So how should the PP behave if the U.S....

[Xan]

Sorry, arguing by asking questions is verboten!  :-)

[Kshartle]

If the Americans make something....and they only get USD paper back from the Chinese, we are worse off. We spent all that time working and they get to enjoy it.

Imagine if they immediately bought 1 trillion worth of stuff. They completely liqudated their reserves. Let's just imagine they were able to sell their Treasuries for the current market value (for ease of argument). Now they turn around and buy a bunch of stuff with the trillion. Maybe it's everything we export for the year and we can't afford any other imports. To the extent Americans still buy foreign stuff the dollar falls because we have to buy the other currency or their central banks get the dollars and sell it to maintain their current reserves.

The end is less stuff for us, wasted effort and just more paper.

You're still not convincing me because you are using an extreme example — we aren't going to become a net exporting nation anytime soon. So, the example isn't all that relevant to us.

And secondly, we still have high unemployment in this country, so despite the fact that we wouldn't get to "enjoy" the production of more whoopee cushions or pet rocks that get sent overseas (an extreme example of disposable junk), increasing exports can be a good thing when unemployment is high because any unemployed citizen who gets hired to an exporting company now has dollars that they can use to feed their families. The dollars these workers spend then get used to pay down debt and credit and can be used to create demand for other goods and services.

Convincing you of what, that if the US makes stuff and the Chinese buy it with their hoarded dollars we are worse off? We have less stuff now and more dollars. The dollars can be traded for other things....but that's importing, we're talking about exporting. Being a net exporter means you are settling for a lower lifestyle than your productivity allows for. It means you can store up savings...and that's great...but if you never spend them then you gave stuff away for free.

If the Chinese decided to spend their 1 trillion USD reserves on stuff here they would get stuff and we would get paper. Incidently, unless you are a real gourmet chef you probably can't feed your family with the paper. You have to buy food. More paper doesn't mean more food it just means higher prices. The spending by the Chinese rather than hoarding will cause the value of the USD to drop (isn't that your bitcoin argument). This is why if they ever "turned" the US into a net exporter, even temporarily, by spending their USD reserves we would feel the pain not reap the benefit.

If you disagree can you point out where I'm wrong?

[Kshartle]

Sorry, arguing by asking questions is verboten!  :-)

The difference is, I state my case (at least I think I do). Sometimes people just ask endless questions as if that disproves someone else's point while never actually pointing out where they disagree. They think that they will "win" an argument if the other person is buried in questions and doesn't answer all of them satisfactorily.

[Gumby]

Convincing you of what, that if the US makes stuff and the Chinese buy it with their hoarded dollars we are worse off?

You're not convincing me because it's a false argument. 1.3 billion Chinese do not have $1 trillion dollars in a vault that they can spend on things. The Chinese government has those reserves, but the government can't spend them on goods — thanks to our purchasing laws. So, those exported dollars can't be easily repatriated by Chinese laborers, in the way you are describing.

If the Chinese decided to spend their 1 trillion USD reserves on stuff

I'll stop you right there. The Chinese governments can't easily "spend" its reserves in the US in the way you are describing. If the government buys 10 aircraft carriers from Russia, over the next decade, and manages to deplete their reserves (never mind that Chinese exporters will continue to accumulate dollars for their government all the while) all that does it shift the dollar reserves from one foreign country to another. The dollars still aren't repatriated in the way you are describing. I still don't see how those dollars will be repatriated easily.

Incidently, unless you are a real gourmet chef you probably can't feed your family with the paper. You have to buy food. More paper doesn't mean more food it just means higher prices.

True. But, not printing paper to buy food means more starving people. Apparently you think it's better to have lower food prices and more people starving?

Oh, sorry, that was a question. I'll rephrase: Apparently you think it's better to have lower food prices and more people starving.

[MediumTex]

Sorry, arguing by asking questions is verboten!  :-)

The difference is, I state my case (at least I think I do). Sometimes people just ask endless questions as if that disproves someone else's point while never actually pointing out where they disagree. They think that they will "win" an argument if the other person is buried in questions and doesn't answer all of them satisfactorily.

All I'm really saying is that any economic disaster involves the sudden and chaotic sale of a certain type of asset or class of assets that people suddenly decide they no longer want to own.

