look pretty healthy and are damned NICE its' just amazing. Ate a very good b'fast burrito cooked at a small lunch truck yesterday, how nice it was to speak in English with a fellow American running her little lunch truck, lunch trailer really lol.
There are jobs here, stone mason, carpenter, stuff like that. And working with horses. Good jobs really, but you have to be reality-based. Not much future in pushing buttons.
Wise words from the depths of your cave, Miyamoto.
Sitting here with a small stack of brass $1 coins, and contemplating.
Knocking a few zeroes off of a hyperinflated currency to create version 2.0 of said currency has happened many times. Some day it will happen to the US dollar, too.
The central banks don't 'print' money, even in a metaphorical sense. They may increase the money supply by creating more credit, but this is debt money that, at some point must be repaid. When it is repaid, the money disappears again. This process is used to 'goose' the economy. Unfortunately the economy seems to be beyond the 'goosing' point and the Fed is facing a big crisis.
The only way I see of actually increasing the money supply is 'monetizing the debt' which, as I understand it, would happen with widespread debt defaults. This would in effect leave all that credit money 'stranded' out in circulation with no one calling the debts due. I'd like to hear a more educated view of this notion. I believe, if the Fed is determined to fight deflation that monetizing the debt through defaults might be one of the few effective things left. This might play havoc with credit markets though, especially when foreign entities are involved. Rock & hard place.
The range of efforts falling into category of "What Is To Be Done" is entirely contrary to the class interests of those at the Fed and other central banks. Except maybe Endless War. [Peak Oil and resource depletion is already playing out as class war.] The central banks are part of a structure built to increase consumption of resources - and to shift it into pockets of corporate and wealthy classes; they might have some of the tools they need to make thing better, but they will not. It does seem that one thing that unites the financial class worldwide is its hatred and fear of everyone else - esp workers.
cfm in Gray, ME
"Don't" is different than "can't". The fact of the matter is that FED can monetize anything it wants, whenever they want it.