The problem is not spending ENOUGH!

If the fed will print me 50K I promise to spend it in America on American products. I swear I will.
And your spending will cause prices to rise, lowering the standard of living for everyone who did not get newly printed money. So in other words, you are indirectly stealing from everyone else. :eusa_shhh:

Here's a chart showing Federal Reserve base money:

fredgraph.png


Here's a chart showing the inflation rate:

fredgraph.png


If there were a direct relationship between the money supply and inflation rate these charts would have something to do with each other. Austrians and Monetarists predict there should be such a relationship. Why isn't there?
First of all, you are comparing a chart with absolute data (supply of money) with percent change data (inflation rate), which is completely meaningless. You would have to compare percentage change of one with percentage change of the other, not absolute value of one with percent change of the other. So right off the bat, you have useless comparisons.

Second of all, there are different measures of prices and different measures of the money supply. Official government numbers often grossly underestimate inflation, because they ignore certain prices. Measures of the money supply are also often incorrect. Rising prices also are not realized immediately. Prices will rise where the new money is spent or invested. If new money is put in the stock market, stock prices rise. If new money is put into housing or education, housing and education will rise. The effect of an expansion of the money supply is not uniform throughout the economy. Food items, often affected most by such inflation because money always goes to food, are not even counted in many CPI calculations, completely distorting the numbers.

Third, prices are not only affected by the money supply. They are also affected by the production of an economy. So simply comparing the rate of rising prices with the rate of money supply growth completely ignores the affect of increased supply of goods on the general price level.

Lastly, Austrians do not predict there is a direct relationship between money supply and prices. In fact, Austrians continuously stress it is possible for their to be an increase in the money supply and a decrease in prices. Austrians define inflation as it has traditionally been defined as "the expansion of the money supply" so it is possible you have come to false conclusions based on misunderstanding of this concept.

1. Your statistical method is wrong.
2. The argument you are trying to disprove was never made.
3. You assume that money supply is the only factor in determining the price level, which is false.

In other words, absolutely everything you said and the way you presented your argument is completely and utterly false.
 
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I never mentioned the housing bubble once.

673.jpg
I'll take that as a concession of my point, considering you still haven't offered any actual data on the German housing market, or any sources to back up your assumptions for that matter.

And I take that as you admitting you didn't read the link I posted.

Reckless Europe beats reckless America at property bubbles – Telegraph Blogs

house-prices.gif


Germany Confidence Rising

eurozone-house-index.jpg


But, just promise me, whatever you do, don't read anything more about this subject and ignore the charts. It will ruin your whole "they got it as bad as we did" thing you got going on.
 
Screw the Keynesians. Not only does their economic meddling not work, it's immoral. Mises was right.
 
I'll take that as a concession of my point, considering you still haven't offered any actual data on the German housing market, or any sources to back up your assumptions for that matter.

And I take that as you admitting you didn't read the link I posted.

Reckless Europe beats reckless America at property bubbles – Telegraph Blogs

house-prices.gif


Germany Confidence Rising

eurozone-house-index.jpg


But, just promise me, whatever you do, don't read anything more about this subject and ignore the charts. It will ruin your whole "they got it as bad as we did" thing you got going on.
Thank you for providing source. I think it is also important to note that Germany experienced a housing bubble a decade before everyone else, and it went bust in the 90s.
Real Estate Doldrums: Why the Global Housing Market Boom Bypassed Germany - SPIEGEL ONLINE - News - International

But there is still one tiny problem. Germany was in a recession even without the housing bubble. It also had bad unemployment numbers. The point is not about the housing bubble, it is about the fact that both the US and Germany entered into recession and had high unemployment. Germany spent less than the US, and employment decreased. I am sure you would not argue that the solution of big spending only works when a recession is caused by a housing bubble, and that lack of spending will only fail when there is a housing bubble. Krugman and Keynesians argue that increased spending in any recession by the government is necessary to stimulate growth. Germany did not follow that advice, yet recovered.
 
But there is still one tiny problem.

Yes, the fact that you are looking at facts and ignoring them and still attempting to draw conclusions. We know that 1/3 of the U.S. plan was tax cuts, 1/3 was infrastructure and 1/3 was aid to states. That right there makes the U.S. plan different from the German plan, since the German plan was 1/3 infrastructure and 2/3 tax cuts. Tax cuts are weak, but they're better than giving aid to states that in turn just cut spending anyway. That affect is basically zero. But whatever, you ignore all this.

Then we know that the German plan was rolled out over a year or two, while the U.S. plan was rolled out over 2-3 years. Again, that is a difference in the plans that you completely ignore. But whatever.