If everyone begins to sell an asset that has fallen out of favor, it means that they must, necessarily, be buying some other asset instead.  Thus, if one asset is losing, another asset is winning.  Even if I sell an asset for cash, I am basically selling my asset and buying cash because I believe that cash is a better asset to own than the asset I am selling.

At any moment in time, the amount of capital that exists in the world is some value X.  Merely reallocating that capital from one economy to another doesn't change the net amount of capital.  Capital can certainly be destroyed, but that's typically the product of war and revolution, not merely investors' changing tastes about the best locations for their capital to go.

If I had to bet on one economy in the world over the next ten years, I would bet on the U.S. economy.  I'm not even sure who would be second on my list.  It definitely wouldn't be China.  The idea of an oppressive communist country with no real hope of seeing a durable middle class emerge any time soon is not something that I would pick as my best capitalist bet over the next decade.

Maybe the U.S. is in terminal decline, but when you look at measures like per capita income, interest rates on sovereign debt, unemployment rates and political stability, the U.S. looks like one of the best places in the world to be, even though it has many imperfections.

[Kshartle]

True. But, not printing paper to buy food means more starving people. Apparently you think it's better to have lower food prices and more people starving?

Oh, sorry, that was a question. I'll rephrase: Apparently you think it's better to have lower food prices and more people starving.

How does printing paper feed people? I can't wait to learn. Can you explain how that works?

The Chinese don't have to literally buy a trillion dollars worth of stuff from us. That is just an easy way to understand the principle. They can simply use their dollars to buy anything from any other group willing to accept them. This will cause the prices of those goods to rise in dollar terms since they are being bid for in dollars. This makes them more expensive for Americans. To the extent other countries or whatever don't want to maintain their current dollar holdings, these dollars will make their way back to our shores. We will have more paper and less stuff because it either gets bid away or we import less stuff because it's more expensive. It's a different way to get to the same result. You are arguing about minutia to avoid the principle.

Do you beleive that the people US would be better off if the Chinese "spent" all their saved dollars, or instead kept hoarding them? If yes please explain, if no, they why are you disagreeing and just nitpicking unimportant details?

Again it's like I'm trying to discuss the consequences of John running over Bill and you're arguing that it was actually John's car that hit Bill. It's not germaine to the discussion. You asked how we'd be worse off if we exported stuff for all the paper floating around in the world and now you want to argue about how the money would actually get here. Does every single thing have to explained in perfect flawless detail from start to finish for anything to be understood?

[Kshartle]

If I had to bet on one economy in the world over the next ten years, I would bet on the U.S. economy.  I'm not even sure who would be second on my list.  It definitely wouldn't be China.  The idea of an oppressive communist country with no real hope of seeing a durable middle class emerge any time soon is not something that I would pick as my best capitalist bet over the next decade.

MT the Chinese middle class is emerging. They are far wealthier than the previous generation(s). It is the opposite here. The US middle class is disappearing. We have the largest US genertion set to leave the labor force and get on the public dole. Who is going to support them? Have you spoken to any recent high school grads? Does it matter if they even go to college? Go to ten bars and ask the bartenders what they majored in.

They live below their means and we live above ours. They have financial reserves, the US has debt.

Yes capital will be relocated, not destroyed in a financial disaster, as well as purchasing power. The point is it will move away from the US when the world stops supporting the dollar by giving us stuff for paper they never spend. Cities are declaring bankruptcy, hundreds more have not declared it yet but they are bankrupt. many States are bankrupt. The federal government is bankrupt. It can never keep it's promises. Do you not think when the con is no longer believed there will be significant consequences?

Do you think the rest of the world will prop up the dollar forever?

[craigr]

Do you think the rest of the world will prop up the dollar forever?

As long as they are buying products made by American companies they will. Because American companies (even if making products overseas) work on US Dollars. Unless of course the world stops going to McDonald's, stops using Apple/Microsoft/Cisco/Dell/Linksys/Google products, decide to cast off their Nikes, stops flying on Boeing jets, ceases to buy Exxon gas, etc.

[MediumTex]

Do you think the rest of the world will prop up the dollar forever?

Is the rest of the world propping it up now?

