Comments on: Time to rethink inflation targeting http://blogs.reuters.com/great-debate/2009/03/19/time-to-rethink-inflation-targeting/ Thu, 21 Jul 2016 07:57:19 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: Joe Logsplitter http://blogs.reuters.com/great-debate/2009/03/19/time-to-rethink-inflation-targeting/#comment-11055 Fri, 27 Mar 2009 00:53:53 +0000 http://blogs.reuters.com/great-debate/?p=2532#comment-11055 The overwhelming cause of inflation is the government printing money that they haven’t taken in. For an irrefutable example just look at Zimbabwe, Weimar Germany or the any other failing government who prints money to pay their debts without taxation. World renowned Economists, Presidents, Congressmen, and world leaders and financial journalists will write and analyze endlessly trying to say otherwise. Various groups (labor unions, and consumers) or industries (oil companies, or wall street)will be blamed by uninformed journalists and self appointed pundits but they are all powerless and blameless to either cause or cure inflation. Inflation = (Total Money Supply)/(Total Goods and Services) I know nothing about economics, but I also know more than you do. Logsplitter

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By: Billy Cope http://blogs.reuters.com/great-debate/2009/03/19/time-to-rethink-inflation-targeting/#comment-10834 Wed, 25 Mar 2009 15:38:44 +0000 http://blogs.reuters.com/great-debate/?p=2532#comment-10834 These arguments are over thinking the problem. If the Fed would have done its job without political influence then monetary policy would have been effective. Two reasons:

First, the Fed dropped rates to near zero after 911 to stave off the recession. The trillions of dollars out there started looking for place that paid better than the 1.0%. Mr Greenspan was offerring so Mortgage backed securities were the investment of choice. Unfortunately there were not enough 30yr fixed pools to satisfy demand so Wall St came up with newer riskier pools. They bought them straight from the originators bypassing FNMA and Freddie. You know the rest.

Secondly, all Greenspan had to do was look at consumer debt as a percentage of GDP. It went from 50-60% in 2002,straight up to 100% by 2008. Somewhere a bell should have been ringing loudly in the Fed’s ear!

If the Fed is paying 5% risk free why would there be a need to invest in riskier products. The higher rates would have deterred home buyers as well.

Bubbles are easy to spot. Even if you dismiss that notion then debt to GDP is published every month. Any Fed chairman should have noticed the dangerous levels of consumer debt and acted accordingly. The system is in place, the people running it failed in their duty.

It might be better if we let a computer run monetary policy instead of humans IMO. Thanks

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By: Anubis http://blogs.reuters.com/great-debate/2009/03/19/time-to-rethink-inflation-targeting/#comment-10594 Mon, 23 Mar 2009 20:09:07 +0000 http://blogs.reuters.com/great-debate/?p=2532#comment-10594 The Federal Reserve Bank was the first act of Congress giving up the one of it’s many Constitutional duties in the twentieth century. Subsequent Congress’ enacted the War Powers Act, Patriot Act, Homeland Security Act… ad nauseum. We have a group of leaders unwilling to make tough decisions because they are more concerned with getting reelected. So they legislated the powers away and created an Emperial Presidency.

I believe we have never as a a nation lived up to the principals or laws the Constitution set forth. I would have hoped we would be a little closer by now. If we expect to endure as nation and a society, we must bring our elected officials to fulfill their constitutional duties, by any means necessary.

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By: katwoman http://blogs.reuters.com/great-debate/2009/03/19/time-to-rethink-inflation-targeting/#comment-10560 Mon, 23 Mar 2009 05:41:58 +0000 http://blogs.reuters.com/great-debate/?p=2532#comment-10560 It is time to end the Fed and return to to consitutional money. Greenspan on page 481 of his book speels it out congress wanted inflation as hidden tax to allow for expansion of government without actually having to raise taxes and as long as things chugged along everyone was happy.

