How many people agree with MR/MT theory described on the forum

[Gumby]

The possibility is extremely remote, but as it grows larger the incentive to print grows and this provides clues to what is going on.

Either you've misconstrued what Browne wrote, or Browne didn't want to wade into the mechanics in his book (i.e. he oversimplified it). There is no "Printing Press" that is rolled out to fund the government when the debt somehow appears to be large. Any left over T-Bonds at auction are always purchased by the excess reserves in the banking system that is created by previous government spending. If the reserves don't exist, they either delay the auctions until they do exist or the Fed makes a short term loan to create the reserves and then the reserves are paid back to the Fed once the Treasury spends to create the reserves. That's how it works. The system is rigged so that the banking system always has the reserves to buy Treasuries at auction.

Currently there is ZERO problem of finding the reserves to buy Treasuries at auction because THERE IS A LARGE SURPLUS OF RESERVES right now that the banks would love to swap for Treasury bonds!

If base money is becoming a greater percentage of the money supply it means

It means very little since Base money is only about 5% of the broad money supply.

[MediumTex]

When does anyone think that prices will start rising in a strong and sustained upward direction in response to Fed policies?

I'm assuming we all agree that prices have been pretty stable (especially wages) in the five years or so since the Fed began its "printing."

All I hear from people is how hard it is to raise prices in the current environment.  I just wonder when anyone thinks that will change beyond the Fed's inflation target of 3-4%.

Some prices have been anything but stable: The S&P 500 has almost doubled from the low in 2009, and the housing market is now roaring ahead.

That's where the money has been going.

The S&P 500 is only slightly higher than it was over a decade ago.

Housing prices have increased from their recession lows, but they are still mostly lower than their 2006-2007 peaks.

An asset recovering to pre-crisis price levels isn't really what I think of when I think of inflation.

My parents bought a house in 1972 for $12,500 and sold it in 1981 for $59,500.  That's inflation.

[Kshartle]

When does anyone think that prices will start rising in a strong and sustained upward direction in response to Fed policies?

I'm assuming we all agree that prices have been pretty stable (especially wages) in the five years or so since the Fed began its "printing."

All I hear from people is how hard it is to raise prices in the current environment.  I just wonder when anyone thinks that will change beyond the Fed's inflation target of 3-4%.

They will have to print a lot more than they are currently. The rate of increase will probably have to increase. I don't think they're going to get much more help from the banks. If the economy produces less as a result of the distortions this will cause prices to rise also since the denominator of the general price level equation is getting smaller.

The wild card is the trade deficit. If other governments fear inflation in their countries and stop propping up the exchange rate then we've got big problems here.

[Libertarian666]

When does anyone think that prices will start rising in a strong and sustained upward direction in response to Fed policies?

I'm assuming we all agree that prices have been pretty stable (especially wages) in the five years or so since the Fed began its "printing."

All I hear from people is how hard it is to raise prices in the current environment.  I just wonder when anyone thinks that will change beyond the Fed's inflation target of 3-4%.

Some prices have been anything but stable: The S&P 500 has almost doubled from the low in 2009, and the housing market is now roaring ahead.

That's where the money has been going.

The S&P 500 is only slightly higher than it was over a decade ago.

Housing prices have increased from their recession lows, but they are still mostly lower than their 2006-2007 peaks.

An asset recovering to pre-crisis price levels isn't really what I think of when I think of inflation.

My parents bought a house in 1972 for $12,500 and sold it in 1981 for $59,500.  That's inflation.

If the S&P 500 would be 900 in the absence of money printing and is now 1800 in the presence of money printing, then that is an example of inflation.

Of course, the impossibility of knowing what prices would be in the absence of money printing (or any other alternative situation that does not actually obtain) is a main reason that economics is a qualitative science, not a quantitative one: you cannot disentangle all the effects of economic causes in numerical terms. All you can say that prices are higher than they would be in the absence of money printing.

[Kshartle]

Some prices have been anything but stable: The S&P 500 has almost doubled from the low in 2009, and the housing market is now roaring ahead.

That's where the money has been going.

The S&P 500 is only slightly higher than it was over a decade ago.

Housing prices have increased from their recession lows, but they are still mostly lower than their 2006-2007 peaks.

An asset recovering to pre-crisis price levels isn't really what I think of when I think of inflation.

My parents bought a house in 1972 for $12,500 and sold it in 1981 for $59,500.  That's inflation.

If the S&P 500 would be 900 in the absence of money printing and is now 1800 in the presence of money printing, then that is an example of inflation.