Isn't the rest of the world doing what is in its own self-interest?  If that's the case, no one is propping up the dollar, they're just using the dollar according to their own self-interest.

Are Walmart shoppers "propping up" Walmart?

***

One thing to keep in mind when thinking about the Chinese middle class is that a characteristic of most middle classes is that they want both economic AND political rights.  This is part of what makes them middle class--they want some say in how their society is structured.  I don't know if the godless Chinese communists are going to be interested in loosening their hold on political rights, and I think that it will create a lot of tension in China that could derail its economic ascent.

The last Chinese revolution produced the largest body count in the 20th century, so there is recent precedent for ugly upheaval in that society.

[Kshartle]

Do you think the rest of the world will prop up the dollar forever?

Is the rest of the world propping it up now?

Yes. The numbers for the trade deficit came out today. 40 bn of goods came in and all the rest of the world got for it was paper. That's every month. By hoarding dollars they support the price, just like Gumby pointed out is happening with bitcoin.

Yes the rulers of these countries must see the hoarding as in their best interest. My question to you is do you think that can go on forever? Incindently the Chinese rurlers just announced it's no longer in their interest to keep hoarding more.

When people buy stuff from walmart they are getting stuff for the dollars, it's the exact opposite. And Walmart isn't hoarding the dollars either, they are spending it on salaries, goods, more stores, sending out dividends etc. so the analogy doesn't work either way.

[MediumTex]

Do you think the rest of the world will prop up the dollar forever?

Is the rest of the world propping it up now?

Yes. The numbers for the trade deficit came out today. 40 bn of goods came in and all the rest of the world got for it was paper. That's every month. By hoarding dollars they support the price, just like Gumby pointed out is happening with bitcoin.

Yes the rulers of these countries must see the hoarding as in their best interest. My question to you is do you think that can go on forever? Incindently the Chinese rurlers just announced it's no longer in their interest to keep hoarding more.

When people buy stuff from walmart they are getting stuff for the dollars, it's the exact opposite. And Walmart isn't hoarding the dollars either, they are spending it on salaries, goods, more stores, sending out dividends etc. so the analogy doesn't work either way.

Nothing will go on forever, but I think that the strength of the U.S. economy is going to go on for a while longer, maybe quite a while.

But I may be wrong.

[Kshartle]

Do you think the rest of the world will prop up the dollar forever?

As long as they are buying products made by American companies they will. Because American companies (even if making products overseas) work on US Dollars. Unless of course the world stops going to McDonald's, stops using Apple/Microsoft/Cisco/Dell/Linksys/Google products, decide to cast off their Nikes, stops flying on Boeing jets, ceases to buy Exxon gas, etc.

They are sending 40 BN worth of goods and services to us each month and getting slips of paper in exchange. The USD paper supply outside of the US is growing by 40 BN every month or they loan it back and hold 40BN in liquid treasuries.

This supports the price of the dollar at the expense of the rest of the world and keeps our borrowing and purchasing costs lower.

The trade deficit is literally the propping up of the value of the dollar by exchanging things of real value for slips of paper. This occurs because foreign central banks are printing their home currency and buying up the dollars, thus lowering the exchange rate and diminishing the standard of living that would otherwise be acheived by the people in the home country. Do you think this will go on forever? Those companies you mention have nothing to do with this concept man.

[Kshartle]

I think that the strength of the U.S. economy is going to go on for a while longer, maybe quite a while.

What do you base that on? See I've made the case for why I think the opposite and it's cast off as doomsday predictions that some people are just naturally drawn to. Obviously I disagree and I think the people ignoring the points I raise are doing so to protect themselves emotionaly.

What strength do you see in the US economy? We consume more than we produce. The central bank is printing 150% of the governments budget deficit annually to keep the government programs going. The labor force is shinking. Over the next 10-15 years a massive wave of people will retire from productive work etc. etc.

[Gumby]

True. But, not printing paper to buy food means more starving people. Apparently you think it's better to have lower food prices and more people starving?

Oh, sorry, that was a question. I'll rephrase: Apparently you think it's better to have lower food prices and more people starving.

How does printing paper feed people? I can't wait to learn. Can you explain how that works?

http://en.wikipedia.org/wiki/Guaranteed_minimum_income
http://en.wikipedia.org/wiki/Basic_income

You print money, and someone who was starving now has money to buy bread. In your world, you are so worried about the price of bread rising a few cents by the minority who might purchase some bread that you'd let them starve. I'm sure it all sounds very "moral" in your book. 

