boglerdude wrote: ↑
Wed May 15, 2019 12:31 am
What about not being allowed to take your money from the bank. eg they offer 0% for liquidity, and 4% for a yearly CD. 250,000 FDIC guaranteed instant liquidity seems like way too much. And margin loans seem like a product that should not exist. They make a "deflationary spiral/panic" worse.
Maybe these ideas are better than printing money/always reflating "bubbles"
> Because in most cases the loan gets paid back/the money gets destroyed, so it's only temporarily inflationary to make the loan in our fractional reserve system, vs just printing and handing out the money, which is 100% and permanently inflationary?
yeh, "natural" inflation is driven by new household formation (population growth). Someone turns 25, takes out a car loan, student loan, and mortgage. They pay them off by 40 (for example). So if your avg population is 40 and increasing, you get deflation. So the BOJ is buying up Japanese companies. Imagine Trump (ie the government) buying your local Taco Bell. Im not sure this is ideal, but its the plan for next time US stocks drop ~50%.
When the loan gets paid back the money does not get destroyed, it is used as capital to finance other loans.
There are also other factors to inflation than just the amount of money in circulation. Case in point, look at the last 10 years. We've printed more money than we ever have post industrial revolution, yet inflation has been anemic. The next greatest period of time for money printing was WWII and inflation was not super high then either. If money supply and inflation were truly correlated this would not be possible. Inflation is driven mostly by a mix of confidence and population demographics. As long as the population demographics are not improving, and the majority fully trust the currency, inflation will stay tame. Now look at the 70s on the other hand. What did they have? A very inflationary demographic of baby boomers coming of age, a generation of baby boomers that had lost all trust in the government because of Vietnam, as well as some supply shortages and drama in the currency and politics that caused the general public to lose even more trust in the government and the currency.
For whatever reason, millennials currently are very trusting in the government, matter of fact they want the governments power to grow to levels never seen in this country before because they trust it so much. Combine that with an aging baby boomer generation, and the fact that most millennials are getting a later start in life than past generations, as well as the student loan crisis... and that is the real reason inflation has been so tame. I see a lot of these inflationary headwinds turning into tailwinds in the next decade though, as the bulk of the boomer retirement bandaid gets ripped off, the large population of millennials come of age, finally join the workforce, and start advancing in their careers / earning more money. I also think that the current populist movements on both the left and the right are eventually going to break the millennials trust in the government and that will effect the currency.
Japan is a scary example that I hope doesn't happen here. They are literally choosing the haves and have nots. This is a very dangerous road to go down, and I have a feeling this will come back to bite them at some point. Well, it already is, the reason why they have such anemic growth is because they don't allow the unproductive branches to be pruned to make way for more productive ones. But it's going to get much worse before it gets better.