Then there is difference in the affects of the housing bubble on both these countries. The bubble bursting is what brought down the U.S. economy and is a major downward pressure still. A pressure that Germany never had to the extent the U.S. did and does. In fact, German housing prices are rising now, which would help lift any economy, regardless of conditions. But you know, whatever right? Who cares? You'll ignore this too.

Look, you want to attack Krugman and Keynes because you think it will get you brownie points with the conservatives. And I'm sure it did. But if you want to have an actual economic discussion then you have to look at more than just "it cost this much". Period. Full stop. You have to look at other factors that influenced the down turn and are currently influencing recovery. If you don't do that, then you're just trying to live in a bubble of your own.

But, whatever, I'm sure you'll ignore all this and just attack me. I recommend going after my handle. It's a pretty popular target.
 
But there is still one tiny problem.

Yes, the fact that you are looking at facts and ignoring them and still attempting to draw conclusions. We know that 1/3 of the U.S. plan was tax cuts, 1/3 was infrastructure and 1/3 was aid to states. That right there makes the U.S. plan different from the German plan, since the German plan was 1/3 infrastructure and 2/3 tax cuts. Tax cuts are weak, but they're better than giving aid to states that in turn just cut spending anyway. That affect is basically zero. But whatever, you ignore all this.
I don't ignore any facts. And the fact is that Germany had a smaller stimulus than the US, and out of that smaller stimulus an even smaller portion went to spending.

Also, the focus since the early part of the year in Germany "has been on reversing stimulus, enacting credible government spending cuts, and encouraging the rest of the developed world to do the same. The result (coincidental or not), has been a return to pre-recession levels of business confidence, a 2.4% annualized increase in households consumption expenditures in the second quarter, and more than a 20% annualized increase in business investment."

Then we know that the German plan was rolled out over a year or two, while the U.S. plan was rolled out over 2-3 years. Again, that is a difference in the plans that you completely ignore. But whatever.
How can I ignore something you have never stated before? Do you have a source for that information? Even if it is true, the simple fact of the matter is that Germany went down a path of more austerity measures and less spending, whereas the US followed an opposite path. Whether you like it or not, Germany did not follow the Keynesian solution.

Then there is difference in the affects of the housing bubble on both these countries. The bubble bursting is what brought down the U.S. economy and is a major downward pressure still. A pressure that Germany never had to the extent the U.S. did and does. In fact, German housing prices are rising now, which would help lift any economy, regardless of conditions. But you know, whatever right? Who cares? You'll ignore this too.
No, Germany did have a housing bubble and bust, only a decade earlier than everyone else. That is why another bubble did not develop with the rest of the world. And the fact that German housing prices are rising only proves my point that they have recovered better than the US due to their focus on austerity measures rather than big spending. I am surprised you cited that bit of information in support of your argument. It contradicts it.

Look, you want to attack Krugman and Keynes because you think it will get you brownie points with the conservatives. And I'm sure it did. But if you want to have an actual economic discussion then you have to look at more than just "it cost this much". Period. Full stop. You have to look at other factors that influenced the down turn and are currently influencing recovery. If you don't do that, then you're just trying to live in a bubble of your own.
Bullshit. I don't want brownie points. Nor am I attacking anyone. I am pointing out the flaws in a bad theory that I believe has caused much harm to people around the world. I never claimed that cost was the only factor. You are making assumptions that are simply not true. If you want to have an economic discussion, stop attacking me for your own assumptions about what I believe. But when Krugman says spend spend spend, and Germany said no and recovered even faster, there is a serious inconsistency in Keynesian theory.

But, whatever, I'm sure you'll ignore all this and just attack me. I recommend going after my handle. It's a pretty popular target.
Oh please. From the get go you have ignored this simple reality:

Both Germany and the US were in recession at the same time, Germany in an even worse slump. The Keynesian solution is more spending to jumpstart the economy. Yet Germany ignored this advice, focusing primarily on tax cuts and austerity measures. So far off course from the Keynesian prescription, your beloved Paul Krugman called the German government "boneheaded" and said they were "wasting time" by not acting and spending big. Interview with Nobel Economist Paul Krugman: 'Merkel and Steinbrück Are Wasting Crucial Time' - SPIEGEL ONLINE - News - International

Yet who came out on top? Germany. You keep sidetracking this point by saying that Germany did not have a housing boom prior to this current recession, but that is not relevant to the point. If you want to argue that a housing boom leads to a worse recession than any other boom, you have to explain what you believe caused the German recession, which was more severe at the start than the US recession, and why whatever caused the German recession is easier to recover from than a housing bust. So far you have offered nothing of the sort. Until you do, your argument does not even come close to refuting the points made in this topic.
 
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I am no huge fan of mixed economies, but actually their constant social spending is BETTER than Keynesianism.