They can simply use their dollars to buy anything from any other group willing to accept them. This will cause the prices of those goods to rise in dollar terms since they are being bid for in dollars.

You really aren't thinking this through. The Chinese government owns most of its "dollars" as Treasuries. In order for it to make any sizable purchase with its Treasuries, the Chinese government would have to sell those Treasuries. Unfortunately for them, they wouldn't be able to find a buyer of that size to liquidate their Treasuries unless they found another large country that was willing to gobble up all their Treasuries at the right place. But, the very sale of all those Treasuries would render their dollars rather worthless (the "elephant getting out of the pool" problem).

So, they wouldn't be able to make any sizable purchases with their reserves. And even if they did, you still have explained how those dollars would make their way back home to American businesses. And even if they did, you haven't explained how $1 trillion in new spending on American shores would make much of a dent in a nation that has over $116 trillion in private and public dollar-denominated financial assets!

Basically you are talking about the inflationary effect of adding a fraction of a penny to a $1 bill. Nice try.

This makes them more expensive for Americans. To the extent other countries or whatever don't want to maintain their current dollar holdings, these dollars will make their way back to our shores. We will have more paper and less stuff because it either gets bid away or we import less stuff because it's more expensive. It's a different way to get to the same result. You are arguing about minutia to avoid the principle.

Again, you are arguing about a drop in the bucket. You aren't convincing me. And its doubtful that more than a fraction of that drop will ever make it back to US shores given that they are in virtually unsellable Treasuries.

Do you beleive that the people US would be better off if the Chinese "spent" all their saved dollars, or instead kept hoarding them? If yes please explain, if no, they why are you disagreeing and just nitpicking unimportant details?

I thought you didn't like it when people asked questions? (You have so many debate rules, its difficult to follow them all.)

I believe the Chinese won't spend much of their dollars (do to logical and real limitations), but it wouldn't hurt us if they did spend them so long as people are unemployed and are struggling to make ends meet. You seem to think that giving struggling Americans money — either via printing or exports — is bad for everyone since that causes money to be redistributed. What a crock. If someone is starving, the best thing you can do for them is get them a job. If that means the only job available making something for exports, so be it. If that means the only job available is making something for printed money, so be it. Better than letting them be homeless and hungry as you would have them do.

You asked how we'd be worse off if we exported stuff for all the paper floating around in the world and now you want to argue about how the money would actually get here

Just because a country exports goods does not mean that it will suck all foreign dollars back into the US. That would only be true if the US stopped importing. If we export $100 worth of goods, and then import $100 worth of good, it's basically no different than if the goods never left the US in the first place. I seriously doubt that the US will become a net exporter any time soon, and so your argument is just not very believable.

And even it was believable (it's not) the amount of dollars being repatriated would still pale in comparison to the amount of financial assets in the private sector. It would barely make much of a dent in our purchasing power. So, we might, or might not, have a tad more inflation, but everyone would be able to feed themselves. You'd be screaming from the rooftops while everyone's stomachs were full.

Does every single thing have to explained in perfect flawless detail from start to finish for anything to be understood?

It helps.

[MediumTex]

I think that the strength of the U.S. economy is going to go on for a while longer, maybe quite a while.

What do you base that on? See I've made the case for why I think the opposite and it's cast off as doomsday predictions that some people are just naturally drawn to. Obviously I disagree and I think the people ignoring the points I raise are doing so to protect themselves emotionaly.

What strength do you see in the US economy? We consume more than we produce. The central bank is printing 150% of the governments budget deficit annually to keep the government programs going. The labor force is shinking. Over the next 10-15 years a massive wave of people will retire from productive work etc. etc.

1. Productive workforce

2. Strong protection of property rights

3. Vast productive capacity

4. Vast natural resource deposits

5. Strongest military in the world

6. Political stability

7. Prime destination for foreign talent and foreign capital

The list goes on and on, but these are some of the highlights.

