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Friday, January 16, 2009 - 10:38pmSanction this postReply
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Are we talking about the alleged inflation rate that the government says we have, or the actual inflation rate not "adjusted" to make the relevant politicians look good?

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Monday, January 19, 2009 - 9:04amSanction this postReply
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As long as we remember that inflation does not mean "rising prices", but rather "an increase in the supply of base money relative to the value of goods and services in the marketplace", then with the Fed's and Treasury's combined flood of liquidity to the banking system, we already have massive inflation well into the double digits.  The banks are holding it now, though.  The rising prices will come when the banks and the public decide that the economy is improving and the new, artificially-created liquidity (freshly-printed paper money or the electronic equivalent thereof) begins to hit the streets.  At that point, we'll see prices spike like never before. 

I don't know that this will happen within one year, but unless our political honchos do some serious curtailing, it will definitely happen.  It always does.  The Fed creates a massive bubble of money in a certain sector (tech in the '90s, housing in the '00s), causing that sector to be overvalued.  When the bubble bursts, they do everything they can to fight the necessary market correct - the "recession", or period of time when resources such as labor realign themselves to more productive uses - thereby adding more false value (funny money) to the market and creating another bubble.  The cycle won't stop as long as paper and the "good faith and credit of the United States Government" are all we have to stand on.


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Monday, January 19, 2009 - 3:10pmSanction this postReply
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Luke said, "The Fed creates a massive bubble of money in a certain sector (tech in the '90s, housing in the '00s), causing that sector to be overvalued. When the bubble bursts, they do everything they can to fight the necessary market correct[ion] - the "recession", or period of time when resources such as labor realign themselves to more productive uses... The cycle won't stop as long as paper and the "good faith and credit of the United States Government" are all we have to stand on."

That is one elegant and powerful statement! Well said.

I chopped out a statement in the middle, just after discussing resources being realigned with more productive uses: "- thereby adding more false value (funny money) to the market and creating another bubble" I doubt you meant to say that the realignment was the source of the next bubble. I'm guessing you meant to say that the Fed starts the next bubble by repeating the process of adding more false value....

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Tuesday, January 20, 2009 - 9:06amSanction this postReply
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Indeed I did, and I apologize for the confusion.  The realignment is part of the necessary correction (recession); it is the Fed's attempt to prevent that correction that causes a new bubble.

Thanks!


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