Higher wages help hide higher prices. Of course the FED wants you to make more money - it helps to distract you from FED induced inflation. Besides it creates more tax revenue. The biggest problem is that higher wages fuels inflation. It increases all the costs that go into what you buy.
Also forces the minimum wage worker (if $10.10 becomes the benchmark) to pony up for health insurance. At current minimum for 40 hours, he is currently under the income threshold.
Of course he could lose his job or be reduced to part time status with the higher wage, but that seems to not matter to the savants of the beltway.
the whole higher inflation, higher wages issue would be irrelevent if the FED realized that all inflation is bad. Somehow they are convinced that 2% inflation is healthy. Do you consider 2% price increases to be healthy. The FED also considers deflation to be bad. Do you consider lower prices to be bad?
To those in such positions (i.e. the Fed etc), the economy is a game and they enjoy the manipulation. Many think they are actually doing good. Of course, they are not, and eventually, most of us will pay a terrible price for what they are doing. Cheers, RickO
<< <i>To those in such positions (i.e. the Fed etc), the economy is a game and they enjoy the manipulation. Many think they are actually doing good. Of course, they are not, and eventually, most of us will pay a terrible price for what they are doing. Cheers, RickO >>
I do not believe that the Fed's aggregate targets for huge averages apply to me personally, perhaps I deserve a raise and promotion, perhaps I deserve a pay cut or to be fired. Which it is would be is determined by my supervisor's opinion of my performance at the job, not by any Fed mandate.
Do you consider lower prices to be bad?
For things that I buy, no, of course not. For things I sell, of course lower prices are bad. Is this a trick question?
Are we going to zoom from the general to the specific, and back again?
<< <i>1) Wages are rising too slowly: Since the recession, worker compensation has increased an average of 2% per year -- very low by historical standards. >>
The Fed often notes that their target inflation rate is 2 or 2.5%. If wages increase say 4% per annum going forward, is the inflation rate not likely to at least match that number in the Feds mind?
Maybe they were better of in the pre transparency past, when the idiocy, lies and half truths remained behind closed doors.
There would be no need for cost of living raises or increases in minimum wage if there were no inflation. Under such a scenario raises would be for performance/increases in productivity, not to keep up with prices. Inflation and Wage increases are a vicious cycle in which the consumer always seems to be lagging.
The FED also considers deflation to be bad. Do you consider lower prices to be bad? "
What about the argument that deflation results in significant economic downturn as people stop spending now because they know prices will be lower in the future…i.e., they delay/put off purchases and the economy slows down and stalls? Was this not the issue with Japan the last 20 years or so? People stop buying, inventories back up, people get laid off and jobs are lost further fueling more price declines/more deflation as supply outpaces demand. Just asking!
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<< <i>What about the argument that deflation results in significant economic downturn as people stop spending now because they know prices will be lower in the future…i.e., they delay/put off purchases and the economy slows down and stalls? >>
If that logic were accurate, sales of computers, Iphones and 99" televisions would plummet as a better unit is almost always available for a lesser cost in the future.
Folks spend money when they have it and nearly as importantly, have confidence in the future of the economy. Average American worker has seen a real annual decline in buying power of 4 or 5% since 2008. As food, medical and auto related expenses rise, consumption of non necessities decline.
Exception of course is the high end designer products that the top 2% can easily afford.
The fed needs inflation so that the average consumer can pay off his debt. The whole economic and monetary system in the United States and the whole world depends on debt. If you borrow a fixed amount of money at a fixed interest rate, then inflation helps you to pay off your debt with devalued dollars thereby freeing up more money for you to take on additional debt. The economic system can not survive without debt expansion.