Return to gold and silver as money per the constitution. Gold reguires no elaborate regulatory policies since it has real value. And forget all that BS about there not being enough gold in the world. The value of gold is tied to supply and demand so ever smaller pieces will have ever greater value and thuis purchasing power.

As for loans allowing for greater economic expansion, business models that reguire loans to keep the doors open in perpetuity are failures. LET THEM FAIL!!!

There will be no confidence in the USD until it is backed with something another than hot air and pipe dreams.

End the Fed

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By: Smack Dab http://blogs.reuters.com/great-debate/2009/03/19/time-to-rethink-inflation-targeting/#comment-10535 Sun, 22 Mar 2009 18:28:42 +0000 http://blogs.reuters.com/great-debate/?p=2532#comment-10535 Take a step back from the frey. Look at the frey. Look at the movements that arise from the frey. Understand the competition that exists between well placed competitors. Recognize the genius of the overall schematic of domestic evolution.

Regulation is always countered with cries of Socialism. Mob rule is always countered with a rally around the republic. Deregulation is always countered with a cry for justice. Until you understand this you will always turn on the mouse wheel of everyday events.

At the end of the day one can feel confident in the application of freedom upon the tendency of tyranny.

You have been smacked.

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By: Andy W http://blogs.reuters.com/great-debate/2009/03/19/time-to-rethink-inflation-targeting/#comment-10459 Sat, 21 Mar 2009 02:48:23 +0000 http://blogs.reuters.com/great-debate/?p=2532#comment-10459 It is easy to sit back, armchair quarterbacking economic policy with the benefit of hindsight.
There is a knee-jerk mentality being cultivated by fear of the unknown and an urgent feeling that we should immediately throw out the baby with the bath water. Bottom line, free market princaples don’t work with out meaningful compitition, excessive speculation on mortgages, dirivatives, insurance, etc, is and was a ticking timebomb with out oversight, meaningful risk mitagation, and reasonable leverage.
To allow purchaes on credit, based on colateral that you can’t hope to cover, to buy things you could and can’t afford??? Did anyone really think that this was a good idea, oh yeah, it’s all hedged, no sweat, and why own something you hedge against, should I go on? How the hell can you buy insurance against the failure of something that you don’t have any interest in.
My point is that the whole financial system is so perverted by the mice running the cheece factory for the last eight years that sound a meaningful theory does not work because sound princaples of money management and risk management have been thrown out.

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By: Paul B http://blogs.reuters.com/great-debate/2009/03/19/time-to-rethink-inflation-targeting/#comment-10419 Fri, 20 Mar 2009 13:05:38 +0000 http://blogs.reuters.com/great-debate/?p=2532#comment-10419 I don’t agree that the management of inflation was entirely flawed, but when you load the model up with the wrong factors it was destined to fail (particularly when the Chinese slave labour camp was keeping it artificially low). I’ve long thought that house prices should have represented a very major slice of the inflation calculation basket. Had they done so, rates would have gone up at the right time to prick the house price bubble when it was needed, and the also the subsequent debt overload. At the end of the day, if you influence house prices in the UK (with rates that’s so easy to do) you effectively control the health of the economy. They chose not to and now we’re going to have to pay the price – yet again!

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By: Rich Paul http://blogs.reuters.com/great-debate/2009/03/19/time-to-rethink-inflation-targeting/#comment-10404 Fri, 20 Mar 2009 09:33:16 +0000 http://blogs.reuters.com/great-debate/?p=2532#comment-10404 There is only one real solution: valuable money.

Worthless money has had it’s day. The Federal Reserve has now caused two depressions in a century (it turns 100 in 2013). The one which started in 1929, just 16 years after the creation of the Fed, was longer and more severe than any in history. It remains to be seen whether the coming one will be worse, but all indications are that it will, and that it will be an inflationary, not a deflationary depression.

So what do we need? Valuable money. Money which has a direct relationship to one commodity. I prefer gold, since in the case of gold, the commodity *is* the money. One can carry a coin which is much like a silver dollar, and is worth over $1000. For those who don’t remember, this means it’s worth as much as $20, on the day the Federal Reserve started it’s orgy of destruction.