[Kshartle]

You really aren't thinking this through. The Chinese government owns most of its "dollars" as Treasuries. In order for it to make any sizable purchase with its Treasuries, the Chinese government would have to sell those Treasuries. Unfortunately for them, they wouldn't be able to find a buyer of that size to liquidate their Treasuries unless they found another large country that was willing to gobble up all their Treasuries at the right place. But, the very sale of all those Treasuries would render their dollars rather worthless (the "elephant getting out of the pool" problem).

So, they wouldn't be able to make any sizable purchases with their reserves. And even if they did, you still have explained how those dollars would make their way back home to American businesses. And even if they did, you haven't explained how $1 trillion in new spending on American shores would make much of a dent in a nation that has over $116 trillion in private and public dollar-denominated financial assets!

Wait. You are finally admitting that the dollar value of these financial assets aren't their real value since selling them would obviously cause the price to plummet. Ohhh wow this is quite a breakthrough. I know I've explained this to you over and over and used the Chinese as examples. It nice to see something finally stuck but again, you are arguing minutia so you can avoid the principle. You do this like it's your job. Why I wonder?

The principle works with 1 trillion dollars, 100 trillion, or $1. In trying to understand economic principles you have to set some things constant so you can isolate what you are talking about. Few are able to do this. In particular, when I discuss economic principles with you, you assume other changes that will offset and distort the result. If the Chinese sell their trillion, or 1.1 trillion, or .9 trillion or whatever, AND they buy stuff with it the dollar price of that stuff goes up. We cannot buy as much as we used to. Unless foreign central banks are willing to buy up more of the dollars and hold more than they did before the dollars will come back here because this is where you buy stuff with dollars. They can use them in trade overseas but only if the parties are willing to hold more paper than before. If you make this assumption you can't understand the economic principles and will continue to be confused by this stuff.

More dollars coming here means stuff leaving our shores. Higher prices for imports means less stuff coming in. The Chinese selling their bonds and spending the loot (everything else being equal) is muy malo for us.

Does that make sense? - That's a rhetorical question. I just read through...it all makes sense.

[Kshartle]

True. But, not printing paper to buy food means more starving people. Apparently you think it's better to have lower food prices and more people starving?

Oh, sorry, that was a question. I'll rephrase: Apparently you think it's better to have lower food prices and more people starving.

How does printing paper feed people? I can't wait to learn. Can you explain how that works?

http://en.wikipedia.org/wiki/Guaranteed_minimum_income
http://en.wikipedia.org/wiki/Basic_income

You print money, and someone who was starving now has money to buy bread. In your world, you are so worried about the price of bread rising a few cents by the minority who might purchase some bread that you'd let them starve. I'm sure it all sounds very "moral" in your book. 

Does anyone else here believe this? You print money and magically the poor get fed? I know I've said that some of you really do beleive in the magic of the printing press and this is just more evidence.

Gumby, if printing money feeds poors people (by magic of course) then why not just print money to fix other things? If it solves hunger (a big thing) surely it can magically solve smaller things (boredom maybe). Maybe we can print away all problems. Print away crime, print away bad drivers, print better music, print away unattractive people.

If printing money can feed people as you say, maybe we should just ask the government to print a couple hundred trillion a month and solve every other problem.

[MediumTex]

How does printing paper feed people? I can't wait to learn. Can you explain how that works?

http://en.wikipedia.org/wiki/Guaranteed_minimum_income
http://en.wikipedia.org/wiki/Basic_income

You print money, and someone who was starving now has money to buy bread. In your world, you are so worried about the price of bread rising a few cents by the minority who might purchase some bread that you'd let them starve. I'm sure it all sounds very "moral" in your book. 

Does anyone else here believe this? You print money and magically the poor get fed? I know I've said that some of you really do beleive in the magic of the printing press and this is just more evidence.

Gumby, if printing money feeds poors people (by magic of course) then why not just print money to fix other things? If it solves hunger (a big thing) surely it can magically solve smaller things (boredom maybe). Maybe we can print away all problems. Print away crime, print away bad drivers, print better music, print away unattractive people.

If printing money can feed people as you say, maybe we should just ask the government to print a couple hundred trillion a month and solve every other problem.

This practice is constrained by inflation, as everyone here has been saying all along.

If you give money to poor people so they can buy stuff and it doesn't result in any inflation whatsoever, what is the compelling reason NOT to do it?