<< <i>The fed needs inflation so that the average consumer can pay off his debt. The whole economic and monetary system in the United States and the whole world depends on debt. If you borrow a fixed amount of money at a fixed interest rate, then inflation helps you to pay off your debt with devalued dollars thereby freeing up more money for you to take on additional debt. The economic system can not survive without debt expansion. >>
That is the intent of the 2% inflation target. Not so much to have a bit of inflation but to avoid deflation. Problem is 2% inflation is not consistent with $3,000,000,000,000 in freshly printed currency.
Once the lenders get a sniff of 10% inflation, they will demand a much greater return on their investment and with the higher interest rates, the economy skids.
<< <i>The fed needs inflation so that the average consumer can pay off his debt. The whole economic and monetary system in the United States and the whole world depends on debt. If you borrow a fixed amount of money at a fixed interest rate, then inflation helps you to pay off your debt with devalued dollars thereby freeing up more money for you to take on additional debt. The economic system can not survive without debt expansion. >>
That is the intent of the 2% inflation target. Not so much to have a bit of inflation but to avoid deflation. Problem is 2% inflation is not consistent with $3,000,000,000,000 in freshly printed currency.
Once the lenders get a sniff of 10% inflation, they will demand a much greater return on their investment and with the higher interest rates, the economy skids. >>
I couldn't agree more! However the fed has been able to suppress interest rates for much longer than I thought they would. Eventually investors will start to demand much higher interest rates for the privilege of being able to use their money. For now they have no alternative for "conservative" investments but to hold their nose and buy bonds at two percent interest. People are still scarred from the stock market bloodbath of '08 and will invest in bonds paying interest that is less than inflation because they don't know what else to do with their money.
The Fed can't expect to cause inflation while letting the worker suffer the consequences. 2000 Hopkins hospital workers here in Baltimore warn of striking unless they get a raise. Of course this tactic can only work with unions. Most of these hospital workers are on Medicaid and food stamps to support their families.
At least the Fed government is trying to help the low wage earners with a minimum wage increase. They realize they can no loner support these low wage earners forever with food stamps and Medicaid. Walmart being the biggest offender.
Maybe congress should pass a law when a company earns a certain threshold in profits at the expense of its workers, it needs to put those extra profits toward making sure it workers receive a decent living wage. When the company achieves fair wages for its employees, than it can continue to keep those profits for its shareholders. The Federal government needs to shift the responsibility of subsidizing these low wage workers to the private sector. Just the price of doing business here in the U.S. Probably socialistic, but sometimes capitalism needs to be reigned in. As it is now, the capitalistic system in the U.S. itself is causing the socialistic government support of these low wage earners and QE to infinity doesn't help except the 1%. The middle class is being destroyed. Once that happens, its game over.
Idonno, it seems confusing at best trying to understand the logic or financial strategy of how the gov and our leaders are trying to help make things better for the citizens.
For example, the epic amount of money and resources spent to promote and enable the health care law/tax. Billions of dollars in 50-100 million lumps spent to try and get 7 million people insured, like this is a great "New Deal" level administrative success but 7 million people is 2% of the population (at least the ones we know about). Great job...but for the money spent to promote, maintain, administer, drive this thing into the future, why didn't the gov just give out health care vouchers for free and save a boat load of money in the process? 7 mill health care vouchers don't seem like much of a hump. The only rule is that you have to be a US citizen.
Another example, QEi expense was running at $85 BBBBillion a month for a couple of years in an effort to increase employment and to sustain the ability to keep our banking system/stock market in a good place...for the good of the citizens. So in two years, the gov could have given each smilin' Jack and Jill and every child $6000 each; seems like that would have helped a lot. $3000 a year might not seem like much but for a family of four, that is an extra $1000 a month for the family for two years. That could have done some good for a lot of people, 350,000,000 of them...talk about happy days are here again but instead, the citizenry got squat out of the deal other than 16 trillion in debt they will be paying off for the rest of their lives. They should have just given the money to the people since they are the ones that will have to pay it back anyway.