Germany and many of the other European states have generous safety nets which trigger immediately once a recession hits. People sit on unemployment and receive various social benefits until jobs return. Compare this to the hubris of Keynesianism in the US. Let's encourage people to buy houses! Let's encourage people to buy cars and appliances! Let's create a green economy!

We can control demand simply because we dictate supply!

No, we can't. All we can do is bring it forward, and waste good money after bad doing so.
 
Yet who came out on top? Germany. You keep sidetracking this point by saying that Germany did not have a housing boom prior to this current recession, but that is not relevant to the point.

Oh, I'm sorry. I didn't realize you get to decide what is relevant and what isn't. Next time I'll check with you before bringing in anything I think is relevant.
 
And your spending will cause prices to rise, lowering the standard of living for everyone who did not get newly printed money. So in other words, you are indirectly stealing from everyone else. :eusa_shhh:

Here's a chart showing Federal Reserve base money:

fredgraph.png


Here's a chart showing the inflation rate:

fredgraph.png


If there were a direct relationship between the money supply and inflation rate these charts would have something to do with each other. Austrians and Monetarists predict there should be such a relationship. Why isn't there?
First of all, you are comparing a chart with absolute data (supply of money) with percent change data (inflation rate), which is completely meaningless. You would have to compare percentage change of one with percentage change of the other, not absolute value of one with percent change of the other. So right off the bat, you have useless comparisons.

Second of all, there are different measures of prices and different measures of the money supply. Official government numbers often grossly underestimate inflation, because they ignore certain prices. Measures of the money supply are also often incorrect. Rising prices also are not realized immediately. Prices will rise where the new money is spent or invested. If new money is put in the stock market, stock prices rise. If new money is put into housing or education, housing and education will rise. The effect of an expansion of the money supply is not uniform throughout the economy. Food items, often affected most by such inflation because money always goes to food, are not even counted in many CPI calculations, completely distorting the numbers.

Third, prices are not only affected by the money supply. They are also affected by the production of an economy. So simply comparing the rate of rising prices with the rate of money supply growth completely ignores the affect of increased supply of goods on the general price level.

Lastly, Austrians do not predict there is a direct relationship between money supply and prices. In fact, Austrians continuously stress it is possible for their to be an increase in the money supply and a decrease in prices. Austrians define inflation as it has traditionally been defined as "the expansion of the money supply" so it is possible you have come to false conclusions based on misunderstanding of this concept.

1. Your statistical method is wrong.
2. The argument you are trying to disprove was never made.
3. You assume that money supply is the only factor in determining the price level, which is false.

In other words, absolutely everything you said and the way you presented your argument is completely and utterly false.

It sounds like you're saying if the data disagrees with the theory, the data must be wrong.

Anyway, here's the chart on a percentage change basis:

fredgraph.png


There's still no relationship.

You can change the chart whichever way you like, it's still going to show the same thing: an enormous increase in base money, with no corresponding change in inflation. If you want to say that the inflation numbers are wrong, you can. But base money increased by a factor of 3. Things don't cost 3 times as much now as they did a couple of years ago.

You said:

Third, prices are not only affected by the money supply. They are also affected by the production of an economy. So simply comparing the rate of rising prices with the rate of money supply growth completely ignores the affect of increased supply of goods on the general price level.

But we're in (or were in, until recently) a recession. The supply of goods has gone down, not up.

You said:

Austrians do not predict there is a direct relationship between money supply and prices.

But Ludwig von Mises said:

In theoretical investigation there is only one meaning that can rationally be attached to the expression Inflation: an increase in the quantity of money (in the broader sense of the term, so as to include fiduciary media as well), that is not offset by a corresponding increase in the need for money (again in the broader sense of the term), so that a fall in the objective exchange-value of money must occur.

And, according to Wikipedia:

the Rothbardian branch argues that inflation is by definition always and everywhere simply an increase in the money supply

And you said:

your spending will cause prices to rise, lowering the standard of living for everyone who did not get newly printed money. So in other words, you are indirectly stealing from everyone else.

What did "stealing from everyone else" mean, if not inflation?

Finally, I don't "assume that money supply is the only factor in determining the price level." That's exactly the opposite of what I'm saying.
 
Here's a chart showing Federal Reserve base money:

fredgraph.png


Here's a chart showing the inflation rate:

fredgraph.png


If there were a direct relationship between the money supply and inflation rate these charts would have something to do with each other. Austrians and Monetarists predict there should be such a relationship. Why isn't there?
First of all, you are comparing a chart with absolute data (supply of money) with percent change data (inflation rate), which is completely meaningless. You would have to compare percentage change of one with percentage change of the other, not absolute value of one with percent change of the other. So right off the bat, you have useless comparisons.

