Very disturbing charts on the wealth imbalance in USA

[joe]

I've read all your posts in this thread and, while some of your statements are somewhat acceptable, most of your economic "analysis" (for a lack of a better word) is seriously incorrect. You're trying to analyze very complex economic questions without, apparently, much knowledge of what your talking about. You're oversimplifying to the point you're leaving very relevants effects and causes out of the equation, only to present your biased point of view in a false light of coherence.

Your definition of inflation is wrong. Inflation is the general rise in the price of goods and services over a period of time. It is not only inherent to a capitalistic economy, but it's also necessary (a healthy inflation rate, that is). What you presented as a definition of inflation is actually called "expasionary monetary policy" and it's implemented in order to modify interest rates and, eventually, inflation rates. However, inflation rates will not always increase as a result of an expansionary monetary policy, they will increase or decrease depending on many factors (likely it will in most developed economies, but it's not a given), characteristic of that economy in particular.

I won't even get in depth about your opinions on the Federal Reserve and how good it'd be to go back to the gold standard because I don't know a lot about the first and the latter speaks for itself (and not in a good way).

I appreciate you trying to contribute to the debate here, but most of what you said is way, way off.

1- I'm not wrong about the definition of inflation. Like I said, we study different forms of economics, and that's okay, but the economics you personally learned isn't the only type in existence. Go to google and type "schools of economics," and you'll see that there's more types than maybe you realize. Not all of them have the same definition of or feelings on inflation.

2- Inflation is not inherent to a capitalist economy, that's a very short sighted thought. Prices are supposed to go down in a capitalist economy. Kind of like computers, look at that market. The price of computers has slowly gone down over time, because capitalism allowed competition+entrepreneurship+advances in technology make them easier to make. The first computers took up an entire room and cost millions of dollars. Now you can buy an even stronger computer for $400. That's capitalism.

Your idea that prices are supposed to rise over time is one strictly tied in with the existence of a federal bank. It's not that prices would never rise or fall without one.. it's just that they wouldn't rise due to a weakened dollar. It would happen because supply fell or demand fell. Which leads me to..

3- I believe you're trying to say I'm wrong for wanting a gold standard. Well, since you think rising prices are a good thing for some reason, I can understand why you wouldn't want us to have sound money. But honestly, I'm not sure how one can study money and come to the conclusion that the gold standard was anything but a positive.

[Lebowsky]

Monetary expansion always gives inflation. Like I said, we're using two different definitions of inflation. You say that inflation is when prices go up, I say it's when new money is created. Money being created will always create a weaker dollar. That's not a debatable point.. Forget economics for a second, its' just a very logical thought. If you have 10 of something that people want, then create 10 more... each one will have less value.



exactly, Austrian economics is what I'm talking about.

Lol, you've got austrian school written written all over yourself I know what you mean and what you're trying to say, but it's incorrect. First: monetary expansion doesn't directly cause inflation, monetary expansion lowers interest rates, which increase consumption, wich increases prices and, therefore, inflation. Second: new money being created doesn't mean money is weaker or can buy less goods per se, because you have to factor in the relative effect of prices. That's why macroecomic models use the variable "real monetary base" instead of just monetary base, because the first is relative to the general level of prices while the latter ignores it. Third: it is possible to find scenarios in which a monetary expasion wouldn't result in inflation.

[joe]

we got a teabagger amongst us. Let me guess the people you trust on economics is ron paul, rothbard and von mises.

your view against increase in the money supply is an oversimplified one that does not take into consideration rational expectation, which is crucial in determining the actual effect of said increase.

furthermore, you realize that china's money supply has increased at far greater rate than us right? in fact their growth bubble is partly due to the hike in money supply. so this is not some US phenomenal.

Yes, there's a large number of fiat money systems in the country, not just the US. I understand that. However, China's growth rate has more to do with having a production economy than their growth bubble. They produce the most in the world (I believe, or close to it), and export quite a bit as well. Something the US used to do, but does no longer.

And yes, I do trust Ron Paul, Rothbard, and Von Mises.

Am I teabagger? No, but I do agree with them on quite a few things. What's wrong with financial responsibility, sound money, and following the constitution? Seems like something all Americans should be interested in, but I guess "teabagger" is supposed to be some kind of insult.

[Lebowsky]

1- I'm not wrong about the definition of inflation. Like I said, we study different forms of economics, and that's okay, but the economics you personally learned isn't the only type in existence. Go to google and type "schools of economics," and you'll see that there's more types than maybe you realize. Not all of them have the same definition of or feelings on inflation.