Of course, the impossibility of knowing what prices would be in the absence of money printing (or any other alternative situation that does not actually obtain) is a main reason that economics is a qualitative science, not a quantitative one: you cannot disentangle all the effects of economic causes in numerical terms. All you can say that prices are higher than they would be in the absence of money printing.

last paragrah big ups.

That's why I focus on logic and reason not specific data from this year or that year or this country etc. You don't need any of that noise if you understand the economic principles (some might call them laws).

Also, the effects of the "invisible fist" to distort are nearly impossible for almost everyone to see. When you see it like second nature you are out of the matrix. More preciesly you are in the matrix but aware of it talking to people who aren't aware.

[moda0306]

Kshartle,

With demand below productive capacity, what makes you so confident that it's market distortions, not just a simple lack of demand, that is inhibiting investment?

If there was adequate demand for a widget, and you knew the nominal price of the product would go up by over 3% every year (maybe more like 5% or 10% or whatever you think inflation would be), but you could borrow money at 4% to build a factory to churn these out, then why the hell wouldn't you build the factory?

I hear these inflation predictions from Austrians, and that rates are "artificially low," and I'm wondering how on God's green earth there isn't more investment if their assessment of the economy is correct.  If inflation is sure to be high, and rates are artificially low, then investment should be rampant.

[Libertarian666]

Kshartle,

With demand below productive capacity, what makes you so confident that it's market distortions, not just a simple lack of demand, that is inhibiting investment?

If there was adequate demand for a widget, and you knew the nominal price of the product would go up by over 3% every year (maybe more like 5% or 10% or whatever you think inflation would be), but you could borrow money at 4% to build a factory to churn these out, then why the hell wouldn't you build the factory?

I hear these inflation predictions from Austrians, and that rates are "artificially low," and I'm wondering how on God's green earth there isn't more investment if their assessment of the economy is correct.  If inflation is sure to be high, and rates are artificially low, then investment should be rampant.

How could anyone ever know what the government is going to do? All you can know is that they can do whatever they want, and will pay little or no attention to anyone's rights, property or otherwise.

In an environment like that, it's a miracle that anyone is willing to invest in anything productive.

[Kshartle]

Kshartle,

With demand below productive capacity

Demand isn't below productive capacity. Desires are limitless. The only constraint on demand is production. Everything produced (I mean except a complete turd) will be demanded.

It's productive capacity that is not being maximized. It's not a function of demand. It's a function of being able to produce profitably. More money due to printing or redistribution only gives the illusion of profitability and only at the expense of something better.

All "stimulation" of demand makes us poorer, wastes resources, impoverishes some at the expense of others, destroys lives, families, creates crime and poverty. It's extremely imoral as viewed either by it's results or the basic recognition that it's theft.

When you understand and accept the last sentence you don't even have to go any further.

[Gumby]

Demand isn't below productive capacity. Desires are limitless.

Oh brother... 

[MediumTex]

Kshartle,

With demand below productive capacity, what makes you so confident that it's market distortions, not just a simple lack of demand, that is inhibiting investment?

If there was adequate demand for a widget, and you knew the nominal price of the product would go up by over 3% every year (maybe more like 5% or 10% or whatever you think inflation would be), but you could borrow money at 4% to build a factory to churn these out, then why the hell wouldn't you build the factory?

I hear these inflation predictions from Austrians, and that rates are "artificially low," and I'm wondering how on God's green earth there isn't more investment if their assessment of the economy is correct.  If inflation is sure to be high, and rates are artificially low, then investment should be rampant.

How could anyone ever know what the government is going to do? All you can know is that they can do whatever they want, and will pay little or no attention to anyone's rights, property or otherwise.

In an environment like that, it's a miracle that anyone is willing to invest in anything productive.

And yet in the current generation the most economic prosperity we experienced coincided with the government beginning to run enormous budget deficits that were used to build weapons of mass destruction that created a very realistic risk of annihilation of the whole human species.

If there were ever a period when wacky governmental policies seem like they should have damaged the economy, it was the 1980s, and yet they didn't.

That's weird, isn't it?

[Kshartle]

Demand isn't below productive capacity. Desires are limitless.

Oh brother... 

Well put.

[MediumTex]

Demand isn't below productive capacity. Desires are limitless. The only constraint on demand is production. Everything produced (I mean except a complete turd) will be demanded.

If there is plenty of stuff out there to buy, why are many companies having trouble selling all of it?