Second of all, there are different measures of prices and different measures of the money supply. Official government numbers often grossly underestimate inflation, because they ignore certain prices. Measures of the money supply are also often incorrect. Rising prices also are not realized immediately. Prices will rise where the new money is spent or invested. If new money is put in the stock market, stock prices rise. If new money is put into housing or education, housing and education will rise. The effect of an expansion of the money supply is not uniform throughout the economy. Food items, often affected most by such inflation because money always goes to food, are not even counted in many CPI calculations, completely distorting the numbers.

Third, prices are not only affected by the money supply. They are also affected by the production of an economy. So simply comparing the rate of rising prices with the rate of money supply growth completely ignores the affect of increased supply of goods on the general price level.

Lastly, Austrians do not predict there is a direct relationship between money supply and prices. In fact, Austrians continuously stress it is possible for their to be an increase in the money supply and a decrease in prices. Austrians define inflation as it has traditionally been defined as "the expansion of the money supply" so it is possible you have come to false conclusions based on misunderstanding of this concept.

1. Your statistical method is wrong.
2. The argument you are trying to disprove was never made.
3. You assume that money supply is the only factor in determining the price level, which is false.

In other words, absolutely everything you said and the way you presented your argument is completely and utterly false.

It sounds like you're saying if the data disagrees with the theory, the data must be wrong.

Anyway, here's the chart on a percentage change basis:

fredgraph.png


There's still no relationship.
The data is wrong if the data is wrong.

You can change the chart whichever way you like, it's still going to show the same thing: an enormous increase in base money, with no corresponding change in inflation. If you want to say that the inflation numbers are wrong, you can. But base money increased by a factor of 3. Things don't cost 3 times as much now as they did a couple of years ago.
That is because money is not being spent. Banks are holding on to it.

But we're in (or were in, until recently) a recession. The supply of goods has gone down, not up.
The point was that a rise in price does not necessarily correlate directly with the increase in the money supply.


But Ludwig von Mises said:
In theoretical investigation there is only one meaning that can rationally be attached to the expression Inflation: an increase in the quantity of money (in the broader sense of the term, so as to include fiduciary media as well), that is not offset by a corresponding increase in the need for money (again in the broader sense of the term), so that a fall in the objective exchange-value of money must occur.

And, according to Wikipedia:
the Rothbardian branch argues that inflation is by definition always and everywhere simply an increase in the money supply
Yes, inflation is defined as an increase in the money supply. Inflation is not a rise in prices. You misunderstand what is being said by Mises and Rothbard. They use the traditional definition of the term inflation, which was simply monetary expansion and not rising prices.

And you said:

your spending will cause prices to rise, lowering the standard of living for everyone who did not get newly printed money. So in other words, you are indirectly stealing from everyone else.

What did "stealing from everyone else" mean, if not inflation?
I meant rising prices, which most people call inflation.

Finally, I don't "assume that money supply is the only factor in determining the price level." That's exactly the opposite of what I'm saying.
Nor do I or Austrians claim money supply is the only factor in determining the price level. Only that an increase in the money supply causes prices to rise. Which is true, and very easy to prove.
 
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Sundial said:
If there were a direct relationship between the money supply and inflation rate these charts would have something to do with each other. Austrians and Monetarists predict there should be such a relationship. Why isn't there?

The Austrians' attack on US CPI data has been constant and perennial.

The first thing to keep in mind is that the CPI is not an economic variable. It is a statistic that at best gives an inaccurate picture of an economic phenomenon: inflation. To calculate the monthly CPI, the USDepartment of Labor takes a weighted average of prices of various things that consumers purchase, and then its statisticians try to figure out the various proportions of different items in a "mythical" household budget. For example, the statisticians may hold that housing costs are 30 percent of household expenditures, food costs 20 percent, gasoline another 15 percent, and so on.

Armed with the proportional spending of the "average" household, the statisticians then assign that percentage to price changes of each item. Obviously, the higher the percentage of a household budget for a certain item, the more "influential" that item may be. For example, if gasoline prices rise sharply, then those particular price increases are seen as "fueling inflation" (no pun intended).

It is easy for the observer to see that the CPI can perpetuate the myth of "cost-push" inflation, in which the cause of rising prices is, well, rising prices.

. . .

As economists and others of the Austrian School understand, inflation occurs when the value of money declines relative to the goods and services it can purchase. In other words, inflation is a monetary phenomenon, not a price phenomenon. Prices go up because inflation is happening, not the other way around.
 
I don't know guys; maybe we CAN be the 1st society in the history of the world to spend ourselves into prosperity!

I mean, this whole stimulus thing that we have now done TWICE seems to be working out great! Let's double down and spend more.

And sure we can control demand! Why not? I mean, that falls right into the leftist theory that we can TELL people what they want.

Maybe if we do that AND pass a law that requires people to be happy about it, everything will get better...
 

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