One more example might be the student loan funding increases that are to insure that everyone has a chance at a college degree regardless of their academic qualifications...certainly a noble idea. Well, before all this student loan funding increase, the citizens with a degree was hovering around 10% of the population and it hasn't changed much from there even with the enhanced access to student loans. If you have a pulse and can sign your name, you can go to some kind of college on a loan program. The only thing that has changed is somehow the gov and loan funders have managed to hook up a significant number of 24-30 year olds up with a part of trillions of dollars of student loan debt that they will have to individually pay off over the course of their life. Why not just give them a provisional degree or something without all the debt and having to go to classes?
And while we are at it...the huge controversy over using names like redskins, warriors, rebels, and other brave names for our sports teams. Why not make a rule that all sports teams from high school to pro be named after plants? Imagine the Dallas Spiked Rushes v.s. the Washington Quaking Oaks or the Memphis Dropseeds v.s. the New York Vomitoria? End of controversy!
<< <i>Maybe congress should pass a law when a company earns a certain threshold in profits at the expense of its workers, it needs to put those extra profits toward making sure it workers receive a decent living wage >>
Sure thing, another government solution. Obamacare has been a huge success.
What happens when a company has a losing year, should the employees donate their time to the cause, of course not.
You cite Wal-Mart as an example of a business whose employees would benefit from a hike in the minimum wage. In what way? Very few, if any WalMart employees earn less than $9 an hour. So hike it to $10.10 (which would take 3 years under the Obama proposal and the Wal-Mart worker falls even further behind.
Socialism/communism has failed in every nation during every century that it has been attempted, and the current jokers in DC do not have a magic formula that will make it successful now.
Why not make a rule that all sports teams from high school to pro be named after plants? Imagine the Dallas Spiked Rushes v.s. the Washington Quaking Oaks or the Memphis Dropseeds v.s. the New York Vomitoria?
I like it!!
To the OP....the FED/White House is finally realizing that there cannot be inflation without ability to pay higher prices.
<< <i>Why not make a rule that all sports teams from high school to pro be named after plants? Imagine the Dallas Spiked Rushes v.s. the Washington Quaking Oaks or the Memphis Dropseeds v.s. the New York Vomitoria?
I like it!!
To the OP....the FED/White House is finally realizing that there cannot be inflation without ability to pay higher prices. >>
They errantly believed that printing money and fattening Wall Street would trickle down to the employment market. Fail.
Now they want to legislate higher incomes. It may help a few on the bottom rung, but will be a net loser as jobs shrink further and those working will pay ever higher retail prices.
<< <i>The fed needs inflation so that the average consumer can pay off his debt. The whole economic and monetary system in the United States and the whole world depends on debt. >>
Banks depend on debt. It's how they make profit at the expense of the borrower. Consumers who depend on debt (other than a mortgage or a car loan) need to learn financial responsibility. Consumers have been conditioned to accept indebtedness as the "American way."
<< <i>If you borrow a fixed amount of money at a fixed interest rate, then inflation helps you to pay off your debt with devalued dollars thereby freeing up more money for you to take on additional debt. >>
Inflation encourages consumers to borrow more and buy before prices go up. While inflation helps to make repayment of debt "cheaper" it also makes future purchases more expensive. It's a zero sum game for everyone except the banks who are racking up more profit as they lend more money.
<< <i>The economic system can not survive without debt expansion. >>
Debt "expansion" is what brought the world economic system to its knees in 2008. Only until that debt is cleared can the economy really expand. To this day most people refuse to understand that easy credit and the resulting debt is a gun to the economy's head.
The economic system expanded just fine when debt was limited to home mortgages and then expanded to automobiles. Since then easy credit has financially ruined nations as well as individuals.
<< <i>It's a zero sum game for everyone except the banks who are racking up more profit as the lend more money. >>
....and a hose job for the bank depositors that receive virtually nothing for their money as it erodes from inflation. >>
Again, thats a lifestyle choice. Three years ago some people took their money from the banks, bought PMs and lost 30%. Others took their money and put it into stocks and made 30%. Others left it in the bank and didnt make nor lose. Some bought real estate. There is always an alternative.