What is keeping you from buying all of the stuff that you want?

[moda0306]

The S&P 500 is only slightly higher than it was over a decade ago.

Housing prices have increased from their recession lows, but they are still mostly lower than their 2006-2007 peaks.

An asset recovering to pre-crisis price levels isn't really what I think of when I think of inflation.

My parents bought a house in 1972 for $12,500 and sold it in 1981 for $59,500.  That's inflation.

If the S&P 500 would be 900 in the absence of money printing and is now 1800 in the presence of money printing, then that is an example of inflation.

Of course, the impossibility of knowing what prices would be in the absence of money printing (or any other alternative situation that does not actually obtain) is a main reason that economics is a qualitative science, not a quantitative one: you cannot disentangle all the effects of economic causes in numerical terms. All you can say that prices are higher than they would be in the absence of money printing.

last paragrah big ups.

That's why I focus on logic and reason not specific data from this year or that year or this country etc. You don't need any of that noise if you understand the economic principles (some might call them laws).

Also, the effects of the "invisible fist" to distort are nearly impossible for almost everyone to see. When you see it like second nature you are out of the matrix. More preciesly you are in the matrix but aware of it talking to people who aren't aware.

The effects aren't that much of a mystery of the "invisible fist" if you're looking at how it's fisting the economy correctly .

Reason and logic are great, but if you're simply closing your mind to the idea that there isn't that much fundamentally different between treasury debt and reserves (both liabilitiesof the government and assets of the private sector), then you're reason and logic will fail... and has decade after decade.

Literally, this is where it's at.  Increasing the money supply, when there is a corresponding decrease in another form of near-money, is not going to be fundamentally inflationary.  Forget about velocity.... there's not even really more quantity there.

And the quantity can be taken away to boot!  The fed can remove the reserves as the inflation level kicks up and/or unemployment drops.  The fed has given us very little reason to think it won't do this, unless maybe it would kick off a US government debt-crisis (but then that would likely be deflationary and induce high unemployment, thereby re-inducing the fed to buy treasuries with reserves).

Your reason and logic is built around a mix of assumptions about the role of the fed and banks and who benefits from these actions that seem to change depend on what you're trying predict.  Either the fed is independent or it's not.  Either the market sets rates or it does not.  Either banks are complicit in the circle-jerk or they are not.  Either "artificially low rates" induce inflation or they do not.  Either savers are hurt by QE or they benefit.  Either business owners benefit from expanded credit, or they do not.  Either treasury debt is essentially interest-bearing cash due to fed non-independence, or it is a normal debt, and the fed will act independently to balance inflation and unemployment.

You can't weave your logic and narrative in and out of opposing positions over and over and then brag about using reason or logic (sounded snarky... really not meant to).  We need to at the very least be consistent in our assertions about what is fundamentally happening here.

[Libertarian666]

Kshartle,

With demand below productive capacity, what makes you so confident that it's market distortions, not just a simple lack of demand, that is inhibiting investment?

If there was adequate demand for a widget, and you knew the nominal price of the product would go up by over 3% every year (maybe more like 5% or 10% or whatever you think inflation would be), but you could borrow money at 4% to build a factory to churn these out, then why the hell wouldn't you build the factory?

I hear these inflation predictions from Austrians, and that rates are "artificially low," and I'm wondering how on God's green earth there isn't more investment if their assessment of the economy is correct.  If inflation is sure to be high, and rates are artificially low, then investment should be rampant.

How could anyone ever know what the government is going to do? All you can know is that they can do whatever they want, and will pay little or no attention to anyone's rights, property or otherwise.

In an environment like that, it's a miracle that anyone is willing to invest in anything productive.

And yet in the current generation the most economic prosperity we experienced coincided with the government beginning to run enormous budget deficits that were used to build weapons of mass destruction that created a very realistic risk of annihilation of the whole human species.

If there were ever a period when wacky governmental policies seem like they should have damaged the economy, it was the 1980s, and yet they didn't.

That's weird, isn't it?

We can never know in detail how the 1980's would have been if the government hadn't been spending wildly. All we can know is that they were wasting resources, which made everyone poorer than they would have been otherwise.
As always, economics is a qualitative science, not a quantitative one.

[Kshartle]

Kshartle,

With demand below productive capacity, what makes you so confident that it's market distortions, not just a simple lack of demand, that is inhibiting investment?