If I had a store with a bunch of poor customers, I would love to see them with more spending money in their pockets, especially if my cost of inventory wasn't increasing.

[Gumby]

Wait. You are finally admitting that the dollar value of these financial assets aren't their real value since selling them would obviously cause the price to plummet. Ohhh wow this is quite a breakthrough. I know I've explained this to you over and over and used the Chinese as examples.

I'm sorry, but I don't recall you ever making the "elephant in the pool" argument. And China's selling or buying of Treasuries does not cause inflation any more than POMO — which doesn't cause much, if any, inflation. You're not convincing anyone with these ridiculous over-the-top fantasyland examples. Let's stick to the real world.

The principle works with 1 trillion dollars, 100 trillion, or $1.

Really, it doesn't. And you've never proven otherwise. And even if it does, small amounts of inflation isn't exactly the worst thing in the world. Just because something makes us "poorer" by a few pennies doesn't mean it's worth getting your panties in a bunch.

If the Chinese sell their trillion, or 1.1 trillion, or .9 trillion or whatever, AND they buy stuff with it the dollar price of that stuff goes up.

The Chinese are not going to mobilize "1.1 trillion, or .9 trillion or whatever". Not...going...to...happen, thanks to the elephant in the pool dilemma. Your examples don't work in the real world. Plus, you just admitted to the elephant-in-the-pool effect, above. So, why are you still making up examples that can't happen?

And secondly, when Chinese consumers buy US products — such as iPads — they pay in RMB. It's up to Apple's China division to find someone who has dollars and exchange their RMB for dollars on the open market to buy the products from Apple in California (only the irony is that Apple bought the iPads from Foxconn, so it's really a bit of a wash). China's foreign reserves don't really have anything to do with Apple China buying dollars on the open market unless the Chinese government decides to mobilize those reserves into the open market to affect the FX rate. The only problem is that, once again, the elephant in the pool effect would make that undesirable. So, in a fantasyland scenario where the US were exporting far more to China than it was importing China would realistically only mobilize a fraction of their reserves to affect the FX rate in a favorable manner. And if the US were a net exporting nation, the US would maintain foreign RMB reserves to support its export businesses — and that's how the RMB would become a "reserve currency". But that ain't happening anytime soon. It's a fantasyland scenario where the US is a net exporting nation and the RMB is the world reserve currency that is buying all of those goods throughout the world. Very far fetched. I don't even know why you are trying to argue that.

More dollars coming here means stuff leaving our shores.

At this point, one has to wonder if you are against exports or against imports. I honestly can't tell. You've argued against both as best as I can tell — and you act like both makes us "poorer" somehow. That despite the fact that every country (both importing and exporting countries) have been getting wealthier — by seeing their standard of livings rise over the past century.

The Chinese selling their bonds and spending the loot (everything else being equal) is muy malo for us.

Honestly, you're making no sense. The Chinese government cannot liquidate their Treasuries and buy cars or airplanes from us whenever they want to — they need special permission. The government's purchases are extremely limited by our laws. If China uses dollars to buy an aircraft carrier from another country, all that happens is foreign reserves change ownership — it doesn't cause inflation back in our homeland. No citizens get to touch the dollars.

Furthermore, Chinese laborers do not have "dollars" in their pockets that they can use to purchase anything (their government does, with limited spending ability). Chinese laborers must purchase dollars on the open market if they want to obtain them. You aren't making any sense!

Does that make sense? - That's a rhetorical question. I just read through...it all makes sense.

No! It doesn't make sense. Your explanation is too simplistic and leaves out too many steps. It's all flawed. Chinese citizens don't have dollars. They (or the companies they buy from) would need to buy dollars (from either their government or the private sector) on the open market — thus affecting the value of those dollars in the process. So, if everyone in China decided they wanted to import US goods (again, unlikely since we aren't a net exporting nation), the Chinese people — or, at least, the companies that sell to the Chinese — would have to be buying dollars with RMB on the open market and making dollars stronger every time they tried to obtain them — thus reducing their own purchasing power (and increasing ours)!

Sorry, KShartle... try again.