<< <i>Three years ago some people took their money from the banks, bought PMs and lost 30%. Others took their money and put it into stocks and made 30%. Others left it in the bank and didnt make nor lose. Some bought real estate. There is always an alternative. >>
Zero percent on bank deposits would be suitable if the federal reserve was not dissolving the value of the currency by quadrupling the supply in a five year period.
It is a sucker play of wealth redistribution that your favorite administration has boasted about for half a decade.
No bank or other investment is obligated to provide you with a positive return, but are we not entitled to some stability in the currency of our nation?
<< <i>The fed needs inflation so that the average consumer can pay off his debt. The whole economic and monetary system in the United States and the whole world depends on debt. >>
Banks depend on debt. It's how they make profit at the expense of the borrower. Consumers who depend on debt (other than a mortgage or a car loan) need to learn financial responsibility. Consumers have been conditioned to accept indebtedness as the "American way."
<< <i>If you borrow a fixed amount of money at a fixed interest rate, then inflation helps you to pay off your debt with devalued dollars thereby freeing up more money for you to take on additional debt. >>
Inflation encourages consumers to borrow more and buy before prices go up. While inflation helps to make repayment of debt "cheaper" it also makes future purchases more expensive. It's a zero sum game for everyone except the banks who are racking up more profit as they lend more money.
<< <i>The economic system can not survive without debt expansion. >>
Debt "expansion" is what brought the world economic system to its knees in 2008. Only until that debt is cleared can the economy really expand. To this day most people refuse to understand that easy credit and the resulting debt is a gun to the economy's head.
The economic system expanded just fine when debt was limited to home mortgages and then expanded to automobiles. Since then easy credit has financially ruined nations as well as individuals. >>
Under our current financial system of fractional reserve banking, money is created when banks make loans. When borrowers stop borrowing and start paying off or defaulting on their loans and banks stop lending, money is "destroyed" and that results in deflation. People believe that when prices rise that is inflation and when prices fall that is deflation. Actually when the money supply expands that is inflation and when the money supply contracts that is deflation. That's what QE is all about. The fed creates money to buy US treasury bonds and mortgage backed securities to keep the money supply growing and to give the illusion of a growing economy. It's also a continuing stealth bailout of the banks, since they are the ones selling these bonds to the fed in exchange for this newly created cash which is then put to work inflating our current stock market bubble.
So in short, yes, the fed does have a mandate to get you a raise and they do so by creating inflation. As long as your raise keeps pace with inflation you are not losing purchasing power. However most people's raises are not keeping pace with the "real" inflation rate so most of us are becoming poorer even if our wages are rising.
<< <i>Under our current financial system of fractional reserve banking, money is created when banks make loans. When borrowers stop borrowing and start paying off or defaulting on their loans and banks stop lending, money is "destroyed" and that results in deflation. People believe that when prices rise that is inflation and when prices fall that is deflation. Actually when the money supply expands that is inflation and when the money supply contracts that is deflation. That's what QE is all about. The fed creates money to buy US treasury bonds and mortgage backed securities to keep the money supply growing and to give the illusion of a growing economy. It's also a continuing stealth bailout of the banks, since they are the ones selling these bonds to the fed in exchange for this newly created cash which is then put to work inflating our current stock market bubble. >>
Money is not destroyed and deflation does not occur when banks stop expanding money supply via lending. Such an occurence only stops an increase in the money supply.
Correct, techincally inflation/deflation are actually increases/decreases to the money supply. Price inflation/deflation is normally a byproduct and what consumers think of when referencing inflation/deflation. Prices, not money supply register quickly in the minds of consumers.