If there was adequate demand for a widget, and you knew the nominal price of the product would go up by over 3% every year (maybe more like 5% or 10% or whatever you think inflation would be), but you could borrow money at 4% to build a factory to churn these out, then why the hell wouldn't you build the factory?

I hear these inflation predictions from Austrians, and that rates are "artificially low," and I'm wondering how on God's green earth there isn't more investment if their assessment of the economy is correct.  If inflation is sure to be high, and rates are artificially low, then investment should be rampant.

How could anyone ever know what the government is going to do? All you can know is that they can do whatever they want, and will pay little or no attention to anyone's rights, property or otherwise.

In an environment like that, it's a miracle that anyone is willing to invest in anything productive.

And yet in the current generation the most economic prosperity we experienced coincided with the government beginning to run enormous budget deficits that were used to build weapons of mass destruction that created a very realistic risk of annihilation of the whole human species.

If there were ever a period when wacky governmental policies seem like they should have damaged the economy, it was the 1980s, and yet they didn't.

That's weird, isn't it?

Please see Tech's prior post. We can't be certain what would have been produced instead of those weapons but we can be certain it would have been better because the market would have demanded it. It would have been what we want.

You can look at any time period you want. If someone doesn't understand the principles they will forever be scratching their heads.

[moda0306]

Kshartle,

With demand below productive capacity, what makes you so confident that it's market distortions, not just a simple lack of demand, that is inhibiting investment?

If there was adequate demand for a widget, and you knew the nominal price of the product would go up by over 3% every year (maybe more like 5% or 10% or whatever you think inflation would be), but you could borrow money at 4% to build a factory to churn these out, then why the hell wouldn't you build the factory?

I hear these inflation predictions from Austrians, and that rates are "artificially low," and I'm wondering how on God's green earth there isn't more investment if their assessment of the economy is correct.  If inflation is sure to be high, and rates are artificially low, then investment should be rampant.

How could anyone ever know what the government is going to do? All you can know is that they can do whatever they want, and will pay little or no attention to anyone's rights, property or otherwise.

In an environment like that, it's a miracle that anyone is willing to invest in anything productive.

Yet we and other coercive countries have educated, forward-looking, cautious people making amazing investments into amazing technology year after year.  Maybe it's a miracle, or maybe you're just hugely, severely mistaken as to the harmful nature of government coercion.

I apologize if that sounded a bit pointed, but miracles aren't common.  Maybe you're just wrong.

[MediumTex]

Kshartle,

Given the condition of the government's finances today, do you think that the economy would be better or worse off if the government enacted deep spending cuts?

If the government kept spending at current levels, would you be in favor of a large tax cut?  I'll bet that you would say you would like a large tax cut AND large spending cuts, but the Reagan and Bush II Administrations showed us that this isn't how it works.  The government never really cuts spending, if anything it just slows the growth of spending, so we don't really have the option of tax cuts accompanied by spending cuts (which makes the first question above sort of academic, but I'm still interested in your answer).

[moda0306]

Kshartle,

With demand below productive capacity

Demand isn't below productive capacity. Desires are limitless. The only constraint on demand is production. Everything produced (I mean except a complete turd) will be demanded.

It's productive capacity that is not being maximized. It's not a function of demand. It's a function of being able to produce profitably. More money due to printing or redistribution only gives the illusion of profitability and only at the expense of something better.

All "stimulation" of demand makes us poorer, wastes resources, impoverishes some at the expense of others, destroys lives, families, creates crime and poverty. It's extremely imoral as viewed either by it's results or the basic recognition that it's theft.

When you understand and accept the last sentence you don't even have to go any further.

So when an unemployed construction worker wants a tax return done, and an unemployed plumber wants a deck built, and an unemployed accountant needs his crapper cleaned out, but none can "afford" to hire the other, are you sure that this isn't just a Mexican Standoff induced by a monetized economy with not enough money that's not built to barter anymore?

[Kshartle]

Demand isn't below productive capacity. Desires are limitless. The only constraint on demand is production. Everything produced (I mean except a complete turd) will be demanded.

If there is plenty of stuff out there to buy, why are many companies having trouble selling all of it?

What is keeping you from buying all of the stuff that you want?

I don't have enough money.

[Kshartle]

Kshartle,

With demand below productive capacity

Demand isn't below productive capacity. Desires are limitless. The only constraint on demand is production. Everything produced (I mean except a complete turd) will be demanded.

It's productive capacity that is not being maximized. It's not a function of demand. It's a function of being able to produce profitably. More money due to printing or redistribution only gives the illusion of profitability and only at the expense of something better.