Only a commodity standard makes it impossible to artificially expand the money supply. And only a natural money supply will stop the American economy from sliding into the ash heap of history.

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By: Gregory http://blogs.reuters.com/great-debate/2009/03/19/time-to-rethink-inflation-targeting/#comment-10252 Thu, 19 Mar 2009 17:56:43 +0000 http://blogs.reuters.com/great-debate/?p=2532#comment-10252 John, it seems to me that you did not expand your analyses on 2 vital points.

1.You provide the notion that fiscal and monetary policy needs to be coordinated. With the central banks exercising control over monetary policy and the government exercising control over fiscal policy, how do you propose to get these two supposedly “independent” decision making groups to coordinate policy?

2. You mention that by focussing monetary policy on consumer prices insufficient attention was given to asset inflation. Seriously John, glossing over this will not do.
Inflation targetting, EXCLUDING asset prices, is part of the heart of the debacle of the crisis in the financial system. A large proportion of the income of banking and financial services businesses is derived from asset related lending (mortgages and CDS) and targetting this area of the economy would have put a dampener on the ever growing income revenue and Capital “expansion” (since it has proven to be illusiory).

The assumptions of your argument is its downfall. The assumption that the central banks are independent and operate autonomously when in fact they are the central clearing house of the private banking system and therefore will act in the interest of that industry and formulate policy based on ensuring the continuation of that industry.
You may say, well what is the problem with that? Simple, are the objectives and policies that are required to maintain the continuity of the present structure of the banking/financial services industry in synchronicity with what is required by the real economy?

See: inflation targetting is directed at the real economy but excludes the economy which is the heartland of banking, asset prices. Why? Because monetising and collaterlising of the assets economy is the bee hive and money pot of the economic and financial system.

The financial crisis has brought to the surface the survival needs of the real economy and this terrain of what is good for the real economy versus what is good for the financial economy may turn out to be more complex than “you suckers need to bail us out otherwise if we go down you go down with us.”

When the real economy is being squeezed who benefits to extend them the “lifeline” of more debt? The banks, obviously.

Summary: What the financial industry would like to see is the bail out the financial system (the Master) with tax revenues from the economy (the Servant) and then the Master can continue to provide for the Servant.

It remains to be seen to what level the Servant imposes conditions and attachments to provide this relief to the Master.

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By: Jonathan Cole http://blogs.reuters.com/great-debate/2009/03/19/time-to-rethink-inflation-targeting/#comment-10248 Thu, 19 Mar 2009 17:09:13 +0000 http://blogs.reuters.com/great-debate/?p=2532#comment-10248 Why is it that I get the feeling that economics is a failure because it believes its own spin/hype.

Inflation is a tax that is levied by people who are not voted into office. This is is simply unconstitutional (and I am not a libertarian). The American Revolution was mounted on a platform of no taxation without representation.

Inflation devalues everything including money and forces business, workers, investors, savers, real estate owners, etc. to deal with the complete skewing of the market economy.

Why do bubbles build up? Because distortion caused by inflation and preferential treatment to some vested interest prevents the market from working rationally. This idea that central banks with the power to create money is somehow beneficial to society is a complete joke. Central banks are simply a way for the financial elite to relieve everyone else of their wealth, gradually, almost imperceptibly through printing money and other non-productive initiatives.

We would be better off to turn these powers back to the Congress and make them publicly debate how much they are going to decrease everybody’s net worth in order to run their unproductive government initiatives.

We could do away with the IRS and taxes and simply devalue the currency every year by printing more in order to pay for government. At least this would be honest. It would really put a laser beam of attention on this subject which would mean that only the most beneficial government programs would be enacted.

As a side benefit, you wold probably get a completely different class of citizen politicians instead of the corrupt, greedy, sold-out hypocrites that we now suffer under.

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