FED has actually created money (via QE) to absorb bad debt (MBSs) and to become a purchaser of treasury bonds in the face of declining buyers. This is why it has been a bailout of the banks. The banks are loaded to the gill with bad mortgage debt that has been concealed by changes in the accounting methods it is carried on their books. FASB changes allow banks to not show the real value of the loans, thus hiding any insolvency.
Money isn't destroyed when a debt is paid back. It only moves around. The inflation is needed for the system to work as I understand it, because only the amount of a loan is created not the extra money in the form of interest to pay off the loan.
If you borrow $100 then the bank creates only $100 . If you have to pay $120 to service the loan where does the extra $20 that wasn't created come from?
Comments
The biggest problem is that higher wages fuels inflation. It increases all the costs that go into what you buy.
Give Me Liberty or Give Me Debt
<< <i> Besides it creates more tax revenue. >>
Also forces the minimum wage worker (if $10.10 becomes the benchmark) to pony up for health insurance. At current minimum for 40 hours, he is currently under the income threshold.
Of course he could lose his job or be reduced to part time status with the higher wage, but that seems to not matter to the savants of the beltway.
Give Me Liberty or Give Me Debt
<< <i>To those in such positions (i.e. the Fed etc), the economy is a game and they enjoy the manipulation. Many think they are actually doing good. Of course, they are not, and eventually, most of us will pay a terrible price for what they are doing. Cheers, RickO >>
Ricko, great observation and analysis.
Which it is would be is determined by my supervisor's opinion of my performance at the job, not by any Fed mandate.
Do you consider lower prices to be bad?
For things that I buy, no, of course not. For things I sell, of course lower prices are bad. Is this a trick question?
Are we going to zoom from the general to the specific, and back again?
Liberty: Parent of Science & Industry
<< <i>1) Wages are rising too slowly: Since the recession, worker compensation has increased an average of 2% per year -- very low by historical standards. >>
The Fed often notes that their target inflation rate is 2 or 2.5%. If wages increase say 4% per annum going forward, is the inflation rate not likely to at least match that number in the Feds mind?
Maybe they were better of in the pre transparency past, when the idiocy, lies and half truths remained behind closed doors.
Give Me Liberty or Give Me Debt
What about the argument that deflation results in significant economic downturn as people stop spending now because they know prices will be lower in the future…i.e., they delay/put off purchases and the economy slows down and stalls?
Was this not the issue with Japan the last 20 years or so?
People stop buying, inventories back up, people get laid off and jobs are lost further fueling more price declines/more deflation as supply outpaces demand.
Just asking!
<< <i>What about the argument that deflation results in significant economic downturn as people stop spending now because they know prices will be lower in the future…i.e., they delay/put off purchases and the economy slows down and stalls? >>
If that logic were accurate, sales of computers, Iphones and 99" televisions would plummet as a better unit is almost always available for a lesser cost in the future.
Folks spend money when they have it and nearly as importantly, have confidence in the future of the economy. Average American worker has seen a real annual decline in buying power of 4 or 5% since 2008. As food, medical and auto related expenses rise, consumption of non necessities decline.
Exception of course is the high end designer products that the top 2% can easily afford.
<< <i>The fed needs inflation so that the average consumer can pay off his debt. The whole economic and monetary system in the United States and the whole world depends on debt. If you borrow a fixed amount of money at a fixed interest rate, then inflation helps you to pay off your debt with devalued dollars thereby freeing up more money for you to take on additional debt. The economic system can not survive without debt expansion. >>
That is the intent of the 2% inflation target. Not so much to have a bit of inflation but to avoid deflation. Problem is 2% inflation is not consistent with $3,000,000,000,000 in freshly printed currency.
Once the lenders get a sniff of 10% inflation, they will demand a much greater return on their investment and with the higher interest rates, the economy skids.