All "stimulation" of demand makes us poorer, wastes resources, impoverishes some at the expense of others, destroys lives, families, creates crime and poverty. It's extremely imoral as viewed either by it's results or the basic recognition that it's theft.

When you understand and accept the last sentence you don't even have to go any further.

So when an unemployed construction worker wants a tax return done, and an unemployed plumber wants a deck built, and an unemployed accountant needs his crapper cleaned out, but none can "afford" to hire the other, are you sure that this isn't just a Mexican Standoff induced by a monetized economy with not enough money that's not built to barter anymore?

Why don't they lower their prices? There's enough money but prices have to come down.

You can always sell anything (again except a turd) if you price it at a penny.

[MediumTex]

Please see Tech's prior post. We can't be certain what would have been produced instead of those weapons but we can be certain it would have been better because the market would have demanded it. It would have been what we want.

You can look at any time period you want. If someone doesn't understand the principles they will forever be scratching their heads.

Couldn't we just look at the economy during the Carter administration when government spending was at FAR lower levels than they were in the 1980s to see the private sector production that occurred when the government wasn't crowding out the private sector?

It looks to me like this production simply wasn't occurring during the Carter administration.

Similarly, if you look at the early 1940s are we really going to say that the economy would have been even MORE productive had the government not been wasting so many resources on guns and bombs?  That seems farfetched to me (especially considering U.S. economic output in the decade preceding the U.S.'s entry into WWII).

[Kshartle]

Kshartle,

Given the condition of the government's finances today, do you think that the economy would be better or worse off if the government enacted deep spending cuts?

If the government kept spending at current levels, would you be in favor of a large tax cut?  I'll bet that you would say you would like a large tax cut AND large spending cuts, but the Reagan and Bush II Administrations showed us that this isn't how it works.  The government never really cuts spending, if anything it just slows the growth of spending, so we don't really have the option of tax cuts accompanied by spending cuts (which makes the first question above sort of academic, but I'm still interested in your answer).

I really only care about the spending cuts first. If they can get it down to zero there will be no one left to rob me!

Cutting taxes but not spending only means more borrowing and printing which is worse than taxing.

[moda0306]

Demand isn't below productive capacity. Desires are limitless. The only constraint on demand is production. Everything produced (I mean except a complete turd) will be demanded.

If there is plenty of stuff out there to buy, why are many companies having trouble selling all of it?

What is keeping you from buying all of the stuff that you want?

I don't have enough money.

And this is the whole thing Kshartle.... if you starve a growing economy of enough money, you end up with productive capacity that goes unused.  Your line about desires being limitless is true, and that supply would normally be the only constraint, but that's in a BARTER system... in a debt-based monetary economy you can have inadequate demand.  The Great Depression is a great example... does that look like "limitless desires" at work?  No... it's an economic Mexican Standoff caused by a monetized economy.

Unemployment doesn't occur in a barter economy.  People are used to trading skills for skills, and can clear debts by doing stuff, rather than chasing after a scarce medium of exchange when everyone else is doing the same.

[MediumTex]

Demand isn't below productive capacity. Desires are limitless. The only constraint on demand is production. Everything produced (I mean except a complete turd) will be demanded.

If there is plenty of stuff out there to buy, why are many companies having trouble selling all of it?

What is keeping you from buying all of the stuff that you want?

I don't have enough money.

But if your concern is that Fed policies are introducing too much money into the economy relative to the quantity of goods and services that are available, shouldn't this money be trickling down to you and me so that we WILL have enough money to buy more of the stuff we want (which will translate into price inflation if it persists)?

It seems to me that you should have too much money right now, which would be the catalyst for a reduction in purchasing power of each dollar.

[MediumTex]

I really only care about the spending cuts first. If they can get it down to zero there will be no one left to rob me!

Cutting taxes but not spending only means more borrowing and printing which is worse than taxing.

Putting aside the theft aspect of taxes (which I agree with), why do you think that the economy of the 1980s and 1990s only started to really rock and roll when government spending was cranked up and budget deficits exploded?

Why do you think that in the late 1990s as the government's deficits began shrinking the economy began to sputter?

Do you think that there is any relationship between government spending and the health of the economy, or are the two events I am describing above (i.e., the expansion and contraction of the budget deficit) unrelated to what was happening in the broader economy?

It seems to me that as the government began to get its financial house in order in the mid to late 1990s, that should have been the catalyst for even stronger economic growth, and yet it wasn't.  Why do you think that was the case?