[Gumby]

http://en.wikipedia.org/wiki/Guaranteed_minimum_income
http://en.wikipedia.org/wiki/Basic_income

You print money, and someone who was starving now has money to buy bread. In your world, you are so worried about the price of bread rising a few cents by the minority who might purchase some bread that you'd let them starve. I'm sure it all sounds very "moral" in your book. 

Does anyone else here believe this? You print money and magically the poor get fed? I know I've said that some of you really do beleive in the magic of the printing press and this is just more evidence.

Gumby, if printing money feeds poors people (by magic of course) then why not just print money to fix other things? If it solves hunger (a big thing) surely it can magically solve smaller things (boredom maybe). Maybe we can print away all problems. Print away crime, print away bad drivers, print better music, print away unattractive people.

If printing money can feed people as you say, maybe we should just ask the government to print a couple hundred trillion a month and solve every other problem.

This practice is constrained by inflation, as everyone here has been saying all along.

If you give money to poor people so they can buy stuff and it doesn't result in any inflation whatsoever, what is the compelling reason NOT to do it?

If I had a store with a bunch of poor customers, I would love to see them with more spending money in their pockets, especially if my cost of inventory wasn't increasing.

Precisely.

[Kshartle]

Does anyone else here believe this? You print money and magically the poor get fed? I know I've said that some of you really do beleive in the magic of the printing press and this is just more evidence.

Gumby, if printing money feeds poors people (by magic of course) then why not just print money to fix other things? If it solves hunger (a big thing) surely it can magically solve smaller things (boredom maybe). Maybe we can print away all problems. Print away crime, print away bad drivers, print better music, print away unattractive people.

If printing money can feed people as you say, maybe we should just ask the government to print a couple hundred trillion a month and solve every other problem.

This practice is constrained by inflation, as everyone here has been saying all along.

If you give money to poor people so they can buy stuff and it doesn't result in any inflation whatsoever, what is the compelling reason NOT to do it?

If I had a store with a bunch of poor customers, I would love to see them with more spending money in their pockets, especially if my cost of inventory wasn't increasing.

Precisely.

Precisely wrong. Have any of you guys ever learned basic economic principles? This is not complicated stuff. More money and equal goods makes higher prices.  In order to deny that reality you have to change the subject to what a shop owner would like, or imagine some other force will jump in to intervene and prevent it from happening. You see when you say nonsense like money-printing doesn't result in prices being higher that they otherwise would you have to keep supporting it with more and more nonsense and subject changing.

It goes like this:

You guys: How does a guy jumping off a 20 story building result in something negative?

KSHARTLE: Well...a guy jumping off a 20 story building and hitting the ground would result in his death.

You guys:
1. No I heard of a guy that lived he was just completely paralyzed after.
2. That's impossible, the buildings have nets.
3. Why would anyone want to jump?
4. It's illegal to do that, your premise is faulty.
5. Someone would stop him.
6. Maybe he wants to kill himself so what's the big deal? Who's to say it's negative?

Look at Gumby's last reply to me for evidence of that. It would take a lifetime to correct all the errors and point out all the contradictions. Here's a couple:

1. Really, it doesn't. And you've never proven otherwise. And even if it does, small amounts of inflation isn't exactly the worst thing in the world.

2. China's selling or buying of Treasuries does not cause inflation any more than POMO — which doesn't cause much, if any, inflation.

Again if you don't understand this stuff and admit that, then why do you post on it?

You also deliberately misstate and missunderstand and add other nonsense in. I explained how the chinese government can buy commodities and other goods from non-US countries and drive up prices for Americans. You change that into some nonsense about the Chinese citizens importing stuff directly from us. You have to change the subject everytime to defend your faulty premises.

Since you're unable to have an actual discussion without deliberate misstating, ignoring of facts, changing the subject constantly, arguing against strawmen or some other invented arguments I have to bow out.

Enjoy the last word.

[Gumby]

Have any of you guys ever learned basic economic principles?

Arguing with simplistic grade-school logic won't get you very far in this conversation. It's a very complex topic.

This is not complicated stuff. More money and equal goods makes higher prices.

Thanks, Mister Monetarist. However, trillions and trillions of dollars have been created by banks and governments over the past few decades and there's been very limited inflation... So, maybe it's time to rethink your "basic economic principles" that are steering you into towards the fear trades.

It would take a lifetime to correct all the errors and point out all the contradictions.