<< <i>
<< <i>The fed needs inflation so that the average consumer can pay off his debt. The whole economic and monetary system in the United States and the whole world depends on debt. If you borrow a fixed amount of money at a fixed interest rate, then inflation helps you to pay off your debt with devalued dollars thereby freeing up more money for you to take on additional debt. The economic system can not survive without debt expansion. >>
That is the intent of the 2% inflation target. Not so much to have a bit of inflation but to avoid deflation. Problem is 2% inflation is not consistent with $3,000,000,000,000 in freshly printed currency.
Once the lenders get a sniff of 10% inflation, they will demand a much greater return on their investment and with the higher interest rates, the economy skids. >>
I couldn't agree more! However the fed has been able to suppress interest rates for much longer than I thought they would. Eventually investors will start to demand much higher interest rates for the privilege of being able to use their money. For now they have no alternative for "conservative" investments but to hold their nose and buy bonds at two percent interest. People are still scarred from the stock market bloodbath of '08 and will invest in bonds paying interest that is less than inflation because they don't know what else to do with their money.
<< <i>However the fed has been able to suppress interest rates for much longer than I thought they would. >>
Agree. Smoke and mirrors though can only fool the audience for so long.
At least the Fed government is trying to help the low wage earners with a minimum wage increase. They realize they can no loner support these low wage earners forever with food stamps and Medicaid. Walmart being the biggest offender.
Maybe congress should pass a law when a company earns a certain threshold in profits at the expense of its workers, it needs to put those extra profits toward making sure it workers receive a decent living wage. When the company achieves fair wages for its employees, than it can continue to keep those profits for its shareholders. The Federal government needs to shift the responsibility of subsidizing these low wage workers to the private sector. Just the price of doing business here in the U.S. Probably socialistic, but sometimes capitalism needs to be reigned in. As it is now, the capitalistic system in the U.S. itself is causing the socialistic government support of these low wage earners and QE to infinity doesn't help except the 1%. The middle class is being destroyed. Once that happens, its game over.
Box of 20
For example, the epic amount of money and resources spent to promote and enable the health care law/tax. Billions of dollars in 50-100 million lumps spent to try and get 7 million people insured, like this is a great "New Deal" level administrative success but 7 million people is 2% of the population (at least the ones we know about). Great job...but for the money spent to promote, maintain, administer, drive this thing into the future, why didn't the gov just give out health care vouchers for free and save a boat load of money in the process? 7 mill health care vouchers don't seem like much of a hump. The only rule is that you have to be a US citizen.
Another example, QEi expense was running at $85 BBBBillion a month for a couple of years in an effort to increase employment and to sustain the ability to keep our banking system/stock market in a good place...for the good of the citizens. So in two years, the gov could have given each smilin' Jack and Jill and every child $6000 each; seems like that would have helped a lot. $3000 a year might not seem like much but for a family of four, that is an extra $1000 a month for the family for two years. That could have done some good for a lot of people, 350,000,000 of them...talk about happy days are here again but instead, the citizenry got squat out of the deal other than 16 trillion in debt they will be paying off for the rest of their lives. They should have just given the money to the people since they are the ones that will have to pay it back anyway.
One more example might be the student loan funding increases that are to insure that everyone has a chance at a college degree regardless of their academic qualifications...certainly a noble idea. Well, before all this student loan funding increase, the citizens with a degree was hovering around 10% of the population and it hasn't changed much from there even with the enhanced access to student loans. If you have a pulse and can sign your name, you can go to some kind of college on a loan program. The only thing that has changed is somehow the gov and loan funders have managed to hook up a significant number of 24-30 year olds up with a part of trillions of dollars of student loan debt that they will have to individually pay off over the course of their life. Why not just give them a provisional degree or something without all the debt and having to go to classes?
And while we are at it...the huge controversy over using names like redskins, warriors, rebels, and other brave names for our sports teams. Why not make a rule that all sports teams from high school to pro be named after plants? Imagine the Dallas Spiked Rushes v.s. the Washington Quaking Oaks or the Memphis Dropseeds v.s. the New York Vomitoria? End of controversy!
