Posted on 07/14/2007 11:02:40 AM PDT by bruinbirdman
He’s an idiot and he’s wrong.
Really? What did the Fed set the 30 year mortgage at this week? Any chance you'll share that rate sheet with the rest of us?
If you think the market is setting rates, do you also think that inflation is in the 2-3% range
Yes.
It actually does make a difference. The US debt market is about $8.5T at the end of 06. You don’t need to do much buying at the margin during treasury auctions to influence the price. This was especially true over the last 5 years or so, when Japan and China where buying up as many bonds as the government could issue. That trend is now beginning to reverse, which will make it harder to keep a cap on interest rates (though they will try).
So here’s where we part ways then, each is entitled to his opinion. Can’t really have a meaningful discussion with such a fundamental disagreement.
“If you think the market is setting rates, do you also think that inflation is in the 2-3% range. Yes.”
I’d advise you to watch the purchasing power of your CASH and see if it erodes at a rate higher than 2-3% over the coming years. Just food and energy prices alone will account for > 10% inflation annually.
And buying $300 billion in the last 6 years cuts rates from 15% to 5%? LOL!
This was especially true over the last 5 years or so, when Japan and China where buying up as many bonds as the government could issue.
Rates are lower because Japan and China are buying? That makes more sense than claiming the Fed manipulated rates to 5%.
That trend is now beginning to reverse, which will make it harder to keep a cap on interest rates (though they will try).
I know, rates actually jumped to 5.25% a few weeks ago, They're back to 5.04%.
The problem historically with using gold as money is that it was combined with fractional reserve banking. This meant that banks printed up more receipts for gold than they had in the vault (same thing they do today with the $US and fractional reserve lending). This causes the boom and bust business cycle of inflation and deflation. It doesn’t mean gold is changing value.
www.mises.org/books/desoto.pdf
This book does a great job of summarizing 500 years of world banking history. It is interesting to see that the same problems recur over and over each generation.
Ok. Are you someone who believes that the Eurodollars and large-denomination time deposits included in M3 represent money "in play"? The increase in Eurodollars has not had an inflationary effect in the U.S. Those dollars are not really doing any chasing of goods with the exception, perhaps, of real estate on both coasts.
Are you also one who believes the Fed stopped offering the M3 calculations because they want to hide the real rate of inflation? The Fed has not used money supply but rather interest rates to manage monetary policy for a long time now. The fact that M2 and M3 have increased so dramatically with modest inflation highlights this disconnect. The bond market understands this. The M3 conspiracists do not.
Inflation is in fact the growth of money over and above the growth of goods and services (GDP). Now, if we know M3 is growing at GREATER than 10%, but GDP is quoted as 2-3%, then we know by definition that there is inflation.
It's that simple, huh? Just look at M3 to determine the real rate of inflation? No need to survey the actual price increases of 95,000 items in 22,000 stores? And you're lecturing me about M3 and monetary policy? The words uniquely unqualified come to mind. Do you even understand that GDP is quoted in real numbers?
All that money that is being printed and is currently being held outside the US will come home (examples: China sinking $3billion into hedge funds) and will drive up prices.
Do tax cuts allow for capital formation that's not inflationary? Just because money is being held outside the US doesn't mean it's inflationary. Foreign investment increases economic growth which can have an anti-inflationary effect as it creates more goods.
housing is deteriorating because the “monthly payment consumer” is not able to make the payments on his ARM loan. Defaults are increasing drastically - read up on the 2 Bear Stearns CDO hedge funds that just went to $0 this week. They held mortgage derivatives
Housing is deteriorating for lots of reasons. Defaults are high but no higher than historical averages. The last few years were a statistical anomaly. The subprime market makes up only about 7% of the total mortgage market. 85% of subprime loans are currently being paid on a timely basis and less than 10% are in default. This is hardly the crisis the doomers would like us to believe. The markets are so worried about it the DOW might end the day above 14,000. Yawn. What else ya got?
Opinion? Where does the government publish all the rates it sets? Should be easy for you to find. Google it?
Just food and energy prices alone will account for > 10% inflation annually.
I wonder what % of my total purchases are food and energy?
That's funny!
Are you saying the gold standard didn't prevent inflation or deflation? LOL!
It doesn’t mean gold is changing value.
Because gold never changes in value?
Both sentences were pretty clear. I’m not sure from your response if you agree or disagree. I would recommend you read desoto’s book.
What's really funny is people who think that 5% inflation one year followed by 5% deflation the next equals price stability. Maybe you just don't understand what my historical CPI chart represents?
I disagree that we had price stability under the gold standard.
Where did I say there was price stability under a gold standard. What I did was explain to you why there was inflation and deflation under the gold standard (i.e. fractional reserve lending).
1.) Average working people, working a substantial amount under the table to avoid being kicked into a higher tax bracket. Also, I know of several men that, on top of their regular jobs, work a significant amount under the table to avoid having the courts increase their child support payments.
2.) People that are on welfare, Social Security Disability, Workman's Comp, etc. that are working under the table so they don't lose their benefits.
3.) People that just don't want to deal with the increasing burdens imposed by the state and federal government. I've posted here before about someone I knew who ran a large scrap metal outfit for over ten years with no business license, permits, never payed any tax including state and federal income, and payed all of their employees in cash under the table.
So gold didn't save us? Excellent!
Of course gold changes in value. It is a commodity that is produced at a rate of 1-2% a year. It is affected by supply and demand fundamentals. That is not related to inflation and deflation in a fractional reserve banking system based on gold.
2 different things.
Damn, you are sharp. Great response. I learned a lot.
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