2- Inflation is not inherent to a capitalist economy, that's a very short sighted thought. Prices are supposed to go down in a capitalist economy. Kind of like computers, look at that market. The price of computers has slowly gone down over time, because capitalism allowed competition+entrepreneurship+advances in technology make them easier to make. The first computers took up an entire room and cost millions of dollars. Now you can buy an even stronger computer for $400. That's capitalism.

Your idea that prices are supposed to rise over time is one strictly tied in with the existence of a federal bank. It's not that prices would never rise or fall without one.. it's just that they wouldn't rise due to a weakened dollar. It would happen because supply fell or demand fell. Which leads me to..

3- I believe you're trying to say I'm wrong for wanting a gold standard. Well, since you think rising prices are a good thing for some reason, I can understand why you wouldn't want us to have sound money. But honestly, I'm not sure how one can study money and come to the conclusion that the gold standard was anything but a positive.

Gotta go to bed, I'll answer your post tomorrow.

[joe]

Lol, you've got austrian school written written all over yourself I know what you mean and what you're trying to say, but it's incorrect. First: monetary expansion doesn't directly cause inflation, monetary expansion lowers interest rates, which increase consumption, wich increases prices and, therefore, inflation. Second: new money being created doesn't mean money is weaker or can buy less goods per se, because you have to factor in the relative effect of prices. That's why macroecomic models use the variable "real monetary base" instead of just monetary base, because the first is relative to the general level of prices while the latter ignores it. Third: it is possible to find scenarios in which a monetary expasion wouldn't result in inflation.

Well since I have austrian economics "written all over myself" I might as well just be clear.. I don't have faith in your variables, macroeconomics models and the like. From an austrian perspective, what all that does is try to turn something inherantly unscientific (economics) and try to measure it as though it were a real science (like chemistry).

Yes, monetary expansion (what I would define as inflation) first is an attempt to lower interest rates, in a misguided attempt to increase consumption. Yes. But after the fun is over, that new money finds its way into the economy. And when that happens, the money will become weaker. It doesn't happen right away, you're right. The market needs some time to realize that new money has been added. But that doesn't mean it won't happen.

I'd like to see your scenarios where monetary expansion won't result in inflation. Although, monetary expansion IS inflation.. I'll go by your definition for a moment.

[-playmaker-]

Monetary expansion always gives inflation.

then why did we deflate after pumping in trillions?

cause a lot of that money left the country...

monetary expansion doesn't always result in inflation...just cause you pump new money into the system, doesn't mean that money stays in the system...

[joe]

then why did we deflate after pumping in trillions?

cause a lot of that money left the country...

monetary expansion doesn't always result in inflation...just cause you pump new money into the system, doesn't mean that money stays in the system...

Definition of inflation that I'm using: Any increase in the supply of money. Therefore, what you call monetary expansion I call inflation.

Just because dollars aren't actively in the American system doesn't much either. If China buys a bunch of dollars, those dollars are still out in existence. All it means is that China owns weakened currency.

I don't think it should be that hard to figure out. Think of it this way.. Ever hear an old person say "back in my day.. going to the movies only cost a nickel!" Do you think the price of going to the movies went up, or that the value of the dollar went down? It's the latter. That's caused by inflation or, as you put it... an expansion in the money supply.

[bladefd]

I don't think it should be that hard to figure out. Think of it this way.. Ever hear an old person say "back in my day.. going to the movies only cost a nickel!" Do you think the price of going to the movies went up, or that the value of the dollar went down? It's the latter. That's caused by inflation or, as you put it... an expansion in the money supply.

It is actually a combination of both (more so that the value of dollar went down, but the other reason also is partially part of the answer). Since the salaries of the people working in Hollywood has gone up overall along with more people required to make movies today, the extra money is required to pay for those higher salaries and more people in the Hollywood industry. Similar things apply to other cases too

Here's a quick calculation to prove why it is not just inflation:
If you calculate for the inflation differences between 1954 and 2009, $7.50, which is the average price of movie tickets in 2009, in 2009 is equal to $0.94 in 1954. The average ticket prices in 1954 was in reality $0.49. A difference of 45 cents between what it is supposed to be if we only take into account inflation and what it is actually was (which takes into account factors other than just inflation).

It is not just inflation that has changed the value of things. Inflation is a big reason but not the only reason.



Sources for the average ticket prices and also for the inflation calculator:
http://www.bls.gov/data/inflation_calculator.htm
http://www.natoonline.org/statisticstickets.htm

[-playmaker-]

Definition of inflation that I'm using: Any increase in the supply of money. Therefore, what you call monetary expansion I call inflation.