Hey...I gotta get back to work.
<< <i>Maybe congress should pass a law when a company earns a certain threshold in profits at the expense of its workers, it needs to put those extra profits toward making sure it workers receive a decent living wage >>
Sure thing, another government solution. Obamacare has been a huge success.
What happens when a company has a losing year, should the employees donate their time to the cause, of course not.
You cite Wal-Mart as an example of a business whose employees would benefit from a hike in the minimum wage. In what way? Very few, if any WalMart employees earn less than $9 an hour. So hike it to $10.10 (which would take 3 years under the Obama proposal and the Wal-Mart worker falls even further behind.
Socialism/communism has failed in every nation during every century that it has been attempted, and the current jokers in DC do not have a magic formula that will make it successful now.
I like it!!
To the OP....the FED/White House is finally realizing that there cannot be inflation without ability to pay higher prices.
Knowledge is the enemy of fear
<< <i>Why not make a rule that all sports teams from high school to pro be named after plants? Imagine the Dallas Spiked Rushes v.s. the Washington Quaking Oaks or the Memphis Dropseeds v.s. the New York Vomitoria?
I like it!!
To the OP....the FED/White House is finally realizing that there cannot be inflation without ability to pay higher prices. >>
They errantly believed that printing money and fattening Wall Street would trickle down to the employment market. Fail.
Now they want to legislate higher incomes. It may help a few on the bottom rung, but will be a net loser as jobs shrink further and those working will pay ever higher retail prices.
...kind of like the name, New York Vomitoria!
peacockcoins
<< <i>The fed needs inflation so that the average consumer can pay off his debt. The whole economic and monetary system in the United States and the whole world depends on debt. >>
Banks depend on debt. It's how they make profit at the expense of the borrower. Consumers who depend on debt (other than a mortgage or a car loan) need to learn financial responsibility. Consumers have been conditioned to accept indebtedness as the "American way."
<< <i>If you borrow a fixed amount of money at a fixed interest rate, then inflation helps you to pay off your debt with devalued dollars thereby freeing up more money for you to take on additional debt. >>
Inflation encourages consumers to borrow more and buy before prices go up. While inflation helps to make repayment of debt "cheaper" it also makes future purchases more expensive. It's a zero sum game for everyone except the banks who are racking up more profit as they lend more money.
<< <i>The economic system can not survive without debt expansion. >>
Debt "expansion" is what brought the world economic system to its knees in 2008. Only until that debt is cleared can the economy really expand. To this day most people refuse to understand that easy credit and the resulting debt is a gun to the economy's head.
The economic system expanded just fine when debt was limited to home mortgages and then expanded to automobiles. Since then easy credit has financially ruined nations as well as individuals.
Give Me Liberty or Give Me Debt
<< <i>It's a zero sum game for everyone except the banks who are racking up more profit as the lend more money. >>
....and a hose job for the bank depositors that receive virtually nothing for their money as it erodes from inflation.
<< <i>
<< <i>It's a zero sum game for everyone except the banks who are racking up more profit as the lend more money. >>
....and a hose job for the bank depositors that receive virtually nothing for their money as it erodes from inflation. >>
Again, thats a lifestyle choice. Three years ago some people took their money from the banks, bought PMs and lost 30%. Others took their money and put it into stocks and made 30%. Others left it in the bank and didnt make nor lose. Some bought real estate. There is always an alternative.
Knowledge is the enemy of fear
<< <i>Three years ago some people took their money from the banks, bought PMs and lost 30%. Others took their money and put it into stocks and made 30%. Others left it in the bank and didnt make nor lose. Some bought real estate. There is always an alternative. >>
Zero percent on bank deposits would be suitable if the federal reserve was not dissolving the value of the currency by quadrupling the supply in a five year period.
It is a sucker play of wealth redistribution that your favorite administration has boasted about for half a decade.