Right. It would take a "lifetime" to correct a few paragraphs of text. It sounds more like you can't correct them.

Here's a couple:

1. Really, it doesn't. And you've never proven otherwise. And even if it does, small amounts of inflation isn't exactly the worst thing in the world.

You're just dodging the questions that matter here. Having the price of bread go from $1.99 to $2.35 isn't such a bad thing if it means that everyone has food in their bellies. Do you disagree?

Your dodging the topic suggests that you'd rather people starve to death than pay an extra few cents for bread. So much for "morality". Show some compassion!

2. China's selling or buying of Treasuries does not cause inflation any more than POMO — which doesn't cause much, if any, inflation.

It doesn't. If anything POMO is deflationary because it removes interest income from the private sector.

Again if you don't understand this stuff and admit that, then why do you post on it?

Enough. If you don't want to listen to us, and Eugene Fama, that's your prerogative. We explained this all to you a few weeks ago here...

http://gyroscopicinvesting.com/forum/ot ... /#msg83311

And you ignored it. You're just alienating yourself whenever you ignore reality and revert back to your overly simplistic "basic economic principles" spiel.

I explained how the chinese government can buy commodities and other goods from non-US countries and drive up prices for Americans.

Sure, they can drive up the cost of commodities via non-US countries. They would be able to do this with or without dollars. This has far more to do with non-renewable resources than the paper they use. In other words, even if we never gave them a single penny, the Chinese would still find a way to accumulate steel, copper and gold, etc. and the cost of everything would still rise regardless of what currency was used to buy those resources.

You change that into some nonsense about the Chinese citizens importing stuff directly from us.

I didn't change the subject. You were the one who kept harping on the idea that the US might become a net exporting nation someday — not me!

You have to change the subject everytime to defend your faulty premises.

Is this another debate rule? No evolving of subjects? I'll add that to the growing list of laws you're imposing on us.

Since you're unable to have an actual discussion...I have to bow out.

Awesome.

[robg]

I thought one of the priinciples with the PP is that you buy the bond/cash portions in your local currency. So people in other countries are running PPs using their countries bonds (or as close as they can get). If the dollar loses its reserve status that principle shouldn't change.  If you live in the US, you'd continue to hold US bonds for that portion.

[I Shrugged]

As an aside, my dad, now in his 90's, was listening to Harry Browne in the early 70's, before I even had a driver's license.  He would go to conferences, read newsletters, and such.  Everyone he listened to said the dollar was doomed, and buy gold.  He bought gold and made a bundle on it.  Dad wanted to use the money to buy land in the hills of Arkansas, and a travel trailer to haul down there.  You know, to avoid the SHTF thing.  I think Mom put her foot down, so no move to the hills.  But they did buy a trailer, and ended up snowbirding in it in Florida.

So today, the dollar is doomed, and preppers are still going strong.
What's old is new again.


Not to say it can't all come to pass.  But HB lived through all this, and wrestled with the same general stuff we are.  I worry about it too, but I'm not smart enough to figure out something better than the PP.

[MediumTex]

Precisely wrong. Have any of you guys ever learned basic economic principles? This is not complicated stuff. More money and equal goods makes higher prices.  In order to deny that reality you have to change the subject to what a shop owner would like, or imagine some other force will jump in to intervene and prevent it from happening. You see when you say nonsense like money-printing doesn't result in prices being higher that they otherwise would you have to keep supporting it with more and more nonsense and subject changing.

Assume that there is a society in which everyone funds their living expenses with credit, and the prices of all goods are determined based upon the availability of credit in the banking system.

If one day the credit completely dries up, the price of everything will essentially fall to zero because there will be a vast excess supply of goods in relations to the money (i.e., credit) available to buy those goods.

In such a situation if the government simply prints up some money in an amount that is more or less equal to the amount of credit that has suddenly dried up, what would happen?

I think that in a sense it is true that the money printing I am describing would be inflationary in that it would take many goods that had become basically worthless and help restore their prices to something similar to what they had been prior to the credit crisis, but I don't know what the mechanism would be for higher inflation than that, especially if the "money printing" was done on a scale that was tied to the scale of the credit contraction that had occurred within the economy in the first place.

Is my thinking out of whack?