enlighten me on inflation.

[aioniosfilos]

I am no expert in eco but isn't part of inflation being a problem because we printed so much damn money? so with technology allowing us to take pictures of checks and deposit them, do you see a potential fraud issue also why not deposit cash this way, in theory you take a pictures and it records serial numbers them after it is recorded It can be destroyed.

 

[DSGE]

Inflation isn't a problem.

In fact you might argue that inflation isn't high enough. Following the low inflation and temporary deflation of the GFC, we should have allowed some "catch up" inflation to bring nominal spending back to trend. But we didn't, and now we're stuck with a tight money induced downturn.

Did we print so much damn money? I assume you're referring to the $2.7 trillion dollar monetary base. The thing about that is that it's not actually contributing to any nominal spending, and hence not contributing to inflation (or a recovery for that matter). First, because banks are being paid interest to have that money just sit there in their accounts at the Fed; second, because banks know that the injection is only temporary. If it starts getting lent out and causing inflation, the Fed will just extract the money they injected. So banks can't exactly go around making long term loans with it. And they don't care about buying short term securities, because all their yeilds are near zero. They may as well just hold it in cash anyway. So yeah, we did "print a bunch of money". But it's not doing anything. And it'll be removed if anybody tries to do stuff with it.

Yeah fraud is a problem. But is it a problem because we can just photograph cheques? No. Hell, just having cheques opens everybody up to fraud. Pay for something with a cheque, but don't have any money in your account. Exactly as much fraud as just being able to photograph a cheque. But the whole thing gets handled by the interbank clearing system. So they take down your cheque serial number and everything. Then if you try to deposit the photograph at another bank, they know it's already been cleared and they'll talk to you about it.

In theory the depositing cash thing could work. The first argument would be "people would just not destroy the cash". But that wouldn't be too big a problem because they have the serial number and your account details recorded, so if you don't destroy it and it turns up in the banking system, they'll just call the police and you'll be arrested. But I suspect that if we're going to go that far, we may as well just get rid of currency altogether and do everything electronically.

 

[waltky]

Granny says, "Dat's right, it's always sumpin' - if it ain't one thing it's a `nother...

Trump's dilemma: slower job growth or rising rates and inflation?
December 2, 2016WASHINGTON (Reuters) - A drop in the U.S. unemployment rate last month to a 9-year low signals the risk of a collision between President-elect Donald Trump's plans to goose the economy and the Federal Reserve's efforts to tap the brakes with higher interest rates.

Since Trump's election, officials at the U.S. central bank have cautiously introduced the possibility that his spending and tax cut plans could prompt a faster pace of rate increases than the two hikes currently foreseen in 2017. An increase is already expected when the Fed meets in two weeks. Fresh economic projections, the first since the election, will also be issued and Fed Chair Janet Yellen will hold a news conference when the meeting concludes on Dec. 14. With November's decline, the jobless rate is now already below the most optimistic projections from Fed policymakers for where it would stand at year end.

If it keeps moving lower, Trump's spending and tax cut plans may be adding fuel to a tank that's already brimming. Possible new trade or immigration restrictions could make markets even tighter, and switch the Fed from worrying about the risk of deflation to fighting price rises before they get out of hand. "There is much more than the Trump election driving the ... rally that started the day after the election," Bank of the West chief economist Scott Anderson wrote. "We are seeing signs of a synchronized rebound in the global economy." When Fed policymakers issued their last projections in September, the lowest level predicted for the unemployment rate at the end of the year was 4.7 percent. In November, it fell three-tenths of a percentage point to 4.6 percent. The decline was partly due to a drop in the labor force participation rate, which officials have expected to begin falling again because of an aging population with more retirees. In general, the lower the unemployment rate, the slower the pace of job growth the economy can sustain without pushing up wages and prices too quickly.

U.S. President-elect Donald Trump speaks at a rally in Cincinnati, Ohio, December 1, 2016 as part of "USA Thank You Tour 2016"​

Policymakers insist they still have time to move rates higher to keep price increases under control. Several officials feel it may even help fix some of the damage from the 2007-2009 recession if inflation moved above the Fed's 2 percent target for a while. That might, for example, allow steady wage increases to restore some of the ground lost by workers. However, in recent months even ostensibly dovish officials, like Boston Fed President Eric Rosengren, have cautioned that steady rate hikes might be needed to avoid the need for even faster increases that could trigger a recession. "I view a small step up in interest rates as appropriate, not because I want to curtail the expansion, but because I believe it will help prolong the expansion," Cleveland Federal Reserve Bank President Loretta Mester said on Wednesday..

Trump's victory gives that debate more urgency. His plans for a big infrastructure spending package, tax cuts and tighter controls on immigration could test the limits of what the economy can absorb before overheating. For a year now, Fed officials have said they expect job growth to slow as the economy nears full employment. It hasn't happened, meaning Trump will take office at what may be a tough point of inflection: either job creation slows or inflation jumps. Jed Kolko, chief economist at the Indeed job site, said the current pace of job growth and low unemployment rate "sets a baseline for the Trump administration." "Recent wage gains and unemployment declines make this a tough economy to improve on," he said.

Trump's dilemma: slower job growth or rising rates and inflation?

 

[EdwardBaiamonte]

I am no expert in eco but isn't part of inflation being a problem because we printed so much damn money? so with technology allowing us to take pictures of checks and deposit them, do you see a potential fraud issue also why not deposit cash this way, in theory you take a pictures and it records serial numbers them after it is recorded It can be destroyed.

inflation is a problem because it distorts price signals. It makes prices go up due to too much money when prices should go up, and down, due to goods being more or less costly to make.