No bank or other investment is obligated to provide you with a positive return, but are we not entitled to some stability in the currency of our nation?
<< <i>
<< <i>The fed needs inflation so that the average consumer can pay off his debt. The whole economic and monetary system in the United States and the whole world depends on debt. >>
Banks depend on debt. It's how they make profit at the expense of the borrower. Consumers who depend on debt (other than a mortgage or a car loan) need to learn financial responsibility. Consumers have been conditioned to accept indebtedness as the "American way."
<< <i>If you borrow a fixed amount of money at a fixed interest rate, then inflation helps you to pay off your debt with devalued dollars thereby freeing up more money for you to take on additional debt. >>
Inflation encourages consumers to borrow more and buy before prices go up. While inflation helps to make repayment of debt "cheaper" it also makes future purchases more expensive. It's a zero sum game for everyone except the banks who are racking up more profit as they lend more money.
<< <i>The economic system can not survive without debt expansion. >>
Debt "expansion" is what brought the world economic system to its knees in 2008. Only until that debt is cleared can the economy really expand. To this day most people refuse to understand that easy credit and the resulting debt is a gun to the economy's head.
The economic system expanded just fine when debt was limited to home mortgages and then expanded to automobiles. Since then easy credit has financially ruined nations as well as individuals. >>
Under our current financial system of fractional reserve banking, money is created when banks make loans. When borrowers stop borrowing and start paying off or defaulting on their loans and banks stop lending, money is "destroyed" and that results in deflation. People believe that when prices rise that is inflation and when prices fall that is deflation. Actually when the money supply expands that is inflation and when the money supply contracts that is deflation. That's what QE is all about. The fed creates money to buy US treasury bonds and mortgage backed securities to keep the money supply growing and to give the illusion of a growing economy. It's also a continuing stealth bailout of the banks, since they are the ones selling these bonds to the fed in exchange for this newly created cash which is then put to work inflating our current stock market bubble.
So in short, yes, the fed does have a mandate to get you a raise and they do so by creating inflation. As long as your raise keeps pace with inflation you are not losing purchasing power. However most people's raises are not keeping pace with the "real" inflation rate so most of us are becoming poorer even if our wages are rising.
<< <i>Under our current financial system of fractional reserve banking, money is created when banks make loans. When borrowers stop borrowing and start paying off or defaulting on their loans and banks stop lending, money is "destroyed" and that results in deflation. People believe that when prices rise that is inflation and when prices fall that is deflation. Actually when the money supply expands that is inflation and when the money supply contracts that is deflation. That's what QE is all about. The fed creates money to buy US treasury bonds and mortgage backed securities to keep the money supply growing and to give the illusion of a growing economy. It's also a continuing stealth bailout of the banks, since they are the ones selling these bonds to the fed in exchange for this newly created cash which is then put to work inflating our current stock market bubble. >>
Money is not destroyed and deflation does not occur when banks stop expanding money supply via lending. Such an occurence only stops an increase in the money supply.
Correct, techincally inflation/deflation are actually increases/decreases to the money supply. Price inflation/deflation is normally a byproduct and what consumers think of when referencing inflation/deflation. Prices, not money supply register quickly in the minds of consumers.
FED has actually created money (via QE) to absorb bad debt (MBSs) and to become a purchaser of treasury bonds in the face of declining buyers. This is why it has been a bailout of the banks. The banks are loaded to the gill with bad mortgage debt that has been concealed by changes in the accounting methods it is carried on their books. FASB changes allow banks to not show the real value of the loans, thus hiding any insolvency.
Give Me Liberty or Give Me Debt
Money isn't destroyed when a debt is paid back. It only moves around. The inflation is needed for the system to work as I understand it, because only the amount of a loan is created not the extra money in the form of interest to pay off the loan.
If you borrow $100 then the bank creates only $100 . If you have to pay $120 to service the loan where does the extra $20 that wasn't created come from?