Just because dollars aren't actively in the American system doesn't much either. If China buys a bunch of dollars, those dollars are still out in existence. All it means is that China owns weakened currency.

I don't think it should be that hard to figure out. Think of it this way.. Ever hear an old person say "back in my day.. going to the movies only cost a nickel!" Do you think the price of going to the movies went up, or that the value of the dollar went down? It's the latter. That's caused by inflation or, as you put it... an expansion in the money supply.

yes I understand what inflation is, lol...I don't think you understand that when kept low, around 5% or so, it helps the economy...and I don't think that is debated by anyone, it is accepted...hyperinflation is bad...like if we were to inflate at 10% or higher...that would get scary...but we aren't...early you acted like we were on the verge of the dollar collapsing that inflation is off the chains...you were wrong

I also don't think you understand that increasing the supply of money doesn't always cause inflation...like I said, the Fed just pumped in trillions of new dollars, and we deflated while they did it...

the stock market is global...money can go "here and there" with great ease these days...

[joe]

yes I understand what inflation is, lol...I don't think you understand that when kept low, around 5% or so, it helps the economy...and I don't think that is debated by anyone, it is accepted...hyperinflation is bad...like if we were to inflate at 10% or higher...that would get scary...but we aren't...early you acted like we were on the verge of the dollar collapsing that inflation is off the chains...you were wrong

I also don't think you understand that increasing the supply of money doesn't always cause inflation...like I said, the Fed just pumped in trillions of new dollars, and we deflated while they did it...

the stock market is global...money can go "here and there" with great ease these days...

I think the dollar may very well collapse. But in any event, we haven't seen the worst of this depression. It's going to get a lot worse. Do you at least agree with that?

Prices are going down (what you'd call deflation) because people can't afford the higher prices. Are you referring to things like the housing market? Those prices are dropping because they were too high to begin with. That doesn't mean the dollar isn't losing value.. In fact the lower they fall, the more it probably indicates that the dollar is in fact losing value. But it depends on the market. Obviously gas prices aren't coming down regardless, because demand is always high and supply is constantly getting lower.

[-playmaker-]

I think the dollar may very well collapse. But in any event, we haven't seen the worst of this depression. It's going to get a lot worse. Do you at least agree with that?

Prices are going down (what you'd call deflation) because people can't afford the higher prices. Are you referring to things like the housing market? Those prices are dropping because they were too high to begin with. That doesn't mean the dollar isn't losing value.. In fact the lower they fall, the more it probably indicates that the dollar is in fact losing value. But it depends on the market. Obviously gas prices aren't coming down regardless, because demand is always high and supply is constantly getting lower.

I am reffering to the value of the dallor...look at the chart I posted...HOWEVER if house prices and everything else is going down cause people can't afford, then obviously that means the dollar is worth more, it can BUY MORE STUFF NOW THAT EVERYTHING IS CHEAPER!!!

you can't have the price of all our goods and services go down the same time the value of the dollar goes up, that makes no sense...

if the value of the dollar goes down, then people start marking prices UP to make up for it, not down...

[rufuspaul]

I made an A in the one econ class I took in undergrad but after reading these posts I see there was a good reason why I didn't go any further in the subject.

[Jasper]

I'm going to throw this in here , just to show how our goverment works at the state level.
Tommy Thompson was a long tenored' elected gov for Wisconsin.
Made the states heart beat go faster , by doing a republican infostructure to the state.
What he did was give all companies out of state to come into the state and set up business with cheap labor and pay ZERO tax's.
All the companies kept their home offices in their local states , but had the companies labor force in Wisc.
Get it ? (Obviously Tommy is gone)

More people had jobs , had less to spend (poor wages) , but it looked great that the citizens of the state paid for all the tax's.
===============
Finally the populas said enough , lets get our horrid high property tax's down , so they started tax'ing those neat new companies.
What did they do , pay the tax's until they could relocate all of their companies.
Now not only was the tax burden just as high , but unemployment became higher , and now in the state we look at empty buildings.
---------------------
Have we learned our lesson ?

The gov was on tonight and stated he has the perfect fix to our budget and excessive tax's. He's going to create jobs !!!!!!!!!!!!!!!!!!!!!!!!!!!!
GREAT guy ....
hammer drops : All new companies that come into the state as start up companies get a free ride .
Everyone in the state room , we're on the feet clapping
Do they not know that they will be paying the tax's for these knew businesses ???
And these were the alderman that represent our state (where are their brains)
===========
By the way : the Gov is a republican , and as the old saying goes " line the pockets of the rich to take from the poor and middle class"
DONE DEAL.
-----------> The perfect bandaid affect to get through the election years , to the next term ,, while who gets rich ???