SonicFlyer

The Federal Reserve just literally said they are planning to inflate the currency:


https://www.cnbc.com/2020/08/04/the-fed-is-expected-to-make-a-major-commitment-to-ramping-up-inflation-soon.html

dera

Thats good news for businesses and the economy as a whole.

tallpilot

How are they going to do it? Start charging banks for excess reserves to encourage them to lend or direct payments? Do they have the legal authority for direct payments? Will banks lend to uncreditworthy borrowers or would they choose to inflate asset prices instead?

The Fed has been trying to create inflation for a long time. They keep failing because the cost of servicing the existing debt eats up all of the additional M2 they create.

I don't like what the Fed is doing and I don't like the trajectory of government spending but I'd still bet on deflation in the intermediate term.

TyWebb

I seriously doubt that the FED has been trying to inflate the dollar for years.MMT is based on not the contraint of debt or insolvency but instead inflation. So, as long as inflation, mainly CPI, stays managable then the printing machine can keep going.

SonicFlyer

You realize the CPI calculation is a scam, right?

Allegheny

The Fed has been "Pushing on String" for a long time now. Interest rates are so low that the Fed can't get below zero with the tools it has. At the same time the Government of the United states is running the printing presses and printing money full blast. We are approaching what one Fed member called "helicopter money." This was his answer to the question, how do you stop deflation. You take off in a helicopter and push the money out the door.

Russell Napier a Scottish economist has said that Central Banks of the World, (ie, the Fed) are irrelevant because EU Govt's are all in the same boat with near zero interest rates so those governments are simply inflating by legislative fiat.

https://themarket.ch/interview/russe...levant-ld.2323

Check out this youtube video by Ray Dialo, President of Bridgewater Associates has this to say https://www.youtube.com
/watch?v=7r_O1eDoF8Y

https://www.investmentnews.com/jamie-dimon-of-jpmorgan-chase-warns-of-5-treasury-yields-75446


Jamie Dimon of JP Morgan Chase sees 5% treasury yields on the horizon.

TyWebb

I sure do, although Wall St uses it without blinking an eye. But also that proves my point, if there was an agenda to raise inflation just let the real CPI come out and stop subsidizing agriculture. See how that works... but those are two things that will not likely happen under MMT.

rickair7777

Yes, inflation is a natural consequence of the concept of money.

Money has no inherent value, it's basically a marker saying "I did something for someone today, and I'm hoping someone will remember that and do something for me in the future".

The more time passes, the more everyone's memory fades. Natural inflation is simply the "cooling" of people's savings.

SonicFlyer

No, it's not.

Inflation is a consequence of government devaluing their currency. It started in ancient times, especially in Rome, when the treasury would take round coins and begin to clip the edges to reduce the amount of metal in the coin.

In more recent history the government would simply print more money making each dollar worth less. These days they don't even bother printing it, they just make it up out of thin air and add it to a ledger sheet. It's completely unaccountable as they don't even report M3 anymore.

Inflation is criminal.

If you want to learn more look up what economists Ludwig Von Mises and Murray Rothbard have to say about inflation.

rickair7777

Yes governments can and do cause inflation. As can outside events which effect the economy.

But inflation would happen regardless, with paper money. If your currency is rigidly backed by say gold, inflation would probably not happen naturally since a precious metal holds its value over time (subject to natural price swings).

Even precious metals are not utterly foolproof, if something changed the underlying value of the commodity to society you could get an associated step change in a backed currency. In the case of a precious metal that could be a black swan such as the (unlikely but possible) discovery of a massive reserve, or conversely a new industrial process which creates a vast new demand (something like lithium & batteries).

Unbacked currency is just a promise, and promises get weaker over time. Producers of goods and services will always prefer to deal with people who can provide goods and services in return, vice people sitting on a pile of old paper. Inflation is the quantifiable manifestation of that preference.